We should all be so lucky as to have our crises be like the looming interest rate change on some student loans. Yes, the rate on subsidized federal loans will double on July 1 absent congressional action, but that needs to be put into context to see that it’s a potential “crisis” — as I heard it described on a radio news report last Friday — akin to your yacht sinking. Your toy, bathtub yacht.

Starting July 1, rates on subsidized loans — a subset of federal loans in which taxpayers eat beginning interest payments as well as bearing non-repayment risk — are set to rise from 3.4 percent to 6.8 percent.

That might sound bad, but note that the rates have only been at 3.4 percent for a year. A 2007 law set them on a gradual decline from 6.8 percent to 3.4 percent over five years. So it’s not like 3.4 percent has been the norm for decades…or even two years.

Next, the rate increase will only affect loans originated after July 1. People with existing loans won’t suddenly see the rates on all their subsidized loans double.

Third, while a rate doubling sounds big, the practical effect according to the White House’s own calculations will be to add about $1,000 to an average loan over its lifetime, which is about ten years. That translates into an additional $8.33 per month — less than the cost of a DC movie ticket.

Finally, freezing the rate for another year will do almost nothing for currently suffering middle-class families, unlike what the White House intimated in President Obama’s most recent weekly address. The large majority of loans originated after July 1 won’t even begin to be repaid for at least another year-and-a-half, after rising seniors have graduated and gone through the six-month repayment grace period.

It’s well known that a crisis is extremely useful for affecting political change — just ask Chicago’s mayor – but it often translates into bad policy. And that’s exactly the kind of policy that creating artificially cheap student loans is. They help fuel skyrocketing college prices, subsidize massive college waste, and contribute to millions of people enrolling who either never complete their studies or who finish largely worthless degrees.

All those consequences are problems that Washington really should worry about. But that’s the other thing about a crisis: It’s usually only embraced when it means giving stuff away to buy lots of votes.

Reports circulated yesterday that President Obama had reached an agreement with House speaker John Boehner (R‑OH) and Sen. Joseph Lieberman (I‑CT) to not only sustain the DC school voucher program for another few years but to eliminate the legislative cap on student enrollment—theoretically allowing it to grow without limit. Based the program’s performance to date, this would dramatically improve the graduation rate city-wide, likely boost performance academically, and save hundreds of millions of dollars from the bloated DC K12 budget.

But I didn’t write about it, because I didn’t believe it. Sure enough, later in the day, Secretary of Education Arne Duncan offered a clarification. Far from allowing unlimited growth in the program, the president only intended to allow another 85 students to participate—and still opposes the program in principle.

There is simply no way—no way—that President Obama could support an unlimited expansion in this successful, fantastically cost-effective education program. If he did, he would demoralize the most powerful force within the Democratic Party, the teachers’ unions, in the run-up to this fall’s election. Clearly he has no intention of doing that, given his recent advocacy of using federal dollars to grow the public school workforce (despite the fact that public school employment has already grown 11 times faster than enrollment over the past four decades).

We have a president who, for political reasons, cannot throw his full support behind the only federal education program in the nation’s history that is constitutional, successful, and cost-effective.

The WSJ recently published an opinion piece passing judgment on a long and still-active battle over school choice in Pennsylvania.

Unfortunately, I think it misses the most important part of the ongoing saga; Pennsylvania is on the cusp of a massive school choice victory. A huge expansion of the education tax credit program looks feasible, and it would make the Keystone state the leader in school choice with $400 million helping over one hundred thousand poor kids get a good education.

But first, since this, sadly, seems necessary; I am not in fear of “the fury of teachers unions.” And I am not beholden to their special interests. Don’t take my word for it. Just look through what I’ve written, and then run it by a union flak for comment. Dollars to doughnuts the response is decidedly negative.

And yet, I, a fully credentialed non-teachers-union-hack, think the Pennsylvania voucher proposal is a very bad idea. Why?

