"There is a price to pay when the government shirks some of its basic duties and opens the door to privatization."
April 12, 2007
Headlines at the state and federal level this week serve as reminders that sometimes, perhaps, we are better off demanding that the government do the government's job.
There are some people in high places who believe that the private sector can always do a better job than the government, no matter what that job might be.
But, as we are finding out in the evolving story from New York, perhaps we were better off when the government stuck to running its own student loan programs rather than subsidizing competition from the private sector.
The gist of the recent news is that private lenders are being accused of using illegal or questionable incentives to get college financial aid offices to steer student borrowers their way. The problem appears to be connected to the departure of a University of Texas official and there are likely more to come around the nation.
That in itself is a problem. But we believe the greater travesty is that the federal government spends hundreds of millions of dollars subsidizing private student lenders, driving the cost of student loans 7 percent higher than if they were made directly by the government.
One of the biggest complaints that critics had when the all of the government's student loans were made directly by the government was that the program lost money on defaulted loans. Ironically, however, the key incentive the government provides to private lenders now involved in the student loan business is a guarantee that it will cover any losses a lender faces on defaulted loans.
As one current critic of the subusidized private student loan process pointed out, the extra money that the government spends to keep private lenders involved in the process could be much better spent on expanding direct student aid like the Pell Grant program.
After all, who needs financial aid more, the low income students or the big bankers?
On to another privatization debate:
The Texas House has given preliminary approval to a moratorium on private toll roads in the state, putting the Trans-Texas Corridor project in limbo and stirring a flurry of dire predictions from toll road supporters.
We have long questioned the state's abdication of one of its prime responsibilities: the construction and maintenance of a network of highways. Because some lawmakers have been afraid to maintain fuel taxes on par with increased road construction and maintenance costs, we have seen Texas roads go from some of the best in the nation to a state of disrepair and inadequacy.
The state's answer to that has an increased use of toll roads, even in rural areas like East Texas. And in the past few years, Gov. Rick Perry has accelerated that approach by introducing privatized toll roads.
The lure of such projects is that they can be done with private, rather than public funding. The downside is that over the long haul of the long-term contracts, hundreds of millions of dollars that should probably be spent on Texas roads will instead line the pockets of the investors and owners of the Spanish firm contracted to build the "Corridor."
The bottom line in both of these examples is that there is a price to pay when the government shirks some of its basic duties and opens the door to privatization.
The public is better served when our public leaders focus more on doing the job right rather than simply shifting it into private hands.
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