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Volume 96, Issue 2

If you think higher education is expensive...

President Don Michael Randel dissects a penny-wise, pound-foolish proposal to curb government support for higher education.
Price controls rarely work. This has been shown in the overwhelming majority of cases in which they have been tried. One would think that the current administration in Washington understands this better than most and that a Republican Congress understands this as well. Nevertheless, a Republican congressman, “Buck” McKeon of California, has proposed legislation that would amount to price controls on higher education. Its operative feature is that any institution that increases tuition by more than twice the Consumer Price Index (CPI) over a certain time period would be denied access to federal funds, such as student loans.

This bill is not likely to affect the University of Chicago or other leading private institutions of higher education directly. Readers of this page know that I believe that there are very good reasons why tuition at such institutions will rise faster than the general rate of inflation. Institutions such as ours are not likely soon to seek tuition increases of more than twice the CPI—unless, perhaps, the CPI remains at rates of 2 percent or less, while other “people costs” such as health care accelerate much faster. Even with rises in the “market basket” of goods and services that make up the Higher Education Price Index (HEPI), we are likely to see private higher education constrained to tuition increases of 5 percent or so.

The institutions most directly affected by the proposed legislation will be the nation’s public institutions. As state governments have faced serious revenue declines, most have withdrawn resources from higher education, often recognizing that these institutions could pass along the revenue gap to students and their parents through increased tuition. The result is double-digit (in some cases 25 percent or more) tuition increases.

Essential to bear in mind, however, is that such increases are made on a very low tuition base, some as low as $2,500. Thus, press reports about tuition’s double-digit rise are stories about public institutions whose tuition may be one-tenth that of the best private institutions. The question, then, is in the first instance, about the appropriate size for the public subsidy of higher education and about the appropriate combination of state, federal, and private support.

The simple fact is that the nation has been disinvesting in higher education—and at a time when our competitive advantage in the world’s economy depends more than ever on our advantage in higher education. Numerous studies show that the vigor of the U.S. economy is closely tied to the strength of higher education, whether one thinks of the return on investment for an individual or for the nation. A recent study shows that a person with only a high-school diploma is not likely ever to earn enough to repay in taxes what a high-school diploma costs the taxpayer. Only higher education enables earnings capable of returning public investment in education.

The nation now faces a situation in which economic growth is fueled by gains in productivity. Workers in the United States, whatever the color of their collar, must be more productive than their competitors worldwide, surely meaning that they must be better educated. We will not soon compete for the kinds of low-wage jobs steadily being exported. And we should not want any significant percentage of our population consigned to the standard of living afforded by most of the exported jobs. But as we begin to see higher-level jobs being exported as well, we ought to realize what makes the difference between one worker and another at any level. That difference is education.

If your child were seriously ill or in serious legal difficulty, you would not shop for medical or legal help on the basis of those services’ rate of inflation. For all of the pressures that have been put upon the costs of health care, they are again rising at five and ten times the rate of inflation. Yet no legislation proposes price controls on health care. In contrast the nation seems prepared to tolerate steadily declining investment in higher education and to contemplate applying the crudest instrument of them all—price controls. But without the greatest system of higher education in the world, the nation will not be able to afford high-quality health care or any other element of the standard of living to which we have come to assume we are entitled.

Higher education is, of course, not an isolated phenomenon. The nation needs not only a coherent policy on higher education but also coherent policies on health care, energy, immigration, and a number of domestic issues, not to mention international relations. These issues are interconnected in many ways, and the problems entailed cannot all be solved in isolation. But if there is any one thing for which the United States is nearly universally admired, it is our system of higher education. Now is not the moment to begin to erode it, let alone to dismantle it. Yet in state after state, as well as perhaps in the U.S. Congress, we are seriously in danger of doing just that.



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