I don't think suffering is good, but I do believe that we have to pay a price for past sins, and the longer we put it off, the higher the price will be.

But this cure has been one ice-cream sundae after another. It can't be that easy, can it? The puritan in me says that there has to be some pain. That's not to say that there hasn't been plenty of economic pain. But that pain has come from the recession itself, not the cure.

The United States has a problem: rapidly rising student debt. It also has a solution: online education. The primary reason for spiraling student debt is the soaring costs of a college education at a physical college. Online education strips away all of those expenses except for the cost of the professor's time and experience. It sounds perfect, an alignment of technology, social need and limited resources. So why do so many people believe that it is a deeply flawed solution?

Because it means massive swaths of higher education is about to change. Technology has disrupted many industries; now it's about to do the same to higher ed.

But it is the students who need aid, and not the financial kind. They have too much of that as it is. The amount of student debt is large and getting larger. It will top $1.1 trillion this year; two-thirds of college students will graduate with debt. The average debt burden is $27,000, though that is skewed higher by a small percentage who owe a lot more. Forty percent of students owe less than $10,000. The amount of student debt has doubled since 2007, tripled since 2004, and many economists believe that the effect on the overall economy is negative.

While college graduates undoubtedly land in higher-paid jobs (earning almost twice those with only high school degrees), that may be offset by the burden of interest payments on student loans. Says Diane Swonk of Mesirow Financial: "Student debt has a dramatic impact on the ability to buy a house, and to buy the dishwashers and the lawnmowers and all the other purchases that stem from that ... It has a ripple effect throughout the economy."

As for the students, the price of the debt is often not worth the benefits. According to economists at the Federal Reserve Bank of New York, 17 percent of students are in default, compared with 10 percent in 2004. And a large portion of those defaulting are over 30 years old, which means that the problems with student debt don't disappear with age.

Some debt is clearly manageable, rational and reasonable. Taking on a modest amount of debt for a degree that dramatically enhances your earnings power makes eminent sense. Yes, interest rates on federal student loans are too high relative to mortgage and market rates, and they are set to go higher this year, possibly to nearly 7 percent. But the problem with student debt is not that it has gotten so large so fast; it's the extent to which a college degree has become so expensive for so many who cannot afford it, yet leaves so many with a credential that is excessively costly relative to the skills it offers.

Colleges, including commuter community colleges, cost money to run and build, and they cost ever more as even third- and fourth-tier institutions try to entice students. Most students earn a degree because the credential is required for almost all higher-paying jobs. If the cost is between $25,000 and $75,000, and more than $200,000 at elite schools, then that is the price that must be born.

But is it? That is where the burgeoning world of massively online education presents such an opportunity. Institutions like the University of Phoenix have been offering online courses since the 1990s, but this new wave is larger in scale and now includes traditional universities. Online courses cost a fraction of a brick-and-mortar education. New companies such as Udacity and Coursera have been experimenting with new models, ranging from per fee, limited-enrollment classes with select professors to the so-called MOOCs ("massive, open, online classes") that attract tens of thousands of students per class. Coursera, barely a year old, already has 3.5 million registered users. Students anywhere in the country and indeed the world can sign up, take a course with skilled professors, meet with other students in their area for study groups and learn the material. Even more crucial, they assemble a menu of courses that combine pure learning and more-tailored vocational studies based on skills needed for particular jobs. And all for a fraction of the costs.

The problem is that many in the business of higher education hate the idea. It's disruptive to the traditional model and profoundly threatening to the current economics of the academic industry. The elite schools have embraced the online world because it allows them to use the power of their brand to extend everywhere. But many community colleges find the prospect more challenging, as it could well undermine their mission and the need for them. One critic quoted in a recent New Yorker described what might happen:

Imagine you're at South Dakota State and they're cash-strapped, and they say, 'Oh! There are these Harvard courses. We'll hire an adjunct for three thousand dollars a semester, and we'll have the students watch this TV show.' Their faculty is going to dwindle very quickly. Eventually, that dwindling is going to make it to larger and less poverty-stricken universities and colleges.

Unquestionably, the next wave of online education will disrupt. It will threaten faculty and colleges, but it will empower students. Yes, we are a few years away from online courses providing degrees and credentials that will be seen by the marketplace as adequate. For now, taking courses online may enrich your life, but it will not provide the entrée into jobs requiring a degree, whether associate's or bachelor's. Many fields of graduate study will be untouched, but many others - law, accounting and others - are ripe for online credentializing.

Having spent almost a decade as a graduate student and professor, I was always struck by how resistant to change and questioning academic cabals could be. The growth of online education is yet another example. Many are embracing it, and many are resisting it because it represents change to a world that often moves at the pace of medieval guilds.

The beneficiaries, however, are students, which really means all of us. The costs of obtaining needed credentials will plummet, and the ability to create more tailored, vocational programs aligned with the skills employers need will increase exponentially. That will likely lead to some shrinkage in the number of physical institutions offering degrees, but an increase in the number of people obtaining them. It will also mean that those taking on debt - especially at elite schools - will be those most likely to be able to bear those debts, while those who need more specific and vocational education for decently paid but not high-paying jobs will not be saddled with loans out of proportion to their earning potential.

This online educational revolution is the next wave, and it is still very early. Rarely has a societal problem been presented with such an ideal solution. We should embrace it passionately, because it's happening whether we do or not.

"The Edgy Optimist" column is initially published at Reuters.com, an Atlantic partner site.

Fewer people going to college? Could this possibly be good news?

Actually, yes. For three reasons.

First, it's probably a sign that the economy is getting healthier. Conventional wisdom says that as the economy tanked, students took refuge from the job market by heading to campus. Some critics say that storyline is bunk, and that the last few years of enrollment growth were really just the continuation of a long-term trend. But either way, fewer new students seems like a sure sign that, if they were before, Americans have stopped turning to education as a professional measure of last resort. Would these folks be better off with a degree? Probably. But there's a pretty decent chance that many students on the fence about signing up wouldn't have graduated anyway.  

Which brings us to point two: Even if you think more Americans need degrees, we should probably be focused on improving our nauseating dropout rates rather than adding more bodies to classrooms. 

And finally, we really, really do want some of these colleges to shrink. As shown in the graph below from Inside Higher Ed, The biggest fall-off by far has been in ever-unsavory for-profit sector, which has been pulling back lately in an effort to improve their abysmal track records and slim down on their cost structures. And the more overall enrollment shrinks, the harder for-profit schools will have to compete to provide better services and, hopefully, results. Meanwhile, the next biggest drop has been in community colleges, where in many states over-crowding has made it nearly impossible for some students to finish degrees, pushing them into the arms of ... the for-profits. 