First, Pennsylvania already has one of the largest, most successful education tax credit programs in the country. It serves more children than any other program, tapping more funds than all but one other program (in Florida, also a tax credit). A huge expansion of the program already passed the House with just 4 percent of legislators opposed.

Critics claim that the proposed credit expansion would help kids “far less than vouchers would.” The opposite is true. The Senate voucher plan is estimated to cost just short of $100 million in the fourth year (covering just kids in failing school districts) and it would expand the education tax credit program to $125 million (up from $75 million). The new House credit plan would add a new fund of $200 million for kids in failing schools and increase the existing credit fund to $200 million.

In other words, the voucher plan envisions $100 million for only low-income kids in failing schools. The new credit program doubles the funds for those same kids, and increases the existing credit program that serves all low-income kids, regardless of their school district, by an additional $75 million over the Senate voucher bill. Senate bill = $225 million for choice, House bill = $400 million for choice. And this would put Pennsylvania ahead of Florida’s $229 million program for next year.

Critics of credits claim that since the average scholarship is just $1,000 per child, it isn’t helping poor kids enough. But this misses entirely the fact that education tax credit funds are just part of the scholarships needy kids receive; schools backfill what’s needed with regular charitable donations. Scholarship organizations and schools are able to work together to ensure that every family gets just what they need to go to the school of their choice, but no more; they use the funds efficiently to help even more families. A voucher program, run by the government, cannot respond flexibly to the diverse needs of individual families, and will therefore waste funds and serve fewer children.

Furthermore, it is likely that this average scholarship size is artificially low, an artifact of a bug in the way education tax credits are currently processed. After two years of donating to the program, a taxpayer is thrown back into a first-come-first serve poll of applicants. Since there is a cap on the popular program, a good number of existing donors will be kicked out of the program each year when the cap is reached. And the schools they were donating to will have to make up a big hole in their budget.

In other words, donors, Scholarship Organizations and schools have no guarantee that a credit donation will come through and therefore face a lot of unnecessary uncertainty in budgeting. So they do the logical thing, which is to spread the money out over more students and rely on charitable funds as the stable base for the full scholarship. If the government processes some donors out, then they have less to try to scrape up per student and less per family to help make up spread over a larger number of families. The low scholarship amount is in part a response to the uncertainty caused by a bug in how the credit donations are process, a problem that can be easily fixed and should be fixed in any new legislation.

Critics also note that credits are subject to budget cuts, and indeed the program was caught in a frenzy to roll back tax benefits in Pennsylvania. But legislators quickly heard from the more than 200 Scholarship Organizations and the thousands of families, taxpayers, and schools who know the value of the program, and the funds were replaced and discussions about expansion resumed.

The fact is, any program can be cut or expanded; credits, vouchers or even, exceedingly rarely, government education. A program is protected to the extent that it has defenders. Because the credit program is entirely private and voluntary, it invests taxpayers and community organizations directly in the program and provides a structure of and motivation for support that voucher checks sent from the government simply cannot replicate.

And this is all before we even consider the fact that vouchers are likely unconstitutional under Pennsylvania’s state constitution, which contains one of the most explicit and restrictive clauses on state funds and religious education in the nation.

Finally, the article looks to Louisiana and Indiana as models for Pennsylvania, but those states would have done much better by modeling their choice efforts after Pennsylvania.

In Louisiana, the voucher program is under siege for a perceived lack of accountability and vetting of schools, and in Indiana, the program is capped at 15,000 students, or less than half of the number of kids currently served by Pennsylvania’s credit program. Both of these programs make nominally private schools “accountable” to the government that got us into our educational quagmire, whereas education tax credit programs keep schools independent while making them accountable directly to taxpayers and families.

The best thing Pennsylvania’s leaders can do is forget about an inferior and unattainable voucher program and make the state’s education tax credit the largest school choice program in the country.

