America isn’t crowdsourcing its policies

By Felix Salmon
November 10, 2011
Anil Dash, of Expert Labs, is very excited about the latest government action on student loans, because he's convinced that it was driven by the White House petition site he helped to set up.

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Anil Dash, of Expert Labs, is very excited about the latest government action on student loans, because he’s convinced that it was driven by the White House petition site he helped to set up.

Something remarkable happened here:

  1. A regular citizen, not a lobbyist or politician or CEO, made a suggestion of a smart idea on the White House’s petition website.
  2. That idea got promoted through social media, filtering its way out through Twitter and blogs and Facebook.
  3. One month later the administration endorsed a variation of the idea, making it actual policy and helping over a million and a half Americans to have more money in their pocket at the end of the month.

Every time these milestones and successes are achieved, skeptics want to scoff. “Maybe this guy’s a plant!” “They’re only gonna accept ideas they already agree with.” “I bet most of the ideas are stupid.” “Why would they really listen to us?”

In this example, we see refutations of many of these objections.

This would be quite amazing and wonderful, if it were true. But it’s not true.

For one thing, it’s worth looking at the original petition, which got 32,008 signatures. Here it is in full:

Forgiving student loan debt would provide an immediate jolt to the economy by putting hundreds and, in some cases, thousands of extra dollars into the hands of people who WILL spend it – not just once, but each and every month thereafter – freeing them up to invest, buy homes, start businesses and families. This past year, total student loan debt finally surpassed total credit card debt in America, and is on track to exceed $1 TRILLION within the next year. Student loans themselves are responsible for tuition rates that have soared by 439% since 1982 and for saddling entire generations of educated Americans with intractable levels of student loan debt from which there is, seemingly, no escape. Relieve them of this burden and the middle class WILL rebuild this economy from the bottom-up!

This is pretty extreme stuff: both the idea that student loans have caused rising tuition rates — which seems to get things exactly backwards — and the idea that a trillion dollars of debt could or should simply be eradicated at a stroke. Yes, it would “provide an immediate jolt to the economy”. But it would do so in an incredibly inefficient way — if you’re going to do a $1 trillion stimulus, there are much better ways of doing so.

Yes, the idea got some traction — enough traction that Justin Wolfers felt the need to comprehensively demolish it in a piece headlined “Forgive Student Loans? Worst Idea Ever”.

So Anil’s first point is simply wrong. Yes, a regular citizen suggested something on the White House’s petition website. But it wasn’t a smart idea: it was a pretty stupid idea.

Anil’s second point is right — the stupid idea did indeed get promoted through social media. Social media can be quite good, it turns out, at promoting stupid ideas.

But what of Anil’s third point? Did the Obama administration indeed sign on to the Worst Idea Ever? No, it did not. Instead, it tweaked something called the income based repayment policy so that certain benefits will go into effect in 2012 rather than in 2014. And it allowed students to consolidate their federal student loans into one loan, to “give borrowers the convenience of a single payment to a single lender”. Which is nice, but hardly a big deal.

It’s a real stretch to call this “a variation of” the original idea, which called for student loan forgiveness. There’s no new forgiveness in the new announcements — and the old forgiveness is the kind of forgiveness which only takes effect after 20 years. Not exactly what “Robert A” of Staten Island had in mind.

On top of that, it defies credulity to suggest, as Anil does, that the White House announcement was in any way of form “crowdsourced policy”. Robert A’s suggestion — which, remember, had none of the elements of the policy that was eventually put into place — was uploaded on September 23; the new policies were announced on October 26.

Earth to Anil Dash: policies like this do not get hatched, implemented, and announced in the space of 23 working days. I can guarantee you that these student-loan proposals were in the works long before Robert A’s suggestion was made, and that they would have been announced anyway, even if the petition hadn’t existed.

