The Corner

Chait Tags Out

Jonathan Chait has outsourced the latest entry in our student-loan debate to “Barron YoungSmith,” an assistant editor at The New Republic. I’m not sure what kind of test you have to pass to be an assistant editor at TNR, but YoungSmith’s post makes me think reading comprehension isn’t on it.

1. YoungSmith writes that my case against the Democrats’ student-loan bill “is terribly convoluted.” Let me try to make it simpler: I do not want the federal government making or guaranteeing student loans. Now, in that context, does it make sense to move toward more centralized government control over the activity? Or would it be easier for conservatives to implement the kinds of reforms we’d like to see if control remained with the private sector?

2. YoungSmith pretends to think conservatives should be jumping for joy because, according to the CBO, the Democrats’ student-loan bill will reduce the deficit. But, as I pointed out last week, the CBO also says Obamacare will reduce the deficit. Nobody seems confused about why conservatives opposed that one (see 1 above).

3. I find it interesting that no one who has disputed my analysis of the student-loan bill has taken up my comparison of student loans to health care. Here we have two once-private activities that the government is in the process of fully absorbing; we are at the end of the process with regard to student loans, and somewhere in the middle with regard to health care. All the rhetoric that was once used to support a “public option” in student lending has been discarded now that it serves liberals’ interests to push for a full takeover of the activity. And all the rhetoric being used to attack opponents of the takeover — that we are shills for private companies and lovers of corporate welfare — can currently be found in the archives of the health-care debate in places such as FireDogLake and The Washington Post op-ed page, where Howard Dean wrote that the Senate bill “expands private insurers’ monopoly over health care and transfers millions of taxpayer dollars to private corporations[.]“

The rhetoric changes according to convenience as liberals march the football toward the full socialization of activities they regard as public goods, such as education and health care.

(Wonkery after the jump.)

4. Does anyone at TNR understand how the old program worked? YoungSmith writes:

Chait wrote that, as long as we’re making loans, the difference between these rates is going to be spent one way or another, and this way it is funding the government, while under the old program it was pocketed by banks. “Not true,” Spruiell writes, and then explains that neither the government nor the banks are able to pocket that entire amount.

Wrong. The government was/is able to pocket this amount under both scenarios. When banks’ borrowing costs fell under the old program, they had to remit the difference to the government. Under the new program, the government will keep the difference between its already-low borrowing costs and the students’ rate, unless Treasury’s borrowing costs spike — a not-unrealistic risk and one the CBO did not account for (see below).

5. YoungSmith writes:

Second, Spruiell plays up the fact that Jason Delisle, the budget expert at the New America Foundation, thinks the student-loan bill was originally scored in a way which hides hidden costs to the taxpayer. But when I contacted Delisle, he said this was a misinterpretation. Both programs contained the same ‘hidden costs,’ yet direct-lending was still vastly cheaper than the old program.

I reached out to Delisle when I first wrote on this topic last July, because I wanted to make sure I had an accurate understanding of the way the program worked, and I thought it might help to speak to someone on the other side of the debate (TNR might try this; see 4 above). I spoke with Delisle for nearly an hour and e-mailed him a link to the story when it was up. That was nearly a year ago. It’s disappointing that he’s just now claiming I misinterpreted him.

I wrote that, according to Delisle, the Democrats’ reform contained hidden costs. He now says both programs contained hidden costs. That’s true of market risk, but not of interest-rate risk (underpriced with regard to the new program, considering the parlous state of the country’s finances) and administrative costs (treated as discretionary spending and thus not included in the CBO’s official score).

Delisle and I talked about this. With regard to interest-rate risk, he admitted that “Treasury can charge 6.8 percent, borrow at 2 percent, and pocket the difference all day” — unless its borrowing costs spike. That’s not accounted for in the CBO score. With regard to administrative costs, I noted that, “There are small but real administrative-cost differences between the guaranteed-lending and direct-lending programs, but, as Delisle points out, this is true mostly because the reimbursement for those costs is settled in back rooms on Capitol Hill, not in the marketplace.” In other words, Delisle explained to me how the banks were overcharging for the service they provided, and I reported it. But it’s one thing to say the government will save money on administrative costs and quite another to omit administrative costs from the CBO score altogether, count the entire amount as “savings,” and then spend the savings, which is what the Democrats did.

6. YoungSmith concludes that I should be happy because I am now “free to enjoy the philosophical purity of railing against a student-loan program that is purely government run.” I guess TNR assistant editors aren’t tested for analytical reasoning, either: By YoungSmith’s logic, the happiest day of my life should be the day the government finally transitions to single-payer health care. For obvious reasons, it won’t be.  

Update: Why this will be my last post on the subject:

Old and infrequent NRO contributor here.  Thought I’d mention something about your new “interlocutor” Barron.  In Aristotle’s list of methods of the sophists (in his Sophistical Refutations), the philosopher notes that one such method of the sophists is to force you to repeat yourself again and again as it dispirits you, makes the debate seem petty and not serious, and causes you to slightly reword your case, thereby making it seem like you don’t hold a stable position (“he first said he hated Obamacare here, but now says he dislikes it!” etc.).  They usually do this by feigning they don’t understand you or by recapping your words in such a way as to be precisely the opposite about what you had actually said, thereby causing you to restate the obvious, again.


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