Tuesday, February 06, 2007

The President's Budget

By Richard Vedder

The first and most important thing that can be said about the President's budget is that it is not terribly important. Whenever you have divided government, the official budget is usually "dead on arrival" on Capitol Hill, and the House and Senate mandarins fashion together their own list of priorities. So the prospects that the actual funding levels will be what the budget proposes are near zero in most cases.

Still, the budget is not irrelevant. The President must sign the final results, and spending wildly out of line with Administration priorities invites a veto. I say "invites", because the reality is that President Bush's aversion to vetoing bills is as well demonstrated as it is incomprehensible. However, with a Democratic Congress and having no political future, the President may start acting Presidential in this respect (actually vetoing some spending bills) so the budget in reality becomes the starting point for negotiations.

The budget is not particularly kind to higher education, which I think is about right. Higher ed is rich and fat and arrogant and needs to be brought down a peg. As to the students, student aid has grown by leaps and bounds and needs to be controlled as part of a strategy to slow down the third party payment growth that is at the heart of the higher education cost explosion. I am impressed that the Administration paid some attention to the Spellings Commission, not only by increasing Pell Grants but by moving to try to squash some of the other programs that make student aid so complex and puzzling. Moving to one or two financial aid programs is desirable administratively and in terms of simplicity. The Bush budget is a small step in that direction, but only a small one. A bold move would have been to get rid of several programs, re-jigger Pell Grants into a true voucher program, and increase their magnitude significantly. But the Bush Administration rejected that approach, maybe because they viewed it politically infeasible (but their current budget suffers from the same problem).

The research spending is fairly flat, which will cause anger among some of my Spellings Commission colleagues (Jim Duderstadt and Chuck Vest come immediately to mind). NSF gets a big increase, but NIH gets a less than inflation adjustment. The Energy Department research programs (particularly atomic energy) do fine, but the Agricultural Department research programs takes some hits, which may be good as the relative importance of agriculture continues to decline. All in all, a mixed bag showing little overall real increase in R and D. This is a case where runaway spending in other areas is beginning to hit basic research efforts. I have often wondered if a majority of the research funded by NSF and NIH would take place anyhow in a world without these agencies, and whether at the margin these agencies provide research that justifies public (as opposed to private) funding. So I do not have the same negative views on this flat funding that many of my academic friends do. The evidence as I read it hints that a good bit of federal research monies have gone to provide economic rent (compensation beyond necessary levels) to researchers.


Ryan Hahn said...

While it might be true that some researchers at NIH and/or NSF obtain an economic rent, this is certainly not true across the board. A large proportion of the researchers (at least at NIH) are foreigners here on a visa. The ease with which NIH can obtain visas for these individuals, relative to the private sector, means that these often highly qualified researchers get paid rather less than their market value.

Marty said...

You might want to read my article, "America's Most Overrated Product: Higher Education." Here's the link: http://www.martynemko.com/articles/college-americas-most-overrated-product-abridged_id1235

Marty Nemko