Wintery Knight

…integrating Christian faith and knowledge in the public square

Obama’s irresponsible student loan policies leave taxpayers with trillion-dollar bubble

President Obama's student loan bubble

President Obama’s student loan bubble

This is from Investors Business Daily.

It says:

In 2010, Obama eliminated the federal guaranteed loan program, which let private lenders offer student loans at low interest rates. Now, the Department of Education is the only place to go for such loans.

Obama sold this government takeover as a way to save money — why bear the costs of guaranteeing private loans, he said, when the government could cut out the middleman and lend the money itself?

The cost savings didn’t happen. In fact, the Congressional Budget Office just increased its 10-year forecast for the loan program’s costs by $27 billion, or 30%.

What did happen was an explosive growth in the amount of federal student loan debt. President Clinton phased in direct federal lending in 1993 as an option, but over the next 15 years the amount of loans was fairly stable. The result of Obama’s action is striking. In each of the past six years, federal direct student loan debt has climbed by more than $100 billion. (See chart.)

And since Obama keeps making it easier and easier to avoid repaying those loans, it’s a problem that taxpayers will eventually have to shoulder.

Through words and actions, Obama has encouraged irresponsibility on the part of student borrowers. He constantly talks as if student debt were an unfair burden they unknowingly had foisted upon them.

At the same time, he’s made it easier and easier to avoid paying back student loans in full. Earlier this year, for example, Obama expanded eligibility for his “pay as you earn” program, which limits loan payments to 10% of income, with any debt left after 20 years forgiven.

Students got the message. The St. Louis Fed reports that 27.3% of student loans in repayment are at least a month behind in payments. That’s a far higher delinquency rate than any other kind of debt, and it’s significantly higher than the delinquency rate 10 years ago.

“This overall level of delinquency is very concerning,” concluded authors Juan Sanchez and Lijin Zhu.

A 2013 Consumer Financial Protection Board report found that less than half of this federal loan money was actually being paid. About 30% was held by borrowers still in school or in a grace period, another chunk in deferment or forbearance, and almost 14% was in default.

The problem here is that whenever the government nationalizes something that the private sector is doing, it always creates a problem. Let me explain. If student loans (or mortgage loans) are run solely by the private sector, then the motivation for lending money out at interest is to make money for the bank’s depositors and investors. In other words, because the bankers are in a free market and have to compete for depositors and investors, they have an interest in making sure that the loans they make get paid back.

But when the government takes over loans, they are not interested in being wise with the money they lend out – it’s not their money. They want to lend out as much as possible today in order to buy votes, and then kick the can down the road on the repayment. So instead of being careful about asking “will this get paid back?” they ask “how can I borrow from the future in order to buy as many votes as I can right now?” And that’s how we got the housing crisis of 2008, as well as this trillion-dollar student loan crisis.

When you take the profit motive out of the lending decision, then money gets lend to people who will never be able to pay it back. No private bank that has to answer to shareholders hands out money to students who want to study underwater basket-weaving. But the government does. They want to buy as many votes as possible. And besides, this is not their money. They are borrowing it from the future earnings of the very students they are giving it to! That’s what happens when you let big government decide everything.

Whenever big government politicians want to buy votes with taxpayer money, they always sell it to the people with sob stories about some poor, helpless group of people will suffer through no fault of their own. There are a lot of voters who will vote for politicians who cry crocodile tears for them, especially ones who don’t understand economics. There is no free lunch – somebody has to pay. Democrats are basically throwing a party for students, and then mailing them the (unexpected) bill for it, with interest.

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Brookings Institution: a $1.2 billion social program that doesn’t work

This is a surprising article coming from the leftist Brookings Institution.

They write:

Afterschool programs, or out-of-school time programs, burst into view in the late 1990s. The federal government—flush with budget surpluses of hundreds of billions—began spending more on the 21st Century Community Learning Centers (CCLC) program. The program was created by the 1994 Improving America’s Schools Act and had languished as an obscure provision to promote schools as community resources. Initially, the program received no appropriation, until Congress appropriated $40 million for it in 1998.

Spending exploded after the program pivoted to support afterschool programs. By 2002, the program’s appropriation was $1 billion. For a federal program to grow from $40 million to $1 billion in a few years happens rarely. The agency overseeing the program, the U.S. Department of Education, partnered with the Charles Stewart Mott Foundation to underwrite conferences and technical assistance for program providers, pumping millions more into the program.

