What many Democrats do not get about conservative views on higher education

The Atlantic published an article yesterday, Why Conservatives are Turning Against Higher Education. The article is mostly about legislation proposed by Josh Hawley, the extremely vocal junior senator from Missouri, that would allow federal funds earmarked for college assistance to also be applied toward the costs of vocational training. The Atlantic paints this legislation as part of a growing disdain among conservatives toward colleges and universities.

This is a terrible article on many levels, but mostly because it is factually inaccurate about who does and does not benefit from a college education. According to The Atlantic, Hawley is peeved by the fact that the perceived need for a degree, even in lines of work that do not require specialized training, is hurting the prospects of working class (read: white working class) Americans, and leading to a litany of social ills, including suicide and addiction. I’ve always been skeptical of this story line, living as we do in Florida, where skilled tradesmen can easily earn six digits with benefits. There are people laying pipes here that out-earn CPAs. But maybe that’s not true for Missouri. (Or maybe Hawley knows fewer working class people than he lets on.)

If anything hurt this population, it was the financial crisis and the steep economic downturn that accompanied it. These events created two scenarios: (1) wages in general were reversed to 1990s levels and many people found themselves competing for work for the first time in their lives; (2) many people rode out the recession on college campuses, where they could borrow virtually unlimited amounts of money from the federal government to live off of, and colleges sold people a lot of degrees they really did not need and many really were not qualified for. (Higher education is not any different than mortgage banking. Extreme cash flows into the industry lowers professional standards. The industry becomes about keeping the money coming in, not achieving a great product. The overwhelming majority of US colleges accept nearly all of the students that apply to them. Getting a college degree does not make you special because higher education is no longer competitive.) If you look at a chart of the total student debt outstanding in this country, it skyrockets in 2008. That’s not an accident. A lot of people who would otherwise have been on the unemployment rolls took out massive amounts of student debt instead. And that decision continues to ruin their financial lives, even as the people who were on the unemployment rolls then have found work and higher wages.

You see these circumstances reflected in the Millennial generation, which is simultaneously the most educated and worst educated crop of kids in modern American history. They have a lot of degrees, but many are unemployable and surely not worthy of promotion within a corporate culture.

All that said, it is not white working class folks that are kept from enjoying the benefits of a college education statistically. I have written about this fallacy before. Economic data from the Federal Reserve and other sources clearly demonstrates that there is no increase in net worth to Hispanics or African Americans with degrees over those with no degrees. These are the two groups where getting a degree literally has no value, because they are the most likely to go to college and still end up in a job that could be done without a college degree (and that’s not as a tradesman). It says a lot about how much colleges and universities truly care about where their graduates end up and how little all these new diversity departments on college campuses are achieving for the communities they were ostensibly created to help.

What is probably the most entertaining aspect of the article, however, is this notion that Republicans are now the party of the working class, and their policy prerogatives are now working against affluent populations. Democrats may be the party of suburban women who think they are special because they have an undergraduate degree like everyone else, but that is not affluence. Golf courses are not loaded with registered Democrats who think the rich do not pay enough in taxes. They are loaded with rich small businessmen and executives who happily voted for Trump and will do it again.

Which brings me to this: It’s not only working poor people who question our country’s perceived obsession with getting a college education. It’s corporate executives and entrepreneurs, who are looking at generations of “educated,” yet unskilled, workers that they really don’t want to hire. Spend twenty minutes around a twenty-something who can’t spell and thinks it’s appropriate to bring their identity politics into the workplace and then ponder why businesses want to automate away every function under the sun. These are the workers colleges are producing, and they are very different from earlier generations, where a college degree was an unassailable object of pride.

If you have a bachelor’s degree, you have taken a lot of core classes and a few electives on the subject-matter that you eventually want to seek employment in. Many of those core classes are now being taught by people who have gone completely off the deep end. I often think I received a college education just in time, because I did not have to experience all the absurdities that are taking place on college campuses now. My philosophy classes were actually about the works of great philosophers, not some instructor spewing their batshit political beliefs for hours. I didn’t have to suffer through listening to a Baby Boomer with comfortable stock portfolio lecturing me about how socialism is the ideal form of governance.

Class angst is not dominating the discussion about whether a degree is worth it. Ultimately, culture is. Are colleges turning out respectable professionals that are capable of financial independence? No, they absolutely are not. They are trading indentured servitude for listening to garbage ideologues for four years. That’s not an education, period, let alone an advanced education. A lot of college graduates resent the fact that they will carry $50,000 of debt for a piece of paper that didn’t actually prepare them for a practical existence in the corporate world. This is not only the opinion of bitter steelworkers and coal miners. It’s also not only the opinion of Republicans.

If trades are a solid path to good earnings, the government should subsidize them over alternatives that involve less desirable consequences. That is good governance. Continuing to throw trillions of dollars at institutions that now specialize in providing a second infancy is not.

I’m not sure that most people genuinely believe going into trades is a better alternative to getting a college education, if we are talking about what a college education could be versus what it has become. They just want to see the culture on college campuses return to some level of rationality. They want a college education to be worth the investment again.

Bernie Sanders has no clue how student loans work

This is not a post about politics. This is a post about basic economics. I really don’t care about your politics.

First of all, let’s talk about where student loans come from and how financial bubbles are created. We can all agree that younger generations are getting absolutely fucking screwed when it comes to obtaining an education. But not everyone who believes this understands the mechanics. And that leads them to support objectively insane public policy positions.

Wall Street is responsible for many yards of bullshit, but they are not even remotely responsible for the student loan crisis. Two other forces in American society are: (1) the federal Department of Education, and (2) postsecondary institutions with bloated administrations and ridiculously lavish capital construction programs.

