Hillary Clinton, Marty O’Malley, Liz Warren, and other 2016 Democrat candidates for the presidency are apparently trying to differentiate themselves from the real-world economics of Republicans by returning to the tried-and-true method of promising to rob Peter to pay Paul, while giving the impression that YOU don’t have to worry, because, dear voter, YOU’LL never be Peter.
The latest method is in capitalizing on the headlines about crippling college debt by setting "debt free college" as their goal.
Now, as far as that goes, it’s a perfectly worthy goal. “Pay as you go” living has always been the responsible advice of our sage elders; youths are told not to charge clothing and restaurant dining to a charge card, and to reserve long-term loans to things that retain their value for years, like houses and cars. A good college education – the right college education, at least – would seemingly belong in that list.
But there is a problem: this college debt is crippling many of our college graduates, often exacting a far greater toll than the product may seem to be worth. That is indeed a problem worthy of consideration by government, if only to see whether existing government policies might be partially to blame, and might be worthy of adjustment in light of the facts.
The Democrat Approach
At this writing, the Clinton campaign is not yet spelling out exactly what The Unavoidable One’s proposals will be if she manages to successfully replace The Anointed One in 2017. Perhaps they have learned one lesson from the Obamacare fiasco: that you need to sell the plan first, and hold back the details until after passage, when it’s too late for the public to do anything about their buyers’ remorse.
To the extent that we can handicap it, though… judging from past history, what Democrats will propose is what they always propose: a combination of price controls and government money. Since the federal government’s support for massive unsecured loans has helped cause tuition prices to skyrocket in the first place, they will imagine, foolishly, that federal government support for more grants instead won’t produce the exact same result.
The federal government already plays quite a role in college pricing, because of the concept of the FAFSA, a mathematical calculation based on a combination of family income and net worth (excluding retirement accounts) and the number of children in college the same year. The government determines what they think the family should be able to scrape together each year, and then the college uses that figure to try to build a mixture of federal and state grants, loans, and the college’s own merit and aid contributions (from its endowment) to bring down the student’s actual cost.
The government approves unsecured loans for college students that no sane lender would approve without that government guarantee; the college views this as a license to raise tuition to whatever the loan, along with everything else, will cover. Can we blame the college? And does anyone objectively think this cornucopia of money has helped the situation?
If these Democrats are serious about wanting college to be debt-free, they’ll likely begin by moving the student loan portion over to the grant column, which will cost the taxpayers far more, without eliminating the root cause of the high price of education.
The fact is, any seller will charge what the market will bear, so, as long as the government is committed to making up the difference somehow, whether it’s in the form of loans or grants won’t change the fact that the market will bear it. So tuition will continue to increase, and the taxpayer burden will continue to rise unabated.
The Democrat approach will therefore have to eventually include price controls, declaring that unlimited tuition prices are inconsistent with the idea of every American’s right to a master’s degree in underwater basketweaving. Eventually – maybe by the general election, maybe by the end of the primaries, maybe even by the Iowa caucuses if The Unavoidable One is in trouble – they will have to declare tuition caps.
Since many colleges won’t be able to survive on such a one-size-fits-all approach, many will go under, and either close their doors or merge with other colleges or be taken over by the government. Everything that’s been happening to hospitals since the passage of Obamacare will now happen to colleges. Won’t that be lovely.
In the healthcare debate, we were reminded that after a certain age, the Left doesn’t think it’s worthwhile to keep spending money on operations for a patient, so the government should just focus on relieving the pain (the Resident of the White House said “Maybe you just take a pill for that” instead of getting cured, if memory serves).
And since the Left doesn’t think that some people are worth caring for in their youth either, every insurance program must allow for abortion, to hopefully discourage people from bringing children into the world who will someday need operations, or welfare, or other public costs. That’s just how they address these issues.
Eventually, therefore the Democratic approach will have to be to ration service here too. It’s fanciful to imagine that it wouldn’t be. It’s a lot easier to make the math work in this elusive goal of debt-free college if you just make sure that far fewer people go to college in the first place.
