D. Dowd Muska


Lies, Damned Lies, and Higher-Ed Subsidies

November 03, 2011

It’ll come as a shock to the dopey college kids at the local “Occupy” encampment, but taxpayers already pick up the tab for a huge share of their, er, “higher learning.”

So says Neal McCluskey, in “How Much Ivory Does This Tower Need? What We Spend on, and Get from, Higher Education.” The Cato Institute scholar tackled the task of tallying just how much tax revenue flows to postsecondary institutions. He quickly realized that the project couldn’t be completed after a morning of spreadsheet-crunching. McCluskey discovered that higher-educrats like their numbers opaque: “There is no one, consistent, comprehensive source of data on taxpayer expenditures for higher education.” Necessity drove him to cobble together data from the U.S. Department of Education, National Science Foundation, College Board, and the organization State Higher Education Executive Officers.

When the last of his innumerable calculations was made, McCluskey found that in real terms, local, state, and federal subsidies to higher education rose from $108 billion in 1985 to $264 billion in 2010. That’s a 144 percent increase. (The number of degrees conferred rose in the quarter-century studied, of course, but by only 74 percent.)

Excluding research grants and loan guarantees, per taxpayer, “the inflation-adjusted [subsidy] increase has been significant, rising from $426 in 1995 to $532 in 2010, a 25-percent expansion. That’s $532 the taxpayer can’t spend on food, housing, investing, or other uses -- all of which might be more important than funding higher education -- and it refutes any notion that there has been declining taxpayer support for higher education.”

As for the “wage premium” ubiquitously deployed to convince teenagers and their parents of the benefits of a degree, McCluskey, echoing many pro-taxpayer policy analysts, has doubts. One problem is “credential inflation.” The Cato researcher suggests a devastating critique that few higher-ed spinmeisters have the guts to address. “[T]he difference between earnings for people with a bachelor’s degree and those with only a high school education are large not because one attains valuable skills pursuing a degree,” McCluskey posits, “but because degrees are so commonplace -- and perhaps signal some basic threshold level of intelligence and work habits -- that employers reflexively screen out job seekers without degrees.”

Maybe HR departments should think twice about that criterion. The National Assessment of Adult Literacy was given in 1992 and 2003. McCluskey notes the second test’s sorry finding that in nearly “all types of literacy -- prose, document, and quantitative -- the percentage of people with at least ‘some college’ demonstrating proficiency decreased markedly.” But for the students who did finish their studies, and even went on to graduate-level work, “the percentages also plummeted.”

It gets worse. “How Much Does the Ivory Tower Need?” exposes undeniably high dropout rates and soaring tuition bills. B.A.-seeking freshman starting out in 2002 were monitored by the federal Digest of Education Statistics. A scant 57 percent had obtained their degrees six years later. The completion rate for community colleges was significantly worse. (“Many people who are, apparently, not prepared for college are entering it and are paying for the experience at least partially with taxpayer funds.”) The College Board determined that real, average tuition and fees at government universities rose by over $5,500 between 1980 and 2010. At private schools, the hike was a maddening $17,800. Subsidies during the era increased by more than $8,000 per student. (“[I]t [is] almost impossible not to conclude that increasing aid enables colleges to raise prices, which schools do because they always believe they have need for even greater revenue.”)

McCluskey’s bottom line: “Taxpayer funding for higher education has ballooned over the last quarter century, but there is little evidence it has done net good. It has probably helped to produce more college enrollees, but it has almost certainly also underwritten poor academic results, rampant price inflation, and considerable college inefficiencies, and has taken increasing amounts of money from individual taxpayers that they would have applied to more important and effective endeavors.”

A brutal conclusion, but one more Americans are beginning to grudgingly reach. Talk of a higher-ed bubble is building, and colleges and universities, both private and government, should be worried. Driven by vote-grubbing pols and greedy professors and administrators, the campaign to massively expand Americans’ “access” to higher education has been an epic debacle.

The Cato Institute’s withering response to “anecdote-driven media stories that focus on financially struggling students” won’t get much attention from the mainstream press. Taxpayers concerned about their nation’s fiscal and economic futures should find the study online. It’s depressing, but essential, reading.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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