Pres. Obama’s College Plan Won’t Solve the Problem

President Obama’s plan to lower college tuition costs is a lot like his plans to solve other problems: crowd out competition and force everyone into the higher-cost standard-bearer.

Just look at  his corporate tax plan. Instead of competing with other countries by lowering our corporate tax rate (something that has broad, bipartisan agreement), the President wants to force global companies to pay that higher tax rate instead of the lower rate in the country they’re doing business. It’s backwards competition.

He has also done this to our energy sector. Instead of – honestly and truly – opening up more drilling for oil and natural gas (cheap, domestic energy) he is keeping prices high to promote “clean” energy. In the “clean” energy market, he is trying to force Americans to buy expensive, inefficient technologies with his “clean” energy loan programs, consumer incentives and calls for a “clean” energy standard (or mandate). No real innovation, just the heavy hand of government selecting alternatives.

He’s now taking this same principle to the higher education market. His plan disincentivizes low-cost college alternatives (like online colleges and classes) and continues the status quo of more federal aid – which allows colleges to increase tuition costs.

The Heritage Foundation’s Stuart Butler explains:

“[T]he extensive and expensive system of federal aid for college has actually exacerbated increases in the total cost of college. This is because colleges can boost tuition when such assistance enables students to offset part of their costs. To be sure, better-targeted student aid can help specific groups of students afford college, but increasing total aid, as the President proposes, will tend to increase—not decrease—the sticker price of college”

One of the major factors for the cost increase is the rise in administrative costs. According to the Goldwater Institute:

“Universities are suffering from “administrative bloat,” expanding the resources devoted to administration significantly faster than spending on instruction, research and service.

“Between 1993 and 2007, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service only grew by 18 percent. Inflation-adjusted spending on administration per student increased by 61 percent during the same period, while instructional spending per student rose 39 percent.”

It would seem hard to justify the need for all these administrators. Colleges, and the President, need to be honest with the American people and cut the bloated administrative payrolls. Of course, federal largess provides a disincentive to rein in the bloat.

Aside from high administrative costs, the President’s plan doesn’t foster innovation. The flawed $1 billion ‘Race to the Top” competition is supposed to promote college affordability and increased Perkins loans that would be given to schools who raise prices less than others. As the Washington Post’s Matt Miller puts it, this plan may “reward colleges that have had smaller price increases than others.” It’s not about cutting costs, it’s about not increasing costs as much.

Does that sound familiar? It should. It’s the President’s and the left’s idea of cutting spending. In Congress, they believe that if you spend more than you are now, but spend less than you wanted to, it somehow counts as a cut. Unfortunately, that absurd account is at times a bipartisan disease.

To answer the fostering competition argument, the President will point to a $55 million fund for start-up institutions that are innovative. But as we know of the federal government, “innovation” actually means “who can lobby the best.” Heritage’s Stuart Butler explains:

“The President wants $55 million to fund a competition for start-up funding for institutions that devise innovative ways to boost productivity. But the way to foster innovation in higher education is not for the federal government to try to become a venture capital fund. It has a dismal track record in picking winners and losers. For one thing, federal officials are far less likely to perceive truly innovative ventures than are private investors or foundations. For another, the recent Solyndra scandal underscores the tendency of political factors to distort federal investment decisions.”

The government has done a poor job of picking winners and losers in the energy market, and now they want to apply these same “skills” to the higher education industry? We won’t be surprised to learn that the politically connected reap the benefits and the taxpayer loses out.

The bottom line is this: government intrusion has led to higher tuition costs and thusly more student debt. Continuing this trend at a much higher rate will only exacerbate the problem. Instead, the government needs to allow the private sector to work and allow students and parents to choose the school that not only suits their needs, but also their budget. When colleges have to compete without government subsidies, you’ll see an end to the outrageous run up in tuition prices.

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