Two publications addressing college costs caught my eye in the last 48 hours. Both undermine the notion that college prices have skyrocketed almost exclusively because state subsidies to schools have plummeted.

The first piece, however, is actually supposed to make the opposite point.

You might recall my previously taking exception to statements by Terry Hartle, senior vice president of the American Council on Education, in which he asserted that there is no meaningful evidence that federal student aid drives tuition inflation, and that price increases are almost entirely a result of decreasing state appropriations to public colleges. Yesterday, Hartle and ACE’s Bryan Cook published a chart in a publication titled “Myth: Increases in Federal Student Aid Drive Increases in Tuition” that supposedly illustrates that it is indeed state budget cuts, not colleges’ ability to rake in money through aid, that explains tuition inflation.

Now, I wouldn’t say that aid “drives” prices, but I would say that aid fuels inflation by enabling schools to greatly increase tuition. I am also not aware of anyone arguing that an increase in aid leads to an immediate, one-for-one spurt in prices; instead, aid enables prices to rise over time. And it is not only federal assistance that enables prices to balloon—though Washington is the biggest aid source—but also state aid, scholarships, etc. And no one says that aid is the only factor involved in price increases; undoubtedly state subsidies matter for public colleges. So to a large extent the argument that federal aid doesn’t fully and immediately drive prices in public colleges attacks a strawman.

With all that in mind, what does ACE’s graph reveal about the declaration that state subsidy cuts are the real culprit behind rapidly rising college prices? It shows that there’s much more to the story. And I’m not even talking about the near-total inability of ACE’s preferred bogeyman to explain private college tuition.

I haven’t been able to track down the source of ACE’s data, so I can’t reproduce the graph here, nor can I do better than eyeball where each point lies. But by my viewing, there are only two academic years in which colleges’ per-capita tuition increase simply made up for state-subsidy losses: 2004-05 and 2010-11. Every other year tuition rose well in excess of subsidy losses, ranging from a 1 percentage point net gain in 1992–93 to 7 points in 2007-08.

So even by ACE numbers, our supposedly beleaguered public colleges actually look pretty greedy. And what likely enables that greed? The ability of students to cover price increases with aid.

But don’t just take my word, or ACE-supplied evidence, for this. Ask a professor:

Academic economists like to make fun of businesspeople: they want competition when they enter a new market but are quick to lobby for subsidies and barriers to competitors once they get in. Yet scholars like me are no better. We work in the least competitive and most subsidized industry of all: higher education.…

Just as subsidies for homeownership have increased the price of houses, so have education subsidies contributed to the soaring price of college. Between 1977 and 2009 the real average cost of university tuition more than doubled.

These subsidies also distort the credit market. Since the government guarantees student loans, lenders have no incentive to lend wisely. All the burden of making the right decision falls on the borrowers. Unfortunately, 18-year-olds aren’t particularly good at judging the profitability of an investment without expert advice, and when they do get such advice, it generally counsels taking the largest possible loan…

Last but not least, these subsidized loans keep afloat colleges that do not add much value for their students, preventing people from accumulating useful skills.

Those are the words of University of Chicago professor Luigi Zingales in a piece in yesterday’s New York Times. It’s a nice bit of truth-telling because it comes from within academia, not without. The article is also important because it goes on to discuss a way of lending that makes sense for lender, borrower, and taxpayer: “equity contracts,” or what a 2002 Cato report called “human capital contracts.” Basically, borrowers would repay lenders by giving them an agreed-upon percentage of their future income, and all government would do is enforce the contracts. That would enable borrowers to avoid the big problem of having a set amount due often before they have the ability to repay, and it would greatly increase the efficiency of college financing, with lenders likely to be quite discerning about who really would benefit from college.

Unfortunately, that sort of efficiency is something colleges—even, it seems, public ones!—almost certainly don’t want. They love making money, and do it most easily when government gives out dollars like water.

