Degree Disaster Behind The Great Wall
Based on my regular reading on education, but not China specifically, I know that the world’s most populous nation has had a lot of trouble finding jobs for its throngs of recent college graduates. I wrote a bit about that yesterday, pointing out that the important higher education lesson from China is that pumping out more college grads is meaningless if they don’t have skills that are in demand. Well, thanks to a very helpful Cato@Liberty reader who actually lives in China (and wishes to remain anonymous) I now have a much better idea just how important that lesson is. He directed me to this Asia Times article that includes, among many fascinating tidbits, this startling revelation:
An explosive report released by the Chinese Academy of Social Sciences (CASS) in September said earnings of graduates were now at par and even lower than those of migrant laborers [italics added].
Wow! If this report is accurate, until now I have had no idea how truly ridiculous Washington’s obsession with pumping out more degrees to keep up with the Chinese has been — and I’ve been pretty sure it’s ridiculous! Much more troubling, if I’ve had little clue about the true extent of the absurdity, imagine how far from grasping it our government-loving federal politicians have been! Of course, as I wrote yesterday, even if they did know it, they probably wouldn’t let on.
Filed under: Education and Child Policy; Tax and Budget Policy
Nothing Good about The Higher Ed Pricing Game
On Tuesday I noted that the College Board had released its annual reports on college prices and student aid. At the time I wrote the post I hadn’t yet been able to download the reports, but was planning to provide a rundown of their major findings once I’d read them. I’ve now done the latter, but it turns out that Ben Miller over at the Quick and the ED has already posted a pretty good summary of the most important findings. Go there if you want the highlights. Don’t go there, though, if you want to know what the highlights mean, at least for anyone other than students. For that, you’ll have to read on here….
The big news is that net college prices — what students pay after aid– have actually decreased over the last 15 years. While sticker prices were rising much faster than incomes and inflation, what students were actually paying dropped. The implication of this is so obvious that Mr. Magoo couldn’t mistake it: Student aid, much of which comes through taxpayers, enables schools to charge ever-higher prices with near impunity.
Back to the Quick and the ED. To some degree, Miller sees declining net price as a triumph for federal aid, making college more affordable even as prices explode:
This story should be encouraging for legislators that fought hard to win Pell Grant increases over the last few years. The steepest decreases in net price occur beginning in the 2007-2008 academic year, the same time Congress began passing legislation that boosted the maximum Pell Grant award several times. This at least suggests that the money spent on the program did play some role in lessening the financial burden for students and was not completely eaten up by sticker price increases.
On the flip side, Miller at least acknowledges that:
The net price figure also lessens the pressure on schools to actually take proactive steps to lower their costs. If the price you list isn’t actually what you charge, then why should anyone care what the listed price is and how high it gets? Net price thus serves as a kind of smokescreen that gets colleges at least partially off fo[r] charging an arm and a leg.
So what’s wrong with this analysis?
Most important is that Miller softpedals the aid effect, suggesting that the main negative consequence of ever-increasing assistance is that it bleeds off a bit of the pressure for schools to lower costs. But it likely has a much more destructive effect than that, not just curbing efficiency pressures, but enabling schools to constantly charge and spend more. It’s a likelihood that student-aid defenders try to dispel by citing studies that cover very short periods of time, or that simply pronounce that we don’t know that it happens. That it probably happens, however, has been borne out empirically, and it’s readily ackowledged by prominent higher educators including former Harvard president Derek Bok, former Stanford vice president William F. Massy, and former University of Iowa president Howard Bowen. Indeed, the latter’s “law” couldn’t be more blunt: “Universities will raise all the money they can and spend all the money they raise.”
Miller’s other major failing is that he completely ignores that all this aid has to come from somwhere, and that “somewhere” is largely taxpayers. (OK, first it’s China.) Just to give you a sense of the impact on taxpayers, College Board data show that between the 1998-99 and 2008-09 academic years, total federal aid — including grant money recipients don’t have to pay back, and loans they (sometimes) do — rose from $61.1 billion to $116.8 billion. Add state aid to that, and the total goes from $66.6 billion to $126.2 billion.
And what are some of the major downsides of these forced third-party payments? Miller mentions a few pricing difficulties for students, but makes no mention of the potentially huge negative consequences for the nation: Encouraging lots of people to attend college who simply aren’t prepared for it; cranking out many more degrees than the job market demands; and potentially slowing economic growth by taking funds from productive uses and giving it to efficiency-averse colleges and students.
The big finding in the latest College Board data, which the Quick and the ED nails, is that net college prices have been going down. The important story, however, is that this is bad news for the country. Unfortunately, the Quick and the Ed misses that almost completely.
Filed under: Education and Child Policy; Finance, Banking & Monetary Policy; Health, Welfare & Entitlements; Tax and Budget Policy
Lies Our Professors Tell Us
On Sunday, the Washington Post ran an op-ed by the chancellor and vice chancellor of the University of California, Berkeley, in which the writers proposed that the federal government start pumping money into a select few public universities. Why? On the constantly repeated but never substantiated assertion that state and local governments have been cutting those schools off.
