House Throws Down the Gauntlet, Challenging Obama

The extreme right of the House could not be contained despite warnings of blow back by Speaker John Boehner. A week before the government runs out of money for its operations and three or so weeks before the nation bumps against the debt ceiling, a party line vote of 230 to 189 expands the nation’s borrowing authority to pay its bills only if all funding of Obamacare is eliminated. There is no chance that the Senate will agree, nor will President Obama negotiate this time, so a government shutdown and the nation’s first ever default on its debts are so far the only foreseeable outcome.

“It’s going to be fight every hedgerow, fight every ditch. It’s just like trench warfare in World War I”, was the prediction in Bloomberg/Business Week of Tim Jost, a health law professor at Washington and Lee School of Law.

Conservatives and Libertarians despise the healthcare law as government overreach for forcing people to buy what they might prefer not to, and for helping them buy it with a massive program of subsidies that the Wall Street Journal estimated will run to $1.762 trillion over 10 years. The Journal editorial page said, “This is Mr. Obama’s dream of expanding government to create a permanent entitlement state”.

Republicans in and out of the government are deploying every weapon in their arsenal to defeat the Affordable Care Act (ACA), with tactics that go well beyond their symbolic but futile 42 attempts to repeal the Act in the House.

Key to Obamacare’s success is bringing everyone into the insurance pool, with premiums paid by the young and healthier counterbalancing the costs of the older with medical problems. But a weakness in the law sets the penalty for the uncooperative well below the cost of insurance, and nothing in the rules prevents them from waiting to opt in only when and if they become ill at some future date. The Tea Party group FreedomWorks is encouraging Millennials to do just that — don’t buy in until they acquire that pre-existing condition that insurers cannot turn away. Failure is assured for a law that “depends on people acting against their self-interest” is Ramesh Ponnuru’s view at Bloomberg.com. “Why is free-loading now a conservative value”, asks Andrew Sullivan at The Dish.

quid pro quo

In Obama’s granting of a reprieve to businesses, postponing for a year the requirement that those with over 50 employees pay for their insurance, Republicans in the House saw an opening to crush the economics of Obamacare. They passed a parallel measure that said that if businesses need not comply, neither should the public have to in that first year. It even attracted 22 Democrats. If those with pre-existing conditions cannot be turned away, postponement of the mandate that everyone must join the pool means that insurance costs would zoom, which Obamacare opponents assume would cause a public outcry for repeal that even Democrats in Congress could not deny to their constituents.

Neglecting other business just before taking a five-week vacation, the House then voted to prohibit the Internal Revenue Service from involvement in the law. Its role is crucial. Subsidies take the form of tax credits, which the IRS would administer. And it is to act as the enforcer, imposing penalties on individuals and companies who fail to meet the law’s requirements. House Majority Leader Eric Cantor (R-Va) says “The IRS” — in his view all of it, apparently, not just the Cincinnati unit discovered using keyword searches to find political non-profits applying for tax-free status — “has been abusing its power” and “the last thing we should do is to allow the IRS to play such a central role in our health care”. The IRS “will have access to the American people’s protected health care information”, said Cantor. That happens to be an absolute falsehood.

These efforts at sabotage, like the 40 bills for repeal, cannot hope to survive the President’s veto, of course, but such negativism serves to set the public against the law. A majority would like to see it repealed. But probed a little further one finds that majority is filled with those whose companies pay for their health insurance; they are covered and don’t want anything to change. Not until after repeal and an eventuality that some lose their jobs, say, and discover what an individual’s insurance policy costs absent the new exchanges or that even a minor pre-existing condition gives insurers an excuse to deny them insurance altogether, would they realize that their former negative opinion was ill-considered.

Beyond the Beltway

The group co-founded by Karl Rove, Crossroads GPS, is running an over the top video clumsily called ObamaCareNado that has a tornado causing “a rising tide [sic] of health care costs” with “nobody safe from its wrath”.

Dick Armey’s creation, FreedomWorks, advises everyone to burn their Obamacare cards as an act of protest. But there are no Obamacare cards. FreedomWorks intends to design one that you can print from the Internet, and then burn. (We’re not kidding).

