Here Come the Obamacare Taxes

Editorial from Las Vegas Review Journal:

EDITORIAL: Here come the Obamacare taxes

LAS VEGAS REVIEW-JOURNAL December 12, 2013 - 4:22pm

First came the compliance burdens. Then came the expensive website woes, millions of policy cancellations and skyrocketing premiums. But if you thought Obamacare couldn’t be less popular, guess again. Here come the taxes.
As reported Sunday by the Review-Journal’s Jennifer Robison, there are a slew of new taxes to help pay for the boondoggle that is the Affordable Care Act, and the Internal Revenue Service will be reaching deep into wallets to collect that money starting next year. Those with high incomes face the biggest increases, but people at all income levels ultimately will feel the costs of the health care law — beyond higher deductibles and out-of-pocket expenses.
Single filers earning more than $200,000 and joint filers who earn more than $250,000 will see a 0.9 percent Medicare surtax on top of the existing 1.45 percent Medicare payroll tax, as well as a 3.8 percent Medicare tax on unearned income (investment dividends, rental income, interest and capital gains on property). And as Ms. Robison reported, that’s on top of the 2013 increases in the capital gains tax and the highest income tax bracket, meaning high earners are seeing a substantial tax jump in just two years’ time.
For the majority of taxpayers, whose income doesn’t meet that $200,000/$250,000 threshold, there are new limits on medical expense deductions and on flexiblespending accounts that are used to pay for everything from prescriptions to braces or even tuition for special-needs children.

Then, of course, there’s the dreaded individual mandate, which hits taxpayers who don’t obtain expensive Obamacare-compliant health coverage. For 2014, the penalty is $95 per person ($285 family maximum) or 1 percent of taxable income, whichever is greater. If your taxable income is $60,000, that’s a $600 tax. For the tax year 2016, those penalties rise to $695 per person ($2,085 family maximum) or 2.5 percent of taxable income, or a $1,500 tax on that $60,000 income.

How many families can afford that kind of tax hit?
Yes, there are some credits, particularly for small businesses. But as Bill McCarthy, a partner in the local accounting firm McCarthy Kaster CPAs, told Ms. Robison, figuring out the existing credit often chews up much of the savings because of record-keeping requirements and paperwork. “You might save $2,000, but the cost to calculate that is $1,000,” Mr. McCarthy said. That credit grows in 2014, but it’s unclear how many small companies might bother taking it — the Obama administration’s projections on everything from enrollment to pricing have been far off the mark.
Don’t forget the delayed employer mandate, which takes effect Jan. 1, 2015. Businesses that have at least 50 full-time equivalent employees and don’t offer Obamacare-compliant coverage will be taxed between $2,000 and $3,000 per worker.
One employer tax was not delayed to 2015: an annual reissuance fee of $63 per per insured person, a levy intended to bail out insurance companies for covering pre-existing conditions. So businesses are taxed if they offer medical benefits and taxed if they don’t. The reissuance tax is so bad the Obama administration wants to exempt unions as a political favor.
With each passing day, more Americans are realizing the Affordable Care Act isn’t affordable at all. It makes people and businesses pay more for worse coverage with less choice and it hits them with higher tax bills, all to subsidize insurance for a select few. As Washington Examiner columnist Byron York wrote this week, the Obama administration’s new promotional push to prop up this failing law doesn’t mention what was supposed to be the primary goal: helping Americans buy affordable health insurance.
Remember President Barack Obama’s promise that the law would reduce average annual family health insurance premiums by $2,500?
Despite the law’s myriad other failings — it has actually increased the number of uninsured — its resulting lack of affordability is enough to justify full repeal. This is not a healthy economy. There are not enough jobs. Obamacare and its tax and regulatory burdens are hurting, not helping.

Two Ironies

Two Ironies to share:

Irony 1. 

We are told NOT to judge ALL Muslims by the actions of a few lunatics." 