As I point out in the following, unpublished letter to the editor, that is what we in the business call “a lie:”
It’s unfortunate that officials of a taxpayer-funded university felt the need to deceive in order to get more taxpayer dough, but that’s what UC Berkeley’s Robert Birgeneau and Frank Yeary did. Writing about the supposedly dire financial straits of public higher education (“Rescuing Our Public Universities,” September 27), Birgeneau and Yeary lamented decades of “material and progressive disinvestment by states in higher education.” But there’s been no such disinvestment, at least over the last quarter-century. According to inflation-adjusted data from the State Higher Education Executive Officers, in 1983 state and local expenditures per public-college pupil totaled $6,478. In 2008 they hit $7,059. At the same time, public-college enrollment ballooned from under 8 million students to over 10 million. That translates into anything but a “disinvestment” in the public ivory tower, no matter what its penthouse residents may say.
Since letters to the editor typically have to be pretty short I left out readily available data for California, data which would, of course, be most relevant to the destitute scholars of Berkeley. Since I have more space here, let’s take a look: In 1983, again using inflation-adjusted SHEEO numbers, state and local governments in the Golden State provided $5,963 per full-time-equivalent student. In 2008, they furnished $7,177, a 20 percent increase. And this while enrollment grew from about 1.2 million students to 1.7 million! Of course, spending didn’t go up in a straight line — it went up and down with the business cycle — but in no way was there anything you could call appreciable ”disinvestment.”
Unfortunately, higher education is awash in lies like these. Therefore, our debunking will not stop here! On Tuesday, October 6, at a Cato Institute/Pope Center for Higher Education Policy debate, we’ll deal with another of the ivory tower’s great truth-defying proclamations: that colleges and universities raise their prices at astronomical rates not because abundant, largely taxpayer-funded student aid makes doing so easy, but because they have to!
It’s a doozy of a declaration that should set off a doozy of a debate! To register to attend what should be a terrific event, or just to watch online, follow this link.
I hope to see you there, and remember: Don’t believe everything your professors tell you, especially when it impacts their wallets!
FTC to Protect Us from Multi-Colored Beer Cans
Recently Anheuser-Busch hit upon the marketing idea of selling Bud Light beer in cans decorated with the college-team colors. As the Federal Trade Commission (FTC) doesn’t have much else to do - it’s not like there’s been say fraud going on in the mortgage market – it quickly turned its attention to the issue, expressing “grave concern” that these team-colored cans would encourage underage and binge drinking.
As quoted in the Wall Street Journal, FTC attorney Janet Evans said “this does not appear to be responsible activity.” What’s not responsible is the FTC wasting taxpayer resources wondering what color beer cans we are drinking out of. When I was an underage drinker, the last thing on my mind was the color of the can. The ultimate purpose of the marketing campaign is to shift demand away from boring, non-team color beer cans toward team color cans. If beer drinkers (or can collectors) get some pleasure out of a certain colored can, where’s the fraud or deception in that?
The real purpose of FTC’s interest is revealed in the comments of the Licensing Resource Group, which represents the colleges in protecting their logos. Almost all the colleges that have asked Anheuser-Busch to stop selling the cans have cited trademark concerns. Yet none of the cans have any team logos. While no one would dispute the right of a college to control the use of its team logo, is it really reasonable to conclude that the colleges also own the rights to the use of certain colors?
Don’t Fear the Freedom, Higher Ed!
It’s not often that I can transition from my education beat to other hot topics, but an Inside Higher Ed story on colleges’ health-care benefits includes this little nugget:
One trend documented in the survey that may concern many employees is the increase in “consumer driven” health insurance plans by colleges. These typically involve employees setting up tax-free accounts to pay for some care, and then high deductibles for major medical expenses. This year, 17 percent of colleges were offering the plans, up from 11 percent two years ago.
So what’s so terrible about “consumer driven” health care, which from the article sounds like health savings accounts ? The story doesn’t say — nor does it give any details on who puts the money into the accounts or other minimally useful info – it just suggests that employees should be a little scared of controlling their own health care funds.
Unfortunately, this kind of reflexive fear of markets and freedom is a hallmark of both education and health care debates, so this thoughtless little passage hardly comes as a surprise. But I want to help Inside Higher Ed: If you folks want to be informed next time you cover health care, give these guys a call. They’ll be more than happy to help you, just as I am with all of your education-related needs!
Operators, as they say, are standing by…
Filed under: Education and Child Policy; Health, Welfare & Entitlements
Education Has Diminishing Returns!?