In 1999, the Department of Education contracted with Mathematica Policy Research to evaluate the 21st Century program. The evaluation had elements that were both rigorous and representative. The elementary school part of the study was designed as an experiment; the middle school part was designed as a random sampling of programs around the country, with students participating in the program matched with students in neighboring schools (or the same school, in rural areas) that were not participating in the program. The evaluation collected data on a wide range of outcomes including grades, test scores, attendance, and behavior.[1]

Ultimately, the evaluation reported on how the program affected outcomes. In a series of reports released between 2003 and 2005 (here, here, and here), the answers emerged: the program didn’t affect student outcomes. Except for student behavior, which got worse. And small samples were not an issue explaining why findings were insignificant. The national evaluation included about 2,300 elementary school students and 4,400 middle school students. The results were insignificant because the estimates of program effects hovered around zero.

In the face of these results, one course of action would have been to at least reduce program spending, if not eliminate the program altogether. The Bush administration proposed a reduction of $400 million in the program budget, advocates rallied to the cause, Arnold Schwarzenegger got involved, and ultimately Congress left program spending unchanged. To this day, the program spends more than a billion dollars each year.

If the national evaluation was thought to be unreliable or errant, a sensible next step would be to do another, possibly with different focuses or features. That hasn’t happened. Or perhaps the evaluation findings were dismissed because other research has shown that afterschool programs are effective. It hasn’t. Echoing a previous 2006 review by Zief, Lauver, and Maynard, a 2015 review of dozens of studies that were published up to 2014 concluded that “mean effects were small and non-significant for attendance and externalizing behaviors.”[2](This is how researchers say the evidence shows that after school programs do not improve attendance or behavior.)

Two other pieces of evidence add to this picture. First, the U.S. Department of Education continues to collect and summarize the program’s annual performance reports (each state reports on its programs to the Department). Its most recent summary noted that ‘nearly all of the performance targets for the 2009-2010 reporting period were not reached.’ Second, a recent federal study of supplemental services programs found no effects on academic outcomes. The study examined programs that are required to be offered by schools that do not meet target levels of adequate yearly progress under No Child Left Behind. They are tutoring and academic support service programs offered outside the regular school day that have a stronger academic focus than the 21st Century programs (which can offer snacks, recreation, and youth development activities), and yet they still did not improve academic outcomes.

I am linking to this because I want people to understand that not every problem has to be solved by the government. It is possible that when politicians tell us that they want to solve a problem by taxing us and spending our money, it’s possible that what they spend our money on does not work. Normally, when it comes to government spending on children,it’s very hard to cut spending because compassionate people do not want to take money away “from the children”. Most Democrat voters do not even realize that money spent by the government either comes from taxation or borrowing from the next generation does not work, it can be very hard to cut funding for those those programs, because the powerful pro-government party has no interest in cutting government spending in any area. They get contributions from people who are very interested in big government.

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58 Democrats boycott Benjamin Netanyahu’s address to Congress on Iran

Israeli prime minister Benjamin Netanyahu spoke before the U.S. Congress on Tuesday, and below you can find a round-up of reactions.

Here’s The Daily Signal summarizing why Netanyahi opposes the deal:

Netanyahu made the case before Congress that the White House’s efforts to negotiate a deal with Iran have about as much in common with the Camp David Accords as an SNL skit has with a State of the Union Address. The administration’s proposal is anything but a realistic plan for peace.

A real peace plan would demonstrate that all sides were committed to not adding more nuclear weapons powers to the Middle East. The deal as it stands does the opposite—it preserves the nuclear option for Iran—and as result will prompt other regional powers to hedge their bets and prepare to go nuclear as well rather than live in Tehran’s nuclear shadow.

The proposed multi-year moratorium doesn’t end concerns that Iran will build a bomb and put nuclear warheads on long-range missiles. Rather, under the agreement, Tehran can walk up to the edge of becoming a declared armed-nuclear state with a robust missile force and sit there. That hardly sets the condition for sure peace in our time.

Meanwhile, even the shaky stalemate proposed by the agreement rests on the assumption that Tehran won’t follow North Korea’s path to breakout status by cheating on the agreement and then abrogating the deal when it no longer suits the regime.

