How to protect students–and taxpayers–from college closures

Plus: Rethinking zoning to expand affordable housing; Bitcoin’s role as a reserve currency; and the regressive nature of inflation

Protect taxpayers–and students–from the costs of college closures: With enrollment down and pandemic-era government stimulus running out, financial pressure is building on many colleges. Although allowing failing institutions to close—making way for newer, better options—is an important way to improve higher education, closures can leave students who haven’t yet finished their degrees high and dry. In Inside Higher Ed, FREOPP Senior Fellow Preston Cooper makes the case that simply forgiving student loan debt for these students doesn’t give them what they need most: a chance to finish their education. Instead, Congress should require reinsurance from colleges dependent on federal student loans. This would protect taxpayers from costs of loan discharges and incentivize colleges to develop transfer plans for students in event of a closure.

Biden’s housing plan will increase demand more than supply: When the Biden administration released a collection of legislative and administrative actions aimed at lowering housing costs in May, non-profit housing groups called the proposal “the most comprehensive national housing policy we have seen in a generation.” Unfortunately, FREOPP Research Fellow Roger Valdez writes, the proposal emphasizes expanding the money supply for existing programs, not increasing the supply of housing in the market. Subsidizing housing rather than tenants doesn’t make the poor better off. A better solution? Reducing barriers to the development and building of market-rate housing—especially zoning—so that supply can meet demand. 

Not convinced that we should rethink zoning? In The American Conservative, Roger argues that zoning reinforced racial segregation and describes the growing agreement among progressives and conservatives that new housing doesn’t displace low-income Americans—it helps them.

America would be better off if Bitcoin became the world’s reserve currency: It has been a rough few weeks for cryptocurrencies, with prices tumbling and critics like Paul Krugmen pointing to the decline as proof that Bitcoin’s value as an inflation hedge is a myth. But, as a non-state-backed store of value that has shown itself to be effectively uncensorable, Bitcoin has a crucial role to play in checking the worst impulses of governments and central banks. In an interview with Nick Gillespie on Reason TV, FREOPP President Avik Roy tackles all these issues and discusses how Bitcoin can help the unbanked participate in the economy in new ways.

Inflation is even higher for the poor: In May, consumer inflation hit its highest level in more than four decades. Making the news even worse, FREOPP Visiting Fellows Jon Hartley and Jackson Mejia write in the Las Vegas Sun, is that the most common measures of inflation understate its impact on the poor. From 2004 to 2021, for instance, Americans in the bottom decile experienced cumulative inflation of a whopping 81%—compared with only 10% for the top decile. Differences in wage growth and ability to save exacerbate this difference. All this evidence suggests that even modest inflation may pose too great a burden on the poor and that the Federal Reserve should rethink its 2% inflation target.

→ Learn more about inflation’s compounding effect on the poor and check out Jon and Jackson’s data in FREOPP’s Inflation Inequality Indices.

Thanks for keeping up with FREOPP, and have a great weekend!

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