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Elizabeth Warren: Going Big Bailing out the Higher Education Lobby

30 Apr 2019

Doug Bandow

With President Donald Trump seemingly vulnerable politically,
you would expect the Democratic presidential nomination process to
attract the best and the brightest. Here is one of those fabled
political inflection points, a moment the next president might
engineer a major ideological alignment. Imagine joining Woodrow
Wilson, Franklin Delano Roosevelt, and Lyndon Johnson on the
progressive pantheon.

So far, alas, the Democratic contenders fail to impress. They
are visiting the usual interest groups and making the usual
promises, with those little radical twists so beloved by activists.
But intellectual heft has yet to make its entrance. Elizabeth
Warren is supposed to be the policy heavyweight, but consider her
grand initiative to bail out the bloated, over-funded, highly
politicized higher education lobby.

This is a winning idea?

Consider it a Marshall Plan for university administrators and
professors. Warren would lavish another $1.25 trillion — why
start at a billion when you can add another three zeroes?! —
on the college sector, which few people mistake as productive or
needy. Everyone involved would be invited to belly up to the
federal trough.

Warren’s educational
lobby bailout is a bad idea. But the biggest problem is principle,
not practical

Washington would eliminate tuition at public colleges and
universities. Government grants for student living expenses would
increase by $100 billion. A special fund of $50 billion would be
created for historically black schools. Write off most student
debt, estimated to be about $640 billion worth. Up to $50,000 in
student loans would be eliminated for students earning up to 100k a
year. A portion would be eliminated for those earning up to a
quarter of a million a year.

“This touches people’s lives,” Warren
exclaimed. But it would be easier to touch them by simply loading
up some B-52s with cash and bombing the countryside!

How to pay for it? Tax the rich, of course.

As giveaways go it’s a great plan. More than 42 million
Americans would benefit. About 75 percent of student debtors would
get a free ride. And the usual suspects employed by the educational
blob would get guaranteed jobs.

What’s not to like?

First, Sen. Warren appears to be spending her “tax the
rich” proceeds multiple times — she also wants
universal childcare, increased affordable housing, and, of course,
Medicare for all. That’s just to start before the first
debate and candidates in the rear begin throwing policy long-bombs
to get attention. As the European welfare states well know,
everyone has to pay more taxes to underwrite generous social
benefits. As a result, the European tax systems are less
progressive than America’s revenue structure. Thus, the rich
wouldn’t pay off the university sector under Warren’s
plan. All Americans would do so.

Second, most people do not go to college and there is no reason
they should. For many people higher education is a default,
something they feel they are expected to do. As more people did so
without much of a plan, job requirements naturally increased. A
university degree now is expected for many jobs even if it not
particularly useful.

Contrary to Warren’s claim, much higher schooling provides
few or no useful work skills. It is a credential, perhaps
representing some level of commitment and discipline, but even
those depend on the student’s own commitment and experience.
And as more people with little interest in more schooling per se
get the degree, employers have little choice but to add other
credentials, further increasing job requirements.

Making it easier for everyone to go to school for no reason is
not the way to generate those heart-warming anecdotes of the
disadvantaged kid reaching the stars. The Warren program has
nothing to do with intent, need, or benefit. It would just toss
money at something which is presumed to be a good thing, without
any evidence of the claimed benefits. Other than for politicians,
who would be buying votes and hooking even more people on
government subsidies.

Third, the ambitious politico from Massachusetts would reward
bad decisions and punish good ones. Want to go to college to punch
your ticket? Mark time while you figure out what to do with your
life? Enjoy a little more subsidized time at your parents’
and Granddaddy Uncle Sam’s expense? This is the plan for
you.

What if you decide to eschew college as not for you? Seek a
two-year rather than a four-year degree? Choose technical training
over a university? Go to college but look for lower cost options?
Work while in school to limit student debt? Once employed, pay down
your debt more quickly than necessary? Then Warren plays you for
the sucker. You get to pay for everyone else.

Fourth, the Warren plan is reverse income distribution at its
worst. She complained that student debt is “the result of a
government that has consistently put the interests of wealthy and
well-connected over the interest of working families.” How is
that, exactly? Most students go to college as a means to increase
their future earnings. That is, they capture most of the benefits
of attending.

Surely Warren knows that her comparison of college to K-12
schooling makes no sense. The social benefits of education are
strongest at the most basic levels — learning reading,
writing, and arithmetic! — and fall sharply at higher levels.
The value almost certainly turns negative at schools which promote
left-wing esoterica, like providing coloring books to students to
soften the impact of hearing views different from their own.

Indeed, two-thirds of Americans don’t go to college.
Warren would have them underwrite their mostly better-off
neighbors. Give South Bend, Indiana Mayor Pete Buttigieg credit for
his response: “Americans who have a college degree earn more
than Americans who don’t. As a progressive, I have a hard
time getting my head around the idea of a majority who earn less
because they didn’t go to college subsidizing a minority who
earn more because they do.”

But this is what interest group liberalism is all about. Public
school systems are favored over students. Corporate behemoths are
protected from fiscal irresponsibility courtesy the taxpayers.
Incumbent businesses are shielded from competition at consumer
expense. Interest group liberalism is predicated on aiding the
worthy — if politically influential — against everyone
else.

Fifth, higher education is awash in cash, and that influx has
inflated the very tuition costs which Warren denounces. Schools are
aware that federal taxpayers are tossing billions of dollars in
loans at students. Which means more kids can afford to pay more.
Thereby reducing resistance to rising tuition.

