New CBO Estimate Cuts Savings from Obama's Student Loan Plan in Half [Stephen Spruiell]
With all the talk about health-care and Gatesgate, not much attention is being paid to Obama's plan to make the federal government by far the biggest provider of student loans in the country. To sell this plan, its backers argue that the government can save $87 billion over ten years by cutting out the private sector.
As I pointed out in this piece, that savings estimate "hides the additional risk to the taxpayer that comes with putting all those loans on the government’s books. For government accounting purposes, that risk doesn’t exist, nor does the risk that Treasury’s borrowing costs might spike." Sen. Judd Gregg asked CBO to re-run the numbers after accounting for those risks. CBO did, and came back with a savings estimate of $47 billion — nearly half the amount Obama is touting.
Why is this important? For one thing, Obama wants to spend virtually all of the projected "savings" on other higher-ed programs, not deficit reduction. If CBO goes with the lower estimate, he'll have less money to spend.
But shouldn't we still support the option that would save money, even if it would save less than the administration claims? The answer is that getting the government out of the student-loans business altogether would save taxpayers the most money, but that's not even part of the discussion. Government-subsidized financing for college has become a middle-class entitlement. We wouldn't be facing this choice if the government hadn't first subsidized private lenders and then set up a "public option" to "compete" with them.
This is the very choice that Obama wants to force on health care. If Congress enacts his health-care agenda, chances are good that some future Democratic president will point out how much we "waste" by subsidizing private coverage and how much we would "save" if we just forced everyone to take the public option. And, as is the case with Obama's student loan plan, the bulk of those savings would be chimerical, based on accounting tricks. Lost in the debate will be the notion that the government shouldn't have intervened in the first place. |
