By Richard Vedder
The ink is hardly dry (figuratively) on the blog I did four days ago on Indiana Governor Mitch Daniel's proposal to privatize the state lottery and use most of the money for college scholarships for good students. Now the Hoosier State's northern neighbor, Michigan, has entered the fray. I learn from a Grand Rapids radio station that Governor Jennifer Granholm is proposing radically expanding an existing scholarship plan. Under the new proposal as I understand it, students who complete two years of postsecondary training will receive %2,000 --even if their academic performance is so-so. If, however, they complete four years of schooling, they will get another $2,000 if their grades have been acceptable. Unlike the current plan, the money will only go to kids going to Michigan schools.
Here we go again. The proposal inflates demand for higher education, which, other things equal, should aggravate the tuition cost explosion. By giving money to millionaire children as well as poor people, it probably is regressive in its impact on income distribution. It proceeds under the dubious assumption that increasing the proportion of kids with a college education will promote economic growth. To be sure, as Governor Granholm argues, states with a high proportion of college graduates tend to have higher economic growth and lower unemployment. But it is also true that much of the higher productivity and income of college grads reflects traits that those persons have that they brought with them when they went to college --higher intelligence, more maturity, better motivation, etc.
Michigan is a state with low economic growth --one of the nation's economic basket cases. It already spends a lot relative to national averages on higher education. It would be better to lower tax burdens, I suspect, then engage in this spending. To be sure, I would rather give money to students rather than institutions, so I applaud the Governor for moving towards voucherization as opposed to institutional support. That is something I have advocated for years. But I am concerned that the increase in third party funds for higher education is likely to aggravate, not reduce, our higher education financial problem. And I am willing to bet Michigan's growth would be greater if the funds were used to reduce taxes that dull worker incentives and the spirit of enterprise.