The Right Opinion

The Fallacies That Guide Us

By Mona Charen · Nov. 30, 2012

Republicans find themselves in the unenviable position of being forced to agree to raise taxes on those earning more than $200,000 (the actual cut off for those Mr. Obama refers to as “millionaires and billionaires”), or risk being blamed for a tax increase on all taxpaying Americans. They will probably agree, which means it's a politically unavoidable policy, not a good policy.

Why does Obama insist upon raising taxes? Not because he believes it will improve the economy, and not because he believes it will increase receipts to the Treasury. The proposed taxes would bring in about $80 billion a year, a trivial number compared with our 1.3 trillion deficits. Making the books balance is (obviously) not Obama's goal. In 2008, when it was pointed out to him that President Clinton's cut in the capital gains rate increased the revenue from the tax (because lower rates encouraged more transactions), Obama was unmoved. He'd still favor an increase in the capital gains rate, he explained, for the sake of “fairness.” In another famous and revealing moment, he told Joe the Plumber that he prefers to “spread the wealth around.”

That's his lodestar. The Washington Post waited until the election was safely behind us to run a story by Zachary Goldfarb examining the president's governing philosophy. “[B]eneath his tactical maneuvering lies a consistent and unifying principle: to use the powers of his office to shrink the growing gap between the wealthiest Americans and everyone else.” The president, the article tells us (not that we didn't surmise this already), is determined to reduce income inequality.

The president has “an acute awareness of recent research” the Post continues, showing that the changing economy has increased the value of a college education and made it harder for those without a degree to succeed. Obama's solution? Despite budget pressures, he made a goal of having every student receive at least one year of college.“

Is inequality a problem if prosperity is broadly shared? As John F. Kennedy observed, "A rising tide lifts all boats.” Improving the life chances of those at the bottom should be a priority. But the way to do that is to focus on education, family structure, and expanding private sector employment, not on redistribution of income.

True to Obama's philosophy, we are pumping cash into the hands of students wishing to attend college. As the Wall Street Journal reports, “Nearly all student loans – 93 percent of them last year – are made directly by the government, which asks little or nothing about borrowers' ability to repay or about what sort of education they intend to pursue.”

Sound familiar? It's exactly the sort of backwards thinking that, to coin a phrase, “got us into this mess.” Politicians (most, but not all, Democrats) noticed that homeownership was associated with a number of social goods – steady employment, social engagement, high test scores for children – and decided that the homes were causing the other benefits. Make home ownership more broadly available by making mortgages easier to get, ran the logic, and everyone would benefit.

We know how that turned out. But the Democrats learned all the wrong lessons from that debacle – fairy tales that they may actually believe about greedy Wall Street and rich Republicans. So now we are busy repeating our folly, inflating what Glenn Harlan Reynolds calls the “higher education bubble.”

“College is getting more expensive, a lot more expensive,” Reynolds said. “At an annual growth rate of 7.4 percent a year, tuition has vastly outstripped the consumer price index of 3.8 percent. It's skyrocketed past spiraling health care increases of 5.8 percent. Even the housing bubble at its runaway peak pales in comparison.”

Colleges are happy to pocket the windfall while students are being sabotaged. Half of all college graduates cannot find jobs. While homeowners could walk away from an underwater mortgage, there is no escape from student loan debt. Student loans, now in excess of $1 trillion, outstrip car loans and credit card debt, and, unlike those obligations, which are declining, continue to increase because the government is offering what seems to the unwary like a gift.

Just as the housing bubble collapse wound up increasing, rather than reducing inequality, the foolish expansion of student loan debt may hobble an entire generation with a crippling burden. Perhaps the new debtors can console themselves, as they postpone marriage and move in with their parents, that Mr. Obama “cared about the problems of people like me.”

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4 Comments

David Thompson in Bellville, TX said:

Even inflation has outstripped the current, reformulated 3.8 percent consumer price index.

Friday, November 30, 2012 at 4:58 AM

Tod the tool guy in brooklyn ny said:

Coney Island knows about hardships. Sandy washed out hundreds, and shorted out thousands of electrical devices. Public/Gov housing is predominate, although there are some private houses, in the neighborhood and Seagate-A gated community, right on the shore. Stilwell Train Station was closed, for 2 and a half weeks, as was the USPS.Con Ed and National Grid have their own flood stories, as well. The cost of living, since 08 has gone up 40%, yet blind sheep- don't see any connection to their Obongo! Blind sheep sit on derrierre, waiting for FEMA checks to arrive.

Friday, November 30, 2012 at 6:16 AM

OKBecky in Ponca City, OK said:

"Politicians ... noticed that homeownership was associated with a number of social goods -- steady employment, social engagement, high test scores for children -- and decided that the homes were causing the other benefits. Make home ownership more broadly available by making mortgages easier to get, ran the logic, and everyone would benefit."

So instead of looking at what personal characteristics make home ownership possible in individual lives, they decided that the mere fact of owning a home led to those other benefits. Not the personal choices or habits of people who are able to purchase a home, but just the on-paper fact of owning a home. Then millions of people signed up to get the paper-ownership, but hadn't developed the personal habits or attitudes necessary to fulfill their obligations.

Friday, November 30, 2012 at 11:46 PM

OKBecky in Ponca City, OK replied:

[Addendum] So with college, there's such a push to make every American a college student (or even better, a college graduate!) because it's strongly associated with higher income jobs and higher quality of life. Fair enough. But so many students are entering college without the interest or ability to do well; they consider it something they're expected to do (by their parents), or an entitlement ("just give me the degree so I can get my high-paying job; that's what I'm paying you for"). And with high school graduates so ignorant in math, reading, writing, history, geography, etc. (even growing numbers of Ivy League and Seven Sisters matriculants), many colleges have dumbed their courses down, lowered their standards, relaxed their requirements, so that students can have the "college experience" and complete a degree, which of course is good for the college's ability to garner more students. Study whatever you want, and as long as you can persuade your professor you deserve an A, or that all your classes combine to form some sort of major, you get it!!

College degrees are more expensive and more worthless than they've ever been, it may be fair to say. They've become a cultural necessity, and the universities charge through the nose, and while a quality education is very possible to obtain (I've received one myself, part at a Seven Sisters college, part at a state university), too too often the paper is a joke. College graduates increasingly graduate knowing *less* about history, geography, economics, etc., than when they entered, and are then too highly educated (or too proud) to do menial work or start at a bottom rung. When a college diploma becomes necessary to get any form of work, the standards must necessarily be dropped because college is simply not for everyone. There's nothing wrong with not being college material; but now the colleges have dropped the quality of education they offer, to where people who *are* college material are being short-changed.

Friday, November 30, 2012 at 11:56 PM