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Why We Should Have a Free Market in Education

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from Sound Politics by pudge,

Maybe Obama Needs to Go Back to School

Our entire nation depends, for our economic future, on an industry that gets hundreds of billions of dollars in direct subsidies from the federal government each year.  This year, President Obama’s administration is increasing it by tens of billions more.

Yet each year, the industry charges more and more money to consumers for the same product.  Obama would have us think that the solution is to continue to give more subsidies to the industry, when the prices increase as subsidies do.

No, I am not talking about oil or gasoline, I am talking about higher education.  Giving subsidies for education — in the form of grants and loans for the students — makes far less economic sense than a subsidy for oil (which is saying something).  The amount a prospective student can afford to pay doesn’t really change from year to year.  Sure, they can get a job and so on, but other than that, it doesn’t change much.  So when government pays for a bigger and bigger chunk of the price, the colleges are free to simply increase the price.  There’s no real competition in pricing, because consumers will pay whatever they can pay and government will pick up the rest of the tab.  The competition is all in what services are provided, so the colleges use the extra money from the higher tuition to provide more and more services, justifying the price increases … but it doesn’t give consumers a proportionally better education, it just keeps the college in the competition for more students.

So make no mistake: more money for grants and loans is not money for the students, it’s a subsidy for the colleges, and students end up no better off.  And, actually, they are far worse off, because this is all just being added on to their liabilities as a taxpayer, ensuring higher deficits and more debt.

Obama’s plans to increase college grants and loans are nothing other than direct subsidies for colleges, and just make college more expensive.


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