Just as Louisiana’s legislative session was wrapping up earlier this month, state Rep. Kenneth Havard refused to vote for any voucher program that “will fund Islamic teaching.” According to the AP, the Islamic School of Greater New Orleans was on a list of schools approved by the state education department to accept as many as 38 voucher students. Havard declared: “I won’t go back home and explain to my people that I supported this.”

For unreported reasons, the Islamic school subsequently withdrew itself from participation in the program and the voucher funding was approved 51 to 49. With the program now enacted and funded, nothing appears to stand in the way of the Islamic school requesting that it be added back to the list, and it is hard to imagine a constitutionally sound basis for rejecting such a request.

This episode illustrates a fundamental flaw in government-funded voucher programs: they must either reject every controversial educational option from eligibility or they compel taxpayers to support types of education that violate their convictions. In either case, someone loses. Either poor Muslims in New Orleans are denied vouchers or taxpayers who don’t wish to support Muslim schools are compelled to do so.

It doesn’t have to be that way. Education tax credit programs can ensure universal access to the education marketplace without violating anyone’s freedom of conscience. That’s because tax credits extend choice not only to parents but to taxpayers as well. Taxpayers in Arizona, Pennsylvania, and a half dozen other states can choose to donate to nonprofit tuition-assistance organizations that serve the poor. If they do make a donation, they pick the organization that receives their funds, whether it be Catholic, Muslim, Jewish, secular or entirely indifferent to religiosity.

Similarly, direct education tax credits for parents who pay for their own children’s education compel no one to support those parents’ choices. Such personal education tax credits, which already exist in Illinois and Iowa, merely let parents keep more of their own money. Far from increasing the tax burden on their fellow citizens, parents who pay for their own children’s education with the help of a credit save other taxpayers from having to pay for their children’s state schooling.

The school choice movement does not need to throw taxpayers’ freedom of conscience under the bus to secure freedom of choice for parents.

In a high-profile presser on the economy last Friday, President Obama’s central proposal was to hire more public employees. Then, in his weekly address, he argued that hiring more public school teachers would allow the U.S. to educate its way to prosperity. His Republican presidential rival, Governor Romney, has recommended precisely the opposite: reducing the size of government to boost private sector job growth–and he, too, mentions public school teachers. So… who’s right?

First, let’s look at public school employment and student enrollment over time.

As the chart makes clear, enrollment is only up 8.5% since 1970, whereas employment is up 96.2%. In other words, the public school workforce has grown 11 times faster than enrollment over the past 40 years. What difference does that make in economic terms? If we went back to the staff-to-student ratio we had in 1970, we’d be saving… $210 billion… annually.

Wait a minute, though! Research by economist Rick Hanushek and others has found that improved student achievement boosts economic growth. So if the 2.9 million extra public school employees we’ve hired since 1970 have improved achievement substantially, we might well be coming out ahead economically. So let’s look at those numbers…

Uh oh. Despite hiring nearly 3 million more people and spending a resulting $210 billion more every year, achievement near the end of high school has stagnated in math and reading and actually declined slightly in science since 1970. This chart also shows the cost of sending a student all the way through the K‑12 system–the total cost per pupil of each graduating class from 1970 to the present. As you can see, on a per pupil basis, a K‑12 education has gone from about $55,000 to about $150,000 in real, inflation-adjusted terms.

The implications of these charts are tragic: the public school monopoly is warehousing 3 million people in jobs that appear to have done nothing to improve student learning. Our K‑12 government school system simply does not know how to harness the skills of our education workforce, and so is preventing these people from contributing to our economy while consuming massive quantities of tax dollars. So what would hiring even more people into that system do for our economy…

When high school student Dawn Loggins was abandoned by her parents, the people in her North Carolina community moved in to take care of her. They didn’t want her to be turned over to the state child welfare agencies. For her part, Dawn performed janitorial work before and after school, while getting top grades. She is now on her way to study at Harvard. CNN has the story. It’s a remarkable example of what Charles Murray calls the “tendrils of community.”