Inside Higher Ed features a terrific essay today by economist Michael Rizzo. Rizzo takes issue with President Obama’s goals to have all Americans complete at least one post-secondary year of education or job training, and for the nation to have the world’s highest percentage of college graduates by 2020. I’ve opined about this before, but Rizzo does it much more comprehensively, noting especially that - surprise! – education can suffer from “diminishing returns.”
Here’s the meat of Rizzo’s piece, but you really should read the whole thing:
More education has to be a good thing. After all, receiving more schooling can’t make you less productive, right? Education is like exercise, reading, spending time with one’s children, and sleeping – each of these is good for you. It is obvious that dedicating more attention to each of these is good. It is obvious … and wrong – for both individuals and societies as a whole.
While investing in each of these likely generates enormous benefits when starting from scratch, at some point each additional unit invested generates fewer benefits than the one before it – just as eating that fourth doughnut brings you less satisfaction than did the second. What if these so-called “diminishing returns” never set in for education? In a world of scarce time and resources, they must, albeit indirectly. Dedicating more resources to the production of educated workers must come at the expense of resources dedicated to creating other important capital goods, institutions, or consumption goods. An individual cannot dedicate 24 hours in a day to everything, nor can society dedicate all of its resources to everything. Put another way, if merely leading the world in educational attainment is desirable, why not aim to have every American receive a college degree? Better yet, why not aim to have every American earn a Ph.D.?
More Undeserved Praise for Obama’s NAACP Speech
Mike Petrilli of the Fordham Foundation is an affable and intelligent man. But he has gone round the rocker in regard to President Obama’s NAACP speech last week.
His review reads like promotional excerpts for a blockbuster movie; Don’t miss what critics are calling a can’t-miss experience . . . “transcendent” . . . “inspirational” . . . “honest, direct, bold.”
Why such superlatives? Because Obama is an “African-American president, speaking to the NAACP, and arguing for reform in our schools and responsibility in our homes and community.” Wow. Reform and responsibility?
Of course, as I point out here, the President OPPOSES the most direct and effective means of reforming education and empowering parents; school choice. And he supports expanding federal control of education from pre-k to college. Our President is working against reform and responsibility in education.
Our President has the nerve to lecture parents on the importance of getting involved as he supports ripping vouchers out of the hands of children in DC and elsewhere. He and his Congressional colleagues have effectively told thousands of District parents, who desperately want to direct their children to a better future, to shut up and sit down.
There is absolutely nothing to celebrate about a President who mouths nice platitudes while doing all he can to undermine the principles that underlie those sentiments.
A Look Inside the Ivory Tower Spiral
With the Obama Administration promising to ramp up all sorts of college-affordability (read: government expenditure) efforts in the coming months, now is a crucial time for Americans to understand why our colleges and universities ingest money as bottomlessly as their students guzzle beer. With that in mind, the release of a new report from the John William Pope Center is perfectly timed. The Revenue-to-Cost Spiral in Higher Education explains how colleges’ internal arrangements render them almost destined to spend every dime they bring in, no matter how wastefully. The basic problem, argues author and economist Robert E. Martin, is that very few colleges and universities are intended to make a profit — which would give “owners” a powerful incentive to maximize efficiency – and no one really seems to be in charge at most schools.
Of course, this is a serious over-simplification of Martin’s argument, so you’ll have to read the report. But don’t just stop there: A few weeks ago the Pope Center held a colloquium right here at Cato to discuss the report, and Pope Senior Writer Jay Schalin just posted an excellent summary of the back-and-forth between participants. I think you’ll find the points about the third-party-payer problem especially powerful, but there are lots of other good arguments highlighted as well.
Why Fear Leviathan U.?
The Harriet Tubman Agenda – ordinarily a pretty rational blog — takes issue with my recent post expressing unease about a proposal to have Uncle Sam create and furnish free college courses. Accurately noting that American institutions of higher education, including private and for-profit schools, are addicted to government subsidies, the blogger asks what the problem is “if a free curriculum (defined by designated text books and tests), coupled with a competitive market in examination services, reduces the burden on taxpayers”?
Here’s the problem: From the perspectives of both freedom and effectiveness, why would we ever want the federal government creating free college curricula and, potentially, a giant federal university that, thanks to the internet, would not even be bound by the need to have a physical campus? Do we really want both state-run and private institutions, which despite huge subsidies still have to charge tuition and compete with one another, to have to go up against a free, Leviathan University? And why would it matter if the examinations accompanying Leviathan U’s curriculum were created by private companies? If you have to master The Little Red Book — to use an extreme example — does it matter if the testing contract is competitively bid?
The Harriet Tubman Agenda is absolutely right that, engorged with government subsidies, American higher education is grossly wasteful. But replacing it with utterly unconstitutional federal courses that could someday yield a mammoth, federal university? For reasons even more basic than saving taxpayer money, that would be a terrible move.