In the immediate wake of the financial crisis, a lot of legislation was passed, among it the Affordable Care Act (colloquially known as Obamacare). The ACA did not just pertain to health care, however. It was what is known in government as a “Christmas tree,” as lawmakers’ and lobbyists’ every desire was dangled from it. This included higher education. A significant provision of that legislation was that the federal government assumed responsibility for substantially all student lending in the country. The federal government actually took over the books of a lot of state-operated nonprofits, which were far more generous than the federal government in terms of servicing loans and turned a lot of their own investment profits into loan relief.

Student loans do not materialize from nowhere. Someone has to provide the funds. To make funds available for student borrowers, the US federal government issues Treasury bonds, which is essentially borrowing a ton of money from places like China and Japan. (And Wall Street! The federal government relies on borrowing money from Wall Street to cash flow.) US taxpayers borrow that money, and the proceeds from those loans are then turned into loans to student borrowers. Make no mistake: These are very generous, taxpayer-subsidized loans. If you walked into Bank of America as an 18-year-old and told the loan officer that you wanted a low interest rate loan for $50,000 with zero regard for your credit history or employment or future earnings, so you could study accounting or philosophy or religion or gender studies, and please pay for your housing and meal plan while they are at it, Bank of America – a Wall Street institution – would laugh you out of the bank. Because to them you are an objectively bad bet on loan performance. And they are not wrong. Most of the student borrowers that have taken out such loans have either defaulted or are in one of the federal government’s very generous forbearance programs (forbearance means you aren’t paying, but the government’s loan servicer is agreeing not to destroy your life just yet). Because their earnings do not match the cost of their education. If they did, there would be no problem here.

So if the federal government suddenly decides to tell you that you do not have to repay your loan, what happens to those Treasury bonds that the government issued to borrow money from China and Japan to fund your education? Nothing. Nothing at all. American taxpayers must still repay those funds at the barrel of a gun (or, let’s be honest, in the path of a nuke). The federal government would never entertain the idea of not returning $2 trillion plus interest to China. That is the stuff of world wars and not the silly swatting at unmanned drones that is happening these days.

Enter Bernie Sanders’ “financial transaction tax,” which Bernie Sanders says will tax Wall Street to pay for the education you received. Bracket off the fact that, again, the federal government makes student loans and not Wall Street. He instead is going to tax a fixed percentage of stock, bond, and *gasp* derivative transactions.

Bernie Sanders is either colossally stupid, or he wants to buy votes and he’s betting that younger generations do not understand a few things: (1) that the people who participate in the financial markets are not an exclusive group of Gatsby-esque assholes in New York, but every person in the US who has set away money for retirement, for their kids’ education, for a down payment on a new home, or pretty much anything that requires saving; (2) that “derivatives” are not just interest rate swaps used to manage portfolios of mortgages and other financial products, but also the options that are used to mitigate risk in, say, the mutual and index funds that almost every American owns, (3) that there’s not going to be fat cats rolling over and accepting the political resistance affecting their bottom line, but that a financial transaction tax is actually a TAX ON CONSUMERS. It’s regressive, not progressive. It hurts the little guy more than the big guy as a matter of fact, not theory. And even the transactions that are institutional, like interest rate swaps used to hedge mortgages, will only make financial products more expensive to consumers, as the cost of hedging the risk will just be passed on to consumers in higher lending fees.

His plan might help the sliver of younger generations who (1) borrowed an epic ton of money for an education they cannot use, and (2) have no income / are trying to fend for themselves in one of the US cities that is experiencing a massive real estate bubble right now (which the federal government is also propping up – noticing a pattern?). But it’s going to be a wash for the people who borrowed within their means and while experiencing loan forgiveness are going to see its long-term impact on their savings. Only Washington can take your money to give you money back and think you’ll be delighted with that outcome. Because they think you are an idiot pawn, and for a lot of people they aren’t wrong.

Which brings us to the other culprits in this situation: universities. It’s not an accident that a young adult in the 1960s (Bernie’s generation) could afford college by working during the summer while younger generations now have educations that cost a quarter of a million dollars and compete with mortgages for their chunk of the American Dream.

College administrators understand this one important point: That young adults can borrow virtually unlimited money from the federal government (ultimately from China and Japan) to pay for their education, and this means that colleges can charge virtually unlimited amounts for an education. The dynamic here is not at all that different than the liar loans of the mortgage crisis and the financial bubble that ensued. Bankers understood that if they were originating mortgages to sell to investors and not holding them on their books, they could lend virtually unlimited amounts of money with no concern over whether the debt could be repaid. Same with colleges. They have no skin in the game financially.

Higher education is an antisocial enterprise now, and they have created a debt-fueled financial bubble in higher education. They sell the idea that younger generations will be ruining their future financial lives if they choose to do something that does not require a degree, but after you buy a degree from them, your financial life is immediately ruined. They’ve turned college into a second infancy, with luxury suites and student centers with rock walls and restaurants – just some warped hyper-materialistic perversion of education in the place of building skills and making an effort at job placement.

The federal government does not have to absorb trillions of dollars in cost now (and pass those costs on to consumers) and trillions of dollars going forward (who knows where those funds will come from) to break this miserable cycle. They can demand that colleges have financial skin in the game for the graduates they have released into the world to fail. They can strip colleges and universities of their nonprofit status and start clawing back some of these multi-billion-dollar endowments that universities hoard while bankrupting their raison d’etre.

This dynamic needs to change by holding the people who are actually responsible responsible. Not by milking narratives of resentment from 2008 that have literally nothing to do with the problem.

What Bernie Sanders is proposing is just going to enrich the people responsible yet again.