More serious are the scores of law suits around the country that take aim at Obamacare’s particulars. Catholic run organizations want the requirement that insurers must pay for contraceptives struck down. The Goldwater Institute has sued to eliminate the Independent Payment Advisory Board — the “death Panel” that would “ration” care if costs exceed targets. One case even wants to invalidate the law altogether because spending bills should originate in the House, says the Constitution, but the ACA was first passed by the Senate. Another suit says that there is no provision for subsidies to be issued by federally conducted exchanges — the insurance marketplaces that the government must set up when states fail to do so — a calamitous defect thanks to faulty wording in the law.

“Almost no law as sprawling and consequential as the Affordable Care Act has passed without changes … known as ‘technical corrections’ …in subsequent months and years”, The New York Times and others have pointed out, listing a number of examples. But there’s the rub. It is Congress’ job to make such repairs, but Republicans intend to block any fixes whatsoever as their way to bring Obamacare crashing down.

the nuclear option

With no budget passed or even considered for the federal fiscal year that begins October 1, the government needs legislators to pass a spending resolution if there is to be money to pay its bills — bills that include such items as Social Security payments and military paychecks. So as a last desperate act to cripple Obamacare, a group of Republican senators teamed with representatives in the House to pursue a defunding option. In a July speech on the Senate floor, Mike Lee (R-Ut) said, “As long as President Obama selectively enforces Obamacare, no annual appropriations bill or continuing resolution should further fund implementation of the law…If the president won’t follow it, the American people shouldn’t fund it”. Co-sponsor Texas’ rookie senator Ted Cruz says that “Under no circumstances will we support a continuing resolution that funds a penny of Obamacare”. If Republicans go through with their threat, avoiding a shutdown of the government calls for President Obama to agree to the effective repeal of his most significant achievement. The likelihood of his doing that is rated at near 0%.

Republicans do not see a repeat of 1995 when they were blamed for 28 days of shutdown using the same tactic against President Clinton. This time it’s different, they say, because Obamacare is so unpopular with the public. With Congress back in the home districts during August, Republican groups are fomenting angry town hall sessions to badger their representatives to vote for defunding or else shutdown.

Charles Krauthammer, the conservative columnist at The Washington Post, says about shutdown and Republican prospects, “If I thought it would work, I would support it. But I don’t fancy suicide. It has a tendency to be fatal”.

are we still a democracy?

It bespeaks an ugly turn of democratic government when lawmakers deploy every tactic to defeat and defund a law that was passed by their own legislative body, signed by the President and validated by the Supreme Court because it is not to their liking.

Obama looks at another way:

“I think a really interesting question is why it is that my friends in the other party have made the idea of preventing these people from getting health care their holy grail, their #1 priority. The one unifying principle in the Republican Party at the moment is making sure that 30 million people don’t have health care”, he said in his early-August press conference. “At least they used to say, well, we’re going to replace it with something better. There’s not even a pretense now that they’re going to replace it with something better. It’s become an ideological fixation”.

Is Obamacare Working? Or Is It a “Train Wreck”?

January 1 is departure time, when the wheels of Obamacare’s principal provisions are set in motion, but its Republican detractors have settled upon “train wreck” as the metaphor to use in every mention of “Obamacare”. They are reaching for every tool they can devise to pry loose the ties and derail the express (see related story).

Mike Luckovich, Atlanta Journal-Constitution

They needn’t bother, one could argue. Implementation of the law has so many complexities that it could go off the rails on its own. Some of the problems the law could encounter:

medicaid flagged down

The fundamental objective of Obamacare is to see as many as possible of the over 50 million uninsured Americans obtain health care coverage. For those too poor to buy even the subsidized insurance that will be offered to higher income groups the states were required to expand Medicaid, offering it to anyone with incomes of up to 138% of the federal poverty level.

That’s what the Supreme Court shunted into a siding a year ago when it ruled that the government did not have the right to force states to do so, delivering a serious setback to that Obamacare objective.