It’s pretty obvious what happened here: the administration wanted to make it seem as though the petition site was having some useful effect, and so it took a policy it would have announced anyway, and declared that the policy was in response to some petition. It just didn’t do that very well, since the announced policy in fact bears almost no relation to what the petition was asking for.

So let’s not get cyber-utopian about crowdsourced policies: they haven’t happened yet, they’re unlikely to happen in the future, and insofar as they do happen, the crowds in question will not be virtual crowds on a White House website, but rather real crowds at places like Tea Party rallies or Occupy Wall Street. The internet is a good way of organizing people to turn up in person. It is not in any way an alternative to doing so, at least if you want to change government policy.

26 comments

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C’mon, Felix, your blithe dismissal of the idea that increasing student loan subsidies could increase tuition charges is pretty lame. Education, especially postsecondary education, is a fairly inelestic good, and even moreso when you reach the top 100 schools or so (those really jockeying for rankings and status) because they can’t increase quantity without losing prestige, their most important attribute. Basic economics tell us that a subsidy will go to the producer if a good’s demand is inelastic. Considering the importance of this question–young people are getting started off on the completely wrong foot because of student loans combined with unemployment–I think you could do better than “seems to get things exactly backwards.” Why don’t you take a closer look at the issue?

Posted by MHouellebecq | Report as abusive

“Student loans themselves are responsible for tuition rates that have soared by 439% since 1982.”

Speaking strictly for me, I had student loans before then.

Of course, my loans were at a government-set rate (4.5% iirc), =totaled= something under $7,500 (which covered my share of four years at a private institution) and repayments were deductible against income (which went away in 1986).

Posted by klhoughton | Report as abusive

MHouellebecq – But “student loan subsidies” were NOT increased. Indeed, rates went up (private-sector “competition,” with subsidies eventually going to the intermediaries–the banks–but not the students) and deductibility of repayment was eliminated.

Posted by klhoughton | Report as abusive

Felix,

There is some evidence that student loans have contributed to general tuition increases – were the funding not there, fewer students would be able to attend, and more institutions would have to consider tuition as a competitive point.

More significantly, it seems convenient that the private for-profit institutions have largely set tuition at exactly the price that would allow students to max their Title IV loans over the course of an undergraduate program.

Targetted, need-based student loan forgiveness might provide some relief for students that have gotten in over their head. But what would be more effective would be more federal support to lower tuitions, at least at state schools. Rather than saddling kids up with loans and then somehow forgiving the loans down the line, lower the cost of education – or provide more need-based grants – upfront.

Posted by Ragweed | Report as abusive

“worst idea ever”? Not by far. Heck – forgiveness worked for the transnational banks. Why not do it for the kids?

Oh, right, sorry. This is America, where we forgive the banks, but not the non-bankers.

Posted by sagreer70 | Report as abusive

“. . . the idea that student loans have caused rising tuition rates — which seems to get things exactly backwards . .”

you, apparently, have never examined the business model of a private-for-profit “university”. set tuition at the available student loan amount, find a naive but ambitious young person, get them a loan to cover tuition, give them a crappy education, laugh all the way to the bank.

Posted by arrgh | Report as abusive

Increased availability of credit has no effect on the prices of things being bought with that credit?

You’re onto a loser with that denial of supply and demand, Felix.

Posted by BarryKelly | Report as abusive

“This is pretty extreme stuff: both the idea that student loans have caused rising tuition rates — which seems to get things exactly backwards — and the idea that a trillion dollars of debt could or should simply be eradicated at a stroke.”

Didn’t you recently argue for principal reductions? How is that different?

As for the other half, if student loans were not available you would see far fewer institutions charging $50k tuition. There simply aren’t enough people who can afford tuition at that rate WITHOUT loans.

Still, nobody forces these students to take the loans. I would rather allow people the CHOICE of whether to pay through the nose for an “elite” school or be more price-conscious in their shopping. Taking personal choice away is typically a bad thing.

