The government's history of distorting the market place is long, storied, and usually ends badly. Federal interference in the market place began in earnest during FDR's New Deal policies in the thirties and continues to this day. Many economists believe that the great depression was extended due to the federal government's marketplace interference. A recent study out of UCLA comes to the same conclusion, showing that FDR's policies extended the depression by 7 years.

More recent federal government efforts have yielded similar results. Progressive policies originally implemented decades ago, and extended since, turned the mortgage business upside down.  The never ending recession was kick-started by the government's distortion of the housing and home mortgage markets through regulation and Government Sponsored Entities (GSE).  Today both Fannie Mae and Freddie Mac are owned by the federal government and are operating at a loss while housing prices continue to fall. Another failure brought to you by the federal government.

The US Government has been heavily involved in the education market for years, and its interference has produced the same results. With "easy money" flowing into the system through student loans and grants, higher education costs have outstripped inflation for the past two decades. Tuition has been growing faster than healthcare and inflation by a substantial margin since the mid 80s. Since 1985, tuition costs have increased by 412%. The result of federal government largess is the same as it was in the housing market; costs are going up , and we are helping to fuel that inflation with our tax dollars.

The results in higher education are only going to get worse. Federal government has removed private lenders from its student loan guarantee programs as a "cost cutting" measure, and now is effectively the sole supplier of college loans. With ability to offer below market interest rates and the world's baddest debt collector in the IRS, federal student loans are the pinnacle of unfair competition. The Obama administration doesn't stop growing government involvement there. Our President invites future federal employees to take full advantage of the US tax payer. On January 28th President Obama said "Let's tell another 1 million students that when they graduate, they will be required to pay only 10 percent of their income on student loans, and all of their debt will be forgiven after 20 years -- and forgiven after 10 years if they choose a career in public service..." .

If this plan becomes law, then the Obama administration will use tax dollars to pay for the education of a student, whose cost of education is inflated because the government is pouring money into the system. That student is then encouraged to take a job with the federal government which pays a premium for 8 out of 10 jobs, and offers better benefits than the private sector, thanks again to your tax dollars.  If on the other hand you have the temerity to get a degree but work in the private sector, you will have up to 20 years to pay off your debt as opposed to having it forgiven after 10. The people that are busy trying to grow the economy are penalized for their labor, while the future bureaucrat has a cushy outcome.

The Obama administration's plan for higher education puts your tax dollars to work incentivizing government jobs, while fueling higher costs that put students in more debt. According to a 2008 college board study 60% of new BA graduate from a private school with a debt of $20,000 or more, with 22% carrying a debt of over $40,000. With more money being spent on education, which is driving costs up, expect the indebtedness of college graduates to increase. This makes the pay back programs more insidious. With more debt being carried by students Federal jobs become more and more attractive. This distorts the job marketplace and makes it harder for private employers to find qualified candidates and drives up the cost of doing business.


The Obama "Education Plan" is the brainchild of an administration that sees big government as the answer to every problem and business as a villain and solutions are only an unlimited checkbook away. These are the same people and theories that brought you the public school system of Washington DC. The worst school system in the nation, and one of the most expensive to boot. Removing competition and providing unprecedented funding has never guaranteed results. In fact it often does the opposite by discouraging innovation and accountability.

The Obama education plan is no different than this administration's other legislative failures that inflate costs, encourages economic stagnation, and will be expensive. Since we have already run out of other people's money (h/t Margret Thatcher), wouldn't it be smarter to turn over student loans to the private sector and pay down the debt?  It won't matter how educated we are as a nation if we are all drowning in debt. Currently every tax payer is carrying $199,525 in debt, and that number is growing.