Of course, if governors and legislatures were to opt voluntarily — after all, the federal government would pay 100% of the expense of added enrollees for the first three years and 90% thereafter — there would be no problem, but instead 21 mostly Republican-controlled states have refused the offer. In the state where the most people will be affected, Texas Governor Rick Perry said accepting the largesse of the government plan would “make Texas a mere appendage of the federal government when it comes to health care”. His rejection will leave 1.5 million Texans without health aid by 2017 says the state’s own health department.

insurance marts

The law also calls for the states to set up “exchanges” (better thought of as marketplaces) where those covered neither by Medicaid nor employers can buy the insurance that the Affordable Care Act (ACA) requires them to have beginning in 2014. The law requires the exchanges to be open for business just one month from now — October 1 — yet over half of the states have so far done nothing to set them up, which leaves the job to the federal government. That’s as prescribed in the Act, but it hands the government a burden of unexpected size and raises the question of whether the Obama administration will be ready in the few weeks remaining.

The exchanges are essentially websites where people can compare prices and plans, forcing insurers to compete on price and features to put an end to the unaffordable costs insurers have long charged to individuals, who have had none of the negotiating heft of corporations and groups. Four tiers of plans are to be offered, all with at least the mandated minimum standard of care, their primary difference being the percentage of health care expense they cover, ranging from around 60% for “bronze” to at least 90% for the “platinum” plan. People whose income falls within a prescribed range — $24,000 to $94,000 for a family of four — are eligible for a subsidy on a sliding scale to help them pay for insurance.

The exchanges are deceptively complex. The web portal must be able to connect in real time with insurance companies to display plans and book orders, and with the federal government where citizenship can be verified and where payroll and health insurance data supplied by corporations is supplied to the IRS for deciding whether someone is already covered or otherwise ineligible, or is instead entitled to buy on an exchange, and possibly qualify for a subsidy, which amount is to be reported to the IRS if the transaction goes through because the subsidy will be awarded as a tax credit. That long and thorny sentence is to make the point about complexity.

“There are going to be some glitches, no doubt about it”, says the President, using a minor word for what could be major dysfunction. Trouble delivering the system became obvious when the White House said it wants a year-long delay of verification of subsidy eligibility. It had to sign on with one of the commercial credit reporting companies as a stopgap to verify income.

weakest link

Essential to Obamacare and its central tenet that forbids insurance companies from turning away applicants with pre-existing conditions is that everyone enter the insurance pool, not just those who are older and more likely to experience health issues. Only by bringing in younger, healthier members of the populace can there be any chance of reducing the cost of insurance for all.

In its upcoming campaign to educate the public about the law, most of the Health and Human Services agency’s efforts will be beamed at the youngest age groups to persuade them to shop the exchanges and buy insurance. They will be charged a penalty if they don’t buy in, so they might. A Kaiser Foundation poll found that 87% of the young consider health insurance “personally important”.

But what if they don’t show up? The weakness of the law is that the penalty scale is so low. At the threshold above which a family is not eligible for Medicaid and must buy insurance, “an uninsured household … must pay a tax of only $95 or 1% of household income” calculates The Weekly Standard and only a $400 penalty for a household with $40,000 in income that elects to forego insurance because it costs perhaps $1,800 on an exchange. And if they opt out, nothing in the rules prevents them from opting in should they at some point in the future become ill.

business gets a bye

The ACA drafters foresaw the cost of the vast number of workers who would need government-paid subsidies to buy their insurance, so they handed off part of that expense to businesses, requiring all companies with 50 or more employees to provide insurance for their workers or pay a fine of at least $2,000 and as much as $3,000 per employee.

Nothing confirmed the “train wreck” belief that the wheels were coming off more than President Obama’s one-year postponement of the requirement. The intent was to give businesses more time to sort out complexities. Some 94% of firms of this size already offer health care so only 1% of the work force will be affected by this delay, but terms such as “imperial presidency” were aimed at Obama by Republicans for overriding a statute of a law as if the sobriquet “Obamacare” meant he owned it. In his early-August press conference he said, “This is a tweak that doesn’t go to the essence of the law”. He would have preferred to call the Speaker and say, “let’s make a technical change … that would be the normal thing … but we’re not in a normal atmosphere around here. He then added, “We did have the executive authority to do so”, a claim for which no one has come up with a basis in law. “To amend the statute, you’re supposed to be required to get legislation, and they didn’t do that”, said Senator Mike Lee (R-Ut).

