New Deal Stacked Again

, Bethany Stotts, Leave a comment

On December 15, thirty prominent academic associations lobbied Congress for the inclusion of funds for schools in the upcoming economic stimulus bill, adding higher education to other industries looking for federal aid in the midst of the economic turndown. Other businesses calling for government funding include failing newspapers and two Detroit automakers—Chrysler and GM.

Drafted by Molly Corbett Broad, President of the American Council on Education (ACE), the December 15 letter requests that Congress allocate six percent of the upcoming economic stimulus bill to higher education. Suggested expenditures include a new federal block grants program for “ready-to-start” college construction projects, increasing Pell Grants by $700, and doubling the funding for Supplemental Educational Opportunity Grant (SEOG) Program from $858 million to $1.87 billion.

The seeds of the coalition’s requests can be found four days earlier in a letter sent by Association of American Universities (AAU) President Robert M. Berdahl to Barack Obama requesting that his administration add approximately $3.7 billion in new funding to his stimulus bill for higher education. Berdahl also requests that Congress “consider the creation of a federal facility that frees up markets for university-issued short-term and construction-related debt, perhaps through extended and additional federal guarantees, underwriting, and insurance.”

Less than $1 billion in Berdahl’s outlined additional funding would go directly to students in the form of federal grants or loans. Most of the requested funds go to science or green-related projects, or, with costs unmentioned, college facility renovation.

Then, on December 16 the Carnegie Corporation placed double-paged ads in The New York Times and Washington Post to directly ask for a much larger sum: $40 to $45 billion. A mere 4.5 percent of the stimulus bill at this writing, this means that the ACE coalition’s requested six percent would cost taxpayers around $60 billion.

This pales in comparison with the Oslo Declaration passed on December 18, which calls for countries around the world to devote four to six percent of their gross national product toward reviving education as a remedy for economic woes.

“In 1862, in the darkest days of the Civil War—the war in which more Americans died than any other—President Lincoln and Congress had the foresight to enact the Morrill Land-Grant College Act, setting aside 17,400,000 acres to provide for the establishment of public agriculture and mechanical arts universities in the states,” writes the George Soros-funded non-profit. Why Lincoln? Perhaps to evoke Obama’s self-proclaimed affinity for the historical leader.

John F. Harris and Alexander Burns write for Politico on December 15 that “Yet if they are governing in different times, Obama nonetheless hears an echo of Lincoln in his own career.” They cite such instances as

• Obama’s adoration of Doris Kearns Goodwin’s A Team of Rivals, which recounts the history of Lincoln;
• announcing “his candidacy in front of the Old State House in Springfield, Ill;”
• telling newspapers “that he looked up to Lincoln, and had a couple things in common with the guy, too;” and
• quoting from Lincoln’s first inaugural address on election night.

“And now there are early rumblings of a backlash to Obama’s ostentatious embrace of all things Lincoln, with his not-so-subtle invitations to compare the 44th president to the 16th, the ‘Savior of the Union,’ they write. “Simply put, some scholars think the comparisons have gone a bit over the top hat.”

The Carnegie authors also evoke the legacy of Harry Truman. “At the end of World War II, the most destructive and expensive war in history, Congress and President Truman conceived the G.I. Bill, providing the financial aid necessary for every returning military man and woman to go to college,” they write. “This was the foundation for democratic access to higher education in the United States.”

In other words, Mr. President, this is your legacy in the making.

The ad was signed by 46 college presidents, trustees, and members of the Board of Regents.

The Obama Administration’s stimulus package, which was $175 billion on the campaign trail, quickly grew to $500 billion in November, and then this December Nancy Pelosi suggested $600 billion.

On December 12, the Wall Street Journal reported that Obama’s advisors are now considering a $1 trillion “stimulus” bill over two years.

In comparison, the Bureau of Economic Analysis places the American Gross Domestic Product (GDP) in the third quarter at $11.7 trillion. According to the Tax Policy Center, a project of the Urban Institute and Brookings Institution, the federal government collected $2.5 trillion in 2007.

In other words, a $1 trillion stimulus package, spent over two years, would eat one-fifth of government revenues for the next two years just with the passage of a single piece of legislation.

As the WSJ reported, “The general sense among economists being canvassed by the Obama team is that ‘every day there’s a new bad number,’ one of the people familiar with the matter said. ‘And people’s sense of what the appropriate stimulus is rises’ with the news.”

It is important to note that many of the suggested education expenditures would provide new sources of perpetual funding, rather than a stop-gap measure to “stimulate” the economy until American markets recover.

Readers can perhaps take a clue from The American Prospect’s (TAP) January-February publication, in which co-founder and co-editor Robert Kuttner writes “But the devil is in the details. Is the stimulus package a one-shot or the beginning of a permanent increase in public investment?…Should they nationalize a bank or two rather than just throwing money at bankers?…Should credit ratings agencies become public utilities?…Recovery will hinge on getting all this right.”

Harold Meyerson, writing for TAP, suggests that the “New Deal II” go global with a “new global architecture” of regulations to help the “return of prosperity.” Mark Schmitt writes that the U.S. government should become “less a regulator of the private economy than a knowing participant, a market actor providing both liquidity and incentives to make the market work for the common good.” One way is for the government to “nationalize one major bank in order to set a standard for others,” as Kuttner suggested in October, Schmitt writes.

As Accuracy in Academia has reported, higher education is an industry uniquely-placed to ride out the recession, although a series of hiring and construction freezes have been put in place at many schools. However, increasing the availability of student loans and grants at this time might just ensure that students can still get their degrees without actually causing schools to charge less for college.

“Right now, the government subsidizes your loans, what, 3-4%, and at most everybody can get them, so what does that do? [It] drives up tuition, creating the need for more loans. It’s almost like the solution is part of the problem,” asserted Troy University professor Christopher Warden this summer. The former editorial-page editor at Investor’s Business Daily, Warden is publishing AIA’s textbook, Voodoo Anyone? How to understand economics without really trying.

Meanwhile, the Federal Reserve—which has expanded its debt from $850 million to $2.25 trillion in just two months—plans to buy up credit card debt and student loans, reports Greg Robb for MarketWatch. It also has “has made promises to spend about a $1 trillion more,” he writes.

Bethany Stotts is a staff writer at Accuracy in Academia.