Monday, January 12, 2015

Obama's Cockamamy Community College Concoction

No president has been perfect, but it is times like these where I think Obama takes the cake on some of the crazier policy ideas. What did he propose last week? To make community college a free service. Granted, the students have to maintain a 2.5 GPA, but if Obama's plan goes into action, the federal government will foot the bill for three-quarters of a community college education, whereas the remaining quarter will be funded by the respective state government. Considering that the recession has caused states to divest because of budgetary cuts, good luck with the latter portion.

But that set aside, why would Obama offer such a proposal? I can see the appeal of subsidizing community college. Community college is a cheaper alternative for a four-year degree. What's more is that not everyone should have the societal expectation of a four-year degree thrusted upon them. There are high-paying jobs out there that only require an Associate's Degree, and even more interestingly, most of the occupations with the highest amount of projected growth don't even require post-secondary education. Obama points out that by 2020, 30 percent of jobs will require some college or an Associate's degree. By funding college, not only would it provide young adults with the education they need, but it would save the 9 million students who would benefit from having to pay $3,800 in tuition per annum. Although $3,800 doesn't sound like much, when you aggregate those figures, it comes out to about $32.4B per annum. I could make the gripe about how the federal government alone is $18 trillion in debt, but that argument unto itself might not work because it's possible that the program can end up paying for itself.

I'm personally skeptical of that argument, and a lot of it has to do with how the federal government presently handles the four-year college education system. The federal government already subsidizes those going to a four-year college, and is I had explained back in 2013, such a policy increases the cost of going to college. This is all the more plausible since tuition is only a small portion of the overall costs for a two-year college program.

Let's say that talking about supply and demand is economic mumbo jumbo to you. It still doesn't address completion rates. Having access to a service is a required first step, but what good does it do when you cannot complete college? Looking at the Chronicle of Higher Education's completion statistics, it's comparatively difficult for someone aiming for a four-year degree to complete their coursework as it is for someone aiming for a two-year degree. Even with the four-year system being subsidized by the federal government, not only do we still have a 41 percent dropout rate, but a quarter of those who do manage to graduate have the same median salary as someone who only graduates high school. Throwing money and grant aid does not have the impact that proponents would like to think, which is why the way the current subsidy system is a textbook definition of over-investment. Federal subsidies towards the four-year college system have caused tuitions to skyrocket while saturating the labor market with people with Bachelor's degrees. It would be lamentable if the community college system ended up with a similar mess.

Another point is that this policy would not be a subsidy for the students; it would be one for the community colleges. As previously mentioned, tuition is only a small portion of overall costs for a two-year education, so much like we have experienced with four-year colleges, we would most likely see costs skyrocket. What's more is that since this is a subsidy for the colleges, there is a major incentive for grade inflation. While a 2.5 GPA average might not seem like much since it's below a B average, it will incentivize community colleges to keep students' grades above a certain level so they don't lose money. Grade inflation is an issue because it erodes the value of a college degree. A GPA is supposed to signal to a potential employer that a certain candidate is competent. What good is the GPA if it ends up distorted?

As Milton Friedman had to remind people enough times, there's no such thing as a free lunch. This "free lunch" would most probably be funded by increasing taxes, assuming you can get the states on board to commit to the remaining fourth of the subsidy. Subsidizing community college will simply boost demand in the same distorting, artificial manner that the federal government already has done with the four-year college system. Subsidizing another market in attempts to offset the other failed subsidy is unacceptable policy. We've seen what happens when the government gets its hands on education, whether it's with four-year colleges, Common Core, or universal preschool. Students should go to post-secondary educational institutions that best suit their skills and actually provides a skills-based education instead of providing what the government thinks is best for them. By discontinuing its subsidies, the government can create a freer marketplace in education, but I see that as improbable of an occurrence as Congress actually voting on this proposal.

10-6-2015 Addendum: The Manhattan Institute published a report on a series of community college reforms that transcend Obama's simplistic approach of "throw money at the problem."

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