Why did Mitt Romney enact Healthcare Reform in Massachusetts

In 2002, Mitt Romney was elected governor of Massachusetts. Before Obamacare became law, Mitt Romney enacted comprehensive health care reform as governor. I began to wonder why he decided to push for this reform. Republicans have long been opposed to universal healthcare and people don’t often change their mind. What specifically was he thinking when he decided to get the ball rolling. As it turns out, there is an aspect to this history that is not often mentioned. While there were a variety of factors behind enacting the legislation, one of the reasons for Mitt Romney getting the ball rolling was a business executive telling him that it will help people. Here is the excerpt from a New York Times article about it:

Mr. Romney started the ball rolling soon after he was elected in 2002. In an interview on Tuesday, he said that a business executive had told him, If you really want to help people, find a way to get everyone health insurance.

Mr. Romney said he replied, “I don’t want to raise taxes and I don’t want to have a universal coverage like Hillary-care,” referring to the Clinton administration’s failed health care proposal.

“So I don’t know that it’s possible,” the governor said.

Mr. Romney assembled a team and presented proposals in late 2004, the same time that Mr. Travaglini gave a speech urging expanded health coverage, but with a more incremental plan. Mr. Kennedy, often a rival of Mr. Romney, gave the governor’s more ambitious proposal a guardedly positive reception that encouraged Democratic leaders to work with Mr. Romney’s template.

There you have it, Mitt Romney waited until one of his friends told him it was a good idea before pursuing it. Because healthcare reform had been associated with his political enemies, he did not want to pursue it. Thus he used the fallacy of ad hominem in deciding important public policy. It was not until the messenger changed that his mind changed. The facts did not seem to change in the timeframe that his mind changed.

There are definitely many more examples of politicians who changed their mind based on influences from people in their personal lives rather than the facts. There are even more examples where politicians and others spend too much time in their own circle and don’t understand the reality of how others live (George H.W. Bush cash register incident*, Mitt Romney telling struggling students to borrow money from their parents). Many of us often fall into this trap when debating political issues.

In any case, how much are our politicians trying to not become part of this trap? Are we demanding good reasoning ability from our elected officials? The evidence, especially in this article about modern day Washington, seems to point otherwise. These officials control the lives of millions and yet are using such illogical reasoning. When you are younger, you are taught that elected officials take in all the information and decide objectively the best course of action. Unfortunately, that does not seem to be the reality.

Is there a way to reform the system? Is there a way to ensure that the legislative and executive agenda is determined by objective rather than subjective factors? Since everyone who ends up elected likely falls into the subjectivity trap, I am not sure if there is a way to reform the system. It’s a conversation we should be having though.

*According to some online sources, it was debunked by Snopes (though their Snopes links don’t work). Nonetheless, the fact that everyone believed he was genuinely surprised points to the larger problem.

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Why State Funding For Higher Education has decreased

It is no secret that states continually shrink their support for higher education and as a result, the tuition at public colleges and universities keeps increasing. Indeed, when those administrators are asked about the rising tuition, that is always their response. There is no shortage of media articles that talk about the dwindling support for education and all of the consequences this has had for tuition. Unfortunately, there is little said about why this is the case. The documentary Ivory Tower suggested it was a legacy of Reagan. He apparently said “the state should not subsidize intellectual curiosity.” The decline in state support occurred in the early 1980’s, a time of the conservative resurgence, so the dates line up. However, this seems to be more correlation than causation. After all, the federal government has limited power over the states. Additionally, everyone on both sides of the political spectrum agree on the necessity of a college education. This caused me to ask why has this reduction continued to happen.

Instead of writing a blog post lamenting about the loss in state funding for education, I decided to see if there is a satisfying answer behind what the budget officers are thinking when they say, “we need to reduce funds for higher education.” After all, people in such a position are likely highly educated themselves and thus know the importance of the system. Some of them are likely old enough to have kids going through college and thus they have the firsthand knowledge of the difficulties of the system. Being that they have government jobs, I doubt they make enough money to not be worried about tuition costs. Moreover, every state, including the more liberal ones, are having issues subsidizing education. There must be some explanation besides, “Reagan inspired Republicans don’t see the benefits of education,” which is what the documentary Ivory Tower seemed to suggest.

As it turns out, there is an association in this country for state budget officers. They recently put out a report which was funded by the Gates Foundation, about suggestions for bringing down tuition. They talk about the issue from their perspective and it was so enlightening! It felt like a breath of fresh air as it had real suggestions for moving forward instead of being a simple party line. As it turns out, there is more that can be done to improve education besides throwing more taxpayer money at it. As it turns, they really can’t increase funds for education no matter how much they would want to. They instead offered some reasonable solutions for how we accept today’s resource constraints and still operate our educational institutions efficiently without raising tuition.

