Submitted by Jason Delisle on June 24, 2008 - 2:07pm.
As we argue explicitly in the post, an auction is a way to ensure that subsidies are not too high or TOO LOW. An auction might very well increase subsidies if lenders bid at rates higher than current law. We accept that outcome as a possibility and believe it to be superior to arbitrarily setting the subsidy. In other words, we support higher subsidies for student lenders, so long as those subsidy rates are set by some sort of competitive bidding process, not backroom political deals as they are under current law. In this very post, we argue that Congress should address the problems posed by bidding caps in the PLUS auction, allowing for subsidy rates higher than current law when bidding suggests they are necessary.
More Fallacies - This One's a Straw Man
As we argue explicitly in the post, an auction is a way to ensure that subsidies are not too high or TOO LOW. An auction might very well increase subsidies if lenders bid at rates higher than current law. We accept that outcome as a possibility and believe it to be superior to arbitrarily setting the subsidy. In other words, we support higher subsidies for student lenders, so long as those subsidy rates are set by some sort of competitive bidding process, not backroom political deals as they are under current law. In this very post, we argue that Congress should address the problems posed by bidding caps in the PLUS auction, allowing for subsidy rates higher than current law when bidding suggests they are necessary.