All Commentary
Wednesday, March 1, 2000

Financing College Tuition: Government Policies and Educational Priorities edited by Marvin H. Kosters

Is Government Involvement in Higher Education Necessary?

American Enterprise Institute • 1999 • 129 pages • $29.95 cloth; $14.95 paperback

Higher education is a prodigious sacred cow in America. Consisting overwhelmingly of institutions that do not have to pass the test of the market and that subsist largely on funds that come directly or indirectly from government, our higher education system grows, absorbs resources, but educates less and less. Good public-relations work and an image that derives from bygone generations shields the system from scrutiny except by a small number of observers. With many well-placed political allies, higher ed grows fat and happy.

The literature on higher ed falls into three categories. In the first, the “cheerleader” category, are works that sing its praises, complaining only that it does not receive enough money; in the second are works that find some fault with the course of higher ed, but do not question the underlying assumption that government support and regulation are necessary; finally, there is a small literature from radical critics who see government as poisoning the system.

Financing College Tuition, disappointingly, falls into the second category. I had hoped for a radical critique. Instead I found a timid collection of essays that contain some excellent observations and arguments but don’t penetrate to the heart of the problem.

Editor Marvin Kosters, a resident scholar at the American Enterprise Institute, contributes an introduction that sets the tone by reiterating a favorite assumption of the educationist: “The rising educational level of the work force has contributed importantly to the growth of productivity and real incomes in the United States.” Once you make that assumption, it is unlikely that you will seriously question government higher-education policy, since our very prosperity seems to hinge on keeping up the flow of college graduates.

One can be in favor of higher education but doubt the extravagant claims that are made for it. The growth rate of the U.S. economy was robust throughout the nineteenth century, when relatively few people pursued college degrees (and those who did rarely did so because they thought it enhanced their productivity), and has slowed in the last third of the twentieth, when college enrollments have skyrocketed. Maybe it’s not the case that having more college graduates causes greater prosperity. Maybe it’s the case that greater prosperity enables more people to afford to pursue college degrees.

Putting that point aside, the book contains essays by Eric Hanushek, Caroline Minter Hoxby, Thomas Kane, and Stephen Cameron and James Heckman. All are well-known scholars who have written extensively on educational issues and whom one might label “conservative.”

Hanushek, for example, is famous for his assault on the notion that higher spending leads to better results in K-12 education. His essay, “Budgets, Priorities, and the Investment in Human Capital,” seeks to spell out what he thinks the government’s role in higher education should be. He sees the root of our educational malaise in our dismal K-12 system and ponders why we should devote considerable resources to higher education, largely subsidizing the education of students who are apt to be successful anyway, while neglecting the many whose educations are woeful. Hanushek’s explanation is that government higher education policy is just another politically motivated device for transferring wealth to a strong interest group—parents of college students. Exactly.

Alas, he concludes that the federal government “has some strong and obvious roles” in higher education. Like what? He suggests that it should provide “leadership in policy development.” Sorry, but we no more need “policy leadership” from government in higher education than in the computer industry, auto industry, or anywhere else.

Caroline Minter Hoxby’s essay, “Where Should Federal Education Initiatives Be Directed?,” scores a knockout against President Clinton’s proposals for expanding “access” to higher education, which means luring more marginal students into the system with government subsidies. She concludes that little good will come of it, at considerable cost, including the further degradation of standards.

The essays by Kane and Cameron and Heckman likewise are useful in helping to fend off proposed educational follies. Kane exposes the undesirable consequences of new college financing gimmicks like the $1,500 tax credit for tuition expenses. Cameron and Heckman weigh in against the idea that the nation should combat rising “wage inequality” by throwing billions more into higher ed.

Not bad, but why couldn’t a shortish book ostensibly on the financing of college have included at least one essay by someone from that third camp, questioning the wisdom of taxpayer financing through grants, loans, and subsidized tuition? Economist Alan Reynolds, for instance, has written, “the most equitable and efficient method of finance is not taxpayer subsidies to either students or institutions, but intelligent use of capital markets.”

Now there’s a radical idea worth exploring.

  • George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.