There is a seesaw battle going on between conservatives and progressives for the public mindset. For the last 30 years, since the onset of the Reagan Presidency, the US has been under the libertarian paradigm as espoused by Milton Friedman, author of Capitalism and Freedom, and Alan Greenspan, Chairman of the Federal Reserve appointed by Reagan, both open and proud libertarians, the latter a disciple of nutcase Ayn Rand. Their philosophy for the US and the rest of the world (which they notably imposed on Latin America) consisted of privatization, deregulation and free trade. They don 't believe in social programs such as social security, public health care, public water and sewage systems or even public schools. Anything public, paid for by taxpayers, is bad, and anything private, sold as a good or service for profit, is good.
This is why Medicare is always under attack from the right. If they can't get rid of it, they undermine and vitiate it by drilling holes and planting Trojan horses. Such a Trojan horse was Medicare Advantage. Medicare Advantage was a purported equivalent to traditional Medicare and is wholly run by private health insurance companies. Since its advent in 1997 after Republicans had taken over both Houses of Congress in the disastrous 1994 elections during the Clinton administration, it has siphoned off unsuspecting seniors into totally privately run health care plans with the temptation of a few added perks like annual free medical exams which, until the recent health reform bill, were forbidden in traditional Medicare itself. It would seem that, if the government wanted to save money, it would have offered free annual medical exams to seniors under Medicare. That only makes sense. But no, having drilled holes in traditional Medicare and having at least partially privatized it, Republicans then stacked the decks by allocating more funds to doctors who accepted Medicare Advantage patients than to doctors who accepted traditional Medicare patients.
The point here is that Republican, conservative administrations were doing everything they could to undermine Medicare as a government run "public" program and to turn it over to private health insurance corporations. Obama's health reform bill reverses that tendency. Although it hasn't eliminated Medicare Advantage, it has put it on a level playing field with traditional Medicare and has thus saved government and taxpayers the money that was going to Medicare Advantage over and above what was going to traditional Medicare. The whole point of Medicare Advantage was to lure seniors away from public Medicare into the clutches of for profit health insurance corporations. The Health Reform bill reverses that trend and those incentives.
But the point is that the game's not over till it's over. New Republican controlled Congresses and administrations will seek to do just the opposite. That's why the mid-term elections later this year are so important. What happened to Clinton in 1994, if repeated under Obama, would be a disaster for Medicare, student loan reform and every other public program. A Republican controlled Congress will seek to undermine traditional Medicare and hasten the flow of seniors back to Medicare Advantage, private health care. Medicare Advantage patients, having been lured by slick advertising promises, are already finding out that, when the chips are down, they will be denied expensive but necessary treatments by their Medicare Advantage for profit health insurance corporations. So that's where Medicare Advantage is heading - denial of health care when it's most needed - just as it is for the general public under 65 until the recent passage of the reform bill. The seesaw between socialization and privatization will continue with government decisions being swayed by the millions of dollars private corporations spend on lobbyists and campaign contributions. This is not balanced in any way by advocates for public programs. The money is on the side of privatization, and, if you can't afford what private corporations are selling, be it health care or anything else, then God bless you. In a totally marketized, privatized economy, you have no rights to anything that can't be bought and sold. You have no human rights. You have only the right to buy and sell in the marketplace. If you can't pay, you go without. That's it.
When it comes to student loans, the same tug of war between government provided student aid and corporate provided loans is occurring. When government was the primary source of student aid prior to the advent of the Reagan administration, grants were emphasized. After the conservative paradigm shift occured around 1980, student aid was shifted towards privatized loans.
The federal government officially entered the student loan arena in 1958. Not only was the demand for access to college increasing, but a report from 1947 called the President’s Commission on Higher Education had revived the debate in Congress in time for the National Defense Education Act of 1958, which was a program of low-interest student loans (to become the Perkins Loan) provided in response to concerns that the United States was falling behind in fields of science and engineering. The scare was caused by the Soviet launch of Sputnik which, combined with the war on poverty, provided for the government a kind of back entrance into the arena of federal student aid.