Additionally, it turns out that my fears of what is happening in the system (top officials don’t agree) was confirmed at 3:34 in the video when the interviewee says the following:

Higher Education, State Budget, and Policy Officials frequently talk past one another when they are talking about spending

This is also reiterated in the last page of the report:

State budget officials and institutional leaders too often talk past one another in discussions about state finance and institutional costs

The report seems to be a good outline of what can change in higher education administration to control costs without comprising the mission. It seems some of the important drivers in tuition increases have been rising employee benefit costs as well as administrative bloat. It seems that if we can figure out how to get those factors under control then we might have a sustainable policy for the future. It does not seem like controlling those costs will compromise the mission of universities severely.

The important thing to remember in the debates about what to do with tuition increases is that universities are not the only organizations that have issues controlling costs. Administrators like to think that they have done all they could to control their costs but we can’t know if that is true unless an outsider does a rigorous evaluation of their finances. As it turns out, there is an entire industry, the management consulting industry, that goes to organizations and companies and figures out better ways for them to work. Thus, the resources exist for very experienced managers to evaluate whether or not university administrations are properly controlling the costs. I think it’s time we use those resources.

After all, we are caught in a vicious cycle that cannot continue. Administrators just say, “give us money,” while the state says “sorry but we can’t,” and then the burden is placed on the undergrads in the form of tuition. Just like many things in life, who suffers when the powerful don’t agree, the powerless. Student loan debt is causing massive financial headaches. There is no shortage of internet articles detailing how massive of a problem this debt is poised to become in the short-term and long-term. The trend is going to continue unless we do something. Administrators can keep saying “give us more money” to the state but as the report suggests, that is not going to happen no matter how much we scream and yell.

Why is College Tuition so high?

This is one of the most talked about issues in American politics today. There is no shortage of information (as well as misinformation) about this issue. I have seen lots of different experts posit different explanations for what has happened and many of them don’t actually make sense when you look at the hard numbers. There are some explanations though that are quite convincing as the hard numbers behind them definitely suggest the reason for the dramatic tuition increases we have seen. Additionally, when you think about those who had the power to control tuition costs and think about their incentives and responsibilities, it becomes clear that no one was really held accountable for rising tuition as the students and parents had no way of holding them accountable.

 

First, I will start with the explanations that fall short:

Administrator salaries are too high: While I do not dispute this fact, the salaries of those at the top when you look at a university budget are usually just a small percentage. At my alma mater, NYU, John Sexton makes $1.3 million while the university likely gets $600 million per year from undergrads (20,000 students who pay an average of $30,000 per year after scholarships and grants, according to the NYU website)

Too many fancy buildings: Again, by the numbers, buildings are not that expensive. While the price tag may be in the millions, that only amounts to thousands per student for the entire building in many cases. The new buildings are also usually not funded entirely by tuition. Additionally, they are not going to pay for it all at once and will likely have a long-term loan, thus further reducing its impact on a student’s tuition.

 

The explanation that college administrators love to posit is that the state governments are not funding education enough. According to the documentary Ivory Tower, Reagan said, “The state should not be funding intellectual curiosity.” In his time, college was not the necessity it has become today. This has not changed the conservative attitude however. We thus have a perfect storm of old attitudes but new conditions. In any case, while this does help explain tuition increases at public colleges, it does not explain private college tuition increases. I want this article to explain the problem more generally, so I will not delve too deep into this source of tuition increases. Wikipedia actually does a really job of explaining the main sources of increases and it has a multitude of links to reliable data on what has really caused the problem. For the rest of this article, I will take the facts from the article as well as many other articles and ask the question of who was held accountable. Spoiler Alert: No one.

One of the main reasons presented in the article is the practice of tuition discounting, whereby the school uses the tuition money for financial aid to less fortunate students. If we ended tuition discounting, the tuition would decrease, but the affordability of college would be adversely affected. We could increase the amount of federal money for education, but that is not likely to happen any time soon. In any case, tuition discounting is only a small part of the increase and it would not explain the lack of affordability of college and the increase in student loans.

Now, let’s think about what is the biggest expense for most non-profits as well as many private companies. No, it’s not building maintenance. It’s salaries for the employees. Faculty and staff salary increases are one of the biggest drivers of tuition hikes. Faculty and staff are the heart of a university and are literally what makes it function and gives it its prestige. However, they come at a high cost. At some point, someone had to look at all the money that the university brings in and decide how many faculty and staff can be hired. Who are those people: university administrators. It is literally their job to look at the money coming in and decide how much money needs to be charged for tuition. Their incentive is to raise the profile of their school and one of the main ways that is accomplished is by hiring more faculty and paying top faculty large amounts of money. One of the main pillars in the US News methodology is faculty resources after all. Hiring more faculty is an ongoing expense and they thus had to increase tuition in order to afford these faculty members. Many education experts agree that the biggest reason for the tuition hikes is the increase in the cost of instruction.

Thus, all across the country, tuition started rising. As tuition was rising, people started borrowing more and more in student loans. They realized that if they declared bankruptcy, their student loans were forgiven. This was not a sustainable financial practice, so the government stepped in. Instead of asking the banks to lend more responsibly or the administrators of universities to stop raising tuition, they placed the blame on the students and imposed the law that student loan could not be forgiven by bankruptcy. This was the Bankruptcy Reform Act of 1994.