BUT, on the other hand. "We are also encouraged TO judge ALL Gun Owners by the

actions of a few lunatics." 

How is that supposed to work??? 

Irony 2. 

The Food Stamp Program, administered by the U.S. Department of Agriculture,

is proud to be distributing this year the greatest amount of free Meals and

Food Stamps ever, to 47.5 million people (most recent figures available

April 2013). 

Meanwhile, the National Park Service, administered by the U.S. Dept. of the

Interior, asks us "Please Do Not Feed the Animals." Their stated reason for

the policy is because "The animals will grow dependent on handouts and will

not learn to take care of themselves." 

Thus ends today's two lessons in irony. 

A ‘Wonderland’ moment for the court

The following George Will column appears in today’s Washington Post. Will applies a wonderful analogy.  See if you can understand the twisted logic of the petitioners.

We should not be surprised by this public display.  After all, Washington is devaluating the dollar and saying that ‘it means just what I choose it to mean — neither more nor less. ”  The $17 trillion of debt is not really owed.  People’s living standards have not really declined to 1989 levels.  The cost of health insurance to everybody will decline.

Fifty-one percent of Americans support this fantasy and the other 49% believe that restoring Republicans to control will change this “through the looking glass” Washington.

A ‘Wonderland’ moment for the court

By George F. Will, Published: October 11

“ ‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ ”

— Lewis Carroll,

“Through the Looking Glass”

The marble friezes above the Supreme Court chamber depict 18 great lawgivers, including Moses, Solomon, King John and William Blackstone. Come Tuesday, as the bemused — or so one hopes — justices listen to oral arguments in a case from Michigan, they might wonder why Lewis Carroll is not included. He would have relished the Alice-in-Wonderland argument the justices will hear, which is as follows.

Although the U.S. Constitution’s 14th Amendment says “No state shall . . . deny to any person within its jurisdiction the equal protection of the laws,” the following provision of Michigan’s Constitution violates the equal-protection guarantee: No public university, college or school district may “discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.”

Yes, in Tuesday’s Through-the-Looking- Glass moment, the court will be urged to declare that Michigan’s ban on unequal treatment violates the U.S. Constitution’s equal-protection clause. The U.S. Court of Appeals for the 6th Circuit — divided 8 to 7, with five dissents — has said just that, citing what is called the political-restructuring doctrine.

The argument is that when, in 2006, Michigan voters put in the state’s Constitution the ban against racial preferences in higher education, this complicated the task of those Michiganders who want to institute racial preferences. Instead of just lobbying the admissions officials of the state’s educational institutions, they must first mount a statewide campaign to amend Michigan’s Constitution. The Supreme Court, however, has hitherto applied the political-restructuring doctrine only against laws that change a political process in ways that diminish protection against unequal treatment, not to prevent laws granting preferential treatment.

Could there be a “political-restructuring” objection to the First Amendment? Because it proscribes “establishment of religion,” people who favor an established church cannot simply lobby Congress to create this, they first must undertake the burdensome task of amending the Constitution. So, is the First Amendment a constitutionally dubious restructuring of the nation’s political process?

Michigan, arguing for the compatibility of its constitutional amendment with the U.S. Constitution’s 14th Amendment, notes that in a 2003 case coming from the University of Michigan Law School, the court held that race-conscious admissions policies are presumed to be unconstitutional except in some narrow circumstances. Racial preferences, if carefully tailored as one component in the “individualized, holistic review of each applicant’s file” and “limited in time,” are permitted for the purpose of promoting academic “diversity.” They are not, however, required , and states are not forbidden to decide that banning preferences is proper policy.

Michigan Attorney General Bill Schuette correctly argues that the voters who passed the amendment in 80 of the state’s 83 counties were not “restructuring” the political process, they were using the process to give constitutional dignity to the valid ideal of a colorblind society.