Posted by TFF | Report as abusive

YES to Forgiveness of Student loans!!!

We shouldn’t be trying to pay any loans at any interest here in the US! We are THE ONLY industrialized nation with this type of DEBT!!!

Please consider that: One of the issues here is that the US invests 10 times MORE than any other industrialized nation combined in Healthcare, education, etc. HOWEVER, we have the worst system. Students shouldn’t be repaying loans at any rate because we do have the funding to make it free. The two main problems are, first this conception of deserving and non-deserving as if some humans were more and some were less than others.

WHY are we so eager to pay when Corporations are getting FREE TRILLIONS of dollars at the expense of the hard working poor and middle classes????

COINCIDENTALLY the deserving ones are the financial parasites that bankrupted the economy and the NON-deserving ones are those who belong to the hard working poor and middle class producing all the wealth… backwards all the way to the bank… MOST of our funding is spent in Corporate welfare now reaching a staggering 10 TRILLION a year not counting a 23 trillion bail out… and WARS against fully occupied countries such as Iraq and Afghanistan, countries whose leaders we formerly trained and armed (Saddam & Osama).

WHERE does our money go? Please see charts and read:

http://threetrilliondollarwar.org/2011/0 6/02/wars-are-one-of-the-main-reasons-wh y-the-us-debt-is-so-high/

Despite having the most expensive PRIVATIZED systems for profit we are the LAST in every area for our citizens:

http://www.unnaturalcauses.org/interacti vities_04-7.php

And by the way, competition is a fallacy, there are ONLY monopolies. And all scientific research done right not by the Cato institute or the heritage foundation or the Koch brothers, seem to agree that COOPERATION is 100 times MORE efficient than competition, we are sold a fallacy… The propaganda machine such as the idea that Social Security is broke when in reality it has a 2.5 TRILLION surplus which Corporations want for themselves so they can pay bonuses and fired half of the employees and then being rescued a few years later…with whose money??? YOURS!!! Public losses and private gains:

http://youtu.be/PPeUrJF6AM8

Many CORPORATIONS DERIVED 100% of their Profits FROM PUBLIC subsidies… YET Government has NO funding for YOU the hard working poor and middle class paying the bill… A discussion of tax subsidies to large corporations and high income individuals, including “big box” stores and wealthy members of the federal government, at the expense of small businesses and taxpayers.

http://youtu.be/LUNHwZVgLB8

Posted by Rvazco | Report as abusive

YES to Forgiveness of Student loans!!!

We shouldn’t be trying to pay any loans at any interest here in the US! We are THE ONLY industrialized nation with this type of DEBT!!!

Please consider that: One of the issues here is that the US invests 10 times MORE than any other industrialized nation combined in Healthcare, education, etc. HOWEVER, we have the worst system. Students shouldn’t be repaying loans at any rate because we do have the funding to make it free. The two main problems are, first this conception of deserving and non-deserving as if some humans were more and some were less than others.

WHY are we so eager to pay when Corporations are getting FREE TRILLIONS of dollars at the expense of the hard working poor and middle classes????

COINCIDENTALLY the deserving ones are the financial parasites that bankrupted the economy and the NON-deserving ones are those who belong to the hard working poor and middle class producing all the wealth… backwards all the way to the bank… MOST of our funding is spent in Corporate welfare now reaching a staggering 10 TRILLION a year not counting a 23 trillion bail out… and WARS against fully occupied countries such as Iraq and Afghanistan, countries whose leaders we formerly trained and armed (Saddam & Osama).