At the same time the price for Obama’s peace comes pretty high. Tehran demands significant and immediate sanctions relief. That means more money for a corrupt regime with one of the world’s worst human records to perpetuate strangled hold over the people of Iran.

Obama’s deal also means more money for Tehran to prop-up the likes of Hezbollah, Assad, Hamas, the Houthi rebels in Yemen and murderous unaccountable Shia militias in Iraq (which are as big a threat to the future of the country as ISIS). As one of the world’s premier state-sponsors of terrorism, enabling and emboldening Iran’s efforts to reshape the region by force of arms and slaughtering innocents doesn’t make the prospects for peace in the region any brighter.

All the partisan controversy and vitriol over Netanyahu’s speech cannot obscure that the White House has no good answers to the legitimate concerns he raised.

Breitbart News summarizes how the speech was received:

Prime Minister Benjamin Netanyahu delivered a passionate, inspiring, thoughtful, and “game changing” speech before the American Congress which lasted for about 45 minutes, during which time he was applauded 43 times, often for 15 seconds at a time. His words elicited many standing ovations.

The only other foreign leader to have spoken to Congress three times was Winston Churchill, the British Prime Minister. In honor of that, Speaker of the House, John Boehnerplans to present Netanyahu with a bust of Churchill.

Netanyahu received wild applause when he said: “The world should demand that Iran do three things. First, stop its aggression against its neighbors in the Middle East. Second, stop supporting terrorism around the world. And third, stop threatening to annihilate my country, Israel, the one and only Jewish state.”

Israel’s Prime Minister again received rather thunderous applause and a standing ovation when he noted that Holocaust survivor Elie Wiesel was in the audience—and when he said: “My friend, standing up to Iran is not easy. Standing up to dark and murderous regimes never is. Elie, your life and work inspires to give meaning to the words, ‘never again!’ And I wish I could promise you, Elie, that the lessons of history have been learned. I can only urge the leaders of the world not to repeat the mistakes of the past.”

At this point Congress outdid itself in term of applause and a standing ovation.

PM Netanyahu was greeted with a thunderous ovation when he first arrived and again after he was introduced.

And here’s Dennis Prager, writing at Investors Business Daily, explaining why Obama refused to meet with Netanyahu:

The prime minister of Israel is at the forefront of the greatest battle against evil in our time — the battle against violent Muslims. No country other than Israel is threatened with extinction, and it is Iran and the many Islamic terror organizations that pose that threat.

It only makes sense, then, that no other country feels the need to warn the world about Iran and Islamic terror as much as Israel.

That’s why, when Benjamin Netanyahu speaks to the United Nations about the threat Iran poses to his country’s survival and about the metastasizing cancer of Islamist violence, he unfortunately stands alone.

Virtually everyone listening knows he is telling the truth. And most dislike him for it. Appeasers hate those who confront evil.

Given that this president is the least likely of any president in American history to confront evil — or even identify it — while Benjamin Netanyahu is particularly vocal and eloquent about both identifying and confronting evil, it is inevitable that the former will resent the latter.

Here is the list of 58 Democrats (House and Senate) who walked out of the speech.

And a number of top Democrats — including Vice President Joe Biden, whose job description includes the title President of the Senate — didn’t attend.

[…]At least 50 Democratic House members and eight senators who caucus with the Democrats said in recent weeks they wouldn’t attend the speech, many in protest to a move that they say is an affront to the president.

The full transcript of the speech has been posted by The Weekly Standard.

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Obama administration giving away the store in nuclear deal with Iran

Map of Iran Nuclear Facilities

Map of Iran Nuclear Facilities

(Source: BBC)

The Wall Street Journal reports.

Excerpt:

Secretary of State John Kerry told Congress this week that no one should pre-judge a nuclear deal with Iran because only the negotiators know what’s in it. But the truth is that the framework of an accord has been emerging thanks to Administration leaks to friendly journalists. The leaks suggest the U.S. has already given away so much that any deal on current terms will put Iran on the cusp of nuclear-power status.

The latest startling detail is Monday’s leak that the U.S. has conceded to Iran’s demand that an agreement would last as little as a decade, perhaps with an additional five-year phase-out. After that Iran would be allowed to build its uranium enrichment capabilities to whatever size it wants. In theory it would be forbidden from building nuclear weapons, but by then all sanctions would have long ago been lifted and Iran would have the capability to enrich on an industrial scale.

