No class: Bill Clinton's education-as-entitlement programs threaten to reverse positive trends in higher education - Editorial

It's not surprising that Bill Clinton has decided to become the education president. Southern governors always emphasize education, hoping to drag their states up a few economic notches and prove they're on the side of civilization; hence, the South has produced such secretaries of education as former Tennessee Gov. Lamar Alexander and former South Carolina Gov. Dick Riley. Clinton follows in this tradition, hailing from a state in which a mere 13.4 percent of the population had college degrees or better as of 1990 (an even worse showing than Mississippi). He knows education is important because he grew up in and later governed a place where it was relatively rare.

Now he wants to make two years of college an entitlement and turn tuition into a tax shelter. He demands a "new nonpartisan commitment to education" and declares that "education is a critical national security issue for our future, and politics must stop at the schoolhouse door." That declaration is, of course, backed by piles of polls showing that education handouts are popular among voters in general and women in particular. And it's tied to programs designed to make educational entitlements as much a part of middle-class life as Social Security or the home mortgage deduction.

In a moment of ideological frankness, Assistant Secretary of Education David Longanecker blurted out this allegedly nonpolitical policy's goal: bribing Generation X and its successors to back big government. "We want to make a very strong statement," Longanecker said following the State of the Union Address, "that it is worth it to this country to invest in these middle-class students. We believe it will help them re-engage in civic life and make them believe that government does something for them too."

Maybe politics should stop at the schoolhouse door, but intelligent analysis shouldn't. Clinton's higher-education policies are harebrained and irresponsible, obviously concocted by people who care more about poll results than about what they might be doing to the nation's colleges or their students. They ignore the basic, well-understood dynamics of higher-education finance and evince no knowledge of how colleges actually work or what challenges they face.

Over the past year or two, American colleges have begun to address two linked problems: rapidly rising tuitions and rampant grade inflation. Clinton's plans threaten these promising trends.

College tuitions rose rapidly in the 1980s - 2.7 percent annually for state schools and 3.9 percent for private schools, after accounting for both inflation and expanded financial aid. That increase had many causes, but the most important was simple supply and demand: Supply was essentially fixed, and demand was rising rapidly. Students were willing to pay, for good reason. In crass financial terms, a college degree is an excellent investment, with an average return of around 13 percent a year after inflation.

"In almost any other unregulated market, an increase in demand against a fixed supply is sure to push up the equilibrium price," writes economist Charles Clotfelter in Buying the Best, a 1996 study of higher-education finances that focuses on four elite schools. "It is a distinctive feature of the market for higher eduction, however, that the supplying firms made it a practice not to charge what the market might bear, choosing instead to ration demand by electing talented and diverse student bodies who would best fit their institutional objectives. At the same time, however, the trustees and administrators of these favored institutions could not fail to observe that their admissions offices were being besieged by eager applicants, and that an unusually large tuition increase would not cool the ardor of prospective students." At all but a few elite and well-endowed schools, in fact, prices were what the market would bear - and it could bear a lot.

At some point, however, parents simply don't have the cash - you can't take out a mortgage against your kid's future earnings. And families paying full freight have started to balk at the price discrimination that charges them high prices and subsidizes scholarship students. Those shocking list prices can be misleading: A University of Chicago official notes that the average student there pays only about half of that private school's approximately $22,000 list price. But family income is at least comparable at the public University of Illinois, where tuition is under $3,000 a year. Families that make too much money to qualify for financial aid find it hard to justify full fare at a private college.

And not every expensive private school offers a world-class, Chicago-style education. These run-of-the-mill colleges are feeling competitive pressures. Susan Lee and Daniel Roth of Forbes have documented how numerous private colleges that compete with nearby state schools have cut tuition to compete. Most are small, non-elite regional schools such as North Carolina Wesleyan, which slashed tuition by 23 percent. And some more-selective colleges are getting price-conscious: Rice University is limiting increases to inflation, while Lehigh University is aiming for that goal. Even Bennington College, long the most expensive school in the country, has frozen its tuition.