Opponents of Michigan’s amendment can hardly argue that it was an act of racial animus. They would have to persuade the court to speculate about voters’ motivations. Furthermore, they would have to persuade the court to disallow the possibility that voters were aware of the abundant social-science evidence that questions the supposed benefits of preferences for those who are stigmatized by receiving them.

And opponents of Michigan’s amendment would have to persuade the court that it is both impossible and impermissible for a majority-white electorate to believe, without malice, that colorblind policies are best for the entire polity. Persuading the court of this would be difficult, given that the court has held that a “core purpose of the 14th Amendment was to do away with all governmentally imposed discrimination based on race.”

If racial preferences are, as proponents of them invariably insist, created for “diversity” that benefits everyone, then Michigan’s amendment banning preferences cannot constitute an invidious restructuring of the political process for the detriment of a minority. Hence opponents of Michigan’s amendment are simultaneously arguing contradictory propositions: Racial preferences serve everyone by producing diversity in academia, but banning preferences is unconstitutional because they primarily benefit a minority.

“ ‘Curiouser and curiouser!’ cried Alice,” in Lewis Carroll’s “Alice’s Adventures in Wonderland.” And so might the court’s justices cry, come Tuesday.

The American Income Crisis: The FED Could Stop It

David Malpass wrote in the September 2, 2013 issue of Forbes                      

President Obama has an opportunity to transform the country’s economic course when he chooses a Federal Reserve chairman to replace Ben Bernanke. While the rich have seen big increases in their share of income, the nation’s inflation-adjusted median income–the middle of the middle class–has been declining sharply.

This is harmful and largely the fault of expansionary government. The solution is for the President to downsize, with a new direction for the Fed as a timely starting point.

In his July 24 speech in Galesburg, Ill., President Obama said he’d like to stop the slide in middle-class living standards: “The average American earns less than he or she did in 1999 … reversing these trends has to be Washington‘s highest priority.”

IRS Security Breach; China's Sex Scandal Steve Forbes Steve Forbes Forbes Staff

There's An Economic Boom Lurking Once President Obama's 2nd Term Ends Peter Ferrara Peter Ferrara Contributor

Barack Obama Has Been Talking About Helping The Middle Class Since 2008 Robert Lenzner Robert Lenzner Forbes Staff

The President is right about that. The record is terrible, and the trends need to be reversed. From 1999 through 2007 the real median household income fell 1%. It fell another 4% during the 2008-09 recession. And then, incredibly, the real median income fell again during the recovery, dropping an estimated 5% in 2010-13.

Rationalizing this as the “new normal” diminishes the past achievements of our economic system. Normal policy increases jobs, growth and real incomes, but we’ve gone backward. Unemployment was still over 7% in July–14% if workers who are underemployed or too discouraged to job-hunt are counted.

The poor performance is the result of policies that seem designed to make the rich richer and leave the middle class stagnant and more dependent on government. While massive growth in government spending is presented to the public as income redistribution, the reality is even worse. Much of the spending ends up in the greater Washington area, which has one of the highest and fastest-growing median incomes in the nation.

The Fed manages what has become the biggest transfer program to the rich, channeling cheap credit to the government and big business. It comes at the expense of small businesses, where most of the entry-level jobs are created. Black teen unemployment stood at 41.6% in July, a stark challenge for the Fed, which has a mandate to achieve maximum employment.

Once a champion of market prices, the Fed is setting short-term interest rates artificially low. This distorts the economy and markets, keeps the dollar weak and increases commodity prices. That benefits the rich, who own and trade commodities, but hammers average Americans, who need low prices and can’t hedge against asset price inflation. The Fed’s policy of lowering long-term interest rates helps the rich even more–they do most of the long-term borrowing, using their high incomes and valuable assets as collateral. The burden falls on the retirement funds and savings accounts of the middle class.

As the President considers candidates for the Federal Reserve, at stake is the current policy of transferring income and wealth from the middle class to the rich. The theory is that a bigger government and an interventionist Fed are somehow reducing the maldistribution of income–”making the rich pay their fair share.” This ignores history, recent performance and the reality of the global economy: The income and wealth of the rich will move toward lower tax rates and strong and stable currencies, burdening the middle class with their government’s debt.