Federal University
There is no official word on this yet, but according to Inside Higher Ed the Obama Administration is putting the finishing touches on a proposed “National Skills College” that will include federally designed — and owned — courses:
The funds envisioned for open courses — $50 million a year — may be small in comparison to the other ideas being discussed. But in proposing that the federal government pay for (and own) courses that would be free for all, as well as setting up a system to assess learning in those courses, and creating a “National Skills College” to coordinate these efforts, the plan could be significant far beyond its dollars.
Darn right it could be significant! Washington would for all intents and purposes be on the way to creating a federal university, and not one like the service academies that is constitutionally justifiable under federal defense powers. No, this one would be completely and utterly unconstitutional, and would unfairly compete with lots effective private — including for-profit – institutions. And, of course, there’s the little matter of how this would be paid for.
I’ll have more on this as details become available.
Filed under: Education and Child Policy; Tax and Budget Policy
MD Taxpayers Should Still Fear the Turtle
I dread my morning commute, largely because of awful D.C. traffic, but also because I never know when I’m going to hear something on the radio that’s (1) going to anger me, and (2) force me to alter my day’s plans so I can lay the smack down on some education report that begs for clarification.
Today, (2) happened, with a reporter from the Washington Business Journal touting a new study on the University of Maryland, College Park — Maryland’s flagship public university — as cause for Marylanders to be ecstatic about the taxes they pay to support the school. According to the WBJ’s online article about the report, the Free State gets $8 back for every $1 taxpayers “invest” in UMCP — a clear winner!
Um, not so fast, WBJ! These kinds of too-good-to-be-true impact studies are usually just that — too good to be true. There are often many problems with them, but most important is that unless the analysts looked at opportunity costs — what would have been produced by the tax dollars had they been left with taxpayers — there is no way to say that Marylanders should be eternally grateful for having to fear the turtle. It is entirely possible, as economist Richard Vedder has demonstrated, that taxpayers would have gotten a better return had they kept their money rather than having to hand it over to students and profs.
Of course, before I posted this objection, I had to check out the report to see if it is forthcoming about opportunity costs. Unfortunately, despite the university touting the findings yesterday and the WBJ reporting on them this morning, all I could find was the 2008 impact report, both looking on the site of the group that commissioned the study — the University of Maryland College Park Foundation — and the outfit that conducted the research. As a result, I can’t say with absolute certainty that the 2009 study doesn’t consider opportunity costs. If the 2009 report is like 2008’s, however, Marylanders have no cause for rejoicing. There’s zero reason to believe that they wouldn’t have been better off if they had just been able to keep their hard-earned ducats.
Why Should We Pity These People?
A couple of weeks ago, I ripped apart a factually anemic but all-too-typical USA Today article decrying the plight of student debtors. Today, the grand journalistic tradition of anecdote-and-pity laden reporting on student debt continues with offerings from Business Week and The New York Times.
In an article about tight times for student loan forgiveness programs, The Old Gray Lady sticks with the journalistic tried-and-true by leading with an extreme anecdote that readers, presumably, are supposed to see as illustrating typical suffering:
When a Kentucky agency cut back its program to forgive student loans for schoolteachers, Travis B. Gay knew he and his wife, Stephanie — both special-education teachers — were in trouble.
“We’d gotten married in June and bought a house, pretty much planned our whole life,” said Mr. Gay, 26. Together, they had about $100,000 in student loans that they expected the program to help them repay over five years.
Then, he said, “we get a letter in the mail saying that our forgiveness this year was next to nothing.”
Now they are weighing whether to sell their three-bedroom house in Lawrenceburg, Ky., some 20 miles west of Lexington. Otherwise, Mr. Gay said, “it’s going to be very difficult for us to do our student loan payments, house payments and just eat.”
Please, Mr. Gay (and Mr. Glater, the author of this heart-string puller)! You, and presumably your wife, are only in your mid-twenties, have what appears to be a very nice home according to the picture accompanying the article, and yet have the nerve to assert that taxpayers should eat your student loans lest you not eat at all!
Excuse me if I don’t start singing “We Are the World.”
This is simple greed – you know, the stuff for which the media regularly excoriates “big business” – but readers are expected to see it as suffering because it involves recent college grads. Oh, and grads who have gone into teaching, according to Glater “a high-value but often low-paying” field. That the Gays have felt wealthy enough to buy a house despite holding much greater than normal student debt – and the fact that on an hourly basis teachers get paid on par with comparable professionals – doesn’t present any impediment to the reporter repeating the baseless underpaid teacher myth. It’s all just part of the standard narratives.
Business Week’s piece isn’t much better than the Times’, though at least reporter John Tozzi had the decency not to start off with an emotionally manipulative anecdote of supposed human suffering. His third paragraph, however, centers around “analysis” from the student-centric Project on Student Debt, and he rolls out the ol’ Tale of Woe right after:
“It’s just so frustrating,” says Susan D. Strayer, director of talent acquisition for Ritz-Carlton in Washington. “They tell you to be self-made. They tell you get yourself a good education and you can get yourself into a pretty big hole.” Strayer, 33, has $90,000 in student loan debt from her bachelor’s at Virginia Tech and a master’s from George Washington University. She also has an MBA from Vanderbilt University, which she earned on a full scholarship—but skipped two years of earnings to acquire. Strayer says her monthly loan payments of $600 barely budge the principal on her debt. She doesn’t regret her educational decisions, although she says the debt load has made her put off plans to pursue a consulting side business full-time.