Our views on college at The Atlantic are pretty simple. We want more college graduates to leverage an affordable education to get a great job. Falling enrollment sounds like an enemy of that goal ... but not when enrollment is falling the fastest at schools with the worst debt and drop-out rates.

Remember when you first learned what socialism was and somebody explained that it was nice in theory, but bad in practice? Here's the sort of thing they were talking about. 

Venezuela is now suffering from a government-induced toilet paper shortage. The situation has become politically dire enough that the government has promised to import 50 million rolls to calm shoppers. 

For those familiar with the Bolivarian Republic's less-than-sterling economic record of late, this won't come as a surprise. The country, while relatively wealthy by developing-world standards, has been suffering through a chronic shortfall of everything from groceries to asthma inhalers, resulting in desperate lines of shoppers and a healthy black market trade in kitchen staples like flour. 

While the government prefers to blame shadowy political enemies for the shortages -- according to the AP, Commerce Secretary Alejandro Fleming said the toilet paper crisis was the result of "excessive demand" sparked by "a media campaign that has been generated to disrupt the country" -- the explanation is much more straightforward.

In 2003, then President Hugo Chavez slammed currency controls into place to prevent money from fleeing the country while government seized land and corporate assets. Those rules have made it harder to buy imports. Meanwhile, price caps meant to make basic staples affordable to the poor are so low that, for many products, they don't pay for the cost of production. 

Nobody's going to make toilet paper if they'll lose money selling it.  

It's tempting make light of this situation, but it's really sort of tragic, yet another self-inflicted wound on an economy rich in natural resources. The shortages are bad enough that Venezuela's central bank has created a scarcity index (shown below in this WSJ graph), which has lately been hovering around a four-year peak. "The revolution will bring the country the equivalent of 50 million rolls of toilet paper," Fleming told a state news agency. It would be much easier to let the free market do it instead. 

[My editor has forbidden me from writing puns into this story, but feel free to get them out of your system in the comments.]

Why might that be the case? The combo of debt and murky career prospects has a way of chilling one's desire to invest in a home. It also doesn't make much sense to settle down when there's a good chance you may have to move for work. 

But there's more to it than that. Lending standards have gotten suffocatingly tight in the wake of the housing bust, and young people with too much student debt compared to their income, or who've fallen behind on their loan payments, may simply be unable to qualify for a mortgage. As the Fed noted, student borrowers now also have worse credit scores, on average, than their ed-debt-free peers.

That's the big picture story. But I want to focus on the small picture for a moment -- the granular picture even. Because the truth is that most young people with student debt are still more likely to take out a mortgage than their debt-free peers, as this New York Fed graph from a separate report shows. The big exception is borrowers who are delinquent on their loans (shown in red). 

The problem is that the delinquency rate has just about doubled since 2004. More than 15 percent of all borrowers under 30 are now 90 days or more behind on their payments. The universe of young adults who have any shot of getting a mortgage has shrunk.

This is why I'm both a bit less worried about the impact of student loans on the economy than writers like Mike Konczal, but more so than my colleague Derek Thompson. Student borrowers who have managed to keep up with their payments are buying homes less often than they were before the housing crash, but the decline seems to have halted, and hasn't been far out of step with what's happened to their non-borrowing peers. On the other hand, the problem pretty clearly isn't a result of students consciously choosing to invest in education rather than real estate. It's that there's a significant chunk of twenty-somethings who borrowed to finance school and are now swimming in debt they're having difficulty paying back. Paying back student loans is probably stopping some young adults from buying a home. But I'm guessing it's the ones who can't pay them back who are the much bigger problem. 

***

For a bit more about student loan delinquencies, and what might cause them, check out my piece from yesterday. 

We like to view higher education as the "great equalizer" that leads to social mobility. But selective colleges have long been accused of perpetuating class divides, rather than blurring them.

A recent landmark study by Stanford's Caroline Hoxby and Harvard's Christopher Avery lent further empirical evidence to this accusation, finding that high-achieving low-income students do not have access to selective schools. The study showed that the mismatch is due to a lack of knowledge, not quality. Low-income students outside of major urban centers do not even apply to the top-tier colleges for which they are qualified.

Many commentators and the study authors themselves have looked for ways to alleviate this mismatch. A follow-up study found that supplying basic information to applicants could substantially increase the number of low-income students applying to more selective schools. Just giving low-income kids packets of information helped them apply to better schools.

Yet while the information gaps are real and need to be addressed, there is a much deeper structural problem. If most top colleges wanted to be truly equitable, they could not be with their current business model. There is not a golden pot of low-income applicants that schools want but are failing to reach. Instead, many schools don't want more low-income students because they won't be able to pay for them without a major overhaul of school funding practices. Outside of the handful of super-elite universities with fortress endowments, colleges' finances are currently designed around enrolling a disproportionately high number of high-income students. These schools could not afford to support more low-income or middle-income students absent either a huge increase in tuition, a commensurate reduction in spending, or a dramatic change in public funding.

In fact, schools are already moving away from a more equitable system. Colleges actively recruit "full pay" students who can attend and will not need financial aid. A 2011 survey by Inside Higher Ed found that about 35 percent of admissions directors at 4-year institutions, particularly public colleges, had increased their efforts to target "full pay" students. Far from wanting to enroll more low-income students, colleges recruit more affluent ones who will pay full price to attend. A follow-up survey of college business officers found that the most common strategy to deal with financial challenges in the next few years was to "raise net tuition revenue." More than 7 in 10 college CFOs cited this answer. In other words, schools are becoming more reliant on the inequality in the system than ever before.

If colleges cannot even currently support their business model with enrollment skewed toward higher-income students, a fairer distribution would make the system completely dysfunctional. What's really holding back a more equitable distribution of access to selective colleges is the financial model of colleges. For systemic reform to work, the government will have to take a leading role in fixing incentives and stopping the college spending arms race in its tracks.

High-Aid, But Not Enough Poor Students

What would selective college populations look like if their student body perfectly reflected the population of qualified students? The short answer is: They would have many more poor students -- and it would wreak havoc on their finances.

High-income students account for about a third of the high-achieving students graduating from high school (see graph above). But estimates suggest that 74 percent of students at the top 146 top colleges came from the richest quartile of households. The Center for Education Policy Analysis (CEPA) at Stanford looked at 174 top schools and noted that richest 20 percent of households were seven to eight times more likely to enroll in a selective institution than those from the poorest 20 percent, even though Hoxby and Avery's research suggests that a fairer distribution should be two to one. The CEPA team also found that the gap between the highest and lowest income groups in college enrollment has increased over time, "as more and more seats in highly selective schools have been occupied by students from high income families."