The rule further embeds employer-paid insurance in the social contract when it should have gone in the other direction. There is no sensible rationale for why businesses should buy health insurance for employees. Had there instead been an option for companies to drop insurance and instead raise wages commensurably, it would have fortified the exchanges and begun to chip away at a relic of the World War II era that companies used to attract workers in the years when there was a labor shortage. And in setting a sharp cutoff no mind was paid to the obvious: that corporations would lay off employees to duck under the 50 threshold — 1 in 5 companies have done so said a June Gallup poll — would shorten hours of others below the 30-hour a week threshold that the Act defines as full-time, or would cease hiring altogether.

death spiral

That large businesses without insurance plans were awarded a one-year reprieve forces employees to buy insurance in the exchanges for just the one year — and after that disruption they must drop that policy and accept whatever their employers come up with. Why shouldn’t their mandate be postponed as well?

It’s a fair and symmetrical argument, but it’s not innocently advanced. Behind the arras lurks an economists’ theoretical that conservatives know could bring down the entire healthcare law.

How would that work? Postponement of the individual mandate could set in motion an effect that the backers of the law most fear called “adverse selection”. The young and healthy would take advantage of the delay and not buy into the pool. Without their funds, insurers would need to raise rates to pay for the medical care of those who do buy insurance but who are older and have a greater incidence of illness. But the rate increases would then cause the healthier among that group to drop out, resulting once again in rate increases for those still in the pool that would produce a new group of dropouts. It is a cycle that could lead to a “death spiral” in which rates successively climb so high to cover the health care costs for only the sickest left in the pool that the system collapses. To see that happen is the Republican dream.

The Republican mantra has been “repeal and replace”. There has been only repeal, with no program whatever proposed for replacement, but any program would certainly not include the individual mandate. A fair question is, without it, how would a Republican plan solve the death spiral of adverse selection?

ripe for abuse

The year delay in businesses reporting employee pay data for determining subsidy eligibility leaves the exchanges wide open for fraud with applicants reporting their income on the honor system.

Additionally, naysayers say the design of the exchanges has paid scant attention to security; its lack of rigorous verification of the user leaves them open to identity theft”. Michael Astrue at The Weekly Standard says he “could change Donald Trump’s health insurance and he could change mine”, which doubly suggests that the system is lax enough to let Trump slip through and qualify for a subsidy.

it’s working, they say

Nevertheless, proponents of the law are heralding signs of success. Predictions that the cost of health insurance will drop are proving true, with insurers at the exchanges in ten states posting rates that are significantly lower, even 10% to 18% lower than the Congressional Budget Office expected. In his press conference, Obama reeled off a list of benefits people are already experiencing: youths up to age 26 covered on family health plans, 13 million receiving rebates from insurers who failed to pay at least 80% of their premium receipts as benefits as the law stipulates, elimination of lifetime benefit limits, free preventive care and so forth — “that’s happening now”.

Pundits are chortling that Obamacare’s success is what Republicans fear the most. They expect the public will look back and remember that the GOP did its utmost to undermine what proved a vast improvement over the pre-Obamacare “system” that leaves many uninsured and lets insurers cherry pick the healthy and discard the ill. But it is certainly premature for them to declare or even think about victory at this stage.

There’s that famous line in “All About Eve” when Bette Davis says, “Fasten your seat belts. It’s going to be a bumpy ride”.

Snowden, Manning & the Entrapment of Oaths

There was a senator the 1950s who gained inexplicable power and gave his name to what is called “the McCarthy era”. It was a period of “red scare” during which legions in government, universities and unions were accused of being “communist sympathizers” by Wisconsin’s Joseph McCarthy and his doctored “evidence” and by the sinisterly-named House Un-American Activities Committee. Careers were destroyed, thousands in industry lost their jobs at the hands of employers fearful of challenging the senator. There were purges at universities for the first time in our history. And in the entertainment industry, where the one accused the other, no one dared hire anyone placed on the resulting “blacklist”. The cloud of fear was so pervasive that when the journalist Edward R. Murrow dared to air a television exposé of McCarthy, it was thought an extraordinary, career-risking act of courage.

At the root of this sorry moment of our history was the “loyalty oath”. That was not a McCarthy invention and even now is a lingering requirement in some states for government employment, but its imposition was never so widespread as under “McCarthyism”. In the induced paranoia of that time, one was made to swear allegiance to the country and to never having had ties to communist-thinking groups.

