Leaderless in Washington

Dan Holler

4/30/2012 12:01:00 AM - Dan Holler

As Americans search for answers, it is increasingly clear that they cannot look toward Washington for leadership. Those who inhabit Washington can tinker with our economy for the next decade and it will do little to help you make ends meet, sell your home, find a better job or fill up your tank. In fact, it will probably make things worse.

A new Pew survey puts some hard numbers on Washington failures. Government favorability is now at a 15-year low, with just 33% of respondents giving the federal government a favorable rating. An interesting aside (although not that surprising), 51% of Democrats give the federal government a favorable rating, whereas just 20% of Republicans and 27% of Independents said the same.

Gaudy conferences, high-priced escorts, gunrunning and green energy ponzi schemes make it easy to see why Americans look at the federal government with disgust. But those are just symptoms of a larger problem. To better understand it, we have to dive into the latest artificial crisis spawned by Washington – student loans.

In a few months, the rate on Stafford student loans will double from 3.4% to 6.8%. The issue has become a political football, with President Obama and the Democrat-led Senate challenging presumptive GOP nominee Mitt Romney and the Republican-led House to extend the lower rate.

Not only did Republicans shy away from fight, they didn’t even ask the right question! Instead of asking what rate the government should set, serious conservative lawmakers should be asking why the government is setting the rate on these student loans to begin with.

(Now, to be fair, President Obama and his political allies didn’t even bother asking the right question, either. Their focus is solely political, and even when it is not, their fidelity to government and central planning rarely permits such rational thought.)

Right now, almost no one in Congress is asking why 3.4% is the magically appropriate rate for these taxpayer-subsidized student loans. Apparently, those who supported President Obama’s government takeover of our health care system and those who support a premium support model for Medicare can, at the very least, agree on this small point.

Somewhere, deposed Speaker Nancy Pelosi (D-CA) is smiling. Her gimmick within a gimmick (halving student loan rates in the First 100 Hours of the new Democrat’s Congress in 2007) is now setting the policy parameters of a presidential contest.

Of course, we know this is all political. Team Obama saw an opportunity to divert, distract and distort; and his political opponents did not want to stray from their larger message, which is the ailing economy and this President’s failures. Few, if any, political strategists would advise a different approach.

What frustrates Americans, though, is that for all the hot air, students will be no better off. In part, that is because the economy will remain stagnant (and get worse if President Obama successfully implements a new tax on S corporations). But more to the point, no one is taking on what is really driving up the cost of college.

When the government took over the student loan industry in 2010, as part of the reconciliation package used to pass Obamacare, it reduced choices for students looking for loans. With interest rates at historic lows, it is quite reasonable to expect a market-based loan industry could produce loan rates below 3.4%.

The real problem is that after adjusting for inflation, the cost of college has increased nearly five-fold since 1982. A few decades of increased government intervention and subsidization has done nothing to make college more affordable, and neither will this absurd fight over a 3.4% interest rate.

This fight over student loans highlights a generation of failed policy and the current lack of leadership at the federal level. Given this context, the Pew results should seem self-evident.

What may be less obvious, though, is that state and local governments receive significantly higher marks in the Pew survey. 52% of respondents held a favorable view of their state government and 61% held a favorable view of their local government, with predictable partisan differences. The old adage that government closest to the people governs best rings true with those surveyed by Pew.

It all raises an interesting question for federal lawmakers: if you cannot do the job and the American people don’t like the job you’re doing, then should you be the ones doing the job?

From transportation to education and Medicaid, it is time Washington began turning power back to the states. Real leadership is about recognizing the limits of your power and abilities.