What would the current high-tuition, high-aid model look like with an enrolled student body that reflects the true distribution of high-achieving students?

At The George Washington University, right around the corner from my office in Washington, D.C., the advertised price is $58,985 for the 2012-2013 school year. For the more than 4,000 undergraduate students (out of about 10,000) who are judged to be unable to afford the advertised cost, GW provides an average of $36,789 in aid to offset this cost.

If GW's demographic profile matched the actual distribution of high-achieving students - that is, if there were one bottom-quartile student for every two top-quartile students -- GW's revenue would plummet by about 20 percent. The school would have to raise its tuition for students that are paying full price. But there would be far fewer of them. To take in the same amount of money as they currently do, GW would have to raise its price by approximately $30,000 per full-pay student, for a sticker price of about $90,000 a year. The actual increase would likely need to be more, given that families making $120,000 per year are classified as high income but cannot afford a college cost that would consume three-fourths of their annual income.

This is not a sustainable model. Colleges will not be able to raise sticker prices to these levels while preserving enough aid for low- and middle-income students. They will either raise prices across the board or recruit more affluent students.

Either way, the unequal system will remain.

How to Keep Prices Down: Be Really Rich

Not all colleges, however, would need to raise tuition drastically to pay for a larger number of low-income students. Schools with large endowments can cover the shortfall in tuition by drawing money from these reserves. But keeping tuition constant and paying more from the endowment is only an option for schools with monstrous endowments.

Many writers cite Amherst College as a success story, which has "aggressively recruited poor and middle-class students in recent years" and has increased its share of low-income students. But Amherst has a very large endowment for the size of its student body. Its strategy is only viable when backed with an endowment of more than three quarters of a million dollars per student from which it can draw additional funds to cover its costs while remaining competitive in its levels of spending.

Amherst is better than others, however. Some schools that already do have sizable endowments and could increase aid are instead decreasing it. Cornell, which has an endowment of about $5 billion, took $35 million from its endowment in 2009-2010 to fund financial aid. It is now changing its policy to draw less from the endowment, which includes lowering its financial aid policies.

For GW, with $1.33 billion in its endowment (about 1/18 of Amherst's per student), it's more difficult to use the endowment as a primary backstop. GW only has around 11.7 percent of its endowment, or $155 million, available for student aid. As such, GW - and most selective schools - would only be able to preserve student revenues by raising tuition.

The Public College Crisis

This problem is not reserved for private colleges and universities like GW. In fact, the problem is even worse at public universities.

In addition to competing with private schools, public universities are dealing with cutbacks in public funding as state governments turn to austerity to restore their balance sheets. State funding for colleges and universities dropped substantially after the 2001 and 2008 recessions. States are now spending 28 percent less per college student than they were in 2008, according to the Center on Budget and Policy Priorities, and the College Board reports that average state appropriations for higher education per $1,000 in personal income have declined from $9.74 in 1990 to $5.63 today. These budget cuts have forced states to raise their tuitions in turn. Over just the last 10-year period, combined tuition, fees, and room and board at public 4-year universities have increased 45 percent in inflation-adjusted dollars.

Flagship public universities illustrate this trend. Every flagship state university has seen its tuition increase faster than inflation over the last five years. The biggest price increases are enormous. The University of Arizona raised its tuition 81 percent above inflation, and five other schools saw tuition increases of more than 50 percent in real terms. As one CFO of a public university explained to Andrew Delbanco, the author of College: What it Was, Is, and Should Be, the issue at public schools is "not so much the cost of college, but the shift of the financial burden from the state to the student." If these trends continue, public universities will limit access to low-income students and increase the number of affluent students. This will create a more unequal system than the already unequal one we currently have.

Can the Drive for Reputation Save Us?

All of these calculations assume that colleges do not, and will not, change their spending. But perhaps the key to fixing the structural problem lies on the spending side, rather than the revenue side. Spending is not bad per se. If increased spending is necessary to contribute to the quality of the education or on increased financial aid, it would be good for colleges to continue to spend this money. Unfortunately, much of the spending has been on new buildings, administration, or "amenities" spending, rather than on the education itself.

Financial aid demands will rise for schools that want to attract more low-income students, as David Leonhardt of The New York Times notes. He is hopeful that the drive for reputation that includes a commitment to equity and supporting low-income students will encourage colleges to ditch the arms race of spending on new buildings and sports teams. If the spending arms race is a fight for more spending on financial aid, rather than other expenditures, it would be an arms race worth having. He writes:

"It is hard to think of a form of spending more consistent with top colleges' self-image and mission than scholarships for low-income students who have managed to overcome barriers and excel."

The problem, however, is that the capital arms race burnishes a school's reputation far more than a greater commitment to low-income students. Under the current set of incentives, colleges are rewarded for providing more of these "amenities" expenditures but not greater access.

A recent NBER working paper found that students value non-instructional amenities and are more likely to attend an institution that spends more on consumption amenities. While high-achieving students also value more spending on instruction (whereas low-achieving students do not, and even think additional instruction is bad), both high-achieving and low-achieving students tend to favor amenities. Universities, responding to this "demand-side pressure," spend more money on these consumption amenities, thus driving up the need for revenue.

Moreover, the current amenities expenditure arms race has succeeded for schools. Before Stephen Joel Trachtenberg took over GW in 1988, the school was "a nonentity in national rankings." Last year it was ranked 51st in the annual U.S. News and World Report list. "Spending more money can lead to higher rankings," writes the Center for College Affordability. This perverse incentive encourages the higher spending that leads again to the need for more revenue. Colleges then compete to outspend each other, leading to the never-ending arms race.

A recent report by my colleague at the New America Foundation, Stephen Burd, tracked colleges' net price for low-income students and what percentage of their students receive federal Pell Grants. Pell Grants can serve as a proxy for how many low-income students are enrolled. Of the 22 selective schools that enrolled a larger share of Pell Grant recipients and kept net price for these students low, only five schools had endowments smaller than $150,000 per student. None of these five schools were ranked in Barron's "most competitive" category. In other words, providing affordable access to more low-income students does not translate into a better reputation. Capital spending of the kind pioneered by GW's Trachtenberg does.

It is difficult to hope that colleges will change their path when the current one they are on has succeeded for their brand, even if it leaves lower- and middle-income students behind.