It’s Wall Street that’s cheering the loudest for Bernanke’s successor to keep the status quo–massive bond buying, promises of low future interest rates, high commodity prices and currency volatility to boost trading profits. The risk from an immodest Fed is that it will remain the center of attention, dominating finance and markets. The Fed and its chairman aren’t supposed to be that consequential. Their duty is to keep the dollar and prices relatively stable, facilitating maximum employment.

The President has an opportunity to guide the U.S. economy in a better direction by downsizing the Fed in order to create more growth and jobs and raise the median income.

'A Nation of Sullen Paranoids'

Peggy Noonan wrote in WSJ:

Too much security can produce a kind of madness.

Three items on the continuing National Security Agency controversy: the information that came out this week, a prescient warning from a veteran British intelligence hand, and a prophecy from an interesting source.

Siobhan Gorman and Jennifer Valentino-DeVries reported in this newspaper that the NSA, which is supposed to have only limited authority to spy on U.S. citizens, has built a surveillance network that covers substantially more communications than had been disclosed. The system is able to reach roughly 75% of all U.S. Internet traffic: "In some cases it retains the written content of emails sent between citizens within the U.S. and also filters domestic phone call made with Internet technology." Sources on the story were current and former intelligence and government officials.

Also this week, a finding was revealed that the NSA violated the Constitution for three years running by collecting as many as 56,000 purely domestic communications without appropriate privacy protections. The secret Foreign Intelligence Surveillance Court slammed the agency for "misrepresenting" its practices to the court, and noted it was the third time in less than three years the government misrepresented the scope of a collection program.

All this in just the past few days. Makes you wonder what might be coming in a Labor Day weekend document dump, doesn't it?

***

Readers of my columns and blog posts see an NSA theme: There are too many built-in dynamics that make the national-security state want to grow, from legitimate fears of terrorism, to bureaucratic pride, to the flaws in human nature. And there are too many dynamics that will allow it to grow. The aftermath of 9/11 happened to coincide with a new burst in American technological innovation and discovery: The government has the ways and means to do pretty much anything now, and if they can do it they will do it.

If the citizens of the United States don't put up a halting hand, the government can't be expected to. It is in the nature of security professionals to always want more, and since their mission is worthy they're less likely to have constitutional qualms, to dwell on such abstractions as abuse of the Fourth Amendment and the impact of that abuse on the First.

If you assume all the information that can and will be gleaned will be confined to NSA and national security purposes, you are not sufficiently imaginative or informed. If you believe the information will never be used wrongly or recklessly, you are touchingly innocent.

If you assume you can trust the administration on this issue you are not following the bouncing ball, from Director of National Intelligence James Clapper, who told Congress under oath the NSA didn't gather "any type of data at all on millions or hundreds of millions of Americans" (he later had to apologize) to President Obama, who told Jay Leno: "We don't have a domestic program." What we do have, the president said, is "some mechanism that can track a phone number or an email address that is connected to a terrorist attack."

Oh, we have more than that.

Almost every politician in America lives in fear of one big thing: a terrorist attack they can later be accused of not having done everything to stop. And so they'll do anything. They are looking to preserve their political viability and historical standing. We, as citizens, must keep other things in mind, such as the rights we are born with as Americans, one of which is privacy.

I happened to pick up "Open Secret," the memoir of Stella Rimington, who in the early 1990s served as director-general of MI5, the British domestic spy agency. I knew a little of her. She was the agency's first female chief, she fell into spy work by accident, and she didn't come from a fancy English family, meaning she didn't proceed professionally with an air of entitlement or a crouch of guilt. So I thought she might have her head screwed on right regarding the surveillance state. She does.

