1/27/10

Tuition and the State of Union

How a Federal Solution For Rising Tuition Will Fail
By: Jonathan Harris

Obama's State of the Union address was admittedly a hard speech to digest for more reasons than one. First of all, after it was over I felt a bit confused. Is Obama the radical leftist he's made himself out to be, or is he a just a moderate who’s been grafted into a progressive establishment? His empathetic statements seemingly aimed at middle class America did not make a great deal of sense in the light of his vigor to continue fighting for health-care reform and now a second stimulus. I had a very hard time taking him seriously especially after lamenting over the fact that America is in a constant state of “campaigning.” Really Mr. President? Didn’t you write the book on the perpetual campaign, being on more interviews, taking more photos, and making more speeches than any president in history? Even the State of the Union Speech itself was in the style of a campaign. As columnist Charles Krauthammer commented immediately following the speech, "It was extremely in-congruent." Obama was acting as an outsider by mentioning the "Washington" establishment about seven times, when in reality he and his party are the Washington establishment. Towards the beginning of the speech he claimed that, “We cut taxes for 95% of working families. . .” Later on in the speech however he stated that he hadn’t raised any taxes. Which one is he more proud of, not raising taxes, or cutting them? While the most overarching issues were all addressed from progressive position, some solutions came from centerfield remarkably. Obama’s proposal to look into offshore drilling and build nuclear powerplants witnessed cheers even from Republicans. Everything from homosexuals in the armed forces (which Obama is in favor of now apparently) to college tuition rates was addressed. The seventy minute speech left me weary and in agreement with Bob McDonald’s GOP response in which he remarked, “The federal government is simply trying to do too much.”

One issue mentioned in the speech which jumped out at me as being especially of interest to the college crowd was Mr. Obama’s statements in regard to tuition forgiveness and government aid. During his anonymous blasting of President Bushes policies over the previous ten years, Obama claimed that income shrunk while tuition went up. As a solution to this imagined colossal nightmare our president proposed increased federal aid to students, tax credits for parents paying for their child’s education, tuition forgiveness after 20 years for students who choose to work in private enterprise, tuition forgiveness after 10 years for students who work in public service – and for good added measure he inserted a personal scold aimed at education institutions for increasing their prices. How dare they! Now while this may sound as comical as the caveman who throws more wood on a fire in an attempt to put it out, most Americans will fail to see the irony. As Neal McClusky from the Cato Institute said, “the more the government gives to student aid programs (in both loans and grants) the more colleges can demand in tuition.” McClusky continues,

“government student aid and tuition costs are running around in a circle: that as Governments offer more aid to help out students with college costs, schools increase tuition accordingly to get even more money.”

This seems like a reasonable proposal. If you were a small businessman, and non-profit paid for you to take on apprentices in the hopes that you would train them in your trade, you would charge the most you possibly could. It was called the “the invisible hand” by Adam Smith in the 1700s, and it’s still just as invisible to Keynesians like Obama. The Associated Press reported this fact in October of last year stating:

“In 2008-2009, 65 percent of the $180 billion spent on higher education expenses came via the federal government in the form of grants, loans and work-study programs, up from 58 percent the year before. Overall, the report estimated federal grant aid rose almost 11 percent last year. That trend will likely continue because the maximum Pell Grant — the government's main college aid program for low-income students — rose by over $600 this year to $5,350.”

This increase in government aid perfectly parallels the 6.5 percent increase in tuition from 2008-2009. In fact, since the 1940s tuition has been steadily increasing as government aid becomes more and more available (though the educational quality has greatly diminished. Hey, I wonder if there’s a relationship there too?). So as you can see, giving more money to students for college will just make tuition rates skyrocket even higher, despite the president’s chastising words to the greedy private schools who, “God-forbid” would ever want to receive a profit.

Tuition forgiveness, the solution Obama spent the most time stressing, will bring tuition levels to a level I hardly want to even think about. Pretend you’re that small business owner once again who’s just taken on some apprentices being sponsored by a non-profit which doesn’t really care how much you charge. Now pretend that a certain percentage of your students are borrowing money to learn from you, but they don’t want to borrow too much. Now you have an incentive to lower your prices because you want their business. But lets say that no matter what, after 20 years that apprentice will have whatever money he borrowed simply forgiven, so he doesn’t ever have to worry about paying it back (because chances are he won’t). Now you’re free to charge whatever you want. The same goes for Yale University and every other educational institution.

Two last observation concerning tuition forgiveness: Obama cuts the waiting period for forgiveness in half for those who want to work in the public sector. This harkens back to his overriding agenda of increasing the public sector at the expense of private industry. It presents a tempting prospect for students who’ve taken out 150,000 dollars to get a degree to work in government. Also, what will happen to the loan companies if the money they expend to students is forgiven or reimbursed by the government? It’s something to ponder.

Despite emotional appeal that “No one should go broke because they decided to go to college,” the obvious question is, “Should the government go broke because they decided to go to college?” because that’s the proposal. He’s asking you the taxpayer to fund other people’s children to go to school through the means of an agency (the federal government) which is already broke. Shouldn’t Obama “Answer history’s call” by fixing that first?

1 comment:

  1. I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

    Alena

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    ReplyDelete

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