Thursday, July 19, 2007

Congress Will Screw It Up

By Richard Vedder

The Gang of 535 sometimes does things right, but not often, and the current circus over higher ed is no exception. The Senate seems poised to adopted a bill slightly less offensive than the House version I blogged about earlier, but only marginally so. The notion that Congress should determine profit margins for loan providers is a very bad idea, albeit a continuation of existing practice. The notion that we should squeeze lenders to increase other forms of spending is dubious public policy at best.

Speaking of all of this, INSIDE HIGHER ED this morning reports that a new study shows that legislatively mandated limits on tuition increases are likely to constrain public universities more than private ones. This is supposed to be scandalous, but I say --so what? Constraining growth in costs to something more resembling the general inflation rate is a good idea, even if that constrains the behavior of the publics a bit more than the privates. A much better way to deal with costs, of course, is to deal with the dozen or so root causes, many of which are Congressional-determined in part. For example, if we slow the growth in the number of dollars we drop out of airplanes over student homes, we probably will slow the growth in tuition sticker prices. If we reduce barriers to entry imposed by accreditation rules, we can open up price competition, and, as one higher education entrepreneur friend on mine says, "prices will plummet." But Congress ignores all of this, merely rearranging the chairs on the Titanic. Don't look to this crowd of "our nation's leaders" for solutions, but merely for additions to the existing problem.

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