Don’t have money in the federal budget for two million college students? Okay, just cap it at one million. Or half a million. Or eventually, a quarter million. When faceless strangers’ lives are just a part of a bureaucracy’s budget, it’s easy for those bureaucrats to just remove them from the equation.
In the Democratic model, the only way to promise debt-free education is to limit who gets one. Whether they admit it or not, it’s the only way.
The Real Problem
In some ways, the college affordability crisis is even worse than the healthcare crisis, though the Left would never admit to the reasons why. There are many reasons, but they can be boiled down to these:
1) The government is even more in control of schools, so, like everything the government touches, the financing model is illogical. Most states operate huge state colleges that spend copious government dollars irresponsibly, allowing professors who could teach four or five courses to get away with just teaching three, or two, or one, while still drawing a full salary, incredible vacation time and other benefits, and often even free housing.
These huge state schools then set the bar, and wealthy premium private colleges match or exceed them.
And then even private colleges and states that would, if operating in a vacuum, be inclined to be more responsible, must offer similar deals to their own staff and administration. The government’s massive involvement in the higher education market is the cause, not the solution, for high higher education costs as well.
2) The current funding system rewards tuition increases. Since aid is pinned to the FAFSA’s “estimated family contribution” anyway, a higher tuition bill doesn’t mean that a college loses customers, it just means that the college gets more of its payment from government than it gets from parents. They’re fine with that. Government doesn’t lose its job in a recession and become unable to pay. Government doesn’t get a divorce that suddenly doubles the family’s housing costs, squeezing the ability to pay for expensive tuition for the eldest kids.
No, the colleges are happy to have the dependable checks of a government payer, rather than having to worry through the constant private sector reality of an Accounts Payable slate that’s often in arrears. Since the EFC stays flat, the more the college raises its price, the more of its balance sheet comes from the much more dependable government checkbook. So, to the extent that tuition is too high (and in many cases, it is, but not in all), the federal government funding system is the cause, not the solution, for high higher education pricing.
3) Like all numbers, such terms as “cost” and “price” and even “debt” are actually relative terms. A $35,000/year college price is an excellent deal if the graduate soon earns $100,000/year as a chemical engineer, or $150,000 or $200,000/year as a surgeon. The same $35,000/year college price, however, would be a terrible deal if the graduate earns $12,000/year as a part time burger-flipper, or nothing at all as an unpaid Clinton campaign intern.
The simple fact is, the cost of a college degree isn’t objectively affordable or unaffordable, just because a campaign speech can pass it off as such. It’s all subjective.
A college degree is objectively worth the price if the person obtaining it can use it to greatly enhance his future earnings. Right now, too many can not use it for that purpose… some, because they’re obtaining degrees undesired by the employment marketplace, but most, because the economy is just horrific.
With ninety million people outside the workforce – with established businesses closing at a faster clip than new business are starting up – with families burning through their retirement savings due to years of unemployment and underemployment, to such a level that no politician of either party even dares use the real numbers – is it any wonder that any high dollar expenditure is out of reach of ever more Americans?
Foreclosures are high because people can’t afford their homes; hospital bills go unpaid because people can’t afford to pay them; dental work is put off because people can’t afford the braces or crowns they need.
In the final analysis, college prices, and even college debts, are all relative. For the micro-economic level of the college student studying a major in demand, there’s no crisis in college pricing. For the micro-economic level of the college student studying a major that’s not in demand, just being a better shopper, a wiser consumer, might have gotten him the degree elsewhere for half the price.
It’s at the macro-economic level that the federal government should focus. It’s government policies, after all, that have so wrecked the economy that there are few jobs even for talented, intelligent, well-educated people. Once again, the federal government – due to its relentless assault on employers and employees, its policy of taxing and regulating the business community out of existence – is the cause, not the solution, for the inability of millions to afford their college educations.