So Ms. Strayer chose one of the most expensive schools in the country —George Washington — for a Master’s (in what we do not know); we have no information about why she chose to finance her education through loans (she and her parents bought new cars, clothes, and stereos instead of saving for college, perhaps?); but we are supposed to feel it is a terrible thing that at 33 she hasn’t been able to start a full-time consulting business. Why is that, exactly?
Thankfully, though he frontloads anecdotes and pity parties, Tozzi ends his piece with a clear, if far too rare, voice of reason:
“It’s easy for me to say, ‘Oh, I have all this student loan debt,’ but I chose to take it and I have to deal with the consequences of that choice,” [24-year-old] Patricia Hudak says. “So many people in my generation think of everything as a short-term investment with immediate return.”
Finally, someone I can truly feel sorry for! Why? Because with journalists cheering it on, Ms. Hudak is exactly the kind of person that our political system will punish, making her pay not only for her own choices, but those of the Gays, Ms. Strayer, and countless other student debtors who really do think that everything, and everybody, should give them an immediate — and huge — payoff.
A Dialogue on School Choice, Part 4
A tax credit bill was recently proposed in South Carolina to give parents an easier choice between public and private schools. It would do this by cutting taxes on parents who pay for their own children’s education, and by cutting taxes on anyone who donates to a non-profit Scholarship Granting Organization (SGO). The SGOs would subsidize tuition for low income families (who owe little in taxes and so couldn’t benefit substantially from the direct tax credit). Charleston minister Rev. Joseph Darby opposes such programs, and I support them. We’ve decided to have this dialogue to explain why. Our closing comments appear below, and the previous installments are here and here and here.
Rev. Joe DarbyClosing Comment
Thanks for the research and references, Andrew, but I don’t live in Milwaukee, Africa or India – I live and grew up in South Carolina, and I remember when my state resisted desegregation. I remember the news reports, white protests and rhetoric about new private schools, where white children would be "safe." Attorney Tom Turnipseed, a repentant racist in Columbia, SC, fought to create those schools and now willingly admits his prejudiced motivation for doing so. That legacy needs to be acknowledged and those schools need to demonstrate that they’ve changed before many citizens will be comfortable with them.
Many white parents who didn’t send their children to private schools in those days simply couldn’t afford to do so without governmental assistance. An irony of American racism is that poor whites have also suffered, but have been culturally conditioned to not collaborate with or trust those of other colors who have common interests.
Having said that, let me keep my promise from my last installment of our dialogue. You noted that some private school parents of modest means have found ways to augment government funding for things like transportation and uniforms. I said that I wasn’t surprised, because good parents will go to great lengths for their children’s well being – and have done so for years without public funding of private schools. My wife and I did so when we were young, struggling parents.
Our sons attended V.V. Reid Kindergarten and Day Care in Columbia, SC – a 54 year old private facility sponsored by Reid Chapel AME Church. That predominately black school has a reputation for excellence and a long waiting list, and now includes an elementary school. The tuition was – and still is – considerable, but we paid it as a matter of parental choice. They also attended and graduated from public elementary, middle and high schools – now labeled as "failing" – and are now very successful men. They attended V.V. Reid with the children of physicians and attorneys and the children of janitors and cooks, but all of those children had one thing in common – their parents paid – and still pay – the full tuition. V.V. Reid does not accept any government funds and the current pastor, Rev. Norvell Goff, says that they aren’t seeking governmental funding and don’t support tuition tax credits and scholarships. As Rev. Goff said, "Parents who care will pay the price."
That points to what most puzzles me about the fight to give private schools public money, allegedly to educate needy children. The idea’s most consistently strident uncompensated supporters in South Carolina are not those of modest means or progressive political mind set, but conservative legislators and interest groups who usually tell the needy to pull themselves up by their "bootstraps" and consistently oppose what they call "handouts" or "pork" for struggling communities. From health care to infrastructure to housing, they condemn governmental involvement in the private sector, but they make a remarkable exception for education. Could they have had a miraculous social epiphany on education, or could they possibly see a financial and social benefit for their constituents and neighbors that wouldn’t be rhetorically prudent in "selling" privatization to struggling families?
I’ll conclude our dialogue with that question, with thanksgiving that a bipartisan, biracial majority of our Senators killed South Carolina’s current privatization legislation last week, and with the wise and true words of SC Education Secretary Jim Rex – when businesses consider locating in South Carolina, they never ask, "How are your private schools." Public education does matter. I’m also sure the issue isn’t entirely dead, so be blessed, take care, and we’ll chat next year.
