Mitch Daniels - Trying to Solve Actual Problems

I read this in the Washington Post by Mitch Daniels, and wanted to share with both readers of this blog. I highly recommend reading the entire article. A few excerpts:

Just for fun, let’s design an economic sector guaranteed to cost too much. Then you guess what it is. For openers, we will sell a product deemed a necessity, with little or no option for the customer to avoid us altogether. Next, we will arrange to get paid for inputs, not outputs — how much we do, not how well we do it. We will make certain that actual results are difficult or impossible to measure with confidence. And we’ll layer on a pile of complex federal regulations to run up administrative costs.

Then, and here’s the clincher, we will persuade the marketplace to flood our economic Eden with payments not from the user but from some third party. This will assure that the customer, insulated from true costs, will behave irrationally, often overconsuming and abandoning the consumerist judgment he practices at the grocery store or while Internet shopping.

Presto! Guaranteed excessive spending, much of it staying in the pockets of the lucky producers.

I have my suspicions that Mr. Daniels wants us to think that he's talking about healthcare but is instead talking about higher ed. Let's read on.

It worked so well in health care, we decided to repeat the formula with higher education. Some sort of postsecondary education is, in fact, necessary for a fully productive life in this economy, but by evading accountability for quality, regulating it heavily, and opening a hydrant of public subsidies in the form of government grants and loans, we have constructed another system of guaranteed overruns. It is the opposite of an accident that the only three pricing categories that have outpaced health care over recent decades are college tuition, room and board, and books.

So true. Let me tell you, as the father of young kids, that I am thrilled about how I get to be overcharged for healthcare now only to look forward to being gouged for my kids' college later. What an awesome way to construct an economy! Of course, I suspect that Mr. Daniels' "solution" to higher college costs is much like his "solution" to overly expensive healthcare: make it cost more for people.

Health care has been crab-walking its way toward a modicum of consumerism through higher co-payments, deductibles and health savings accounts. 

Raise your hand if you think that higher co-payments and deductibles help with the cost of healthcare, as opposed to just convincing people to do without needed care; it seems to me that this is like skipping oil changes on your car as a way to save money: penny wise and pound foolish. Anyway...

As a condition of participating in the federal student aid programs, universities could be required to either guarantee a percentage of the dollars loaned to their students, or be penalized a specified amount based on default rates. Or be charged a yearly premium for an insurance fund that would, at least partially, protect taxpayers against what has turned into the latest massive driver of national debt.  

This seems reasonable at first glance. Of course, it would likely spell the end to programs in the arts, music, philosophy, the humanities, etc. Pretty much everything except healthcare and business. Methinks that for Mr. Daniels, this is a feature and not a bug.

While I disagree with Your Man Mitch in his proposed solutions, at least he has properly defined the problem. College is essentially necessary for a middle-class lifestyle and income going forward, yet has become increasingly unaffordable for anyone who has to finance it him/herself, unless that person plans to be a doctor or a well-paid salesperson (or has a well-endowed trust fund). 

Something's gotta give. At least the president of a Flagship State University recognizes the problem, even if he misdiagnoses the nature of it and mis-prescribes the solution. Progress is progress.