Sunday, January 30, 2011

Government and Choice

On Thursday I was in a meeting in San Francisco with a former Obama administration person.  At the end of the meeting we had a chance to talk about a regulation which I believe the US Department of Education has mis-interpreted.  The effect of the mis-interpretation has been to radically slow an effort that I have worked on to encourage students, when they use something called alternative loans (which are those loans used to finance an education that are taken out after all federal sources have been used) to be fully informed consumers.   The results in the first year of the program have been superb - not only have borrowers been better informed but their average rate of interest on their loans was almost 4% below what they would have received had they done a search for loan options on the web without using this comparison tool.

We talked and I told him that a) the program's growth had been very slow, in part because of the Departments interpretation of their own regulations.  His comment was "Students should not use variable rate debt to go to school."   In this case there is a federal program which allows students to borrow at a fixed rate which is a bit more than 1% higher than the rates in the consumer friendly program - but fixed.   But shouldn't that be up to the consumer?

Second example, a short time ago the TSA announced that it would allow some airports to go to private security for screening.  Many airports across the country have complained that the expense and the bureaucracy in the TSA has reached unacceptable levels.   When the Bush administration federalized security screeners many of us pointed out that some of the best screening systems in the world are private not governmental.  But the Bush people went ahead with this new bureaucracy anyway.

This week the TSA announced it was halting the program of conversion.  Evidently, just like the student loan program, the feds don't like to competition.    So how many of you still believe that the health overhaul that was passed by Congress will continue choice for consumers?  If you do you must also believe in Tinkerbell.

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