More Obaminations

By Richard Vedder

I got so mad reading the online version of USA Today yesterday that I forced myself to sit 24 hours before blogging about it, thinking I might say something intemperate or unreasonable if I did not give myself a cooling off period. I don't think the wait did much good, so here are my thoughts.

The headline that set me off was about another speech from President Obama that, first, repeated his embarrassing and economically and academically untenable suggestion that the U.S. should lead the nation in college graduates by 2020. And then, to add icing on the cake, he implied the key to doing this was socializing student financial aid, getting those wicked banks and selfish private capitalists out of the student lending business, and allowing the more efficient, more moral, and more just federal government (B.H. Obama, proprietor) to do the job.

Everything he said was wrong. As Andy Gillen has pointed out so beautifully and rigorously, student financial aid as it currently exists often does little, if anything, to improve college accessibility, worsens college affordability, and is a prime example of the law of unintended consequences. Concentrating on making it more attractive for students to go into debt is bad on many grounds, and only aggravates the conditions that have made college so expensive in the first place (there are some exceptions to this generalization, as Andy points out in his study).

Beyond that, the notion that financial resources should be primarily allocated by the federal government is a huge move towards a bankrupt socialism that time after time was shown to be deficient in the 20th century. The Feds now, effectively, control Fannie Mae, Freddie Mac, AIG, and are the leading stockholder in Citigroup. Political decisions about allocating resources are almost ALWAYS worse than market decisions in terms of advancing economic and, I would argue, social welfare.

And, let us return to the goal of becoming number one in the proportion of adults who are college graduates. First of all, is that necessarily a good objective? I know many many college graduates taking jobs for which a high school diploma is perfectly adequate, or perhaps a high school diploma plus some specialized post-secondary vocational training. But even if the President's goal is somehow a good one, we would have to have a revolution in education at the K-12 level as well, one that the president would never support because it would offend his union allies. When 30 percent or so of kids do not make it out of high school, it is hard to be number one in college graduates. When over 40 percent of those who do go on don't make it out of college, it becomes impossible. The president is concentrating on the one-third or so of high school graduates that do not go on to college, ignoring the larger other problems that keep 4 of 5 high school freshman from getting a bachelor's degree within a decade of entering high school.