Friday, January 16, 2009

The Stimulus Package and Higher Education

By Richard Vedder

Most in the higher ed establishment are no doubt doing cartwheels, if they are physically able, over the Democrats proposed $825 billion stimulus package. They think it will help higher ed, even if it does not help the economy. Count me as one dissenter: I think the proposal is an unmitigated disaster.

First of all, what the Dems are really trying to do is use the rhetoric of "stimulus" and the reality of a recession to implement cherished left-wing programs that have little to do with the economy. Second, stimulus packages don't work --period. They did not work in the 1930s (unemployment at the peak of the Works Progress Administration was over 17 percent), did not work in the U.S. in the 1970s (indeed, causing stagflation), did not work in Japan in the 1990s, and did not work in our nation early last year, as unemployment rates have risen and equity values fallen in the wake of a $100 billion plus stimulus package. We are in uncharted territory running budget deficits that will be well over 10 percent of GDP in relative peacetime, and, if history is any guide, the results will not be pretty.

But what about colleges? The proposed aid does nothing to force colleges to reform, and, indeed, delays reforms that are needed. The colleges not only will gain some funds directly, but get the ability to raise tuition charges more. The proposed bill will give the states billions for educational aid, which will end reductions in state college appropriations. It will pour tens of billions into student aid through larger Pell Grants and increased student loan availability, allowing the colleges to raise tuition charges even more.

There is nothing, of course, that forces the colleges to do anything different. To be sure, this is not an education bill, but a so-called stimulus package. But it is bad fiscal policy, bad education policy, and, in general-- just stinks. To be sure, the bill is far from a done deal, and Congress will wrangle. But usually, Congressional wrangling works to worsen, not improve things. The market is low for a reason --the prospects for the private economy in the coming years is abysmal. It is not yet noon where I am writing this, but I need a drink.

5 comments:

capeman said...

Doc, go have your drink, and then another, and another. You must be feeling pretty low. Your guys managed to bring the country to the worst financial crisis in the lifetimes of most of us living. And now it's jist about about over.

You say "The market is low for a reason --the prospects for the private economy in the coming years is abysmal." Who is responsbile for that? There's plenty of blame, but why weren't your beloved capitalists sounding the alarm? Because they were too busy running the looting party!

Margaret Spellings was the great chance for you guys who hate higher education as it is in this country. And you got nothing with her around, and now you're going to have to live in a country run by all those academic types -- Summers and that woman from Berkeley and all those professors from more distinguished places than your little outpost, plus all those guys with degrees fromt the fancy schools, in addition to the holdovers from Bush like Bernanke and Gates.

Plus, the Pres is actually going to be a Hyde Park University of Chicago law school instructor!

Doc, you guys had your chance, you tried to burn the barn down, but it didn't work. And now the liberal posse is back to take charge.

Get yourself a good bottle or two or three, finish 'em up before dawn, enjoy it while you can, the posse and the sheriff and the judge are on their way and ready for business.

Cowboy said...
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Mad Dog said...
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