***
The Rev. Darby is senior pastor of the AME Morris Brown Church in Charleston, and First Vice President of the Charleston Branch of the NAACP.
Andrew CoulsonClosing Comment
You wrote that "dangerous buildings can… be expeditiously made excellent and secure while occupied and before they catch fire…. The chronic inequities in public education can be expeditiously addressed with will and commitment."
"Before they catch fire"? Nearly half of all children in South Carolina drop out before finishing high school. Nearly HALF! Public schooling is burning NOW. It’s been ablaze for decades, reducing countless children’s dreams to ashes. Having another meeting to discuss fire codes would be madness. We need to get a ladder to these kids today.
And "fixed expeditiously with will and commitment"? Spending per pupil has more than doubled in real terms over the past forty years. Two generations of would-be reformers have worked feverishly to improve the system, passing one education bill after another at the state and federal levels, and introducing countless revisions to the curriculum and teacher training policies. Class sizes have been reduced, teachers’ salaries have been raised. Short of ritual sacrifices, there is nothing that has not already been tried, repeatedly, to fix the public schools.
You wrote that "studies on the success of privatization… are a ‘wash’ — each of us can find support for our positions." This is simply not true. As I’ve noted, the research findings comparing market to monopoly schooling all over the world favor markets by a margin of 15 to 1. That’s based on the most comprehensive literature review to date. Social science, while imperfect, is science. And on this point, it is unambiguous.
As for your statement that South Carolina significantly and systematically underfunds rural black districts along the I-95 corridor, I decided to check it out. Using this year’s data from South Carolina’s General Appropriations spending bill, I calculated the average expenditure per pupil: $11,815. For rural districts along the I-95 corridor, it comes to $11,743 — a difference of $72.
You’ve said that, in the wake of the civil war, some middle-class blacks excluded lower-class blacks from their private schools. If that’s true, I would certainly join you in lamenting their behavior. But who is guilty of this cruelty today? Who is currently trying to keep poor young blacks from getting easier access to private schools? The NAACP supports scholarships for low-income students to attend private colleges, but fiercely opposes the same practice at the elementary and high school levels. Who’s blocking the schoolhouse door now?
Fortunately, school choice is advancing despite such misguided opposition. There are dozens of choice programs around the nation, and the best among them are growing rapidly and with bi-partisan support. Some black leaders of your own generation, such as South Carolina Senator Robert Ford, have gotten on board. Even more of the next generation of black leaders, from Corey Booker in New Jersey to Kevin Johnson in Sacramento, are on board as well. And some of the most eloquent voices in support of educational freedom are beneficiaries of school choice.
Perhaps, if you talk with some of the tens of thousands of families benefitting from school choice around the country, you’ll be convinced to join them aboard the educational freedom train. It’s pulling out of the station regardless.
In closing, I’d like to thank you for participating in this exchange. I hope people on all sides of the debate have found it useful.
***
Andrew Coulson is director of the Cato Institute’s Center for Educational Freedom, and author of Market Education: The Unknown History.
Old Enough to Die for Your Country, Too Young for a Credit Card
While much of the debate around the so-called “Credit Cardholders’ Bill of Rights” has been on ending various card policies aimed at disguising different credit risks, one group of cardholders is certain to lose their right to credit under this bill: adults between the ages of 18 and 21.
Under the current Senate bill, the only way for someone under the age of 21 to get a credit card would be either:
1) they have a co-signer, such as their parent, sign for it, or
2) they maintain a job with sufficient income to cover any obligations arising from the credit card.
By contrast, neither of these requirements is put in place for student loans; there is the clear expectation that you pay those loans back in the future from your increased future income that results from going to college. While the purpose of a student loan is to offer one the means to get a higher education, the purpose of any form of credit is to borrow against your future earnings in order to enjoy some consumption today. Whether that consumption is in the form of textbooks or beer and pizza should be left up to the individual—we are talking about adults here—and not the state.
As with any legislation, there are likely to be substantial unintended consequences. Of the approximately 18 million students enrolled in U.S. colleges, some number of those will not want to give up their credit cards (maybe they value their beer and pizza) and will accordingly take what may be their only option to maintain that consumption: a job in addition to their studies. As with any choice in lift, this one comes with a trade-off. One of the primary factors related to whether one graduates from college is if one is holding a job while in college—the relationship being that the more hours a student works unrelated to classes, the less likely they are to finish college. Some students are going to take that trade-off. That means one impact of this bill will be that slightly fewer students will finish college. If we are ever to expect college students to start behaving as adults, we should start treating them as such, including allowing them to make their own credit decisions.
Two Terrible Tastes That Taste Even Worse Together
Few things irk me more than human-interest anecdotes parading as objective journalism, or college students/graduates complaining about how much money they owe – and think someone else should pay – for their educations.