WHERE does our money go? Please see charts and read:

http://threetrilliondollarwar.org/2011/0 6/02/wars-are-one-of-the-main-reasons-wh y-the-us-debt-is-so-high/

Despite having the most expensive PRIVATIZED systems for profit we are the LAST in every area for our citizens:

http://www.unnaturalcauses.org/interacti vities_04-7.php

And by the way, competition is a fallacy, there are ONLY monopolies. And all scientific research done right not by the Cato institute or the heritage foundation or the Koch brothers, seem to agree that COOPERATION is 100 times MORE efficient than competition, we are sold a fallacy… The propaganda machine such as the idea that Social Security is broke when in reality it has a 2.5 TRILLION surplus which Corporations want for themselves so they can pay bonuses and fired half of the employees and then being rescued a few years later…with whose money??? YOURS!!! Public losses and private gains:

http://youtu.be/PPeUrJF6AM8

Many CORPORATIONS DERIVED 100% of their Profits FROM PUBLIC subsidies… YET Government has NO funding for YOU the hard working poor and middle class paying the bill… A discussion of tax subsidies to large corporations and high income individuals, including “big box” stores and wealthy members of the federal government, at the expense of small businesses and taxpayers.

http://youtu.be/LUNHwZVgLB8

Posted by Rvazco | Report as abusive

Felix Salmon and Justin Wolfers are both absolutely wrong because they do not point out the mega expenses US tax payers have with corporate welfare or tax breaks for billionaires. Their argument is a one sided argument without any rationale or dialogue!

I agree with Forgiving ALL student loans!

Posted by Rvazco | Report as abusive

Felix, in the words of comic book guy and to echo wee willy winkle man ‘Just-in’ the big bad wolf, this is the Worst Article Ever. Get your head outta you know where… the idea gained traction because it makes sense and folks are gonna back the idea and keep backing it regardless of what jumped up drongos like you think.

Posted by Greyhound83 | Report as abusive

YOU SAY: “This is pretty extreme stuff: both the idea that student loans have caused rising tuition rates — which seems to get things exactly backwards — and the idea that a trillion dollars of debt could or should simply be eradicated at a stroke.”

FACT: The Goverment guaranteed these loans to the lenders, then made it so all consumer protections were removed, effectively cutting off the students at the knees. Colleges, knowing that the lenders would be giving these loans to any 17 or 18 yr old Tom Dick or Harry wanting to attend any college (good or bad notwithstanding) began letting more and more students in, collecting more and more money…building bigger and better buildings to attract more and more students, and raising the tuition to afford these bigger and better buildings….get it? And then the guaranteed loan amounts were increased to allow students to keep going to college. etc. etc.

FACT: This debt could be erased. Just written off the books like so many other billions of dollars written off the books every business quarter by huge banks. Either that or the interest rates/capitalization/fees set to the rates the big lenders get to have themselves. If, in fact, education is important like we have always been told it is, and that EVERYONE, not just the 1% should be entitled to it.

Posted by SPeas | Report as abusive

I agree that the White House tried to placate the thousands of Americans seeking student loan relief who signed the on-line petition for loan forgiveness by throwing a bone that will affect certain current students only.

I disagree however with your poo-poohing of the power of the internet. Just today USDA policy was reversed due to conservative blogging: http://www.washingtonpost.com/business/e conomy/usda-yanks-christmas-tree-promoti on-program-after-conservatives-call-it-a -tax/2011/11/09/gIQATfqA6M_story.html

Just like I would shout if I were standing next to you at Lafayette Park: “WE’RE HERE! WE’RE CLEAR! GET USED TO IT WE’RE HERE!” And if my nephew was here to help me link to Garageband, I could even do it in audio with a drum!

Posted by Topazmoon11 | Report as abusive

It seems to me that most people who want to minimize the role of the internet do so because they want to remain in denial regarding this powerful tool. Social media is bringing the world together unlike ever before. Now while the president’s nod to all those who are being crushed under student loan debt does indeed reflect recognition of the problem, and by proxy the power of social media. His changes fall so short of addressing the problems that it would be laughable if it were actually in his power to truly fix the problems. The thing is, Obama doesn’t have that power without the legislative branch backing him up. Which…is currently the most broken thing in the world.