With the trial of Bradley Manning and the NSA leaks of Edward Snowden, “oath” again was at center stage. Apart from their being accused and convicted of crimes, they are guilty of betraying the oath they swore when entering upon military and government service. Among the many saying this were Senator John McCain (R-Az) who asked, “Do we have to find these things out from Mr. Snowden, who violated his oath to the United States of America?”. White House Press Secretary Jay Carney said, “I think it’s important to note that individuals who take an oath to protect classified information are bound by it”. Senator Dianne Feinstein (D-Ca) said, “He took an oath — that oath is important. He violated the oath…It’s an act of treason in my view”.

blind-siding

An oath is entirely one-sided. You have no say in the language used, no freedom to amend it with your own contractual terms. And most important, you have no knowledge of what awaits on the other side. You are made blindly to swear to keep the secrets of the organization whose portals are about to be opened to you before you have any notion of the secrets you have just sworn to keep.

Oaths can be seen therefore as quite sinister, potentially used to lock in wrongdoing from private view — and with the threat of prosecution if the wrongdoing is classified, as is most everything by this government (which classifies 1.83 million documents every week; Manning’s release in excess of 700,000 communications was less than 1% of what the government classified in 2010).

Critics of leaking have often spoken of Snowden and Manning “acting on their notion of what the law is”. That lofty view assumes no one in the public sphere is capable of knowing the law. But we certainly do know enough law to realize when it clearly has been broken or when the government has violated the Constitution.

Manning in Iraq “started to question the morality of what we were doing” when he became aware of the military killing innocent civilians and burying the truth wrapped in the all-purpose national security winding sheet. He exposed the “collateral murder” video taken from an Apache gunship that killed civilians and two Reuters correspondents. He knew of torture by Iraqi authorities while the U.S. military looked the other way. And he exposed much more. “We have forgotten our humanity”, he wrote.

As for Snowden, one oath he took was of the blindfold sort described above. In contrast, the other was a pledge to uphold the Constitution — a text available to all. It didn’t take any more than his high school education to tell him that Section 215 of the Patriot Act, which permitted examining “tangible things” including “books, records, papers, documents, and other items”, did not permit the wholesale violation of the Constitution’s 4th Amendment by capturing and storing for years the phone records of everyone in the United States. Yet we have present and former “leaders” such as Feinstein, House Speaker Boehner and former Vice President Cheney calling Snowden a “traitor” — as well as Obama, who called Cheney’s pronouncement “music to my ears” — for honoring that oath by exposing NSA’s violations of the Constitution.

What further proof could there be of the rectitude of Snowden’s courageous act than the cascade that has since poured forth to amplify what he had first reported: the revelations of NSA’s spying on Internet, e-mail and cellphone traffic of Americans and heads of foreign governments; the exposure of a Congress that doesn’t even know that it isn’t doing its oversight job; and a President shown to be naïvely clueless — repeatedly contradicted in his assurances that the government is not doing what the next news cycle reports it is doing?

Those who believe that one must never violate an oath effectively swear to leave their own conscience and ethics at the door. That says we should abdicate any higher morality than some oath of secrecy an institution or government body has devised. It says that the oath is paramount and is an agreement that the organization one has joined should be allowed to continue whatever illegalities that may be uncovered. Just what is the virtue of keeping an oath if you find that the organization to which you have sworn fealty has betrayed you by acting illegally?

Manning acted because the military was violating the laws of war. Snowden knew the NSA had broken its vow to uphold the Constitution. If a government succeeds in indoctrinating or intimidating its citizenry that obedience to oaths and pledges is inviolate, it knows it is secure to trample laws in perpetual secrecy. It will have cynically hoodwinked us into our spinning a web in which we trap ourselves. The truth would never come out.

Obama Seeks to Cut College Costs

His plan to attack the runaway cost of a college education sounded grand on its first hearing in a speech in late August, but it then came clear that President Obama must intend for it to never happen — or so a glance at its timetable indicates. The scheme would award more government funding to those institutions that deliver greater value to their students according to a national rating system that the government would develop. But the criteria making up

the ratings won’t even be decided until 2015, and his plan is to ask Congress to link them to student aid wouldn’t take effect until 2018, after he has left office.

sticker shock

Over the last 30 years, the cost of a college education has risen by three times the rate of inflation while household income rose only 16%. The sticker price last year averaged $39,520 for private non-profit colleges and $17,860 for public colleges. The net cost of tuition, fees and room and board after financial aid and tax credits were deducted reached an average of $12,110 for in-state students at public four-year colleges and $23,840 at private non-profit institutions. In the last decade that has meant a rise from 23% of a median family’s income to 38%.