Perhaps in a bid to break some sort of irritation record, yesterday the USA Today combined these two odious phenomena into one wretch-inducing article about how just cruelly difficult it can be to rid oneself of the student debt one freely entered into.
I won’t go into a detailed dismantling of the piece. Read it for yourself and you’ll see that it really is nothing but a long series of anecdotes delivered with way too little information to have any idea why the debtors shouldn’t, you know, take responsibility for debt they freely incurred. I’m just going to highlight one vignette that sickly typifies just how rationally and morally bankrupt (pardon the pun) both the sentiments of some debtors, and the article, are:
Lenders often fail to offer relief to the neediest borrowers, says a report issued last month by the National Consumer Law Center.
“I feel like it’s a real shame that people like me are coming out of college, weighed down by all this debt,” says Austin Light, 24, a journalist for The Mecklenburg Times in Charlotte. He and his wife have $100,000 in student loans. “My dream is to be a full-time children’s book author and illustrator, and if I wasn’t shackled with this debt, I would be pursuing that.”
In how many ways is this galling?
- We don’t know anything about why Mr. and Mrs. Light have $100,000 in student debt, but we are supposed to become morally indignant just because they feel “weighed down” by it? Did they go to very expensive schools? Did it take them each seven beer-soaked years to graduate? Who knows, but since average student debt for graduates who have any debt is only about $20,000, the rational conclusion must be that they did nothing to control their costs.
- We don’t know what these two studied, but we do know that Mr. Light really wants to be a children’s book author and illustrator. Well, you don’t need to go to college for that, especially one so expensive you incur a debt that even Stephen King — much less a neophyte kiddie lit author — might have trouble paying back.
- Given the overall context of the article, readers are presumably supposed to feel that it should be easier for the Lights to discharge their debts in bankruptcy. But why should people who lent them the money, especially taxpayers who have no choice but to back federal loans, have to take losses on loans that these two freely agreed to pay back when they took them? Isn’t the word for that “stealing”?
Unfortunately, this seems all-too representative of the growing sense of entitlement exuded by many student interest groups. Students should get all the benefits of an education, but someone else should pay for it! And their will is being done in Washington, with several pieces of aid-enhancing, loan-forgiving legislation (which I sketch out here) having been passed in the last couple of years; the Serve America Act – which includes taxpayer-funded education stipends for qualifying “volunteers” – enacted in April; and Senator Dick Durbin (D-IL), according to the USA Today article, planning to re-introduce legislation that would allow private student loans to be discharged under bankruptcy.
And we wonder why higher ed costs, among other things, seem to be out of control…
Now Is Not the Time to Reduce Credit Card Availability
With the House having passed credit card legislation and the Senate scheduled to take up its own bill this week, one questions keeps coming back to me: What’s the hurry?
We are in the midst of a recession, which will not turn around until consumer spending turns around—so why reduce the availability of consumer credit now? And the Federal Reserve has already proposed a rule that would address many of Congress’ supposed concerns. The Fed rule will be implemented July 2010. Were Congress to get a bill to the president by Memorial Day, as he has asked, the Federal Reserve and the industry still couldn’t implement it before maybe January, if they were lucky.
Congress should keep in mind that credit cards have been a significant source of consumer liquidity during this downturn. While few of us want to have to cover our basic living expenses on our credit card, that option is certainly better than going without those basic needs. The wide availability of credit cards has helped to significantly maintain some level of consumer purchasing, even while confidence and other indicators have nosedived.
It was the massive under-pricing of risk, often at the urging of Washington, that brought on our current financial market crisis. To now pressure credit card companies not to raise their fees or more accurately price credit risk, will only reduce the availability of credit while undermining the financial viability of the companies, ultimately prolonging the recession and potentially increasing the cost of bank bailouts to the taxpayer.
As Treasury Secretary Timothy Geithner has repeatedly said, some of the biggest credit card issuers will not be allowed to fail (think Citibank, American Express, Capital One, KepCorp) should they suffer significant losses to their credit card portfolios. Will taxpayers ultimately be the ones covering those losses?
Congress should also further examine the wisdom of restricting credit to college students under the age of 21. Outside of the obvious age discrimination, why treat adults between the ages of 18 and 21 any differently from those above 21? The basic premise of college is making sacrifices today in order to have a wealthier tomorrow—accordingly being able to borrow against that better tomorrow should be an option for any college student. Just as some small number of college students don’t benefit from college, some don’t benefit from credit cards, but throwing the “baby out with the bathwater” hardly seems the idea solution.
Government Finds New Targets to Regulate
I suppose it should be no surprise that once the Democrats got full control of the federal government, we’d see the feds taking control of every nook and cranny of society, from giving orders to credit card companies to firing automobile company CEOs to demanding a change in the way college football decides its national champion.
