Phi Beta Cons

The Spectator on Higher-Ed Subsidies

The American Spectator makes some interesting points today. I especially like the suggestion to only subsidize college degrees that have vocational utility.

However, the writer falters in making a financial case to back this up:

Having the equivalent of Australia’s entire labor force, around 11 million American adults, idle on college campuses around the country, “studying” subjects of dubious vocational merit at public expense, results in significant waste [including lost income during those four years]. . . .
Of course, college attendance entails not only lost income, but forgone tax revenue. If six million full-time U.S. students were working rather than studying, on $40,000 a year income and a total average tax rate of 30 percent, U.S. governments would gather an extra $72 billion a year in tax in the short-run, enough to fund the entire Departments of Justice, the Interior, Commerce, and Energy.

For one, only the rich pay taxes, so adding a bunch of workers at $40,000/year wouldn’t significantly increase revenues. It’s cute to talk about funding this or that department, but total federal spending in 2007 was $2.8 trillion. Total tax receipts — federal, state, and local — from these folks would amount to about 2.6 percent of annual federal spending, under the writer’s own assumptions. That’s not negligible, but it’s not exactly a money shower, either.
In addition, the $40,000 figure is high, perhaps dramatically so: Median household income in 2006 was $48,000. Many of these households have multiple income earners, many have college degrees, and most of the earners have far more experience than a fresh high-school graduate. In fact, lots of college graduates start out at less than $40,000 (though my career choice of journalism may skew my perception of how often that happens).
But the deeper problem is that there’s really no way to determine how valuable a college education is, even for the six million most-useless-topic-studying students. Statistics indicate that college graduates make more than high school graduates, but at least part of this is because college graduates are smarter. If the training and credentials that college offers, however, cause a decent degree of the difference, that means college education puts people in higher tax brackets. This very well could make up for the four years they spent without working, income- and tax-wise.
I think the better point of this piece is that not all college degrees are equal, and the government should offer incentives to choose the more useful ones. A more detailed financial argument requires one to weigh the benefits of working for four years, immediately after high school, against those of working the rest of one’s life with a degree. It’s very difficult to do that.
UPDATE: I looked up some more numbers on the $40,000 figure. It turns out that the average starting salary for many college degrees is right around that mark, and some are even below it (those with degrees in marketing average just under $37,500; liberal arts, just less than $31,000). In 2004, the average person with only a high-school diploma earned slightly less than $28,000 — that includes all ages, not just recent graduates. So there’s no reason to believe that relocating college students from “useless” programs will result in the same number of $40,000 tax returns.

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