Perhaps the best example of capital spending trumping financial access is the story of Cooper Union, a small elite private school in New York City that has been free for students since its founding in 1859. Cooper Union used to fund itself on the proceeds from owning the land underneath the Chrysler building and other land assets in New York. To increase its reputation, the school tried to build its brand by building a fancy building. But facing large deficits after taking out a $175 million mortgage to erect the new building and incurring investment losses in the financial crash, the school's board of trustees announced that Cooper Union will start charging undergraduate students tuition in 2014. The consequence of the capital spending, combined with other financial struggles, is that something had to give. Undergraduate students will now be charged tuition (up to about $20,000 per year) for the first time in the school's history.

If reputation cannot slow the spending arms race, could technology? The rise of massively-open online courses, or MOOCs, raises the possibility that we could slash the price of college by replacing expensive college campuses with a broadband connection. But if digital colleges are going to have an effect, it will likely be felt at non-selective low-quality schools, such as for-profits, that currently leave students with few opportunities and plenty of debt. At selective schools, the introduction of online learning does not change the basic incentive structure that pushes schools to spend for the sake of their brand.

What Can Be Done?

In an optimistic scenario, finding ways to increase the information available to high-achieving low-income students would increase the number of applications and put pressure on colleges to end the amenities arms race, decrease costs, and spend more time and resources on learning and education supports.

But a more likely scenario is bleaker. Even if we end the information mismatch, colleges will find ways to preserve their existing business models to avoid fundamental reform. Once again, colleges already do this. Not only do they actively recruit full-pay and out-of-state students, they engage in a practice called "admit-deny." As Burd writes, admit-deny is when "schools deliberately underfund financially needy students in order to discourage them from enrolling." Nearly two-thirds of private colleges and one-third of public schools currently engage in this practice.

We need to fix the underlying incentives, and the best institution to lead these changes is the government. It is necessary to have a large public role to guarantee that a basic postsecondary education is not merely a luxury for the wealthy but is instead available, affordably, to every student who wants it.

A public sector that is not caught up in the arms race should serve as the proper "public option" to attempt to drive down costs at private schools in a semi-competitive sphere. The cutbacks in public funding of higher education have made it more difficult for public institutions to keep their prices down and provide a comparable quality of education. The fact that public schools are actively recruiting full-pay and out of state students means that they are moving away from their necessary function as the core provider of higher education to residents in its state. We need not only to restore funding of public universities, but substantially increase it.

Additionally, many of these schools are reliant on federal aid and federal loan programs to finance their students' educations. For example, the government provides Pell Grants to low-income students up to an amount of $5,550 and subsidizes student loans. Rather than continue to offer federal aid to schools that absorb these costs and continue to operate under the unsustainable high tuition, high-aid model, the government can tie its financial aid support to the elimination of the arms race.

As with a military arms race, no individual actor in the education arms race will voluntarily pull back. Only an external force, like the public sector, can make across-the-board changes to fix the problem. The government has leverage because of the importance of federal programs like Pell Grants and subsidized student loans.

To end the arms race, the government should decrease or eliminate federal money to students at schools that continue to increase prices while enrolling disproportionate levels of high income students. Schools would then need to prioritize costs and access, rather than spending and reputation, to be able to function. And no individual school would have to unilaterally draw back.

More broadly, the public sector can also help drive down runaway costs by pushing for policies to promote full employment and the creation of good jobs that do not require a college education. When college is all but required to be able to have access to decent quality jobs, colleges can extract economic "rents" because there is no alternative for people entering the labor force. For students who need access to college as an economic stepping-stone to future employment, simultaneous changes on both the educational and labor market fronts can increase the chances of successful reform. Labor market policies to put pressure on college costs can range from creating more useful, high-quality public sector jobs, like childcare and eldercare services, to increasing the minimum wage or supporting workers' bargaining power.

Any and all of these policies will help drive down the natural inclination for colleges to pursue the arms race and push schools back to the quality, accessible education they should be providing.

Until the underlying problems of arms-race expenditures and declining public funding are addressed, colleges will continue to use high-cost, high-aid strategies that are inherently unsustainable and inequitable. Many selective schools derive their status because of the information asymmetry, not in spite of it. It is the structural deficiencies in the higher education system that are pushing college further away from being the much-hallowed "great equalizer" and instead perpetuating privilege for those who can pay.

A statistical case-in-point: According to the Federal Reserve Bank of New York, 17 percent of all student borrowers are 90 days delinquent on their payments, yet only 11.2 percent of all loan balances are that far behind. That gap suggests there are lots of small-time debtors in trouble these days.

Looking at the geography of student borrowing teaches us a similar lesson. As part of its most recent report on household credit, the NY Fed has produced a neat pair of maps detailing which states have the highest education debt burdens and which have highest delinquency rates. The two pictures overlap less than you might expect. 

As shown below, student borrowers in the mid-Atlantic, parts of New England, the Southeast, Illinois, and California tend to have above-average balances compared to the rest of the country.  

Yet they also have a superior record of paying them back. Delinquency rates in Massachusetts, New York, Pennsylvania, New Jersey, Connecticut, Delaware, Virginia, Illinois, and Washington, D.C. are lower than average, even though their debt levels are high. Meanwhile, borrowers in low-debt states like Nevada, New Mexico, and Idaho have some of the worst payment records in the country. 

What's going on?

It's possible that students are paying lots of money for private schools in high-debt, low-delinquency states that equip them well enough to handle their loans. Graduates of elite schools also tend to congregate in and around the Beltway, which would help explain the debt levels in Maryland, Virginia, and D.C. itself. 

Then there's the job market. If you borrow cautiously for your education, but end up in a state like Mississippi or West Virginia with a high unemployment rate, you might end up in bad spot with your loans. That's straightforward enough. 

Another factor may be the echoes of the housing bust. This is often missed, but it's not young student borrowers having the most difficulty paying off their debts. It's 30-to-49-year-olds, who may also be coping with other financial obligations gone sour. Foreclosure and mortgage delinquency rates in Florida and Nevada -- two big student loan trouble spots -- are still quite high. And, I don't think coincidentally, more than a quarter of delinquent student borrowers are also more than 90 days behind on house payments. They're not just sinking in education debt. They're sinking in debt, period.

And finally, it might be a matter of staying in school. When you talk to higher-ed policy folks, one of the first things they'll tell you is that student debt delinquencies or defaults don't just happen because students borrow too much. Often, it results from a lack of information. When students drop out of school -- which, at many institutions, is the norm rather than the exception -- they usually don't get an exit interview from an administrator explaining their debt repayment options, such as income-based programs. So they end up trying to pay it back too quickly and fail. I wouldn't be surprised if that scenario were replaying itself often in low-debt, high-delinquency states. 

