Hoorahs and adulation have been heaped on Elizabeth Warren for proposing to reduce the student loan rate to 0.75%, the rate charged by the Federal Reserve for very short term loans to banks.
While the left-blogosphere, progressive movement, and low-information political consumers have been cheering, we repeatedly have exposed that proposal as economic folly and political demagoguery:
- Elizabeth Warren finds way to inflate Higher Ed bubble even more
- More on the bad economics of Elizabeth Warren’s student loan proposal
In our posts we have cited many economic commentators who agree, but I just found out (h/t @RubySlipperBlog) that two authors at the liberal Brookings Institution share this view, Policymakers Get Serious About Student Loan Interest Rates (emphasis added):
At about this time last year, we saw President Obama and Republican challenger Mitt Romney engage in a pandering contest on student loan interest rates. Cheap political theater produced a shortsighted political solution—a one-year extension of the 3.4% interest rate on subsidized federal student loans….
This time around, the Obama administration and several members of Congress have produced serious proposals …
4) Sen. Warren proposal: one-year fix in which the rate on subsidized loans is set at the rate the Federal Reserve changes to banks (currently 0.75%).
Sen. Warren’s proposal should be quickly dismissed as a cheap political gimmick. It proposes only a one-year change to the rate on one kind of federal student loan, confuses market interest rates on long-term loans (such as the 10-year Treasury rate) with the Federal Reserve’s Discount Window (used to make short-term loans to banks), and does not reflect the administrative costs and default risk that increase the costs of the federal student loan program.
Setting aside this one embarrassingly bad proposal, the remaining proposals raise a set of questions that need to be answered in order to select the ideal policy….
These are exactly the points we have made.
I don’t expect this to diminish the praise for Warren from her base and compliant media, but it does confirm — once again — that Legal Insurrection has been ahead of the curve and correct on Elizabeth Warren’s politics.
The student loan crisis deserves serious solution, not embarrassingly bad cheap political gimmicks.
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Comments
Sadly, the target audience will lap it up.
Pretty sure Lawrence O’Donnell won’t be getting an autographed copy of that Brookings assessment.
Yowza, I got a hat/tip too, thanks 😀
Elizabeth Warren
student loan proposal“embarrassingly bad” and “a cheap political gimmick”Tidied that up for ya’ Brookings..
LOL that was exactly what I was thinking
With her focus on banks & Wal Street aka the financial crisis and all her political stunts… like the good Professor has been saying she’s being prepped for a Presidency run.
I’m wondering if she isn’t the Left’s attempt at a counter to Rand Paul.. the pitch being, we’ve both got crazies that make too much sense but we’ve got to go safe with the status quo, Hillary. Everybody loves her.
Warren’s really into fractions (and not the big picture).
Does Brookings have some real Indians on staff…???
‘Cause those are SOME arrows sticking outta Princess Running Bare.
All student loans should be guaranteed by funds from university professor pension funds.
Some Democrats are criticizing Betty’s proposal. This is gratifying but puzzling. Maybe the disapproving Democrats are placing country before party. If so, good for them.
Or maybe they are Clinton allies who are trying to discredit Warren. Maybe the 2016 Democratic primaries have begun.
I know which way I’d bet.
The problem for Lieawatha is that any serious solution would adversely affect the robber barons of acedmia, her truest constituents.