Of course, students and their families are big losers from this
process. They pay higher tuition and with loans that must be paid
back. The total cost of education rises, hobbling students’
financial future. The problem is not government policy favoring the
“wealthy and well-connected,” but designed to benefit
the university complex. Which has made many of its members wealthy
and well-connected. Academia may be the highest, most jealously
guarded progressive redoubt in American society.

Sixth, the logistics of such a program would get messy very
quickly. Once established, subsidies would become sacrosanct. The
pushing and shoving at the federal trough would become fearsome to
behold. Would money be distributed by formula? Who would get to set
the numbers? Does anyone imagine Congress staying out of the
porkfest?

Warren explained that “The federal government will partner
with states to split the costs of tuition and fees and ensure that
states maintain their current levels of funding on need-based
financial aid and academic instruction.” How precisely would
she do that? Uncle Sam can’t force states to subsidize
education. Would she punish students if their states cut back by
reducing federal subsidies? What if states chose not to increase
funding as new students, attracted by the prospect of a freebie
degree, flooded in? Would influential Congress stand by
members’ districts and states were penalized?

Obviously, Washington could easily cancel the student debt that
it owns. What about privately held loans? Paying off banks would be
a subsidy to them, as if they need it. Warren apparently realizes
that, having said the feds would “work with the borrower and
the owner of the debt” to encourage its elimination. Which
means what? Tell bankers they should write off the loans? Good luck
with that! Make them see the wisdom of that course by adopting a
Corleone approach? Even most liberal judges wouldn’t square
that with the Constitution. If more coercive approaches were
successful, consider the consequences for the health of the
financial system and future of employees and shareholders, who are
not as well off as Sen. Warren, and many of the students she wants
to aid.

Seventh, reducing competition in higher education isn’t
likely to improve the quality of schooling. There is no reason to
presume that Americans get their money’s worth from all the
private and public money spent on colleges and universities.
Insulating government-funded schools from competition would not
improve any of them.

Yet Warren’s plan would put private schools in a deep
financial hole, making them even less competitive economically. It
hardly seems fair to use the taxes paid by their administrators,
professors, graduates, and students’ parents to underwrite
competing schools. And doing so would render an entire echelon of
competitors too expensive. That would be a gift of monopoly to the
public sector.

Of course, private schools might thwart Warren’s public
preference. No doubt, they would clamor for their place on the
federal teat, to gain a subsidy at least equivalent to that
delivered to public institutions. And who believes progressives
willing to saddle working stiffs with the cost of sending kids of
privilege to public university would stop there? Especially if
private schools promised to adopt whatever progressive mandates
Warren’s colleagues were inclined to impose. Then her budget
estimates would fall by the wayside, and the tax burden would have
to be increased even more on those working families Warren claims
she wants to protect.

Eighth, once the formulas are established for doling out the
loot to colleges and universities across the nation, administrator
and professors alike could look forward to the good life with even
fewer worries about accountability. Today schools sometimes
don’t attract enough students and fail. If cash is available
for even the most unsuitable student to attend the least effective
school, would even the worst institution ever have to close its
doors?

Bankruptcy is painful, but it performs an important public
service: it frees up potentially productive resources for use
elsewhere. That applies to the education sector no less than
elsewhere in the economy. Once provided, subsidies would be
virtually impossible to end, as legislators lined up to protect
institutions in their districts and states. Colleges and
universities would become welfare dependents.

Ninth, the economic benefits of Warren’s plan to enrich
higher education are imaginary. There’s no free money: paying
tuition and canceling debts means diverting resources from other
people and uses. If writing off debt really would create the
wonderful “economic stimulus” that she predicts, then
why not apply the principle more broadly?

Many people are burdened by high mortgages, which helped trigger
the 2008 financial crisis. Why not wipe the mortgage slate clean?
Some people go into debt to purchase vehicles necessary for work
and life. Why not eliminate all auto-related debt? People
accumulate personal debt for all sorts of good and important
reasons, providing social as well as economic benefits. Why not
free people from these debts? The feds could create a tsunami of
economic stimulus by getting rid of all debt now and forever
more!

Warren’s educational lobby bail-out is a bad idea. But the
biggest problem is principle, not practical.

Warren calls college “a basic need that should be
available for free to everyone who wants to go.” But why stop
there? Food is a basic need. Housing is a basic need. Clothes are a
basic need. Health care is a basic need. Transportation is a basic
need. Even culture is a basic need. For progressives, what
isn’t a basic need? Why not make them all free for everyone?
For Warren, “basic need” is living your dream at
someone else’s expense.

Moreover, she says this is a great deal since “we can
fully cover the costs of these ideas with revenue from my
Ultra-Millionaire Tax on the wealthiest 75,000 families in the
country — those with fortunes of $50 million or more.”
Granted, most people, me included, would like to live at someone
else’s expense. However, why does having more money obligate
someone to underwrite everyone else?

The rich earned their cash. If the system was unfair — and
our own is permeated by the seemingly endless looting and pillaging
in Washington — then it should be reformed. But wealth per
se, no matter how “excessive” it might seem to social
engineers like the former academic turned Massachusetts politician,
does not belong to Sen. Warren, and the other well-connected,
influential, and pampered members of the political class.

The Democratic presidential contest has barely started and
candidates are spewing forth their worst nightmares as their
electoral platforms. The race for November 2020 is likely to be
even longer and more painful than the worst pessimists
imagined.

Doug Bandow
is a Senior Fellow at the Cato Institute and a former Special
Assistant to President Ronald Reagan. He is the author of The
Politics of Plunder: Misgovernment in Washington.

Click here to view the full article which appeared in CATO Journal