In the preface of the 2002 edition she is already concerned about a loss of civil liberties. Terrorism didn't begin on 9/11, she says, it has been with the modern world since at least the late 1960s, and it isn't going away anytime soon. We must commit ourselves to do everything we can, within the law and within our most valued traditions, to oppose and thwart it. But, she suggests, you don't want to lose your country—the thing you are so anxious to defend—in your effort to save your country.

In a career in what she calls "the secret state," she learned that at the heart of countering terrorism is intelligence, and the most valuable sources against terrorism are human beings—long-term penetration efforts. This must be heavily supplemented by technical intelligence—phones, the Internet—and the more expert the better.

But democratic nations must always balance "the citizens' right to live their lives in freedom, with minimum interference with their privacy from the security agencies" against the governments' responsibility "to protect their citizens from harm." That balance, she warned, had already begun to swing toward "more emphasis to our safety than our civil liberties." It has become more acceptable "for the government . . . to take more powers." She laments this. Pointedly: There is a danger, she observes, that "security can become an industry in itself and will not be protecting what is truly at risk."

Terrorism will continue to appeal to extremists, to "weak minded" individuals drawn by passionate causes. But lack of attentiveness to our liberties will not help us succeed against them, and it can damage us. I wrote in the margins: "She's saying we can't become suicide bombers of our own rights."

Finally, I heard this week from a respected former U.S. senator, a many-termed moderate conservative who was never known as the excitable type. He wrote in reaction to Nat Hentoff's warnings regarding the potentially corrosive effect of extreme surveillance on free speech. "All this scares me to death," the man wrote. "How many times do we have to watch government, with the best of intentions, I am sure (or almost so), do things 'for us'? Now 'security' and 'terrorism' argue for and justify the case for ever more intrusions—all in the name of protecting us. The truly frightening thing is that we are told we have to depend on government to police itself. Not a comforting thought, for we already have far too much evidence of the lack of such self-supervision. These actions, as Nat Hentoff said, will sooner than later curtail free speech.

"If so, I am fearful that this will ultimately lead a nation of sullen paranoids, ever more dependent upon government, ever more fearful of it. A free society, it will not be."

"A nation of sullen paranoids." Boy, is that it. This picks up on a point a friend, a veteran of Republican White Houses, said near the time the controversies were beginning. He told me of a sophisticated person he knew, experienced in journalism and the ways of government, who thought the U.S. government might have had the reporter Michael Hastings killed.

He said, musingly, "The future is paranoia."

Unless, of course, we stop it.

A version of this article appeared August 23, 2013, on page A11 in the U.S. edition of The Wall Street Journal, with the headline: 'A Nation of Sullen Paranoids'.

Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved

Richard Vedder: The Real Reason College Costs So Much

Allysia Finley wrote in WSJ:

The expert on the economics of higher education explains how subsidies fuel rising prices and why there's a 'bubble' in student loans and college enrollment.

Another school year beckons, which means it's time for President Obama to go on another college retreat. "He loves college tours," says Ohio University's Richard Vedder, who directs the Center for College Affordability and Productivity. "Colleges are an escape from reality. Believe me, I've lived in one for half a century. It's like living in Disneyland. They're these little isolated enclaves of nonreality."
Mr. Vedder, age 72, has taught college economics since 1965 and published papers on the likes of Scandinavian migration, racial disparities in unemployment and tax reform. Over the last decade he's made himself America's foremost expert on the economics of higher education, which he distilled in his 2004 book "Going Broke by Degree: Why College Costs Too Much." His analysis isn't the same as President Obama's.
This week on his back-to-school tour of New York and Pennsylvania colleges, Mr. Obama presented a new plan to make college more affordable. "If the federal government keeps on putting more and more money in the system," he noted at the State University of New York at Buffalo on Thursday, and "if the cost is going up by 250%" and "tax revenues aren't going up 250%," at "some point, the government will run out of money."
Note that for the record: Mr. Obama has admitted some theoretical limit to how much the federal government can spend.

