Thursday, August 22, 2013

Government and the Rising Cost of College

In his speech in Buffalo, President Obama declared his intention to bring down rising college tuition costs.
His speech makes plain three things:  (1) He thinks rising tuition is caused by colleges; (2) He thinks government is the solution to the problem, not one of its chief causes; and (3) He thinks he knows how much tuition all colleges and universities ought to charge and, therefore, which ones are charging too much;
He is triply wrong:
(1) As everyone who ever studied economics ought to know:  All other things being equal, when the demand for a good or a service rises, its price rises as well.  By providing grants and low interest loans to millions of students, the government has driven up the demand for college enrollment dramatically, thereby driving up the price as well.  When colleges educate more students, they must build new classrooms in which to teach them, new dormitories in which to house them, new dining halls in which to feed them, new health facilities in which to care for them, new athletic facilities in which to keep them fit and entertained, and new parking lots for their cars.
Colleges also must hire new admissions counselors to handle their applications, new campus police to keep them safe, and new maintenance crews to keep them comfortable.
They also must hire new faculty members.  Those faculty members require competitive salaries, health insurance, retirement funds, research sabbaticals, offices, parking lots, and secretarial staff.  Like the faculty, the secretarial staff requires salaries, retirement funds, insurance, vacations, offices, and equipment.
Did I mention that a larger student body requires bigger libraries, more books, and more librarians?
What money colleges cannot get from donors to cover these crushing new expenses, they must get from students. 
Of course, government intervention and the rising costs it entails are not limited to the demands of expanding enrollment.  Government intervention also includes government regulations that tell colleges and universities whom to hire, whom to enroll, and what to teach.  If colleges do not comply, federal funds are cut off.  To avoid that cut off, institutions of higher learning must hire whole departments full of educational bureaucrats to implement, to assess, and to enforce government mandates.  Those departments of compliance must be housed and supplied.  The bureaucrats who administer them require salaries, retirement funds, insurance, and vacations, as well as expensive, well-equipped and air-conditioned office buildings in which to do their work.  If colleges opt out of hiring and housing teams of bureaucratic overlords to manage the rigors of government compliance, they run the risk of falling afoul of the laws, in which case they invite not only the loss of government funds but also possible lawsuits, the costs of which are rising along with everything else.
The heavy expense associated with meeting the needs of more and more students -- and the heavy cost of government mandates on colleges and universities -- can exceed many millions of dollars per campus, depending upon the size of the school.  The aggregate costs to colleges and universities nationwide are perhaps incalculable.  In order to meet the rapidly expanding financial burdens that government intervention places upon them, colleges must raise tuition, sometimes dramatically.
In other words, government itself has done things that drive college costs into the stratosphere.  And now that it has, the President wants to punish colleges for the soaring prices he and his ilk helped produce.
Please note:  I am not saying that by opening up access to college for millions of service men and women via the GI bill that the government did wrong.  That is not my point.  I am saying that by doing so it has cost colleges and universities enormous amounts of money.
(2) Expensive as those forms of government intervention are for colleges, they are not alone, and they are perhaps not the worst.  By printing many billions of dollars in fiat money every month, and thereby shrinking the value of every American dollar on the planet as a result, the government makes it necessary for colleges and universities to charge ever greater amounts of money for the services they provide just to break even.  Because it takes more newly shrunken dollars to buy what old dollars used to, more dollars are needed.  Even if all colleges and universities decided against raising tuition in order to cover the costs involved in servicing more and more students, the government’s monetarist chicanery still drives up prices dramatically over time. 
(3) Finally, I cannot imagine upon what possible basis Barack Obama thinks he can calculate how much tuition every college and university in America ought to be charging, or how much that tuition ought to go up each year.  But if, as he indicated in the past, he plans to punish colleges whose tuition rises too quickly or too much, then know it he must.  But know it he does not.  No one does. 
Suffice it to say that I am continually amazed at how much community organizers know, or think they do.

No comments: