At the Conservative Political Action Conference, Wisconsin Gov. Scott Walker dinged President Obama for his economic policies.
“We have a president who thinks we grow America by growing Washington,” Scott Walker said yesterday at CPAC, the annual shindig for the center-right movement. “We understand that people create jobs, not the government.”
When it comes to student loan policy, Walker’s right. The Obama administration has worked to bypass Congress to expand student loan repayments for workers in the public and non-profit sectors. Formally known as the Loan Repayment Assistance Program (LRAP), this preferential treatment stunts private economic growth and actually discourages it through moral hazard. Why work hard, take risks and grow a profitable business, while in the process paying your loans off, when Uncle Sam will subsidize your economically unproductive lifestyle?
We do need smart, high-quality civil servants in government and charitable roles, but there should be competition and limits to this largesse rather than expansion. Tying loan forgiveness and interest rates to the private-sector value creation of a student’s major makes more sense.
Subsidization of public workers feeds the self-sustaining feedback loop between government unions who are monetary patrons of Democratic politicians. These pols in turn offer favorable and unsustainable pensions and salaries without the ability to hire and fire based on merit. Manhattan Institute scholar Daniel DiSalvo has done a thorough job of documenting this troubling feedback loop in his new book Government against Itself: Public Union Power and Its Consequences.
Public worker unions create stereotypes of penurious teachers buying their own students’ supplies. Perhaps there may be a few instances of this that should be remedied. Yet not only has education spending overall grown, public sector workers make more than private sector workers after factoring in the generous vacation and benefits.
Data from the Congressional Budget Office shows why the LRAP program should be suspect. Across all education levels, excepting the few lucky souls with doctorates, people who work in the public sector are better compensated than people who work in the private sector.
It seems prima facie unfair that private sector workers should subsidize student loans on top of spending taxpayer money to compensate workers who make more than them. To add insult to injury, those wealthier workers turn around and spend more union dues on political advocacy for more salary and benefits.
It is human nature to seek self-preservation, and it’s time to revisit thinking behind the LRAP program. Unfortunately, many Democratic politicians haven’t proven themselves reliable allies in this process.