Except — wait a minute — it was actually a senior Republican member of the House, one of those right-wing Texans, who issued the most direct threat to the football officials summoned before the House Subcommittee on Commerce, Trade and Consumer Protection:
Rep. Joe Barton of Texas, who has introduced legislation that would prevent the NCAA from calling a game a national championship unless it’s the outcome of a playoff, bluntly warned Swofford: “If we don’t see some action in the next two months, on a voluntary switch to a playoff system, then you will see this bill move.”
The federal government is set to spend $3.5 trillion next year, with a deficit expected to hit the unbelievable level of 12 percent of GDP. The president is seeking to impose a “blueprint” for federal takeover of health care, energy, and education. He is acting as a super-CEO for the finance and automobile industries. The country is bogged down in two floundering wars.
And Joe Barton thinks the matter that deserves the attention of the Congress of the United States is how college football designates its “national champion.”
The best thing that can be said for this is that it’s probably actually safer to have Congress screwing around with amateur sports championships than with matters of war, spending, and central planning.
Not Everyone Needs to Go to College
William F. Buckley famously said that he’d ”rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University.” That was, of course, a swipe at the practical wisdom of those people who spend their lives teaching in ivory towers, and a deserved one. But score one for the egg heads when it comes to identifying the practical reality of modern higher education.
According to a new report from Public Agenda, while college presidents blather on about their impoverished schools and what a tremendous public good higher education is, the professors (at least those that Public Agenda interviewed) are pretty darn realistic about the real problems in academia. This quote, echoed in professorial statements throughout the report, captures exactly what a lot of us libertarian types have been saying for years:
I think a big problem facing higher education is the idea that everybody should get into college. I don’t think everybody is designed to go to college. Not everybody needs to go to college. I know that’s shooting ourselves in the foot, because that’s where our jobs are. The more people show up at our schools, the more jobs we get. Not everybody needs to go to college. Not everybody should. Not everybody’s prepared.
Public Agenda doesn’t identify who the speakers are in its report, but whoever said the bit above – or any of the similar statements about too many people going to college or being pushed to go to college — actually deserves to get tenure.
What “Taxpayers?”
In an editorial yesterday on President Obama’s proposal to end federal guaranteed student lending and turn everything into loans and grants direct from Uncle Sam, the New York Times had an interesting take on what constitutes putting ”taxpayers’ interests first”:
Private companies that reap undeserved profits from the federal student-loan program are gearing up to kill a White House plan that would get them off the dole and redirect the savings to federal scholarships for the needy. Instead of knuckling under to the powerful lending lobby, as it has so often done in the past, Congress needs to finally put the taxpayers’ interests first.
So let me get this straight: Redirecting tax dollars from lenders — who do get cushy fees and security through the guaranteed loan program — and giving it to students is somehow in the best interest of taxpayers? Maybe I’m old fashioned or something, but wouldn’t the best thing for taxpayers be to get their money back, not just see it shuffled from one special interest to another?
Obviously it would, and not just because taxpayers are best off when they decide how their ducats are used. As Andrew Gillen and I made clear in a Capitol Hill briefing last week, the best thing that could happen for taxpayers, students, and all of society would be for the federal government to provide much less aid to students, not more. The reality is that student aid drives massive, self-defeating college price inflation, creates ugly bloat and waste in our ivory towers, and ultimately cramps economic growth.
And we wonder why there are tea parties!
Shuffle, Shuffle, Shuffle…
This morning I attended a federal student aid event at the New America Foundation. The big topic? Not the effect of aid on out-of-control college prices, by far the most important concern from the contexts of economic growth, affordability, fairness to taxpayers, etc. No, it was the Obama Administration’s “bold” (NAF’s word) proposal to kill the federal guaranteed student loan program and do all lending directly from Washington. It was just the kind of debate folks in DC love, one that sounds really important but leaves the government-created problem almost totally untouched.
Here’s the critical reality that was completely ignored: taxpayer-furnished financial aid – whether coming directly from DC or delivered by “private” institutions completely backed by DC – appears to be a very big enabler of rampant tuition inflation. Quite simply, as I lay out in the most recent Cato Handbook for Policy, when government ensures that customers can pay more, students demand more and colleges raise prices.
Of course, the argument that aid drives prices is not without its critics, but they’ve got a tough case to make both in terms of economic theory and college cost reality. In Washington, however, this isn’t even being discussed. In DC, it’s all about the deck chairs and nothing about the sinking ship. But then, as we’ve learned oh-so-clearly over the last several months, politicians gain little from averting disasters they’ve helped cause, and lots from handing out life jackets.
Fortunately, Cato is here to remind politicians about the important stuff, not just to bicker over which special interest gets the biggest tax-dollar windfall. On April 7 we will address the fundamental problems with student aid, hosting a Capitol Hill Briefing on the effects not just of switching from guaranteed lending to direct lending, but of all federal student aid. It’ll be just the kind of discussion Washington so desperately needs but so rarely has.
Register here to attend, or watch online the day of the event.
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