Accuracy in Media

Are there any industries that Barack Obama won’t consider nationalizing?

Don’t look now, but the Federal government under the design of takeover artists in the Obama administration is engaged in an until-now little-noticed power grab of the student loan business.

It would be accomplished in one fell swoop, away from public view, by linking student loan-giving to health insurance “reform,” via a backdoor effort called “reconciliation.” Slick, eh? What will Big Government fans think of next?

Student loans taken over by Big Government, with a new bureaucracy, is the object, under the guise, we suppose, of that old trite joke, “we’re from the government and we’re here to help you.” But this is no joke. Big Brother lives and breathes in this control-freak administration.  They covet the student loan business, too. 

How did this attempted takeover happen? It cerainly made few headlines, only the news briefs. TV news said nada, zilch. But it is no trifling matter.  

The movement started officiously last September after brewing in the hearts of liberals for years. A House-passed bill would put 2,000 private lenders of student loans on the sidelines, foisting upon them extraordinary, impossible, inviable standards. Nothing like a few more oppressive regs to chill the competitive drive, eh? Stifling student loans made in the private sector was the aim. (Back of this move is this administration’s lack of regard for what Obama calls “greedy banks” and his obvious antipathy for “Wall Street.”) 

Target date for government takeover of student loans is scheduled for July 1, 2010, according to the House-passed bill last September. Bear in mind, the bill was passed, without fanfare or vaunted transparency, at all, in September 2009, with this as a target date for its implementation. Talk about chutzpah! Presumptions were that it would be passed by the Senate by then, in some form.

Proponents claimed the House bill would save $87 billion by substituting a bureaucratic government-run loan program for what private lenders do – that is, making government-subsidized student loans. Now, incredibly, implausibly, the administration applies these presumed savings of $87 billion – to reduce the costs, of all things! – to its health care “reform.” Ingenious, no? Linking two unlikes?

It’s a mad, mad, mad shell game. Where is that elusive pea? It is also a false presumption of “savings.” Even the Congressional Budget Office (CBO) reports savings would not be $87 billion, not even close. No, it would be an estimated $47 billion, give or take, if we are to believe the numbers. Consider, too, the costs of setting up a new bureaucracy to administer the 19 million student loans each year. Not chump change, to be sure.

How do Big Government lovers seek to slip this loan takeover past a snoozing public? Past conservative critics of Big Government – you know, those darn “obstructionists,” including some in that liberals-detested  “Party of No”?  Government takeovers of traditionally private business matters do not go down easily, of course, in free enterprise America, so stealth was required.

Quiet, please. Media seems to comply, raising no red flags. Few know about the latter of the twin takeovers by government – implausibly, health insurance and student loans.   

Neither logic nor law matter to Big Government devotees. Only their agendas count. It’s Katy bar-the-door to opposition whom they vilify as heartless, or cruel, or (gasp!) insensitive to others’ feelings. Make the people heel. Bureaucrats must prevail. Such is the hubris of the ultraliberal ethic. 

Spelled out succinctly by Professor Peter Wood at the National Association of Scholars (NAS) website, the scheme shapes up this way:

The health care bill that the Democrats hope to pass by “reconciliation” to avoid the normal Senatorial voting procedure is now being amended to include the administration’s Big Grab on federal student loans. If this works, we will have one bill in which the federal government not only takes primary control of American health care but also simultaneously takes practical control of American higher education.

Such double-dealing is not foreign to political Washington. Rife with secret deals, duplicity, and non-transparency, such as the Cornhusker Kickback and the Louisiana Purchase, it’s just that old horse-trading, politics as usual, they say. No Big Deal. Big Brother is always correct. Now, where’s that memory hole?

In an op-ed in the Washington Post on March 7, Senator Lamar Alexander (R-TN), onetime Secretary of Education under President George H.W. Bush, says of the current administration’s bold, devious takeover plan: “While health care ‘reform’ takes the spotlight, the Obama administration is pushing for another Washington takeover – this time, of the student loan system.” (Why are we not at all surprised?)

Secretary of Education Arne Duncan puts a smiling face on it, calling it providing students with “direct loans,” the epitome of efficiency, without bothering the private sector. Secretary Duncan, an amiable sort, points to alleged savings of $87 billion – er, make that $47 billion? (Just $40 billion off. Close enough for government work?)

Big Government (not what he calls it, of course) will take care of the flocks of students, later voters, to their secure loans, making them serfs to the hand that feeds them.  Ingenious, no? Brings to life Professor Freidrich Hayek’s comments about making folks rely on government, making them subservient, in his landmark book, The Road to Serfdom.

If the underreported takeover plan of the student loan business succeeds, and it might, Senator Alexander writes: “All 19 million students who want government-backed loans will line up at offices designated by the U.S. Education Department. Gone will be the days when students and their colleges picked the lender that best fit their needs. Instead, a federal bureaucrat will make that choice for every student in America based on still-unclear guidelines.”

Bottom line, says Professor Wood at the NAS website cited above: “Some 2,000 private lenders will be forced out of this business. Services to [loan applicants] students driven by industry competition will be eliminated in favor of typical federal bureaucratic ‘efficiency.'” (Big Brother knows best?)

Why, ostensibly, kick 2,000 private lenders out of the system? Reported abuses by a handful, such as bribing schools to recommend their loan packages, and some unchecked financial misdeeds, including kickbacks, are noted. Rather than deal directly with those issues, as logic would dictate, these become handy excuses for “cost-saving” government takeover of the whole system.  “Reform,” you see, becomes an excuse for the control freaky lovers of Big Government.

Dr. Wood at NAS says private lenders may have brought it on themselves: “Corrupt practices combined with wildly imprudent financial dealings, opened the way for ‘reform’ that President Obama, Secretary Duncan and the Congressional leadership now intend to push through.” Make that, “ram through?” What a way to run a railroad.

How to finance all this shady operation and emerge?  Senator Alexander explains in his Washington Post piece: on March 7:

Here is what they haven’t told us: The Education Department will borrow money at 2.8% from the Treasury, lend it to you at 6.8 % and spend the difference on new programs [such as Pell Grants and other government give-away programs]. So you’ll work longer to pay off your student loan to help pay for someone else’s education – and to help your U.S. representative’s reelection.

As to helping those re-election bids, such as for those who take credit for this legislation , it boils down to one word – PORK. New programs grease the skids for their reelection. “Look what I did for YOU!” Upon such dreams are re-election bids built. Give ’em bread and circuses, you know.

Senator Alexander suggests: “If there really is $47 billion in savings to be found, Congress should return it to students in the form of lower interest rates, not trick students by overcharging them so government can create more programs.”

If the takeover of the student loan system comes to pass, with or without health insurance revamping rammed through, Senator Alexander, tongue firmly in cheek, suggests this warning label on all 19 million student loan applications every year, in the interest of basic honesty and full disclosure:

Beware: Your federal government is overcharging you so your representative can take credit for starting new government programs. Enjoy the extra hours you work to pay off your loan.


Guest columns do not necessarily reflect the views of Accuracy in Media or its staff.

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