The true power of social media is found in the Occupy movement it’s self. In that movement we see an idea that was spread solely via social media to the point that thousands of people world wide stood up together to make this idea a reality. Yes there have been problems, that is because we are human and there is no perfect system or solution. However if social media can inspire social movements with the intent to change the course of the world’s history, then it is no mere child’s toy to be dismissed as useless. That way of thinking is how we recognize regressives who want to remain the proverbial ostrige in the sand, and sadly try to force everyone else to wallow in their denial as well.

A side note, please do your research before you attack a movement you know nothing about. You reference Justin Wolfer’s article that, as you say “demolished” Robert’s essay on student loan forgiveness. However Justin’s article has no basis in fact, and I actually thought it was satire until Robert told me otherwise. So please if you want to disagree with this movement, ensure that your arguments actually do have basis in fact; I might suggest an economics 101 text book as a good place to start your research. We invite open minded discussion and debate, it is the only way to continue learning and growing.

Posted by FallingSpider | Report as abusive

Felix,
You seem to be quite vigorous in analyzing other people’s ideas but fail to examine your own beliefs. I’m amazed that you stated that “the idea that student loans have caused rising tuition rates — which seems to get things exactly backwards”. Have you ever examined a chart of education cost inflation versus health care and overall inflation? Have you ever considered that government guarantees can make a lender lend as much as possible? Have you ever wondered if the student loan explosion and skyrocketing tuition costs are similar to the housing bubble? Have you noticed that students never live in bare dorms but loft-like apartments? Ever wonder if constant tuition raises that are possible due to gov’t guarantees are truly being used to improve the education or to pimp out the campus?

Posted by badbisco363 | Report as abusive

The WH petition site is nothing but PR.

Posted by GRRR | Report as abusive

Laughable article with hyperbole to serve a certain faction.
As a person crunching numbers for the federal government on a daily basis and taking into account the different theories impacting the current student loan crisis, Mr. Applebaum appears to be very accurate.

The reasons surveyed for default and the actual default rates are rather astonishing. Mr. Applebaum provided a perfect outlet for those heavily concerned with the current student loan crisis to voice their concerns.

In my office the petition spread rapidly. To be more specific, we had very little idea of how to voice our concerns over the student loan crisis besides taking to the streets or writing a representative. With the petition many were able to unite as one and voice concerns. If one dabbles into the call statistics for direct loans one will find there are many more that will gladly sign the petition as it continues to spread. At this point I believe the petition is above 650,000 signatures making this petition one of the fastest growing petitions in U.S. history.

Lastly, the author’s (Felix Salmon) qualifications to speak on this subject is minimal. Besides a lack of any real analysis the author appears to have not even attempted to understand the raw data impacting: (1) the student loan crisis, (2) the true power of social media. While the author postures, the world is passing the author by…much like most technology the simple-minded tend to not grasp. I traditionally do not give time to such sad/weak sophistry but what the hell.

Have a good day. Hit the books.

Posted by ScottinDC | Report as abusive

“FACT: This debt could be erased. Just written off the books like so many other billions of dollars written off the books every business quarter by huge banks.”

Didn’t you say the government guaranteed the loans? Would think that the government would be on the hook for the losses. I can think of worse uses of $1T, though. (Such as propping up an overpriced housing market.)

Posted by TFF | Report as abusive

We the people demand a vapid, condescending, meaningless, politically safe response to this petition.

Since these petitions are ignored apart from an occasional patronizing and inane political statement amounting to nothing more than a condescending pat on the head, we the signers would enjoy having the illusion of success. Since no other outcome to this process seems possible, we demand that the White House immediately assign a junior staffer to compose a tame and vapid response to this petition, and never attempt to take any meaningful action on this or any other issue. We would also like a cookie.

http://www.plutocracyfiles.com/2011/11/b est-we-people-petition-ever.html

Oh and Paul Krugman would like a pony for everyone

Posted by rjs0 | Report as abusive

Oh thank goodness there were enough comments that were thoughtful and appropriate…because apparently I’m completely unable to come up with a comment to post that is more than just a thumbs up to other folks who articulate my thoughts without it turning into a really long, flaming rant full of net.behavior that I entirely disapprove of….