In any event, the point remains: When it comes to the student loan mess, it's not just the size of the debt that matters.  

Here's the story I wish more people would talk about: Our incredible shrinking Medicare projections. Since August, CBO has now revised down its projections of mandatory health care spending by nearly $500 billion, as Michael Linden pointed out. Since the 2010 CBO report, projected Medicare spending between 2013 and 2020 has fallen by just over $1 trillion ... or 16%.

Here's the graph comparing 2010's Medicare projection to 2013's ...

...  and here's the graph comparing cumulative Medicare spending over that time. In three years, we've taken projected Medicare spending in the twenty-teens down from about $6.5 trillion to about $5.5 trillion.

So many numbers. Why should you care?

Two reasons. First, the "runaway" growth of health care costs has been a motivating reason for responsible Washingtonians to ignore the unemployment crisis and focus on our deficit. But lo-and-behold, we've cut more than ONE TRILLION DOLLARS from projected Medicare spending -- and much more if you project out for the full decade. Many of the cuts have come from laws, like the Affordable Care act. Others came from lower growth in overall health care spending.

Second -- and this is the really important point I wish I could make more often -- this is an invaluable lesson in the folly of long-term budget projections (yeah, I appreciate the irony that I'm graphing budget projections to make this point). In a world where all predictions about the future of U.S. government spending turn out to be true, it makes a lot of sense to pay rapt attention to 10- and 20-year forecasts of spending and revenue. But in a world where the most exquisitely delicate change in hospital cost inflation suddenly saves hundreds of billions of dollars, it makes projections impressionistic, at best. In the future, there are budget crises that some people think might happen. In the present, there is a long-term unemployment crisis that we know is happening.

Why should impressionistic statistics about the future win that fight for Washington's attention?

The lines at Disney World are awful, we can all agree, but the lengths to which some people will go to bypass them are worse. Wealthy Manhattan parents are reportedly using a service that typically assists disabled children around the theme park to drive their non-disabled families around in a "handicapped" scooter, allowing them to skip lines by up to two hours.

It sounds like something out of a "Modern Seinfeld" episode. But in this case, the horrible people are real. And they're spectacularly crass.

"You can't go to Disney without a tour concierge," one rich mom said, according to the New York Post. "This is how the 1 percent does Disney."

Well, gross. This is, above all, a problem of basic human decency. But it is also a problem of black markets -- or legal markets extended illegally (or extra-legally) to people who shouldn't qualify.

The official Disney VIP Tour includes guides and premium fast passes for between $300 and $400 per hour. That's much more expensive than a $130-per-hour disability service afforded by Dream Tours Florida. There's a very simple explanation for the price difference: The VIP tickets are priced to where the rich will pay (and also to weed out all but the richest families to keep the service exclusive); whereas, the disability tour company sees all families with a disabled person as consumers. So these rich families reportedly using Dream Tours Florida aren't benefiting from a peculiarly effective and peculiarly cheap service, precisely because neither the service nor the price is intended to serve wealthy families. They're benefiting from a service they don't deserve at a price far below where the real luxury market for fast passes has settled.

Markets in everything, you might say. Sure. Regulation (and retribution) in everything would be good, too.

We've reached out to Dream Tours Florida and will report back when we hear.

On April 24, Minnesota Sen. Amy Klobuchar scheduled a hearing. Fun story, right? A hearing in Washington is like a fern in the rainforest. But this hearing was notable for both its subject and its attendance. It was a meeting about the most important economic crisis facing America today: long-term unemployment.

At 10:30am, the hearing began. She was the only attendant.

***

I have two stories for you about Washington and the economy. Both true. But very different.

The first story is called: How Washington Saved the Economy. You might begin in 2008, when the Federal Reserve went on an unprecedented spree of asset-buying to un-gunk the banks, push down interest rates, and spur investing in mortally weakened economy. This was followed, in 2009, with an equally historic stimulus package aimed at filling holes in state budgets and sending cash back to families and businesses. The government ran steep $1+ trillion deficits to keep as much money in the weak private sector as possible.

There is little question that monetary and fiscal stimulus blunted the recession -- and saved the economy.

The second story is called: How Washington Permanently Scarred the Labor Market. You might begin this story in 2011, when Congress (led by Republican obstructionism) embarked on a historic quest to crush deficit spending by any means necessary. Hold the economy hostage over the debt ceiling? Check. Kill the American Jobs Act while scheduling a too-awful-to-be-a-real-law sequester? Check. Allow the too-awful-to-be-a-real-law sequester to become a real law? Checkmate.

The deficit fell fast. As unemployment ebbed, the ranks of long-term jobless calcified, creating two separate job markets. One broken market for people out of work for more than six months. And another slowly healing market for everybody else. But the combination of a thermostatic recovery and a deep aversion to stimulus crushed any hope that the long-term unemployed would get the help they needed. Long-term unemployment isn't special just because it's longer; it's special because it's self-perpetuating. Skills atrophy, networks dry up, and employers discriminate, creating a vicious cycle of joblessness that can't be cured by normal economic growth.

There is little question that, in the last two years, Washington has essentially left the long-term unemployed to fend for themselves -- and permanently scarred the labor market.

***

This isn't so much a tale of two cities, but a tale of one city that responded differently to two crises: (1) the collapse of the financial system and (2) the scarring of the labor market. These are both emergencies. So why did we respond to the first emergency like an ambulance siren and the second like a harmless murmur of white noise?

I can think of at least three explanations. The first two are the explanations I've heard, believed, and used. The third I hadn't fully considered until last week. But it might be the most compelling.

(1) It's the basic fact that, without a financial system, there is no economy.

This explanation blames pretty much nobody in Washington.

In 2007 and 2008, the entire economy stood on the brink of collapse, and the only way to save it was by a historic all-hands-on-deck response from the Federal Reserve and Congress. In retrospect, you could say that we went too far to protect the biggest banks (some of which are even bigger, today) without ensuring similar financial protection for homeowners. And yet, while millions of underwater homeowners are an acute tragedy, you might say, they won't guarantee a lasting national depression. Without enough gainfully employed homeowners, you won't have a strong housing market. Without a banking system, you won't have a housing market, period.

(2) It's all the Republicans' fault.

This explanation blames half of Washington.

Let's be crystal-clear about this: There is no doubt that Republican policies are disproportionately to blame for the shift away from stimulus. That's an easy story to tell, and I don't think Republicans would even dispute it. After all, they've argued that cutting spending would help the economy. The GOP has thoroughly convinced itself that spending-side efforts to fix unemployment are unworkable.

