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The College Cartel
From the March 19, 2012, issue of NR

(Darren Gygi)

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There was a time when higher education wasn’t a national political issue. Then as now, the United States had a flourishing network of private and public colleges and universities, which were supported primarily by fee-paying students and subsidies from state governments, many of which took great pride in building academic powerhouses.

But in the decades since Sputnik and the Great Society, the federal role in higher education has increasingly taken center stage. Though Obamacare, taxes, and Iran are soaking up most of the attention, funding for higher education might emerge as a key dividing line in this year’s presidential election. Last year, the Occupy movement devoted much of its attention to mounting student-loan debt.

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More recently, higher education once again became a flash point in the culture war. At a tea-party rally in Troy, Mich., last month, Rick Santorum called President Obama a “snob” for wanting all Americans to go to college. “I understand why he wants you to go to college,” he said. “He wants to remake you in his image.” The former Pennsylvania senator was suggesting that the president had embraced a one-size-fits-all worldview in which a college education is the highest aspiration of all students. And President Obama has dramatically expanded federal funding for higher education.

But President Obama has also been striking a different note on higher education in recent months. During his State of the Union address, for example, the former legal academic said, “We can’t just keep subsidizing skyrocketing tuition,” a message that has been advanced by a number of conservatives and libertarians. “So let me put colleges and universities on notice. If you can’t stop tuition from going up, the funding you get from taxpayers will go down.” This was a welcome breath of fresh air from a president who has never evinced a terribly strong taste for controlling the growth of public spending. It remains to be seen whether Obama follows up on his pledge, but he certainly deserves at least some credit for taking on an industry that has been his powerful ally.

It is easy to understand Rick Santorum’s frustration with the notion that college is for everyone. It really is true that, as Santorum said in Troy, “not all folks are gifted in the same way,” and it seems profoundly unfair to suggest that there is only one way to succeed. But there is a very simple reason that the universal college ideal has emerged: While Americans with a high-school education or less have seen their labor-market position deteriorate in recent decades, the wage premium for college-educated workers has increased. Moreover, the unemployment rate for college-educated workers has consistently been lower than that for workers with no more than a high-school diploma. As of January, the unemployment rates for the two groups were 4.2 percent and 8.4 percent respectively. There are, of course, confounding variables at work. The kind of person who attends and completes college might have a number of other qualities that make it more likely that she’ll be able to maintain steady employment. Nevertheless, the divergence in life outcomes between the college-educated and all other workers has been front-of-mind for policymakers for some time now. 

What isn’t very well understood in today’s higher-education debate is that we can reconcile the positions advanced by conservatives and liberals. By doing the unthinkable — by dramatically reducing federal funding for higher education — we can actually make a college education more accessible and more affordable for working- and middle-class Americans. At the same time we can reduce the burden on taxpayers and alleviate legitimate concerns that we are unduly privileging one way of life over another. 

Having a more educated population can in theory create a positive feedback loop, in which workers innovate faster and find ways to spread knowledge more efficiently. Some argue that this is exactly the dynamic that fueled America’s rise to economic dominance in the last century, which is why the case for subsidizing higher education has been so widely accepted. As Claudia Goldin and Lawrence Katz recount in The Race between Education and Technology, the United States educated its workers to a far greater extent than any other country at the start of the last century. As late as the 1930s, the U.S. was all but alone in providing a free and accessible high-school education to its young. And mass secondary schooling provided a solid foundation for a vibrant and diverse higher-education sector, which was and to some extent still is the envy of the world.

Yet in more recent years, something has changed for the worse. In our breakneck efforts to subsidize education, we’ve wound up spending more and more for the same mediocre outcomes. High-school-graduation rates peaked in the United States in the late 1960s, despite the fact that the labor-market position of high-school dropouts has sharply deteriorated in the decades since. Despite the fact that per-pupil spending on K–12 schools has increased threefold in inflation-adjusted terms since 1970, high-school-graduation rates have been stagnant. And while the number of students attending college has increased over this period, college-completion rates have been similarly disappointing. Until the 1970s, they rose at a healthy clip, but there was a sharp deceleration in the mid-1970s, driven in large part by the failure of men to keep up with women.

One curious result of this stagnation is that while American 65-year-olds are among the best educated in the world, American 21-year-olds are in the middle of the pack among workers in the world’s most advanced economies. Goldin and Katz observe that while the 25-to-34 age group is better educated than the 55-to-64 age group in most European nations, the two groups are nearly identical in the U.S. The economists Dale Jorgenson, Mun Ho, and Kevin Stiroh reached the sobering conclusion that, because educational attainment appears to have reached a plateau, the labor quality of the U.S. work force will stop improving within the next decade.


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