I can normally write something that is objective even my if personal views are completely different. I perfected that ability at uni since it was going to he useful fo the job I wanted…before the short sided cutbacks and hiring freeze. Apparently the sheer volume of daily, relentless republican (and their followers) stupidity, greed, lack of compassion, short sidedness, and bloodthirsty stupidity…oops! Well at least I said stupidity twice instead of leaving it out completely.

Crap! Forgot what I was trying to say before those meds started to kick in. Somebody call the CDC! Lordy…it looks like Perry is contagious! Hmmm…. Of course he may have caught it from one of the others. I’ve been getting the urge to inappropriately grab crotchets lately…among other things…

Evidently, I’ve exceeded my allotment of objective, rational thought for the decade. Combining *that* with my inability to write anything shortly and concisely means that my blackberry thumb is gonna be acting up a lot.

Aw, man! I bet that’s gonna make me ineligible for the cookie. ;-)

Posted by J.N. | Report as abusive

Felix,
you are like the people we are fighting- clueless.

Posted by kpmac | Report as abusive

Dear Felix, you obviously don’t understand the despair of student loans and why they need to be forgiven. #1 They are absolutely predatory. #2 These are real lives enduring extreme hardship. That’s the “extreme” in all of this – the petition is the finger to the pulse of the current group ( ranging from newly graduated and unemployed to the ball and chain – veterans of the economic hardship default) that can not manage the accelerating interest or the trumped up principle amounts. #3 The interest is absurd for education and is set up so you can’t whittle away principle. Historically this will be seen as similar to indentured servants in colonial times! It’s completely outrageous. Forgiveness is a first step to a full scale correction in college education. The Department of Education has failed to protect students from these profiteers, and that relationship or conflict of interest escalated tuition. READ more, you are gravely misinformed.

Posted by HappyHarey | Report as abusive

“#1 They are absolutely predatory.”

I hate this term. You can avoid “predatory lenders” simply by making wise choices. True predators are harder to avoid.

Posted by TFF | Report as abusive

couple points:

Student loans don’t drive tuition increases (other than in the private for-profits, who do appear to set their tuition to exactly the rate that will allow students to max their loan limits over a 4-year degree). But they do contribute.

Most colleges are non-profit institutions and are not looking at tuition from a revenue maximization standpoint. They look at tuition as a means of covering their costs, but one of their main concerns is maintaining or improving their ranking in various college rankings, such as US News and World report, which has a big impact on student choices.

Right now, two of the biggest factors in college ranking is faculty-student ratio and student quality of life (which is impacted by big sports complexes, media centers, dorm quality, etc.). Colleges are pressured to increase spending on these areas to improve their rankings, which increases costs that are largely passed on to students through tuition.

Student loans allow students to afford the higher tuition that is paying for all this. Without it, insitutions would be under more pressure to compete on tuition. But also, millions of students wouldn’t be able to go to college, and that would not be a socially desirable goal either.

Targetted loan forgiveness on a need-basis is a good idea, but across-the-boards loan forgiveness is very regressive. The largest average loan burden is on the 90th income percentile, for whom paying it off is not going to be a problem. Better to restore support to bring state schools back down within reach of more students.

John

Posted by Ragweed | Report as abusive

“Better to restore support to bring state schools back down within reach of more students.”

An admirable goal, but I would like to see the additional funds spent on education rather than luxury dorms and sports complexes. Can we not find a way to tease these costs out of the core operations? Perhaps make them optional, so that cost-conscious students who are interested in a quality education might not be forced to take out loans to support the Penn State football team?

Posted by TFF | Report as abusive