Democrats and Republicans had different takes when Congress passed legislation last September to reduce federal subsidies of private student loans. Democratic Senator Ted Kennedy claimed, “The reality is that our bill restores the balance to this grossly unfair student loan system by directing funds to the students, not to the banks.”
House Republican John Boehner disagreed, arguing the cuts would “cripple the private sector loan program.”
So who was right? Well, last week the New York Times ran a story about the difficulty high school seniors face in trying to secure loans for their upcoming freshman year. Which should come as no surprise, considering that more than fifty banks, including the nation’s largest private student lender, Bank of America, have pulled out of the market because subsidy cuts have made such lending unprofitable.
It’s reminiscent of what happened when Congress decided to place a luxury tax on the purchase of yachts back in the early nineties. The attempt to get the wealthy to pay their “fair share” backfired when wealthy folks chose not to buy such boats, resulting in large job losses for the working-class Americans who built them.
This is what we can expect when fairness replaces common sense as the operative value in crafting policy. Yet fairness drives proposals this election season on everything from tax policy and energy prices to free trade (never mind that the original North American free trade agreement – the Commerce Clause of the U.S. Constitution – helped make us the most prosperous nation on earth).
Truth is, the profit motive is a powerful tool in bringing goods and services to market. Punishing those who succeed at bringing us those goods and services in the name of fairness may make us feel better in a spiteful sort of way, but it only serves to hurt us all.
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