So students have had to borrow. Debt per student doubled over the last 15 years leaving the average student owing $26,000 on graduation day. A decade from now over 50% of them will still have outstanding loans when they enter their early 30s.

spending spree

Colleges have spent lavishly to compete in rankings, particularly the most prominent (and controversial) published by U.S.News & World Report to add to prestige and attract students. They have been on a building spree adding “amenities” that would stun a college student of fifty years ago: student unions with movie theaters and wine bars, dining halls designed on the food court model, workout facilities with climbing walls, even dormitories that have single rooms with their own private baths.

More damaging from an education standpoint, spending on instruction has been far outpaced by spending on non-faculty. Whereas in 1978 there were 55 administrative and other employees for every 100 in faculty, that ratio has risen to almost 1 in administration for every 1 on the faculty, says
The Economist. That growth rate is 10 times that of tenured faculty according to Bloomberg.com.
And administrative paychecks have soared, even at public universities. Penn State’s Graham Spanier was drawing down $2.9 million a year when forced out by the sex abuse scandal in the athletic department (and he got an additional $1.2 million in severance and $1.2 million in deferred compensation on the way out the door). Deadspin.com reported that in 41 states the highest paid state employees are college sports coaches. And did our building spree list forget the expanded football stadiums and skyboxes?

All this in the face of the 2008 downturn that has caused states to cut back on college funding severely and contributions to drop some 40% during the last decade until a recent rebound, according to Moody’s, the rating service, which says that has caused colleges to double their debt between 2000 and 2011. The cost, of course, is passed on to students.

anyone else to blame?

It has been a slow awakening, but the government is increasingly held responsible for feeding the cost spiral. Its direct aid to education, paired with its Pell grants and Stafford loans to students, have caused something of a feeding frenzy by colleges. The government, in its zeal to encourage everyone to get a college education, is not selective about who can get a loan, nor are a multitude of the over-4,000 colleges in the U.S. selective about whom they admit, in their equal zeal to get that student money.

To make sure the money keeps on coming, the education industry poured between $88 million and $110 million into lobbying the government in each of the past six years. With all that money for the taking colleges raise their tuition and other charges to get more of it. “Tuition is set at the level to suck up all the aid that students are able to get”, writes the Wall Street Journal. Evan Feinberg of Generation Opportunity makes the point that if the government gave everyone $100 to buy an iPhone, Apple would raise the price because they’d know everyone has $100 extra to pay for an iPhone. There hasn’t been enough research but a limited study at the National Bureau of Economic Research bears that out in its findings that tuition was 75% higher at for-profit schools where students receive federal aid than at for-profit counterparts where students do not receive aid.

The for-profit colleges are the worst offenders, as we reported in this exposé a year ago. They accept virtually all comers, and charge almost four times what public colleges charge, according to a Senate study. Large corporations and hedge funds have piled into the education business, starting online “colleges” to get at those federal dollars. Of those students enticed to spend their government loans at third-rate for-profit websites, few complete their courses. At Phoenix U., which gets almost all its revenue from the government and is the largest of the for-profits, two-thirds leave before earning their associate degree, and less than 9% of its bachelor degree candidates graduate. The rest of the students have left still owing the government for their loans which their lack of a college education will have difficulty paying back.

But their debt lives on. About 96% of students at for-profit schools take out loans, versus about 13% at community colleges and 48% at four-year public universities. Those at the for-profits may be only 13% of the national student body but they account for 47% of student loans defaults. Yet the government does not make distinctions about job outcomes or default rates, which is what the president wants to fix.

rating weighting

A rating index using different criteria would certainly be welcome. The rating that has most fueled an arms race of college spending and debt to improve their competitive rank — the annual U.S. News & World Report rankings — has long been criticized for basing its grading in part on such self-fortifying factors as a school’s reputation and admission exclusivity. So no surprise to see Harvard, Princeton and Yale at the top of the heap.