But there's something else, too.

In the last year, there has settled, even among the Democrats, a kind of reserved defeat that shows a stunning lack of urgency toward the crisis of long-term joblessness. From abandoning the payroll tax cut in late 2012, to quietly acceding to sequester, to going silent on unemployment, nearly all of Washington -- not just the right -- has essentially stopped talking about the most important economic issue of our time.

High-ranking Treasury officials officials I've spoken with on background couldn't name any specific proposals they have to help the long-term unemployed. Instead, they've argued that general economic growth stuff, such as infrastructure spending, should be enough to put these 4 million people back to work. But the economic literature objects: Fighting vast long-term unemployment with general economic growth policies is like fighting pneumonia with Vitamin C.

So, why aren't even Democrats scrambling to fight for the long-term unemployed?

(3) It's the mind-shifting power of money in politics.

This explanation blames everything about Washington. Money might not buy elections. But it does buy the attention of electeds. It subtly but substantially biases them toward the issues that most concern the rich.

Let's begin with a zoom-out: Winning elections is more expensive than ever. Ironically, that makes it harder to "buy" elections, in the conventional sense, because both sides in marquee elections raise so much cash that each marginal dollar becomes less consequential (principles of inflation apply). But it also means that candidates are required to spend an egregious and unprecedented share of their time getting rich people to donate. Having a Rolodex full of wealthy folks is a prerequisite for winning federal representation. It's also a recipe for having your priorities shaped, if not determined, by hours spent going over rich-guy problems.

"Being a candidate means being a telemarketer for 24 months before an election," Connecticut Sen. Chris Murphy said last week at a conference by the Yale Institution for Social and Policy Studies. But not just any telemarketer. A telemarketer for people with lots of money. After all, it doesn't make much sense to spend your limited time asking jobless families to send you their unemployment insurance.

Murphy's remarks were as critical of the corrosive power of money as they were revealing: Even if money doesn't buy legislators outright, it does buy their legislative focus. Political science backs the claim: As Larry Bartels' 2005 paper on "Economic Inequality and Political Representation" found, Democrats and Republicans are responsive to middle-class and high-income constituents much more precisely than the low-income ...

Even if money doesn't always change the outcome of political debates, it shapes what debates we have. We didn't have a debate about whether we should extend the payroll tax in December 2012. But we did have a debate about whether we should raise taxes on families making more than $250,000. Congress didn't vote to cancel the sequester when it learned it would cut unemployment benefits and assistance to low-income households. But it did cancel the FAA cuts when frequent flyers complained about security lines and departure times. Nobody on Capitol Hill is talking about long-term joblessness. We're still debating carried interest and the Volcker Rule.

I'm paid to spend my day reading economic papers and asking people to explain their conclusions. Spending my time this way has persuaded me that long-term unemployment is a national emergency that is both devastating millions of families and making the country permanently poorer.

Politicians have a slightly different information diet. They spend more time gleaning information from lobbyists and rich donors whose concerns and opinions graft themselves onto representatives as easily as the pithiest economists' opinions attach themselves to me. If politicians naturally gravitate to the issues rich folks want to talk about, it doesn't make them bad people. It makes them normal people in a broken system that elevates polarization -- both between parties and between the priorities of high-income and low-income families -- while subtly concealing the issues that most affect Americans who cannot afford a lobbyists' luncheon or a number on a congresswoman's speed-dial. 

The centrality of big money in politics makes it nearly impossible for an issue like long-term unemployment to buy a sliver of mindshare. Our priorities are shaped not only by the stories we choose to believe, but also the stories we happen to hear, from the ideas we give a hearing ...

***

... Sen. Chris Murphy eventually joined the April 24 meeting on long-term unemployment. He was joined by two more Democrats. Sixteen of the 20 members of the Joint Economic Committee never bothered to show up. National Journal wrote a report. Liberals blogs expressed outrage. But the story quickly died, carried out by the effluence of the media cycle and the frenzied schedule of Washington, its writers, and its representatives. There were so many hearings to attend. There were so many calls to make.

Here's what places like Detroit, St. Louis, and Pittsburgh do have, however: big universities, if not inside their city limits, then fairly close by. And so unsurprisingly, some Rust Belt efforts at immigrant outreach have been focused on convincing international students to stay put after graduation. 

There's a lesson for Congress in this story. Right now, the way politicians think about high-skilled immigrants is deeply influenced by tech companies, which dubiously argue that we need more foreign talent because there's a widespread shortage of computer skills in the United States. Silicon Valley types like this angle because it justifies expanding guest worker pipelines such as the H1-B visa program, and guest workers make for fairly compliant and often inexpensive employees (some would call them "indentured"). But there's a much better justification for welcoming educated workers to our shores. They're good for growth. They can start businesses, conduct research at our universities, and join corporations. At an even more basic level, they buy homes, shop, and have families, all of which add up to more spending at local businesses. In short, they set down roots in a community, which is what Rust Belt cities are really hoping for.

Immigrants will be more likely to do those things, however, if they're given permission to stay here long-term. It's easier to invest in a home if you're certain you'll be in the U.S. more than five years down the line. Likewise, you're more likely to take career risks, or demand that you be paid what you're worth, if you're not relying on your employer to keep you in the country.

Right now, Capitol Hill is taking an all-of-the-above approach to high-skill foreigners. The immigration bill would dramatically grow the annual allotment of guest worker visas available to corporations and expand the number of green cards for educated professionals. But we should be focusing less on the former, and more on the latter -- pushing for fewer guest workers and for more green cards. We shouldn't just think about what companies want in Silicon Valley, but what people are trying to do in places like Detroit. 

When California State Sen. Kevin de Léon talks about his plan to help people save for retirement, he usually starts by describing his Aunt Francisca, a housekeeper. "She's north of 70 and she still cleans homes," says de Léon. Francisca can't afford to retire because she has no savings. Even with help from Social Security, she struggles to make ends meet.

"It's the story of tens of millions of Americans throughout the country," de Léon says. The Los Angeles Democrat isn't just talking about domestic workers. Nearly half of Californians are on track to retire in or near poverty, according to a University of California (Berkeley) study. A separate analysis of census data from The New School for Social Research found that three-quarters of Americans ages 50 to 64 have an average total retirement account balance of under $30,000.  

Saving for retirement has never been easy for poor and middle-class workers, and employer-sponsored retirement plans have never been universal. But the recession and slow recovery have made it hard for many Americans to make a living, let alone put money away.

