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Proposals like $200 pharma gift cards & $50k student loan forgiveness are consequences of a political system that rewards politically expediency rather than addressing structural problems. These ideas not only perpetuate poorly designed systems but propagate them. 1/
Resource allocation has tradeoffs, even if they’re not explicit. With seemingly no constraints on deficits now, there is an illusion of no tradeoffs. The result is policymaking that, in using band-aids, weakens public demand (and hence political will) for needed reforms. 2/
The issues around student loan forgiveness are best summarized by @justinwolfers as “Worst. Idea. Ever.” So why is it even being considered? Giveaways are easy; fixing systems is hard. 3/ https://freakonomics.com/2011/09/19/forgive-student-loans-worst-idea-ever/
It’s politically difficult to make a policy in which an influential group feels harmed. With no fiscal constraints, there’s no reason for a politician to make a hard decision. This makes federal policymaking sloppy as it’s easier to just keep the interest groups happy. 4/
It’s politically expedient to give away $200 gift cards rather than reform a broken drug pricing system. It’s politically expedient to forgive student loans rather than create real higher-ed accountability that will improve student outcomes. 5/
The answer to growing unaffordability of higher-ed and healthcare is not more subsidies. Subsidies just increase costs even more. Econ prof @ATabarrok writes in jest about the long-term effect: 6/ https://twitter.com/ATabarrok/status/1328511580548567040?s=20
We @Arnold_Ventures have worked for years trying to improve these systems. We target the root cause of the problems, trying to get structural solutions to improve value through (1) increased access (2) improved quality (3) lower total cost (including gov't expenditures). 7/
But its lonely work. There are a 100 advocates for “more” to every 1 for “better”. Individuals and gov't together spend so much money on these systems already. We can get better results for that money. We must. But the interest groups don’t like the solutions. 8/
It’s hard to argue against band-aids. People like the relief. Industry likes more revenue. But these systems need real reform because they waste 100s of billions of taxpayer & consumer dollars better spent elsewhere and, more importantly, these systems are hurting people. 9/
People have stagnant paychecks because of healthcare inflation. People don’t fill needed prescriptions because drugs cost twice as much in the US relative to our economic peers. Society gets incremental, me-too drugs because that’s what the system rewards. 10/
Students waste their Pell Grants & time on colleges with 6 year grad rates of 10%. Students are left with debt they can’t repay because predatory colleges spend more $ on marketing than instruction, leaving students (even if they graduate) without skills valued by employers. 11/
Of course, the health care and higher-ed industries hate reforms. The current system works well for them, even if it’s lousy for consumers. These industries are well-organized and politically connected, so passing anything without their blessing is hard. 12/
So politicians recoil. They know the problems with these systems. They know what should be done. But rather than working on real fixes, they default to addressing short-term out-of-pocket costs that makes the structural problems worse. 13/
Here’s what policymakers could do instead:
- Create consumer protections to stop predatory practices
- Provide students relief when defrauded or school closure
- Strengthen accountability measures through gainful employment rule, 90/10 rule, & risk sharing 14/
- Create consumer protections to stop predatory practices
- Provide students relief when defrauded or school closure
- Strengthen accountability measures through gainful employment rule, 90/10 rule, & risk sharing 14/
- Improve data transparency so students & regulators have better info on outcomes
- Scale interventions that increase student success (like ASAP)
- Support experimentation with non-traditional models that decrease costs
- Fix accreditation
- Improve state level oversight 15/
- Scale interventions that increase student success (like ASAP)
- Support experimentation with non-traditional models that decrease costs
- Fix accreditation
- Improve state level oversight 15/
We have to start addressing the root causes of problems rather than the symptoms. The unintended consequence of gift cards and loan forgiveness is that the problem only gets worse. Future generations inherit our debt and a system that will only be harder to fix. 16/16
