Student Loans Belong In The Market, Not The Government

July 10, 2013

Mandeville, LA – Exclusive Transcript – Once something becomes law, even if the Republican Party opposed it, they will ultimately find a way to make it their own, and it will then become a part of conservatism. Sure enough, student loans have now become part of a conservative policy in the House of Representin’, I guess. Members of the GOP are demanding that action be taken immediately to spare those students out there the unbelievable horror and fate of their interest rates, on the free money that was granted to them by the federal government, doubling. Check out today’s transcript for the rest…

Begin Mike Church Show Transcript

Mike: The story about the student loan rates, it follows one of Church’s laws. Once something becomes law, even if the Republican Party opposed it, they will ultimately find a way to make it their own, and it will then become a part of conservatism. Sure enough, student loans have now become part of a conservative policy in the House of Representin’, I guess. Members of the GOP are demanding that action be taken immediately to spare those students out there the unbelievable horror and fate of their interest rates, on the free money that was granted to them by the federal government, doubling. The story was “Republicans Demand Action on Student Loan Interest Rate.”

[reading]

Rep. Lynn Jenkins, R-Kansas, faulted Senate Democrats on Saturday for this week’s hike in student loan rates . . .

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“For too long, politicians have been in charge of setting these rates, and we keep coming back to the cliffs and deadlines like this one,” Jenkins said. “Paying for college is difficult enough without all this uncertainty. I have two kids in college, I know how hard it can be.”

Negotiators are stuck largely on the question of whether to require an overall cap above which interest rates on new loans could rise.

Top Senate Democrats want a cap in place to protect students if interest rates spike.

Republicans, who prefer a more market-based approach . . .

[end reading]

Mike: Notice it’s not a market-based approach; it’s a more market-based approach. I believe it was Ludwig von Mises that said either it is a market approach or it is not. There is no gray area there. Either the market satisfies the need for the supply of the product and then the market then serves the demand, or the government serves the demand. Once government starts meddling, and once they get their hands in it, then the price mechanism is then thrown off to the side. When the price mechanism is discarded, it is then no longer a function of the market. It’s a price control, in other words.

[reading]

“When President Obama proposed letting the markets set interest rates instead, the Republican-led House passed a bill reflecting his plan,” Jenkins said. “Republicans in the Senate came to the table with similar ideas…

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[end reading]

Mike: If you want the market to set the rate, why don’t you just let the market loan the money then? Gee, that’s a novel concept. Why don’t you just let banks, which used to do this, banks and credit unions and anyone else that wants to get into the student loan business, why don’t you let them loan the money? Why don’t you let them make the determination on whether or not they want to roll the dice that loaning little Johnny Smith down the street $120,000 to go to school, to go study women’s studies or whatever fanciful new field of endeavor you can get a degree in these days, whether or not they think that is a wise and prudent investment and is going to result in an elevated income level that will allow for the repayment of the dough? There’s a very good chance that a bank is going to decide: I don’t think you’re going to be able, yeah, I’m gonna go ahead and say no.

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[reading]

Nevertheless, many of those same senators said they hope to finalize an agreement shortly after the break and have it apply retroactively so students are not hurt by the temporary hike.

[end reading]

Mike: Students are hurt by the existence of the student loan because it drives the cost of tuition up, you dolts. That’s how a market works. That’s how the price mechanism works. Because the money is free, or it’s viewed as being free, and the government ponies it up, there’s no price mechanism. Just look at the skyrocketing rate of college tuition over the last 15 years since this idea has gained so much favor with almost every human being alive except me. You can draw it on a graph and see it.

[reading]

“Republicans continue to insist that we reduce the deficit on the backs of students and middle-class families,” Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid, said a week before the deadline.

[end reading]

Mike: Isn’t that a pile. You get to pass the law. This is Robert Higgs’ Crisis and Leviathan ratchet effect in effect here. You identify a crisis and the crisis is students can’t afford to go to school anymore. Okay, what are we going to do about it? We got this guy Stafford. We got this guy Pell. We’re going to have grants and loans and we’re just going to give them the money. Of course, the crisis then evaporates, but the agencies and entities created to loan the students the money, they’re still around. As a matter of fact, not only are they still around, they keep getting bigger and bigger. They keep crowding out those that used to do these sorts of things. Maybe there weren’t that many that used to do them because it wasn’t a function of the market. Then as this process continues down in its inexorable course and its inexorable path to expansion, which is what you see right in front of your eyes, non-believers out there today, as you see this, then what happens? Then it becomes the Republicans — gee, what’s a Republican? That’s a member of a political party. I got it. The Republicans want to do this with your student loan money, but the Democrats, they’ve got a much better alternative. They give more of it away for free. What are you going to take, Johnny, more free or less free? It’s up to you.

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Now it’s part of politics. Now it’s part of the two-party system. Now the market has no control over it and thus the consumer now has no control over it. Gee, where else has that happened? Let me ponder that for just a moment. Hold on, give me a minute. Healthcare services, the medical services industry. It’s happened there, too. You know, Mike, you could almost write a book about that. Gee, I think I could, if I could convince anyone that that’s actually the way it happened, even though it has happened right in front of their very eyes. [mocking] “That’s not the way, come on, Mike. We have to have these arguments here. It’s why we have two parties.” Really? Yes, really. Se la vie.

At the end of the day that will be whatever the day the deal is struck to slice the student loan rate back to 3.4 percent from 6.8 percent, one thing will be inescapably true, and that will be that the federal government of these United States, which has absolutely no plenary authority in the matters of education whatsoever, will be 100 percent in control of funding over and above what any family or individual can afford to pay to go to college. That will be true. Therefore, it’s now all part of this vast, vast field that we call politics these days. This is just another example of something that doesn’t have to be decided at a voting booth. The voting booth is whether or not you go to Harvard or whether or not you go to Poughkeepsie Community College. That’s the freaking voting booth. But no, we don’t want to hear that.

End Mike Church Show Transcript

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