Obama to Throw Gas on Fiscal Fire of Student Loan Debt Crisis

By: Jeffrey Klein

This morning on the Fox and Friends television news show, anchors Steve Doocy and Brian Kilmead interviewed Secretary of Education, Arne Duncan. The subject was the steep continuous increase of College tuition costs across America.

It was an obvious segue from President Obama’s State of the Union Speech, wherein he called for [no specific] action by these institutions to decrease their costs (sic) [pricing], or risk losing federal funding.

Duncan’s answers during the interview, and a subsequent review of his bio, reveals that just like his boss, although a Harvard grad (majored in Sociology), he does not have a scintilla of good sense when it comes to applied economics and business.

But, even more dangerous to the fiscal health of our country and it’s economic recovery, he is ready to enact Obama’s student loan [balance] write-down [forgiveness] idea, which is nothing more than a thinly-veiled “college student vote buying mechanism”–where he would once again use taxpayer dollars like campaign money.

The interview, with my “truth-translations” embedded, is paraphrased below:

FF: ‘Why has a college education gotten so expensive?’

AD: ‘I’m not interested in finding blame–I am just interested in finding a way to fix it.’

JK: Duncan knows the primary cause of problem is the steep increase in cost of labor and benefits, due mostly to union intervention–both of whom represent a very large portion of the Democrat voter base…so of course he doesn’t want to assign blame.

FF: ‘How come private schools are so much more expensive?’

AD: ‘I don’t have an explanation for that–I don’t know.’

JK: Yeap, you guessed it–he doesn’t want to rile the private academic voter block either; and, to correct his shyness, Duncan went to Harvard and knows exactly why it is more expensive–no government subsidies.

AD: ‘But, we are looking at increasing Pell Grants and “reducing” student loans, to cut the cost of education.’

JK: First, these actions do not result in “cutting” the cost of education, as Obama demanded in his STOU address, the financial burden of which would be born by the budget of each school. Instead, they “subsidize” an “offset” the student’s cost of education–using taxpayer dollars.

And, therein lies the problem with Obama and Duncan’s plan–total lack of knowledge, or understanding, regarding the Economic Pricing Model.

Pell Grant and Student Loan money availability are the prime movers that continue to directly drive “UP” the cost of tuition and books–due to the increased demand for education services and products subsidized by government money, against a more “inelastic” [difficult to increase] supply of such services and products.

This is the exact same type of economic “government horseplay” that led to the residential real estate market “boom,” causing market values to skyrocket way beyond inflation, in a [historically] very short period of time–resulting in the bubble that imploded the worldwide financial system.

To describe in this case, instead of Pell Grants and Student Loans, the catalyst for the real estate boom was the Community Reinvestment Act changes, brought about by President Clinton beginning in the mid-1990s, resulting in the creation of “Sub Prime” mortgages.

These new mortgages had much relaxed, or even eliminated, [low income] buyer qualification standards, which resulted in a greatly increased number of people with mortgage money in the market, quickly creating a much greater demand “chasing” the inelastic [difficult to increase] supply of homes–causing the price of residential real estate to skyrocket to heights never before seen.

It is clear that should Secretary Duncan be allowed to implement [Obama’s] plan, it would actually be ‘pouring gas on the fire’ of an already critical, $1 trillion Student Loan Debt “catastrophe waiting to happen”–by creating another economic bubble of artificial demand using [borrowed] government money.

So, it is imperative that the U.S. House of Representatives must keep the door of the Treasury Department securely locked, to prevent the self-serving incompetence of the Obama Administration, from financially ruining what is left of our country–before they can all be escorted out of Washington, D.C. one year from now.

Be on the lookout for my article next Monday afternoon, wherein I will outline a sound method for correcting this serious situation.

Copyright (c) 2012 by Jeffrey Klein

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