Solving the Problem
But what, then, is the right solution? If we have as our goal an essentially affordable college education – just as we have always aimed for affordable housing, affordable dining, affordable entertainment, in short, the American Dream – then we must solve the problems of the economy.
Our colleges are not the problem, any more than houses and banks, automobiles and insurance, food and drink are problems. Our nation’s problem is that prosperity is in an eight-year retreat. Our problem is that the recession that began with the Pelosi takeover of the House in 2006 has only stabilized; it has never ended.
Just like anything else, college is affordable when parents earn enough to pay for it for their children, or when the students can earn enough to pay for it on their own. Government is largely responsible for this long and painful economic contraction; only a return to growth policies will put us back on the right road. For example:
1) Our effective corporate income tax rates are the highest in the industrialized world, at about 38%. Halving that number to an effective rate of 17%, or dropping it even more, would be revenue-neutral almost immediately, and would soon pay dividends in both revenue and greater employment as the change took hold.
2) Our regulatory burden has moved beyond crippling to lethal. With every passage of Clean Air Acts and Americans with Disabilities Acts, Obamacare, and every new air standard and energy restriction, the federal government has driven American manufacturing out of business and out of the country.
We need to rescind most of the new federal regulations of recent decades, from the Departments of Energy and Interior and Education and Labor and more. We need to draw down the charters of agencies like the FCC, FDA, ATF and OSHA. We need to close the ones that are utterly beyond reform, like the EPA.
3) In recent decades, our porous borders have introduced cheap labor, massive crime, an exploding welfare burden, a loss of what it was that made American workers and culture exceptional in the world, and a newly guaranteed voting base for the Democratic Party. All these have combined to result in ever-fewer promising job opportunities for our graduates.
We must close the borders and engage in policies that cause self-deportation of the illegals (the only kind of deportation that actually works), so that those immigrants who do remain have a chance to assimilate, and so the American worker is again in demand.
4) We must wean the higher education marketplace away from its addiction to the federal dollar. We can replace federal grants and loans with more generous income tax credits (no, not “refundable tax credits,” the current administration’s euphemism for handouts).
But most importantly, we can tie education more solidly to the employment sector, through tax policy that encourages employers to offer tuition benefits to their employees. This takes both focused tax policies (more tax credits for the businesses offering the benefit, making acceptance of the benefit tax free for the employee, etc.), and a booming economy in which companies can both afford to offer such generous benefits, and feel that they must do so, in order to win and keep good employees.
Like so much in public policy, everything is interconnected. Greater regulation results in economic pain and therefore greater need; lessened regulation results in an economic boom and therefore, less need.
This plain fact is counter-intuitive for the knee-jerk statists of the Democratic Party. To the modern Democrat, you show you care by writing a government check, and you close your eyes to the wanton destruction that inevitably results.
The idea that the right policy would involve terminating those government checks can never enter their minds; this is why no modern Democrat can be trusted with the reins of an economy. Their policies leave nothing but poverty and hopelessness in their wake.
But the conservatives understand. The conservatives know that lower taxes and lessened regulation will solve all the problems together, in a package. In an economic recovery, like that one that resulted from the Reagan administration policies in the 1980s, the private sector will again be able to afford college, solving that problem, while eliminating most other needs as well.
New businesses, new jobs, faster career trajectories. These are the solutions to our college debt crisis.
Oh, there’s more to it, yes. There are schools that aren’t as good as others, or aren’t as good fits for some students. There are students seeking foolish majors; there are students who aren’t as well prepared by their high schools as they should have been to ensure success at college.
But these issues will be manageable, in a booming growth economy. We just need to get there, and unfortunately, there’s only one party in our system that’s interested in doing so. Only one party that’s interested in ending the cycle of dependency, and interested in enabling Americans to stand proudly on their own two feet at last, free of the golden handcuffs of the Democratic plantation.
Oh, yes. November 2016 can’t come too soon.
Copyright 2015 John F. Di Leo
John F. Di Leo is a Chicago-based international trade lecturer and Customs broker. His columns are regularly found in Illinois Review.
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