The Problem With “College for All”

On Monday, Bernie Sanders introduced his College for All Act, aimed at making higher education more feasible for lower-income students. The bill would allow students whose families earn less than $125,000 to attend 4-year universities for free, while also making community colleges free and providing re-financing options for student loans.

The bill’s goals are noble. Despite being a hard-line conservative myself, I believe that usually the Democratic Party has good intentions with its policy proposals (though I disagree with their methods-of-choice). However, there a few problems with the bill.

The first problem is how Sanders plans to raise funds to cover the cost of the program once enacted. Bernie proposes a “Robin Hood tax”, a financial transaction tax on Wall Street that charges various fees on different transactions. Sanders claims that, “It has been estimated that this provision could raise hundreds of billions a year which could be used not only to make tuition free at public colleges and universities in this country, it could also be used to create millions of jobs and rebuild the middle class of this country.”

In actuality, the proposal may end up hurting the middle class. High-frequency trades (that the bill is aimed at) are such a sizable part of modern trading activity that many households (as well as universities’ endowment funds used to fund operations) would end up feeling the effects of the tax.

Another unintended consequence of the Robin Hood tax is that it shrinks investing within the country. Sweden tried a similar tax in 1984, and it led to half of the trading in Swedish shares exiting the country for London. France also enacted a financial transaction tax in the early 2000’s, and most of the target investing activity simply moved to non-taxed instruments. One study found that, after the tax, activity rose in non-taxed sections by 19%, while decreasing in taxable activity by 16%.

The tax could also lead to less tax revenue being raised, due to its possible effects on GDP. When debating a possible financial transaction tax, the European Commission estimated that a tax rate of 0.1% would lead to a shrinking of the GDP by 1.75%. The result, according to Forbes, is as follows:

Thus if we have a fall of 1.76% in GDP we have a fall in tax revenues of 0.7–0.9% of GDP. The proposed FTT is a tax which collects 0.1% of GDP while other tax collections fall by 0.7–0.9% of GDP. It is very difficult indeed to describe this as an increase in tax revenue.

In other words, if the tax ends up reducing a country’s GDP, it can reduce tax revenues that are gained from other taxes.

Finally, the last problem with Bernies’ plan of payment is that only 67% is covered by the federal government, leaving the last 1/3 of the revenue at the feet of the states. Many states strongly prioritize balancing their budgets (Vermont being the only state with no statutory or constitutional requirement to balance their budget). If a state does not have the ability to cover the cost and opts to forgo funding it, the program either operates at a huge deficit or becomes ineffective to those it aims to help.

Besides simply finding a way to finance the bill, Sanders’ proposal doesn’t seem to address the actual problems of higher education. 4-year universities simply are not providing students as much value as we think they are. The percentage of students who completed college in 6 years, or “on-time”, in 2015 was 52.9%. 45% of students did not demonstrate any significant improvement in learning over their first 2 years of college, and 36% showed no improvement over 4 years. Rather than try to pump more students into a broken system, we should figure out why it isn’t working in the first place.

For many programs, a 4-year degree isn’t significantly more valuable than a 2-year degree. From the Huffington Post:

A recent report that analyzed wage statistics in Virginia found that of the most popular courses of study, recipients of four-year nursing degrees earned the most during their first year out of college with a wage of $48,959. Those with two-year nursing degrees averaged only slightly less at $45,342.
NerdWallet’s look at jobs that require an associate’s degree showed the median 2010 pay for Air Traffic Controllers was $108,040. Construction managers brought in $83,860 and radiation therapists received $74,980.

Considering the lower cost in earning an Associate’s degree, one’s left to wonder if it makes more sense to pursue a 2-year program over a traditional university.

Sanders’ plan means well, but it might not be workable. Instead of throwing money at the problem, we might benefit from researching why the quality of higher education seems to have fallen at the same time its price tag has skyrocketed. I would also like to see more advocacy for community colleges and 2-year degrees, especially for students who may not thrive at a traditional 4-year university. If the goal of earning a college degree is upward mobility, it seems like these more unconventional approaches are being undervalued.

Before I let you go, I want to leave you a TedTalk that now-Senator Ben Sasse gave about the core issues higher education is facing. It’s a bit long, but well worth your time.