“I’m from the government and I’m here to help”

The Wall Street Journal had two good commentaries on Obama’s latest pitch to use more government to fix problems caused by government — that is, his recent speeches on college education.

1. From Obama State University, this one is a page out of Hugo Chavez’s playbook:

 “We’ve got a crisis in terms of college affordability and student debt,” said Mr. Obama, without a trace of irony at the State University of New York at Buffalo. The same man who three years ago forced through a plan to add $1 trillion in student loans to the federal balance sheet over a decade said on Thursday, “Our economy can’t afford the trillion dollars in outstanding student loan debt, much of which may not get repaid because students don’t have the capacity to pay it.”

Naturally, the President blamed somebody else and demanded more authority over higher education.

Mr. Obama specifically blamed colleges and universities for charging too much. “Not enough colleges have been working to figure out how do we control costs, how do we cut back on costs,” he said. His solution is for the federal government to rate colleges on their effectiveness and efficiency, and then to allocate federal subsidies to the schools that Washington believes are providing the best education at the lowest cost.

Chavez and Obama don’t understand (or admit to understanding) that incentives matter. They distort incentives then blame the problems that result from those distorted incentives the folks who respond to them.

It’s not that colleges haven’t been working to figure out how to control costs (actually, some are, but we haven’t widely accepted the for-profits just yet), it’s that they have no incentive to do so.

Well, Obama is now proposing incentives, I can imagine some will say. To them, I respond, imagine how much credence you would put into a Federal government’s rating system for restaurants. My guess is that no matter what those ratings say, you’re still going to trust your gut and what you hear your family and friends say.

This is also from the article:

Mr. Obama is trodding a well-worn political path. Politicians subsidize the purchase of a good or service, prices inevitably rise in response to this pumped-up demand, and then the pols blame the provider of the good or service for responding to the incentives the politicians created. Think housing finance and medical care. Now President Obama is attacking colleges for rationally raising tuitions and padding their payrolls in response to a subsidy machine that began in 1965.

That’s when the feds launched a program to make college “affordable” by offering a taxpayer guarantee on student loans. Federal grants and loans have been expanding ever since and it’s no coincidence that tuition prices have been rising faster than inflation for decades. This week the White House noted that since the academic year ending in 1983 tuition and fees at four-year public colleges have risen by 257%, while typical family incomes have advanced 16%.

2. Richard Vedder: The Real Reason Colleges Cost So Much

Here’s something I’ve noticed when visiting my own alma mater:

Many colleges, he notes, are using federal largess to finance Hilton-like dorms and Club Med amenities. Stanford offers more classes in yoga than Shakespeare. A warning to parents whose kids sign up for “Core Training”: The course isn’t a rigorous study of the classics, but rather involves rigorous exercise to strengthen the gluts and abs.

Or consider Princeton, which recently built a resplendent $136 million student residence with leaded glass windows and a cavernous oak dining hall (paid for in part with a $30 million tax-deductible donation by Hewlett-Packard CEO Meg Whitman). The dorm’s cost approached $300,000 per bed.

Universities, Mr. Vedder says, “are in the housing business, the entertainment business; they’re in the lodging business; they’re in the food business. Hell, my university runs a travel agency which ordinary people off the street can use.”

My alma mater has a fantastic turf field complex for its students. It has an indoor/outdoor mini water park resort. The dorms look like alpine ski lodges. It has an arena for women’s basketball and one for men’s. The commons area rivals high-end shopping mall experiences. And, yet, they still have the nerve to call me weekly asking for money. No thanks. 

 

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