Jay P. Greene's Blog

(Guest Post by Matthew Ladner)

The final night of the Democratic convention is here, which seems like a good time to take a look at some of Senator Obama’s education plans. Here is the major Obama higher ed proposal from BarackObama.com:

Create the American Opportunity Tax Credit: Obama will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students. Obama will also ensure that the tax credit is available to families at the time of enrollment by using prior year’s tax data to deliver the credit when tuition is due.

Good politics to be sure, but a terrible idea, for a variety of reasons. At the most basic level, far and away the main beneficiary of a college education is the student-he or she knows more, usually earns more money, etc. Even if universities do provide positive externalities to society, the evidence of this is far, far weaker than that of it benefiting individuals. Many studies, for example, find no relationship between state or national economic growth and higher education spending. Ergo, a university education is a primarily a private good, not a public good.

As a society, we lavish resources on those students choosing to go to university, and ignore those who do not. Sooner or later, some bright young progressive will start to raise the equity issues involved in asking blue-collar folks to subsidize outlandishly expensive six year beer binges quests of self-discovery by rich kids.

More importantly, we now have a multi-decade long experience with public subsidies and higher education. One can only describe the higher education market as highly distorted, with costs out of control. Demand is inelastic (people think they must have a BA and will go into enormous amounts of debt to get it) and transparency is extremely poor (we literally have no way of knowing for sure whether a kid learns more at Harvard or Appalachian State).

For instance, a recent study by the Intercollegiate Studies Institute found a stunning lack of civic knowledge among our nation’s university students. Worse still, the authors found that some of the nation’s most prestigious universities had negative learning gains :

Generally, the higher U.S. News & World Report ranks a college, the lower it ranks here in civic learning. At four colleges U.S. News ranked in its top 12 (Cornell, Yale, Duke, and Princeton), seniors scored lower than freshmen. These colleges are elite centers of “negative learning.” Cornell was the third-worst performer last year and the worst this year.

Worse, much worse, is research on the reading skills of college students. American Institutes for Research (AIR) assessed the literacy of 1,800 graduating seniors from 80 randomly selected two- and four-year colleges and universities. What they found was not pretty.

The AIR study finds that 20 percent of U.S. college students completing four-year degrees have only basic quantitative literacy skills. That means they are unable to estimate if their car has enough gas to get to the next gas station or to calculate the total cost of ordering office supplies.

The study also finds that more than 50 percent of students at four-year colleges have only the most basic literacy skills, meaning they can’t do basic tasks like summarize the arguments in a newspaper editorial. On both measures, students at two-year colleges perform even worse.

The implications of this report are profound. Universities nationwide have been increasing taxpayer subsidies, tuition and fees for decades without anyone seriously questioning their return on investment.

Universities make outlandish claims about spurring economic development and leading the way to a new knowledge economy. At this point, we need to start asking if colleges are requiring students to read. To be sure, K-12 has much to answer for in this, but no one requires these universities to admit functionally illiterate students, and if they do so, they have an obligation to provide remedial education. Remedial courses of course are widespread, but apparently aren’t as widespread and/or as effective as needed.

The market does not discipline this type of failure, due to a lack of transparency. Instead, universities retain what looks to be close to unlimited pricing power. Higher education cost inflation has outstripped even that of health care inflation. Universities are much more expensive today than they were 20 years ago, but I am unaware of any evidence that they do a better job teaching students today than they did 20 years ago.

In short, we have every reason to expect, based on past experience, that if the Obama tax credit plan were to come to pass, that universities would simply hike their tuitions and continue on their merry way of ignoring quality issues in undergraduate education. The Congress has been chasing it’s own tail on “college affordability” for decades- providing more and more subsidies, watching costs go up and up, begin process again. Einstein’s definition of insanity certainly comes to mind.

Sadly, the Obama plan would simply add more fuel to the fire, and leave our very serious higher education problems unaddressed. We need to take a long hard look at higher education, not simply throw more money at the problem.