This created a terrible perfect storm. Universities were free to raise tuition because banks and the federal government would cover the cost for the students. They were happy to provide these loans since these students had to pay them. At no point were they worried about the welfare of the students. Why would they be? What power did the students have in that equation?

Now, I am not saying that hiring more faculty or paying top faculty a lot of money is a bad thing. Hiring more people to enhance your mission and paying the best people a lot of money is common practice in every organization. However with certain (unfortunately not all) corporations, they have to figure out how to do this without raising prices too dramatically. It is thus likely that university administrators heard two things from business executives:

(1) You need to pay a lot of money for the absolute best people

(2) You need to make sure you are not raising your prices in the marketplace to accomplish (1). If you fail to do this, you will get shut out of the marketplace or the government will come after you.

I think they listened to (1) but not (2). Instead they thought, “If we all agree to this practice, students will have no choice. After all, we control who is accredited.” So, there you have it. University administrators did not figure out how to provide faculty and staff salaries without raising tuition. They were not held accountable for this failure by banks or the federal government in any way and now we have our current mess that is only getting worse. Since all the top private universities abide by this practice, there is no way for a market to hold them accountable.

 

So what’s the solution. Trying to add competition to the marketplace might help but it does not seem practical as the costs of new universities are extremely high. Instead, we need to start holding university administrators accountable. I have been in academia for 6 years now and have rarely heard the words, “I love the administration and everything they are doing. The huge tuition that undergrads have to pay is completely justified.” On the contrary, most people have very negative things to say about the administration of their university. Faculty members are often included in this group of people dissatisfied with the administration. The NYU faculty gave its president a vote of no confidence recently. Everyone I knew at NYU was very upset about the lack of financial aid and we have been consistently voted “Most Dissatisfied With Financial Aid” by Princeton Review. Cooper Union’s administration made everyone angry recently for introducing tuition for the first time in 150 years. This is just a small sample but with every university I visit, I hear cries of dissatisfaction with the administration.

The administrators like to argue that the steps they take are painful but necessary. It would thus follow that a private university would release their budget and every practically-minded person would agree that it’s necessary. After all, we all want free food and free housing but we accept that the fact that it takes resources to provide those things so we have to pay for them. For the longest time, people accepted that college had tuition and they took out loans or worked summer jobs to afford it. I don’t think there was too much of a backlash about college tuition before 1980 after all. Unfortunately, tuition is out of control and no one seems to understand why. Additionally, many private universities, including NYU, don’t release their budget, so we have no way of knowing if they are being honest.

Since faculty members do most of the work in keeping a university’s mission of research and teaching functioning, you would think that they should elect people to be given the job of deciding how the university’s finances should be handled. That is not what happens at all. Universities typically have a separate board of trustees that has most of the power. The university president as well as some other administrators run the daily operations. The important thing is that at no point, does the faculty or students have a say in who these people are. The board and current administrators decide who the next administrators will be. History has taught us that when there is a gilding process like that with positions of power, the status quo is maintained and meaningful change is never accomplished.

I think it’s time we start auditing what they are doing. Because the federal government provides a lot of money in student loans to both private and public schools, I would argue that the government has the right to audit the administrations in both cases. We have a right to know if this money is truly being spent as needed. Universities are not the only people who need help figuring out how best to operate. Corporations hire consultants all the time for this task and there is a huge body of experts that has developed in how best to run an organization. I think it’s time the government hires some of these experts temporarily for an audit of university finances. The cost would probably be a fraction of what it pays in student loans every year. We definitely need to do something quickly or else, as the past 30 years have proven, tuition will just keep rising and rising.

The most important thing to look for in this audit: where does the tuition money go? I have a five-figure debt load from my undergrad. I understand that education is expensive but did it really need to be as expensive as it was. Around the country, people are saying NO! We all understand that education costs money, but why so much money? More specifically, undergrads should definitely be told how much of their money is going toward the following: tuition discounting, faculty salaries (up to $200,000), top faculty salaries (salary amounts over $200,000 paid), academic staff salaries, non-academic staff salaries, building costs, and administrator salaries.

Maybe this audit won’t do anything. Perhaps after seeing the budget for private universities, it will turn out that those line items are necessary. If this is truly the case, then administrators have indeed been doing a great job. However, our mistrust in them grows as they hide this information. The call for transparency has been growing. Let’s hope something actually happens. After all, the students, teachers, and federal government are largely paying the administrators and thus have a right to own if they are doing their job correctly. We all have to answer in this world for whether we are doing our job. Let’s start holding university administrations to that standard better.

Welcome to the Freethinking Pragmatist!

Welcome to my blog. It is devoted to expressing views on politics, religion, and society that are rooted in practical rather than ideological considerations. While this blog may appear liberal or conservative depending on the reader, it is above all meant to be a blog that examines what works, why it works, and what that means for the future. I plan to especially focus on impactful but little mentioned problems and solutions. This will be iconoclastic at times. Living in a free society means we always have to question authority in all its forms. Let’s commence the muckraking!