A new law authored by de Léon attempts to address what he calls the coming "retirement tsunami." Signed by Gov. Jerry Brown in September 2012, the California Secure Choice Retirement Savings Program would establish automatic payroll contributions into retirement accounts for 6.3 million Californians whose employers don't sponsor a pension plan or a 401(k). Legislators in left-leaning states such as Connecticut and Illinois have put forward similar proposals, as has U.S. Sen. Tom Harkin (D-Iowa). 

The California program aims to create an effortless savings vehicle for an underserved population. Three-quarters of eligible workers make less than $46,420 per year, putting them into a demographic that relies heavily on Social Security in retirement. The new law won't end reliance on Social Security, but it could provide workers with additional financial security.  

The program is designed to be privately run and managed, ideally at no cost to the state. Advocates like de Léon argue that its structure combines portability--one of the best features of 401(k)s and Individual Retirement Accounts--with professional management of pooled funds--one of the best features of traditional pension plans. The new system would deduct an automatic 3 percent contribution from the paychecks of eligible employees, unless they chose to opt out. Workers with unconventional employment arrangements--like housecleaners--could opt in. And businesses with more than five employees that fail to allow payroll deduction would pay a penalty of $500 per eligible employee.

The contributions would be saved in individual, IRA-type accounts, but the accounts would be managed collectively as an estimated $6.6 billion fund. To protect workers against stock-market crashes, no more than 50 percent would be invested in equities. "Looking at what happened in 2008, 2009--we can't have that happen for this population," says Lisa Chin, de León's legislative director.

Additional protections include a reserve fund that could be drawn from during years of slow growth, and private insurance, to guarantee account-holders a rate of return. The guarantee would likely be tied to the 30-year Treasury bond rate, which is currently about 3 percent.

"Automatic enrollment is great because the evidence we have so far--which comes from large companies that have traditional 401(k) plans--is that participation rates are extremely high," says Brigitte Madrian, professor at the Harvard John F. Kennedy School of Government. Automatic enrollment and payroll deduction are powerful tools that help people save, she says, because people don't tend to miss money they don't see.

Large, pooled funds are cheaper to manage than hundreds of individual accounts--and that lowers fees that account-holders have to pay, says Nari Rhee, manager of research at the National Institute on Retirement Security. Pension funds also tend to have higher returns, because they're professionally managed, invest over the long term, and spread market risk across a range of people of different ages and income levels.

De León insists that the savings program isn't a new entitlement. But California's existing pension obligations loomed over his bill. The measure didn't get a single Republican vote in the Legislature, and even many Democrats were skeptical. "It's one of the most dangerous pieces of legislation I've ever seen," Democratic State Sen. Ted Lieu, told The Sacramento Bee. The California Department of Finance Analysis, also opposed the bill, saying it could create a new "multibillion-dollar liability."

The California Chamber of Commerce argued that the plan was unnecessary, as any worker with taxable income and a bank account can open an IRA. De León counters that if the current system was working, there wouldn't be so many Californians who lack retirement savings plans.

Still, implementation of the new law will be slow, partly in order to address concerns about liability and cost. Many of the details of the program--like how retirees will be able to access their money-- will be determined by a yet-to-be appointed board. The board must raise private money to pay for a market analysis of the program to find out what tweaks are needed to smooth implementation. 

Despite language in the bill freeing the state of all liability, it is unclear what responsibilities the state will have under federal law to ensure benefit payments. The final program must be submitted to the Internal Revenue Service and the Department of Labor to make sure the individual accounts qualify for the same tax treatment as IRAs, and that they doesn't constitute an employer benefit plan. If the plan passes both assessments, it will be resubmitted to the state legislature for authorization.

Enrollment won't begin until 2015, at the earliest. It could be years before de Léon finds out if the new program helps workers like his aunt Francisca--or if, for those with little income to put aside for retirement, the only way to ensure financial security in old age is to keep on working.

Neat fact: If the federal government were to take all of the money it pours into various forms of financial aid each year, it could go ahead and make tuition free, or close to it, for every student at every public college in the country. 

Will it ever happen? Ha. Not unless Bernie Sanders somehow leads a Latin American-style coup down Pennsylvania Avenue. But one of the reasons I argued for the idea a couple of months back was that it would allow us to finally stop burning money subsidizing obscenely expensive tuition at dubiously worthwhile private institutions. At the time, I singled out the for-profit college industry, which has been rightfully savaged for devouring federal aid dollars while charging poor students backbreaking prices. 

Today, though, I'd like to apologize to the University of Phoenix and its kin. It seems there are plenty of traditional, non-profit colleges leeching off the system as well. 

For proof, see the demoralizing report released this week by Stephen Burd of the New America Foundation on the state of financial aid in higher ed. It documents the obscene prices some of the poorest undergraduates are asked to pay at hundreds of educational institutions across the country, even as these same schools lavish discounts on the children of wealthier families in order to lure them onto campus.  

And here's the key bit: Many colleges, he argues, appear to be playing an "elaborate shell game," relying on federal grants to cover the costs of needy students while using their own resources to furnish aid to richer undergrads. 

"With their relentless pursuit of prestige and revenue," Burd writes, "the nation's public and private four-year colleges and universities are in danger of shutting down what has long been a pathway to the middle class for low-income and working-class students."

Give to the Rich, Overcharge the Poor
Burd's paper isn't an indictment of the entire higher ed establishment -- just a startlingly large portion of it. Many of the worst offenders he identifies are small, private colleges with meager financial resources, or public schools concentrated in a handful of states like Ohio, Pennsylvania, and South Carolina that have moved to what's called a "high tuition, high aid," model. The theory was that, in a time of tight state budgets, charging wealthy students exorbitantly would allow them to charge poorer students reasonably. 

It hasn't worked out that way. Unlike twenty years ago, Burd explains, it is now more common for colleges to hand out aid packages based on "merit" rather than financial need. And "merit" is often a rather nebulous concept.

Sometimes, colleges (and states) really are just competing to outbid each other on star students. But there are also economic incentives at play, particularly for small, endowment-poor institutions. "After all," Burd writes, "it's more profitable for schools to provide four scholarships of $5,000 each to induce affluent students who will be able to pay the balance than it is to provide a single $20,000 grant to one low-income student." The study notes that, according to the Department of Education's most recent study, 19 percent of undergrads at four-year colleges received merit aid despite scoring under 700 on the SAT. Their only merit, in some cases, might well have been mom and dad's bank account.

There's nothing inherently wrong with handing out tuition breaks to the middle class, or even the rich. The problem is that it seems to be happening at the expense of the poor. At 89 percent of the 479 private colleges Burd examined, students from families earning less than $30,000 a year were charged an average "net price" of more than $10,000 annually -- "net price" being the full annual cost of attendance minus all institutional and government aid. Less technically, it's what students can actually expect to pay. At 60 percent of private colleges, that net price was more than $15,000. 