Is Iran our friend? Not really:

That is some gamble on a regime that continues to sponsor terrorist groups around the world, prop up the Assad regime in Syria, use proxies to overthrow the Yemen government, jail U.S. reporter Jason Rezaian on trumped-up espionage charges, and this week blew up a mock U.S. aircraft carrier in naval exercises near the Strait of Hormuz.

Charles Krauthammer comments:

News leaked Monday of the “sunset clause.” President Obama had accepted the Iranian demand that any restrictions on its program be time-limited. After which, the mullahs can crank up their nuclear program at will and produce as much enriched uranium as they want.

Sanctions lifted. Restrictions gone. Nuclear development legitimized. Iran would re-enter the international community, as Obama suggested in an interview last December, as “a very successful regional power.” A few years — probably around 10 — of good behavior and Iran would be home free.

The agreement thus would provide a predictable path to an Iranian bomb. Indeed, a flourishing path, with trade resumed, oil pumping and foreign investment pouring into a restored economy.

Meanwhile, Iran’s intercontinental ballistic missile program is subject to no restrictions at all. It’s not even part of these negotiations.

Why is Iran building them? You don’t build ICBMs in order to deliver sticks of dynamite. Their only purpose is to carry nuclear warheads. Nor does Iran need an ICBM to hit Riyadh or Tel Aviv. Intercontinental missiles are for reaching, well, other continents. North America, for example.

[…]The deal now on offer to the ayatollah would confer legitimacy on the nuclearization of the most rogue of rogue regimes: radically anti-American, deeply jihadist, purveyor of terrorism from Argentina to Bulgaria, puppeteer of a Syrian regime that specializes in dropping barrel bombs on civilians.

Based on past deals, we shouldn’t be surprised by this news.

This Heritage Foundation article re-caps our negotiating blunders.

What makes these deals even worse is that they are all about constraining us, not the other guy. New START didn’t require Russia to destroy a single nuclear missile: it only reduced the size of the U.S. stockpile. The Arms Trade Treaty won’t stop the lawless and incompetent nations of the world from selling arms irresponsibly, but our lawyers will guarantee that it restrains us.

The essence of the Syrian deal was that it saved the U.S. from having to carry out Secretary of State John Kerry’s “unbelievably small” retaliatory strike on the Assad regime, which gets to remain in power. The Iran carve-up removes the lingering threat of any U.S. military action and makes Israeli action all but unthinkable, while the Iranians keep on enriching uranium and can zoom up to weapons-grade levels far faster than we can reimpose sanctions.

The administration is more afraid of having to respond to an Iranian nuclear breakout than it is of a breakout itself. The deal has bought only a six-month delay in the Iranian program, at the cost of easing UN sanctions the U.S. had carefully built up since 2006.

At the core of the accords is the belief that the U.S. is the nation that needs to be restrained. That is why they involve big concessions from us in exchange for far less from the other side. Since we are the problem, we are the ones who need to give things up to get a deal.

And what about the global warming deal with China?

We got fleeced there, too:

When the United States and China announced a surprise carbon-emissions deal, the environmental Left squealed in delight. Al Gore declared it “groundbreaking progress from the world’s largest polluter” (i.e., China), while John Kerry patted himself on the back in the New York Times, gushing about how “the world’s most consequential relationship has just produced something of great consequence in the fight against climate change.” Despite the extraordinary fanfare, there’s abundant reason for skepticism.

Though the announcement is politically expedient for both Barack Obama and Xi Jinping, China almost certainly won’t take significant steps to reduce carbon emissions.

[…]Beijing hasn’t actually agreed to much: It will try to “stop increasing” carbon emissions by 2030 — which is a slanted way of saying its emissions will continue to grow for another 16 years — and derive 20 percent of its energy from renewables by then, up from about 10 percent now. Though these goals may be codified into Chinese law, the CCP does not have a reputation for respecting the rule of law. And the United States and the international community won’t have any way of enforcing these goals. No wonder Reuters called it a “largely symbolic plan.”

