Hillary Clinton comes up with a plan to help students pay for college. From the New York Times:
Under the plan, which was outlined by Clinton advisers on Sunday, about $175 billion in grants would go to states that guarantee that students would not have to take out loans to cover tuition at four-year public colleges and universities. In return for the money, states would have to end budget cuts to increase spending over time on higher education, while also working to slow the growth of tuition, though the plan does not require states to cap it. [Emph. added]
So Hillary is going to make college more affordable by adding a $175 billion federal subsidy for it, and by jawboning states to stop cutting their higher-ed budgets. One gets the sense she doesn’t quite understand how economics works. Over the past 30 or so years, recall, tuition inflation has increased at twice the rate of health-care inflation. Which is to say, it is zooming. Here’s why: a) for reasons that have little to do with academics, a college diploma is now a requirement even for jobs that don’t require much strenuous thinking, and b) over the years, the federal government has larded on one tuition subsidy after another, from low-cost federal loans to Pell Grants, that students can use to buy these now must-have documents. The government is handing out more and more money for consumers to buy something they know they have to have. No wonder tuition is blasting through the roof.
Hillary’s new plan will only exacerbate all this. Who takes seriously the idea, for instance, that one way to control education costs is to get states to not cut back on their higher-ed spending? Overall, the Clinton campaign estimates her plan would cost the federal government $350 billion over ten years, a not-insignifiant amount of money considering that total student-loan debt lately comes to $1.2 trillion. It will almost certainly have the effect of accelerating tuition inflation even further. That’s how subsidies work. It was only recently, after all, that the federal government decided it would get heavily involved in trying to control spiraling costs is another important sector of the economy: health care. The ACA was going to “bend the cost curve,” remember? Five years on, and health care inflation still roars ahead faster than the CPI.
There’s no reason the cost of education should be chronically rising faster than the cost of everything else. It is not especially capital- or R&D-intensive. The body of knowledge being taught—from physics to Western literature—doesn’t change especially quickly. The main reason college has gotten expensive is that misguided government policies have made it that way. Hillary’s new proposal would only add to the problem.
What do you think? Let me know!