Why Capitalist Students Should Accept Government Aid

As American college students begin returning to their campuses across the nation, they are again faced with now perennial problem of paying for higher education. Due to a variety of factors that have driven up the cost of obtaining a bachelor’s degree in recent years, the American college student is now largely unable to obtain a college education without accruing a fairly substantial amount of debt. Which is why, without shame, capitalists should obtain as much government aid as is offered to help pay for their college education.

Before explaining why, examine the problem itself: the rising costs in college-level education result from government intervention into America’s higher education system. The state and federal governments have pumped taxpayer dollars into public (and, too, “private”) institutions and have expanded them into massive, bloated organizations. Using my own alma mater as an example, the University of Georgia is actually comprised of sixteen separate colleges and schools which offer degrees in hundreds of fields of study ranging from a bachelor’s program in biochemical engineering to a master’s program in “nonprofit organizations,” whatever that entails. There is little to no discrimination made on the part of those in charge of the budget (as it is virtually unlimited) between those programs which are valuable and worth funding and those which have little to no demand. The same applies to the funding of research projects, administrative costs, and other expenditures.

In the state of Georgia, public colleges and universities receive funding on the basis of what is known as “formula funding.” As the Athens Banner-Herald reports, “Formula funding is money that UGA and other Georgia public colleges receive every year from the legislature based on enrollment growth, maintenance costs and other factors.” In essence, the more money you spend digging a hole, the more the government will give you to try and fill it back up again. Schools which keep their costs low and do not try to perpetually expand beyond a reasonable capacity, under this system, receive less. And certainly, this kind of “formula funding” is used across many different areas of government funding at the state and federal level. Thus, one arrives at UGA’s current annual budget of $1B.

What happens when the state suffers a budget shortfall and it must cut funding to its public universities? The cost of maintaining such a massive university falls on its students – at least those not already funded by the government to attend.

As it is, much of government’s “selfless” sponsorship of public universities is not even through direct payment to the university itself, but the subsidization of student tuition and other fees. Rather than simply dumping the money into the university itself, the government essentially gives to many college students a coupon for either part or all of their tuition/fees for their chosen university. And so, price becomes no object to the purchaser.

The free market, however, cannot be fooled. If those on the receiving end are willing to pay nearly any price for their education, then those providing it will invariably charge as much as they can.  This, in turn, allows them to finance any number of frivolous projects and expand beyond what would otherwise be natural and sustainable in a free market setting. With the demand being perfectly or almost perfectly elastic, the cost will continue to rise unchecked until one of three things occur: 1. the bubble bursts (see: our government’s subsidization/regulation of home ownership/sales and the subsequent 2008 collapse of the real estate market), 2. the cost skyrockets beyond what the government can finance, so it further regulates the market with price controls (see: Leonard Peikoff’s lecture “Medicine: The Death of a Profession”), or 3. the cost skyrockets beyond what the government can finance, so it cuts, in whole or in part, such things from its own budget. It is the third situation which we see in America today – a welcomed change, to be sure, though it is occurring far too slowly and insufficiently.

Unfortunately, cuts in the state budget do not necessarily produce cuts in the budgets of state universities. It is often too daunting a task for those who rely on public image to retain their jobs to confront the “pull peddlers” who are sure to raise hell if state officials have the audacity to cut their program from the budget (as did former Georgia gubernatorial candidate Austin Scott who lamented cuts to something as trivial as 4-H).

This is especially true when the money used to finance student tuition and fees is entirely separated from the regular state budget, as is the HOPE Scholarship in Georgia which is funded by a state lottery. Why? Because an easier solution simply presents itself. The universities (which are overseen in Georgia by the State Board of Regents) merely raise their tuitions, which the students covered by government subsidies are still able to afford, to make up the deficit as best they can. When growing universities are met with an economic decline and a subsequent reduction in revenues, this can lead to massive increases in tuition, such as the 70% tuition hike at UGA and Georgia Tech since 2007. The budget set by the State Board of Regents for the University System of Georgia, however, has increased $200M over a similar timeframe.

But even this revenue pool is not bottomless, which prompted the Georgia General Assembly to make cuts in the HOPE Scholarship in 2011.* Even with a coercive monopoly over lotteries in Georgia, only so much revenue can be raised in this manner. Those who get the short end of the stick when it comes to receiving HOPE and other aid/scholarships end up paying the extra costs in full.

At least the HOPE, however, is awarded based on a student’s academic performance. Though originally it was only offered to students whose parents made less than $100,000 annually, it became entirely merit-based in 1995. Other kinds of government subsidies are much more destructive, handing out funds to students, not because they have earned them, but because they need them.

More than any other government fund this author can think of, the Pell Grant is perhaps the most consistently altruistic government subsidy for college tuition. According to the website of the Federal Pell Grant, the program is “needs-based,” and students need only meet the vague standard of “satisfactory academic performance” to maintain funding (which, generally, is nothing more than a C average). Though both merit-based and needs-based scholarships produce the same inflationary effects on college tuition, the needs-based variety produces the most malevolent inversion of justice. Surely, there are some who receive the Pell who do achieve spectacular academic success (my own roommate, for example), but it is fundamentally unjust to deny the same funding those who have achieved the same, or more, simply because the state determines that they do not “need” it as much as the marginal student who spends more time drinking than he does studying.

The solution to America’s tuition problem is to remove government from the equation. Privatize the public schools or auction off their assets to the highest bidder and eliminate government subsidization – all of it – of student tuition and fees. Without access to “free” tuition, students will search for the most cost-effective colleges and universities which suit their needs. Without a continuous flow of government funds, the universities will learn to survive in a free market as any business does: by offering products of value as profitably as possible, and by not wasting resources on products which are not valuable. And when such unnaturally massive government-backed budgets are no longer needed for schools, those in lower income brackets can expect to not be required to pay such hefty tuitions to fund programs they neither seek nor benefit from anyway.

No taxpayer will be forced to finance ideas to which they are ideologically opposed (and trust me, the conservative taxpayers of Georgia are financing a great deal of Marxists at the University of Georgia), nor will any man be asked to sacrifice the product of his labor, the judgment of his mind, or the pursuit of his self-interest to that of any else. When self-interest and individual rights become the standards of ethics in our political system, then production – not political pull or “need” – become the standards of value in our economic system. Those universities which provide the most inexpensive education at the highest quality will succeed. Those which do not will fail. As is always the case, the moral is the practical.

* “Cuts” meaning strengthening the academic requirements on students to maintain funding.

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