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Review & Outlook: Obama State University

His solution consists of tieing financial aid to college performance, using government funds as a "catalyst to innovation," and making it easier for borrowers to discharge their debts. "In fairness to the president, some of his ideas make some decent, even good sense," Mr. Vedder says, such as providing students with more information about college costs and graduation rates. But his plan addresses just "the tip of the iceberg. He's not dealing with the fundamental problems."
College costs have continued to explode despite 50 years of ostensibly benevolent government interventions, according to Mr. Vedder, and the president's new plan could exacerbate the trend. By Mr. Vedder's lights, the cost conundrum started with the Higher Education Act of 1965, a Great Society program that created federal scholarships and low-interest loans aimed at making college more accessible.
In 1964, federal student aid was a mere $231 million. By 1981, the feds were spending $7 billion on loans alone, an amount that doubled during the 1980s and nearly tripled in each of the following two decades, and is about $105 billion today. Taxpayers now stand behind nearly $1 trillion in student loans.
Meanwhile, grants have increased to $49 billion from $6.4 billion in 1981. By expanding eligibility and boosting the maximum Pell Grant by $500 to $5,350, the 2009 stimulus bill accelerated higher ed's evolution into a middle-class entitlement. Fewer than 2% of Pell Grant recipients came from families making between $60,000 and $80,000 a year in 2007. Now roughly 18% do.
This growth in subsidies, Mr. Vedder argues, has fueled rising prices: "It gives every incentive and every opportunity for colleges to raise their fees."
Many colleges, he notes, are using federal largess to finance Hilton-like dorms and Club Med amenities. Stanford offers more classes in yoga than Shakespeare. A warning to parents whose kids sign up for "Core Training": The course isn't a rigorous study of the classics, but rather involves rigorous exercise to strengthen the gluts and abs.

