Boehner and Reid agree that poor students should pay more

The finale of the debt-ceiling theatre is nearing, and it is shaping up to be an exciting one. With this self-imposed disaster looming, two plans have moved ahead as front-runners in the negotiations. The two plans — proposed by Harry Reid and John Boehner — cut a basically identical amount of spending, with the exception that Reid’s plan includes caps on spending for the wars in Iraq and Afghanistan. Without those caps, the Reid and Boehner plans reduce the deficit over the next decade by $927 billion and $917 billion respectively. Reid’s war-spending caps net his plan an additional $1.277 trillion in deficit reductions that Boehner’s does not, but the significance of this is disputed as the wars are already winding down.

Despite their disagreements in some areas, both Reid and Boehner have come to agree that poor students need to pay more. Senator Reid’s plan calls for the elimination of the interest subsidy for loans taken out by low-income graduate and professional students. Representative Boehner’s plan calls for the exact same thing. They likely got the idea from none other than President Obama who proposed eliminating the subsidy earlier this year. With Boehner, Reid, and Obama on board, increasing the burden on poor students is shaping up to be quite a bipartisan success.

As someone who presently receives the subsidy, I have a good idea what the elimination of it will mean for poor students. Under current law, graduate and professional students who are sufficiently needy are able to access up to $8,500 per year in subsidized Stafford Loans. What makes the loans subsidized is that the federal government pays for the interest that accrues on the loan while the student is in school. After graduation and a six-month grace period, the student is then responsible for paying off the principle and any interest that accrues from that point.

For a student who takes out the full $8,500 for three years — as poor law students likely do — the elimination of this subsidy will cost them slightly more than $3600 during the time that they attend the school. Upon graduation, their higher debt total will lengthen the amount of time it takes for them to pay off their loans. That delay will then cost them more as interest will continue to accrue. Just how much more it will cost them depends on how quickly their income after graduation allows them to pay off their loans. While it will vary by case, for many students, it is likely thousands more will have to be paid in additional interest on top of the extra $3600+ that the subsidy used to cover.

While there are cuts that would be worse than this — like cuts to Medicaid or SNAP — this is still contrary to any reasonable picture of distributive justice. With the elimination of this subsidy, poor students are being told that they must pay money that they do not have in order to decrease a deficit which they did not cause. What caused this deficit that we are now having to close? In short, it was three things: the Bush-Obama tax cuts, the two wars, and the Great Recession. The tax cuts primarily benefited the wealthiest individuals in this country; the wars — one of which was perpetrated through outright lies — benefited few except war contractors; and, the Great Recession created enormous pain for almost everyone except the very bankers who caused it.

No one could seriously maintain that the logical remedy for a problem generated by those causes is to take money from poor people. At most, one might try to argue for some sort of shared sacrifice. We might say that we should let bygones be bygones, and stop pointing fingers at the classes and groups of people who have put us in the situation we are in. On this kind of line, we would remark that this is a problem for the entire country, and we all need to sacrifice in order to solve it. But, we are not even doing that.

The leaders on both sides have decided that we will fix our problems exclusively on the backs of poor people, old people, and sick people. The extremely rich financiers — who both caused our present predicament and have plenty of money to contribute to fixing it — are going to be spared completely. Asking them to pay a single dollar to improve our fiscal situation has been taken completely off the table.

Race to the bottom leads to corporatism

Right-wing advocates of limited government often argue that locating political power in state governments is preferable to locating it in the federal government. The reasoning they give for why this is the case is a bit complicated. On its face, it seems like it is irrelevant where government power is located. After all, a state government can be just as involved in regulation and social programs as the federal government is. Advocates of this view do not deny that, but they typically claim that locating power in state governments will force states to compete with one another which will lead them to reduce regulations and taxes in order to attract businesses.

That is, they believe that the natural conclusion of inter-government competition for capital investment is a race to the bottom which will force governments to increasingly dismantle labor laws, environmental laws, taxes, and other regulations. When the federal government sets nationwide standards, owners of capital have no way to escape them except of course to move out of the country, something they increasingly do. However, if a state sets a particular standard, owners of capital can just shift that capital to another state and easily avoid it. Thus, this strategy of relocating power in the states will usher in the kind of limited government those on the right-wing would like to see.

That is the theory at least. In reality, the mechanism used to force the creation of limited state governments — the profit-motivated decisions of investors — will actually create large state governments that provide generous handouts to attract businesses. Advocates of this strategy typically think of it in terms of the pairwise comparisons of investors. An investor choosing between two states would choose the one that had less environmental regulations, assuming everything else about the states was identical. Along the same lines, an investor deciding between two states would pick the state that had lower taxes, no workplace safety rules, and no unions. The state that was imposing these profit-reducing measures would then be starved of capital investment, and would thus be forced to dismantle them to stay competitive.