Of the eight titles of the Higher Education Act of 1965, only Title IV addressed assistance to students, and initially it took a back seat to institutional aid. Title IV established Educational Opportunity Grants based on institutions aggressively pursuing students with “exceptional financial need”. The Guaranteed Student Loan Program (to become the Stafford Loan) was designed to appeal more to middle-income students by providing loan subsidies; the government paid interest accrued during the student’s collegiate career and paid the difference between a set low interest rate and the market rate after graduation. It was, however, in 1972 with the reauthorization of the Higher Education Act that Congress rounded out the program to form what is the “basic charter of today’s federal student aid system”. Out of the heated debates about the program there emerged new language, new types of assistance, expanded opportunity grants, and more incentives for the states. The term “postsecondary education” replaced “higher education” in order to expand aid to students entering junior colleges as well as trade schools and career colleges. During a congressional session in 1980, the Pell Grant (named after Senator Claiborne Pell) emerged from the Basic Economic Opportunity Grants; it was larger than its predecessors and designed to encourage students from low-income situations to attend college. Eligibility for Pell Grants is based on a family’s total income and assets. Finally, the State Student Incentive Grant Program, which also originated with the 1972 Higher Education Act, offered matching funds to states to encourage their need-based aid programs, and within three years all fifty states actively participated in this program.
After 1972, new initiatives such as the Middle-Income Assistance Act of 1978, which widened Pell Grant eligibility, further catered to the middle class. Already a gap was becoming apparent between the availability of federal aid and access to institutions as tuition began to rise steadily. President Reagan cut spending significantly during the 1980s though demand for loans continued to rise, though less rapidly than before. The leveling off of student aid spending was partially responsible for the shift toward loan spending and away from grant spending that has continued to the present day.
Privatization of the student loan industry accelerated in 1997 when Sallie Mae, which had hitherto been a government sponsored enterprise was privatized. After the Republicans took control of both Houses of Congress in 1994, the impetus toward privatization continued on steroids. Albert Lord proceeded to lobby Congress to fully privatize Sallie Mae which it proceeded to do. In a previous post, "Sallie Mae Pauperizes Students," we reported on the draconian laws that Albert Lord's lobbying efforts resulted in with consequent gigantic profits for Lord and Sallie Mae. Congressman John Boehner was Lord's man in Congress and Lord lavished campaign contributions on Boehner. Sallie Mae essentially could have its cake and eat it too. If a student defaulted, the government came in and paid Sallie Mae the full amount of the loan plus interest. In addition Sallie Mae could pursue the student in collections and collect even more. Meanwhile, the student was forbidden by law to consolidate his or her loans for a more favorable interest rate or even to discharge the loan in bankruptcy. The student could be pursued till his death bed with even his social security check being garnished. So privatization worked well for CEO Albert Lord and his other executives; it was a total disaster for students driving some of them to suicide.
The student loan reform bill claws back the privatization of student aid undertaken by the Republicans which has resulted in extreme profits for some at the expense of immiseration for a whole class of students who come out of college with the equivalent of a first mortage and no house to show for it. In a sense it is a "government takeover" of the student loan industry. That's after it was subjected to a "corporate takeover" in 1997 by a Congress and a mindset hell bent on privatizing everything, the libertarian way. Please remember that originally student aid was a government program. Government is simply "clawing back" what was originally under government auspices saving taxpayers billions of dollars in the process that won't go to private profits in the future. Instead, this money will be spent giving out more student loans.
So President Obama and the Democrats are to be credited for socializing the student loan industry. No wonder Republicans are decrying socialism. They want everything to be privatized so that corporations who are their paymasters can make bigger profits at public expense. The student loan industry was originally a government run, socialized public program before it was privatized with disastrous results for students. Elizabeth Warren, the same Elizabeth Warren who is now fighting for a Consumer Financial Protection Agency, had said about the privatized student loan industry: "It's a market in which the protection goes to the lender. And the students get served up like turkeys at the Thanksgiving dinner."
This seesaw between privatization and socialization can be expected to continue with the conservative, libertarian goal to privatize everything: public schools, public parks, public libraries, public health care. Any public program that is taxpayer funded would be privatized if these guys had their way. And they have enormous power on their side: unlimited corporate money. The proper role of govenment is to prevent the fusion of corporate and government interests and to protect the average consumer and citizen. The false dichotomy is between big government and small government. Private corporations don't really want small government except when government benefits the average citizen. They want that sector of government shrunk to the vanishing point. They want to use government for their own profits even to the point of taking goverment (read taxpayer) money at every opportunity lobbyists can buy. The real dichotomy is between government in the interests of the privatized corporations and government in the interest of the average public citizen.