In other words, low-income families are routinely being asked to fork over more than half of their annual income for the privilege of sending their child off to campus for a year. 

Feeding Off the Government
Many these institutions didn't just soak poor students; they also enrolled them in droves, collecting taxpayer dollars in the process. Burd identified 287 private colleges where more than a quarter of the student body received federal Pell Grants, which go to undergrads from low-income and working class families. These schools charged families earning under $30,000 a median net price, again, of more than $15,000. 

This scatterplot graph of private colleges (interactive version here) reveals the extent of the problem. The dots in blue show schools where more than 15 percent of students received Pell Grants, and students from low-income families were charged a net price of more than $10,000 a year. In total, these troublesome institutions make up 80 percent of the private colleges Burd analyzed.

A quick perusal of this list from The New York Times shows that many of these "high-Pell, high-net-price" schools, as Burd calls them, do in fact hand out generous amounts of merit aid to undergrads. For example:

• At Georgia's Berry College, 30 percent of students receive Pell Grants, and low-income students pay an average net price of $16,174. Yet 25 percent of its freshmen also receive merit aid, averaging more than $10,000 a piece.
• At Wabash College in Indiana, 28 percent of students receive Pell Grants, and low-income students pay an average of $15,480. Yet 12 percent of its freshmen get merit aid, averaging $15,393 each.
• At Case Western Reserve, one of the better known institutions among the high-pell, high-net-price schools, 23 percent of students receive Pell Grants grants, and low-income undergrads pay $18,381 on average. And yet 19 percent of freshmen also receive merit aid, averaging $18,359 each. 

These schools are accepting government money meant to make college accessible for low-income Americans, yet still charge them extravagantly. Meanwhile, they continue to hand aid off to wealthier students, either because they score higher on the SAT or bring in extra revenue. It's hard to imagine a more surefire way that colleges could undermine the public trust. 

Hard to Justify
It is possible that some of these institutions are charging their low-income students less than the data suggests. Net-price takes into account the cost of room and board, and at some schools, needier undergrads may be choosing to commute to campus. A survey by student lender Sallie Mae suggested that 40 percent of four-year private college students lived at home. But if the theoretical cost of housing really is artificially inflating their net cost data, it's up to college presidents to make that case persuasively. 

Otherwise, it's hard to think of a justification for their behavior. Could it be that their prices are worth it, that the educations they provide justify the eye-popping cost? It's hard to say definitively. But I'm hoping to put that possibility to the test in the coming week by matching Burd's data against graduation and student loan default rates. In the meantime, the preponderance of evidence seems to suggest that many private colleges are either undercutting the intent of the Pell program, if not abusing it outright.

As a general rule, this problem seems to be much less severe at public colleges. At roughly three-quarters of the state schools Burd examined, low-income students paid a net price of under $10,000. Almost half of those where they paid more were located in just eight states, where the experiments with the "high tuition, high aid" model seem to have gone awry.

When we sufficiently fund our public institutions of higher ed, in other words, it really does keep prices low for the students who need it. Something to consider.

If you love television, you probably hate the television bundle. And if you hate the television bundle, your favorite person in Washington today is Sen. John McCain. His new legislation, introduced this afternoon, would pressure pay TV operators (i.e.: what you'd call "cable companies") to offer channels on an a la carte basis.

What's not to like about this law? You pay for the channels you want. You don't pay for the channels you don't want. Even the name -- "Television Consumer Freedom Act of 2013" -- is full of utterly unobjectionable words and sounds pretty perfect.

McCain's proposal comes at a rocky time for cable companies. Time Warner Cable and Comcast recently announced shrinking subscriber numbers. Their growing revenue comes mostly from higher cable costs among paying households. Meanwhile, Netflix and Hulu are setting new customer records each quarter. Tensions between media companies (who sell their networks in bundles to cable companies) and cable companies (who sell those network bundles in a megabundle to you, the TV-box owner) are boiling over in a lawsuit between Cablevision and Viacom.

This would appear the perfect occasion for Washington to ride in and slash the Gordian Knot of cable once and for all. But there's a catch -- actually, there are three catches.

First catch: Plausibility. McCain has proposed an a la carte TV plan before, and it was rejected even when he had more friends at the FCC who were vocally supportive of choose-your-own TV in 2006. So temper your optimism.

Second catch: Cost. Most independent studies have found that un-bundling the networks would dramatically raise the price of each individual channel because the networks would have to replace the money lost from being a part of the bundle. "A la carte" is not a synonym here for "vastly cheaper."

Why's that? Your bundle pays each channel in two ways. First, it pays directly. For example, ESPN "costs" about $5 a month; that is, about $5 from every cable bill goes to ESPN. Second, the bundle pays indirectly through advertising. If ESPN is in fewer households (i.e.: only the households that pay directly for ESPN), they'll project less ad revenue. As a result, buying ESPN could cost as much as $20 a month as the company seeks to make up revenue in the interim. Even if you don't watch ESPN, you'll still have to pay more per channel that you do today because of the economics of bundling and the dual-revenue model for networks.

On the bright side for consumers, perhaps you could see the dissolution of the cable bundle squeezing networks and programming costs and show budgets, leading to a deceleration of overall TV costs. But if customers had to pay more than expected for individuals channels, it's hard to know if they would view these savings as a bargain or just a less-for-less exchange.

Third catch: Logistics. Let's talk about something really practical. How many times a year could you switch your channel line-up? Once a year? Four times a year? It's a serious question.

Let's say you don't want A&E on its own. Sounds sensible. Then a show like "Duck Dynasty," one of the biggest hits in cable history, debuts and suddenly you want A&E. 'Easy,' you say, 'I'll just subscribe to A&E for a few months and cancel after Duck Dynasty is over.' But that just won't do. Channels like AMC won't survive if a handful of people only sign up for the few weeks that 'Mad Men' is airing. A la carte sounds like a pain-free option, but 100 million households adding and dropping channels mid-year is a recipe for a logistical and strategic disaster for the industry.

The television business is changing already. But the change is mostly additive. SNL Kagan estimated that pay-TV subs grew through 2012, even as Netflix and Hulu had historic years. TV might get smaller and more customizable sometime in the near future. But in the nearest future, the total TV megabundle -- cable + Netflix + Hulu Plus etc. -- is just getting bigger, and McCain's plan, which would introduce headaches for consumers and providers alike, probably isn't going to have a shot at changing anything.