Wednesday, July 15, 2009

Additional Thoughts on Obama's Latest Proposals

By Richard Vedder

My colleague Daniel Bennett has given a rather thorough analysis of the Obama community college proposal (see associated blog). What he says is generally sensible. Some quick additional thoughts:

1) It sounds impressive, but the dollar amounts actually are not particularly large by Washington standards --a little over $1 billion a year --not peanuts, but not transformational in its impact. Remember, this is a 10 year program.

2) Much good non-traditional college work is done via for profit schools. Obama pretty much ignores them, although they are the fastest growing component of higher education.

3) I agree with Daniel: the real promising part of the proposal --free on-line courses-- gets the least emphasis.

4) The funding for the program is a complete fiction. Obama attacked the "special interests" in his speech, that is to say American private companies providing financial services to college kids. It really showed his strong socialist views. The notion of financing this from "savings" by moving to direct student loans is fantasy, if everything is taken into account. For starters, the assumptions of big savings are based in part on a view of the term structure of interest rates that may be inappropriate. Secondly, estimates fail to account for lost taxes paid by current private loan providers. My sidekick Andrew Gillen could probably rattle off a few more reasons.

5) The basic premise that the jobs of tomorrow nearly all require post-secondary education is completely wrong if you believe the projections of the highly respected Bureau of Labor Statistics in the U.S. Department of Labor. We should be unwinding federal involvement in higher education, not increasing it.

I agree that increasing emphasis on two year schools is good (Predictably, the Dr. No of Higher Education, David Warren of the National Association of Independent Colleges and Universities--NAICU--apparently disagrees). Moving to lower cost delivery systems is desirable, and the community colleges are under appreciated. Still, a nation with trillion dollar deficits should be going on a diet, not on a frenzy of "eating" --spending on new programs.


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