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One Man’s Inefficiency is Another Man’s Job

Trouble for SAFRA:

Delaware Sens. Tom Carper (D) and Ted Kaufman (D) expressed their doubts about the bill to its sponsor, Sen. Tom Harkin (D-Iowa), in a letter dated Saturday. Primarily, they noted they had concerns about the legislation’s plan to prohibit private lenders from servicing federal loans.

Supporters say that proposal, which would essentially shutter companies like Sallie Mae out of the federal loan market, could save the federal government $87 billion over 10 years and lower students’ loan payments. However, Carper and Kaufman — who represent the state Sallie Mae in particular calls home — fear the reform could stifle local investment and result in lost jobs.

On the merits, Carper & Kaufman are totally wrong. The private-but-federally-guaranteed student loan racket is an abomination and replacing it with direct lending should be a no-brainer. But one thing I think liberals sometimes don’t get is that this kind of argument isn’t dishonest. When liberals see legislators — especially legislators they often have reason to like — taking this sort of indefensible position, they tend to immediately reach for the “corrupted by corporate cash” explanation of what’s going on. But I think that’s wrong. When you have a substantial inefficiency, you also have a whole bunch of people whose jobs depend on that inefficiency. That’s why it’s hard to treat coal the way we should and that’s why it’s hard to treat Sallie Mae the way we should. It’s also an important reason why “Medicare for All” isn’t really the political no-brainer that people sometimes claim it is — insurance companies employ tons of people, the vast majority of whom are not cackling and evil executives.

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Now at the end of the day, I don’t think policy should be made on that basis. The best path, over the long-run, to ensuring good jobs for all Americans is to have sustainable prosperity built on economic growth. And that means accomplishing our public sector tasks in efficient ways — no needless subsidies to private student lenders, no teachers who stay on the job no matter how badly they do, no unnecessary health insurance company middlemen taking a slice of all our spending, no Medicare payments for useless or harmful treatments, etc. But all of this stuff is very challenging to do in part because of special interest money but also in part simply because behind every instance of waste stands someone whose livelihood depends on the waste.