Friday, November 26, 2010

Michael Ignatieff's Vision of the Future

Speaking to students at Dawson College in Montreal, The Montreal Gazette quoted Ignatieff as saying:

“The key thing is to make sure young Canadians aren’t crippled by debt as they go through post-secondary. They’re carrying a heavy load, and I want to take the load off their shoulders.

All of us can pay for school with Michael Ignatieff's credit card?! Unless he meant 'I' as in the Canadian government. Then the taxpayers will be paying for Canada's post-secondary students. And since everyone pays taxes, students will still be paying for their own education, just now in a more systematic approach.

So what exactly is Michael proposing here?

Does Ignatieff support direct funding to post-secondary schools or more loans to students? Or both? Which ever one, he'll have to abide by various bureaucratic restrictions. How many are involved in the exchange of this money? How much of it will remain when it reaches the student? Is there any guarantee the taxpayers will see a return on this 'investment' in the country's younger generation? Can something like this even be considered an investment?

One's head begins to spin when one considers all various ways governments spend our money and justify taxation. Let's simplify this:

Funding to universities or colleges serve all interests involved with post-secondary education, including the students. The immediate interests are of those directly receiving the money: the school administration. Wishing to see their business succeed and expand, this money is invested back into the school. The problem is such: The school's revenue is not earned by competitive market prices, it comes directly from the taxpayers. The only competition is for public money. Government funding requires a lot of graduating students.

In order to get more students graduating the government has got itself involved in the loaning business. When the government does this it deprives the students who are qualified for loans in the private sector. It also deprives students that have saved for their post-secondary education. Recipients of government loans shouldn't be getting these loans at all. The consequences of this policy have led to post-secondary institutions raising their tuition to absurd levels. The more government loans are made, the higher tuition goes and the higher tuition goes, the more government loans are made. This is the unintended consequence of trying to provide post-secondary education to all Canadians.

Yet if Ignatieff still persists on government assistance his third option can be absolving debts, similar to what Obama is doing. However inflation is usually required when one uses this scheme. But inflation or not, the taxpayer will still be poorer as this 'investment' never bears fruition. Students realizing the government discharges a portion of their debt are more willing to spend money they don't have. An incentive arises as the student knows part of the debt will be forgiven.

This is also an incentive for banks to sell more student loans, especially to those who don't qualify. Government guaranteed loans ensure banks that they'll always get a return on their investment – courtesy of the taxpayer.

Right now the best thing students can do is ignore Michael Ignatieff or demand he takes a free-market view of this situation. Stop giving money to schools and get out of the loan business. Free markets are, after all, the classical liberal approach.

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