But what happens when different criteria are used — criteria that consider value or “bang for the buck”? One example is Washington Monthly’s annual survey, now in its 9th year. Its emphasis uses criteria such as how many low-income students are enrolled, are students helped to graduate on time, is tuition kept low, does a healthy percentage of graduates go on to earn PhDs, and even how much community service participation students are engaged in? When those yardsticks are used, the results turn out quite differently. Leading their pack are Amherst College in Massachusetts, Queens College of the City University of New York (CUNY), Baruch College (also part of CUNY), California State University in Fullerton, and the University of Florida in Gainesville.

The White House already has an interactive College Scorecard on its website which finds colleges that match the searcher’s criteria, or shows on dials how a requested college compares with the average in a number of parameters such as cost, graduation rate, average amount borrowed and loan default rate. Obama has the U.S. Department of Education working on how to add information about the average earnings of former undergrads. That’s particularly difficult and has been met with criticism. How many years after graduation would the income snapshot be taken? What happens when a school that’s a farm team for Wall Street is compared with, say, Oberlin, where music is paramount? Or is money all that should matter? And how will the data come to hand? Does the government expect to snoop into tax returns?

Actually, the government does have default rates on its own student loans, which may be virtually as good an proxy of how well a college prepares its students for making their way in the world.

The President’s proposals have some good features, if we can imagine Congress ever passing them. Currently, the federal government’s $150 billion in annual student aid is mostly allotted uncritically to colleges in proportion to the number of students enrolled. Under Obama’s rankings, money would gravitate to schools where a higher percentage of students stay to graduate and to those that enroll more students from lower income families.

government greed

But this does nothing to cure the deeper problem — a system in which the federal government has become addicted to the money made from the student loan programs. When one considers that the goal is to create an educated America to compete in the world, the interest rates in the deal finally struck this summer are appallingly high. At a time when banks can borrow from the government at less than 1%, the rates are 3.9% for undergraduates, 5.4% for graduate students and 6.4% for parents. In future years interest rates will follow the market. There are caps beyond which the rates will not go, but consider how prohibitive an education would become at those caps of 8.25% for undergraduates, 9.5% for graduate students and 10.5% for parents. Such rates could easily double the debt for the typical payer.

This is all very lucrative for the federal government. Over the past five years, the Education Department has generated nearly $120 billion in profit off student borrowers, per the Huffington Post, “thanks to … the agency’s aggressive efforts to collect defaulted debt”. Under the new rates, estimated earnings from students is estimated at another $184 billion over the next 10 years.

Those “aggressive efforts” are what make the government’s student loan program a disgrace. To begin with, as we have reported, it was the banks that practically wrote the student loan law and saw to it that they are not “dischargable” under bankruptcy. Students are thus singled out with harsher bankruptcy rules than anyone who defaults on mortgages, car loans, credit card debts, etc. Those debts are eligible for dismissal in bankruptcy court, but student loan debt stays permanently attached.

Loans in default are turned over to an army of debt collectors. Paid a percentage of what they bring in and armed with the power to confiscate wages, they are accused of regularly misrepresenting the law by pressing for maximum payments and not advising debtors of more lenient options that the law provides. Elizabeth Warren, in campaigning for creation of the Consumer Financial Protection Bureau, said in 2005, “Student-loan debt collectors have power that would make a mobster envious”.

Unlike debt owed to credit card companies or mortgagors, there is no escaping the federal government. A Rolling Stone article reveals that the government’s own projections expect more than full recovery of defaulted loans, thanks to added fees and penalties — 109.8% for one type of Stafford loans, for example, and still 95.7% after the debt collectors’ cut.

In its student loan program, the government has found a red hot money maker, encouraging the young to burden their lives with loans they may not be able to repay and acting as a ruthless predator when they don’t. It’s just one example, but this from the Rolling Stone piece probably speaks for thousands:

“Talk to any of the 38 million Americans who have outstanding student-loan debt, and he or she is likely to tell you a story about how a single moment in a financial-aid office at the age of 18 or 19 — an age when most people can barely do a load of laundry without help — ended up ruining his or her life. “I was 19 years old,” says 24-year-old Lyndsay Green, a graduate of the University of Alabama, in a typical story. “I didn’t understand what was going on, but my mother was there. She had signed, and now it was my turn. So I did.” Six years later, she says, “I am nearly $45,000 in debt. If I had known what I was doing, I would never have gone to college.”