This analysis of what would happen makes good sense, but it does not go far enough. There is nothing that would constrain states that are competing with one another to only use decreased state intervention to attract investors. In fact, at some point all of the regulations would have to be repealed which would leave the states no choice but to compete in some other way. That other way would of course be through subsidies, corporate welfare, and other sorts of monetary bribes. If an investor is choosing between a state which will cut them a check from the public coffers and one which wont, clearly the state giving them money would be preferred. The same competition effects would kick in, and states would be off to the races to see who could hand out the most money to attract capital.

This kind of corruption of the state by owners of capital is quite natural and pops up in almost any place where a free market is supposed to exist. Noam Chomsky’s talk on this phenomenon which he refers to as the “really existing free market theory” is illuminating:

And the principle of really existing free market theory is: free markets are fine for you, but not for me. That’s, again, near a universal. So you — whoever you may be — you have to learn responsibility, and be subjected to market discipline, it’s good for your character, it’s tough love, and so on, and so forth. But me, I need the nanny State, to protect me from market discipline, so that I’ll be able to rant and rave about the marvels of the free market, while I’m getting properly subsidized and defended by everyone else, through the nanny State.

The brute fact of the matter is that a capitalist who has to choose between a perfectly laissez-faire state and a corporate welfare state will always choose the latter. Forcing states to compete to attract capital will consequently always lead to the construction of corporatist states, not limited-government paradises. To suggest otherwise is to pretend that owners of capital will not invest that capital where it will yield the best return, i.e. that capitalists will not act as capitalists.

Centrist third party destined to fail

Thomas Friedman’s article on an upstart third party in Sunday’s New York Times has been generating buzz. Friedman explains that the new party — Americans Elect — will be one of a radical centrist variety. Eschewing the normal nominating processes, it will harness the power of the internet to nominate its own candidates for President and Vice President, stipulating that they cannot both come from the same political party. This is supposed to lead to the nomination of more representative candidates that will challenge the entrenched interests of the two major political parties.

On first glance, it is not clear what distinguishes Americans Elect from the spectacularly failed Unity08 movement which made a similar splash in the early parts of the 2008 presidential election. Americans Elect is wrapped in the same sort of vague centrism and similarly requires multi-party representation on the ticket. Unlike Unity08, it appears that Americans Elect at least superficially understands the necessity of actually organizing to get on the ballot, something which is quite difficult due to ballot access laws that are designed to frustrate third party participation.

Other than that, its chief novelty I suppose is its heavy dependence on internet participation. Its polished website and internet nominating process makes it somewhat distinct from Unity08, but not in a good way. Absent mass participation — which I am willing to predict will not materialize — the nominating process will almost certainly devolve into a comical circus of fringe candidates with dedicated internet supporters. Judging from how often Ron Paul supporters organized to spam internet polls last election cycle, I can already see him being a big contender once he loses in the Republican primary.

My real problem with Americans Elect, however, is not its internet-heavy process or its remote chances; rather, it is its reliance on the tired political rhetoric of populist centrism. According to this rhetoric, the Democratic party is an uncompromising left-wing political machine, and the Republican party is an equally uncompromising right-wing political machine. They are both controlled by hyper-partisan interest groups that seek to polarize the American people who are, on this view, actually more in agreement with one another than disagreement. If only we could find the sweet spot right in the middle of the right-wing and left-wing, we would somehow find the correct governance.

This populist centrism is surprisingly widespread. For instance, Jon Stewart’s whole persona as one of the few mature, reasoned, and therefore legitimate political commentators is premised on just such a populist centrist line. Additionally, you can hear the sentiment echoed in the voice of the everyday person who remarks that they are not a Democrat or a Republican, and that they are conservative on some things and liberal on others. Of course, this is a view you have to line up behind to position yourself as someone who is truly politically independent.

The chief problem with this centrist line is that it is not truly centrist, at least not on any normal political spectrum. As Paul Krugman succinctly points out, the modern-day Democratic party is really a moderately right-wing party. The policies that they pursue are the same ones that Republicans advocated less than two decades ago. The idea that finding some arbitrary point in between the moderate right-wing Democrats and the more extreme right-wing Republicans will generate excellent public policy is completely without merit. This is an especially strange rhetorical line when one considers that the center — when conceived of as being in between the Republicans and Democrats — is constantly shifting.

More than that, populist centrism seems to completely reject the idea that there are actually good reasons to have a defined political persuasion other than vaguely “in the middle.” It is not mindless partisanship or political dogmatism to line up behind a unified conception of the role of government that forwards a coherent program based on a particular worldview. In fact, that approach to doing politics actually makes sense because it is based on carving out a definite position based upon theories, arguments, and ideas. It differs from the amorphous centrism of parties like Americans Elect which defines solid political ground as being relational to existing political tides — the relation being of course in the center of them.

That Americans Elect will almost certainly fail goes without saying. However, in its failure it will probably provide at least some boost to the frustratingly incoherent rhetoric of populist centrism. That contribution, no matter how small, will only help to make the mainstream political discourse more vacuous than it already is.