Fred Harper

Or consider Princeton, which recently built a resplendent $136 million student residence with leaded glass windows and a cavernous oak dining hall (paid for in part with a $30 million tax-deductible donation by Hewlett-Packard CEO Meg Whitman). The dorm's cost approached $300,000 per bed.
Universities, Mr. Vedder says, "are in the housing business, the entertainment business; they're in the lodging business; they're in the food business. Hell, my university runs a travel agency which ordinary people off the street can use."
Meanwhile, university endowments don't pay taxes on their income. Harvard's $31 billion endowment, which has been financed by tax-deductible donations, may be America's largest tax shelter.
Some college officials are also compensated more handsomely than CEOs. Since 2000, New York University has provided $90 million in loans, many of them zero-interest and forgivable, to administrators and faculty to buy houses and summer homes on Fire Island and the Hamptons.
Former Ohio State President Gordon Gee (who resigned in June after making defamatory remarks about Catholics) earned nearly $2 million in compensation last year while living in a 9,630 square-foot Tudor mansion on a 1.3-acre estate. The Columbus Camelot includes $673,000 in art decor and a $532 shower curtain in a guest bathroom. Ohio State also paid roughly $23,000 per month for Mr. Gee's soirees and half a million for him to travel the country on a private jet. Such taxpayer-funded extravagance has not made its way into Mr. Obama's speeches.
Colleges have also used the gusher of taxpayer dollars to hire more administrators to manage their bloated bureaucracies and proliferating multicultural programs. The University of California system employs 2,358 administrative staff in just its president's office.
"Every college today practically has a secretary of state, a vice provost for international studies, a zillion public relations specialists," Mr. Vedder says. "My university has a sustainability coordinator whose main message, as far as I can tell, is to go out and tell people to buy food grown locally. . . . Why? What's bad about tomatoes from Pennsylvania as opposed to Ohio?"
Mr. Vedder notes that, by contrast, "you don't have to worry about this at the University of Phoenix. One thing about the for-profits is that they are laser-like devoted to instruction." Although for-profits like the University of Phoenix and DeVry spend more money on marketing, they don't contain as much administrative overhead.
'The Obama administration has been beating up on [for-profits] pretty hard for the past two to three years," Mr. Vedder says. "It's true that drop-out rates are disproportionately higher at the for-profits, but it's also true that the for-profits are reaching the exact audience that Obama wants to reach"—low-income minorities, many of whom are the first in their family to attend college.
Today, only about 7% of recent college grads come from the bottom-income quartile compared with 12% in 1970 when federal aid was scarce. All the government subsidies intended to make college more accessible haven't done much for this population, says Mr. Vedder. They also haven't much improved student outcomes or graduation rates, which are around 55% at most universities (over six years).
Mr. Vedder is skeptical about the president's proposal to tie federal aid to graduation rates, among other performance metrics. "I can tell you right now, having taught at universities forever, that universities will do everything they can to get students to graduate," he chuckles. "If you think we have grade inflation now, you ought to think what will happen. If you breathe into a mirror and it fogs up, you'll get an A."
A better idea, Mr. Vedder suggests, would be to implement a national exam like the GRE (Graduate Record Examination) to measure how much students learn in college. This is not on Mr. Obama's list.
Nor is the president addressing what Mr. Vedder believes is a fundamental problem: too many kids going to college. "Thirty-percent of the adult population has college degrees," he notes. "The Department of Labor tells us that only 20% or so of jobs require college degrees. We have 115,520 janitors in the United States with bachelor's degrees or more. Why are we encouraging more kids to go to college?"
Mr. Vedder sees similarities between the government's higher education and housing policies, which created a bubble and precipitated the last financial crisis. "In housing, we had artificially low interest rates. The government encouraged people with low qualifications to buy a house. Today, we have low interest rates on student loans. The government is encouraging kids to go to school who are unqualified just as it encouraged people to buy a home who are unqualified."
The higher-ed bubble, he says, is "already in the process of bursting," which is reflected by all of the "unemployed or underemployed college graduates with big debts." The average student loan debt is $26,000, but many graduates, especially those with professional degrees, have six-figure balances.
Mr. Obama wants to help more students discharge their debts by capping their monthly payments at 10% of their discretionary income and forgiving their outstanding balances after 20 years. Grads who take jobs in government or at nonprofits already can discharge their debt after a decade.
"Somehow working for the private sector is bad and working for the public sector is good? I don't see on what basis one would make that conclusion," Mr. Veder says. "If I had to make some judgment, I would do just the opposite."
He adds that the president's approach "creates a moral hazard problem. What it signals to current and future loan borrowers is that I don't have to take these repayment of loans very seriously. . . . I don't have to worry too much about getting a high-paying job." It encourages "sociology and anthropology majors compared with math and engineering majors."
Can online education, which is being pioneered in some science disciplines, substantially reduce costs? Mr. Vedder says it can, but government won't do the innovating. "First of all, the Department of Education, to use K-12 as an example, has been littered with demonstration projects, innovation projects, proposals for new ways to do things for decades. And what has come out? Are American students learning any more today than a generation ago? Are they doing so at lower cost than a generation ago? No."
Innovation, he says, is being driven by entrepreneurs like Stanford computer science Prof. Sebastian Thrun, who founded the for-profit company Udacity that offers "massive open online courses" (MOOCs). Mr. Thrun began teaching artificial intelligence, first at Stanford and then at Udacity. Mr. Vedder notes that he quickly got "200,000 people to sign up for it. And it's a great course and people are learning like crazy."
Where the government can help, Mr. Vedder says, is to get out of the way of progress and encourage slow-moving accreditors to allow innovations to move forward more rapidly. But ultimately, the way to improve college affordability is for the government to disinvest in higher ed and wean students from subsidies.
Mr. Obama is dead set against that. "He wants to maintain that world" of nonreality in which demand is impervious to cost, Mr. Vedder sighs. "That world has to change."
Ms. Finley is an editorial writer for the Journal.