[…]Critics of the president’s environmental policies have noted that even the most stringent emissions reductions from the First World won’t have much of an impact unless the developing world also cuts back. The environmental Left is marketing the new U.S.–China deal as a way to eliminate that objection and plow forward with the president’s hardline proposals for carbon regulations. “Now there is no longer an excuse for Congress to block action on climate change,” Senator Barbara Boxer said in today’s New York Times. “The biggest carbon polluter on our planet, China, has agreed to cut back on dangerous emissions, and now we should make sure all countries do their part because this is a threat to the people that we all represent.”

Boxer ignores the myriad other valid objections to the Obama administration’s proposed regulations, which seek to cut carbon emissions 30 percent from their 2005 levels by 2030. In reality, it’s bad policy because, despite enormous economic cost, it would yield very few environmental benefits.

And of course we have the complete surrender to Russia in the Arctic.

We are cutting deals with every bad actor on the planet that will undermine our interests at home and abroad for years to come. And why? Well, it’s because Democrats think that United States is more of a threat to world peace than a force for good, and so they think the best way to save the planet is to strengthen countries like Russia, Iran and China. I think in one way this plan will work – Democrats will feel as if they are doing something, and they will congratulate themselves on their moral superiority. But as far as actually achieving good results? It’s not going to happen.

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Obama’s executive amnesty will make it easier for non-citizens to vote in elections

This is from the Washington Times.

Excerpt:

President Obama’s temporary deportation amnesty will make it easier for illegal immigrants to improperly register and vote in elections, state elections officials testified to Congress on Thursday, saying that the driver’s licenses and Social Security numbers they will be granted create a major voting loophole.

While stressing that it remains illegal for noncitizens to vote, secretaries of state from Ohio and Kansas said they won’t have the tools to sniff out illegal immigrants who register anyway, ignoring stiff penalties to fill out the registration forms that are easily available at shopping malls, motor vehicle bureaus and in curbside registration drives.

Anyone registering to vote attests that he or she is a citizen, but Ohio Secretary of State Jon Husted said mass registration drives often aren’t able to give due attention to that part, and so illegal immigrants will still get through.

Oh, but it gets better – they also get tax refunds for years where they worked illegally:

IRS Commissioner John Koskinen told Congress on Wednesday that even illegal immigrants who didn’t pay taxes will be able to claim back-refunds once they get Social Security numbers under President Obama’s temporary deportation amnesty.

[…]Mr. Obama’s new deportation policies, which carve most illegal immigrants out of danger of being removed, and could proactively grant as many as 4 million illegal immigrants work permits and Social Security numbers, are increasingly under fire for ancillary consequences such as tax credits and competition for jobs.

Mr. Koskinen, testifying to the House oversight committee, said the White House never asked him or anyone else at the IRS about the potential tax effects of his amnesty policy.

[…]He also clarified his testimony to the Senate last week, where he acknowledged illegal immigrants who had paid taxes using substitute Social Security numbers but who gain real Social Security numbers when they are approved for the amnesty can apply for back-refunds of the Earned Income Tax Credit.

On Wednesday, he said even illegal immigrants who didn’t pay taxes will be able to apply for back-credits once they get Social Security numbers.

The EITC is a refundable tax credit, which means those who don’t have any tax liability can still get money back from the government.

“Under the new program, if you get a Social Security number and you work, you’ll be eligible to apply for the Earned Income Tax Credit,” Mr. Koskinen said.

He said that would apply even “if you did not file” taxes, as long as the illegal immigrant could demonstrate having worked off-the-books during those years.

That expands the universe of people eligible for the tax credit by millions. He said only about 700,000 illegal immigrants currently work and pay taxes using an Individual Taxpayer Identification Number, but as many as 4 million illegal immigrants could get a stay of deportation and work permits under the temporary amnesty, which would mean they would be eligible to claim back-refunds if they worked those years.

I just don’t like it when I see Democrats making it harder for people who play by the rules and easier for people who break the rules. It’s things like this executive amnesty that discourage me from working and getting married. If the government just views me a chump who they can tax with impunity in order to buy votes from the people who get more from government than they put into it, then why should I try to do anything? I feel used. I’m being pressed to work to pay their taxes, then they turn around and give the money to people who break all the rules. Since young, unmarried women are the ones who vote for high taxes and bigger government, it makes me think I should get married at all. Why try to do anything when your government is trying to wreck all your plans anyway? Nobody seems to care about the man who works hard and plays by the rules.

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