PrintJanuary 24, 2011
Regulations Bad, Free Market Good
Is 2011 to be the year when liberals awaken to the virtues of the free market? First Donald E. Graham, CEO of the Washington Post Co., and now our president himself? What's going on?
When most people hear "Kaplan," they think of prepping for the SAT and other college tests, but since being bought by the Washington Post Co., Kaplan has expanded into a for-profit college system. This system is so profitable that it keeps the Washington Post afloat: "In the two most-recent fiscal years, Post Co.'s newspaper division lost a combined $356 million while Kaplan's higher-education unit alone, which excludes the test-preparation business, posted an operating profit of nearly $450 million."
So where's the problem, you say? Kaplan aggressively recruits students who cannot afford an education, "pushing prospective students to take on heavy debt while failing to prepare them for careers that allow the students to pay off the loans ... provid[ing] misleading loan advice to students in an effort to enroll them." When the Government Accountability Office revealed this behavior, did executives at the Post Co. or Kaplan deny the allegations? No, but they were shocked, shocked at such "sickening" tactics, and they "pledged to weed out any misconduct" among their recruiters.
What do Kaplan students receive for their studies? A mountain of debt and, apparently, an unmarketable degree: "Bachelor's degree recipients at for-profits have median debt of $31,190 compared with $17,040 at private, nonprofit institutions and $7,960 at public colleges." And so the students from for-profits default at far higher rates than those at nonprofit colleges.
So the Washington Post is on life support from its Kaplan Higher Education division, which receives $1.3 billion (83 percent) of its total revenue from federal student loans. But Kaplan's students default at an alarming rate, leaving the taxpayers stuck with the bill. Yet Mr. Graham is not greedy. Far from it. He's just ministering to "underserved" populations. In an op-ed last week for the Wall Street Journal under the scare-making headline "Avoiding Disaster for Low-Income Students," Mr. Graham said his Kaplan division is providing an opportunity "for nontraditional and lower-income students to earn a college degree."
Yes, he is just trying to help President Obama realize his goal of giving more of our "underserved" populations a college degree, and he's being stymied by -- by regulators. Regulators from the Department of Education, regulators working counter to the president's goal, regulators who would tie a college's access to federal loans to the college's student default rate! "When a regulatory train starts running down the wrong track[,] it is very hard to stop it."
Look out, Mr. Graham! Regulatory train on your left running down underserved populations! I'm not sure which is more alarming: a regulatory train running down the wrong track or the CEO of the Washington Post Co. championing free markets.
I opened the Wall Street Journal a few days after reading the Graham piece and discovered another convert to regulatory reform: the president himself. Apparently Mr. Obama has been having nightmares of regulatory trains running down the wrong track, too, awaking after two years in office and discovering that government regulation can be a bad thing. Not, you understand, regulations passed by Democrats: "From child labor laws to the Clean Air Act to our most recent strictures against hidden fees and penalties by credit card companies, we have, from time to time, embraced common sense rules." Yes, "from time to time," his country does something to make Obama proud. Never miss an opportunity to pat yourself on the back, Mr. President. But alas! there are also the Bad Regulations from the evil George Bush:
Sometimes, those rules have gotten out of balance ... Such was the case in the run-up to the financial crisis from which we are still recovering. There, a lack of proper oversight and transparency nearly led to the collapse of the financial markets and a full-scale Depression.
And so Obama has delivered himself of an executive order requiring "that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth." This is apparently necessary to derail the Awful Regulations Express running from Bush Station, because the Obama Cannonball has been carrying regs that are actually saving us "billions of dollars":
Despite a lot of heated rhetoric, our efforts over the past two years to modernize our regulations have led to smarter -- and in some cases tougher -- rules to protect our health, safety and environment. Yet according to current estimates of their economic impact, the benefits of these regulations exceed their costs by billions of dollars.
Boy, that was a well-kept secret. Must have been a plot by the Vast Right-Wing Conspiracy to keep those glad tidings from the public. What you can learn from an Obama op-ed. So if the Obama regulations of the past two years are already saving us "billions of dollars," why not just pile on more? Heck, regulate the regulations, and Uncle Sam will soon be awash in cash. End the deficits and pay off the debt through revenue raised by regulations. Sounds like a progressive's paradise.
Any who have the stomach to read the executive order in toto may do so here, where you will learn that "Our regulatory system must ... be based on the best available science." Like global-warming science? What might such "science" entail?
[E]ach agency is directed to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible. Where appropriate and permitted by law, each agency may consider (and discuss qualitatively) values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts.
"Equity, human dignity, [and] fairness" -- sounds like the marching orders for Fannie Mae and Freddie Mac in their quest to put more and more people into houses they could not afford, and we all know how well that turned out. Such abstractions cannot be quantified, so the agencies can just assign any weight they wish. Sounds like the "best available science" to me. Oh, and the public will get "an opportunity to participate in the regulatory process." Well, sort of: "each agency, consistent with Executive Order 12866 and other applicable legal requirements, shall endeavor to provide the public with an opportunity to participate in the regulatory process." Yes, just "endeavor," minus the countervailing "Executive Order 12866 and other applicable legal requirements." Of course. And "before issuing a notice of proposed rulemaking, each agency, where feasible and appropriate, shall seek the views of those who are likely to be affected, including those who are likely to benefit from and those who are potentially subject to such rulemaking." Ah, "where feasible and appropriate." No obligation to listen, mind you -- just to "seek" their views. Talk about groundbreaking. Could there be any more qualifiers in this wilderness of words?
And here comes the really stern message to His Government: "each agency shall ensure the objectivity of any scientific and technological information and processes used to support the agency's regulatory actions." Does that apply to the EPA and its finding that CO2 is a greenhouse gas, Mr. President? Be still, my beating heart!
There are, mirabile dictu, more exceptions:
(b) Nothing in this order shall be construed to impair or otherwise affect:(i) authority granted by law to a department or agency, or the head thereof; or(ii) functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
No reason for the Director of OMB to "seek the views of those who are likely to be affected," right, Mr. President?
Henry Percy is the nom de guerre for a technical writer living in Arizona.
