Community College: What is the Right Price?

Reihan Salam writes,

Texas A&M economist Jonathan Meer kindly pointed me to their recent work on net prices — that is, net tuition and fees after grant aid — for students attending public institutions, including community colleges. It turns out that in 2011–12, “net tuition and fees at public two–year colleges ranged from $0 for students in the lower half of the income distribution to $2,051 for the highest-income group.” That is, net tuition and fees were $0 for students from households earning $60,000 or less while it was $2,051 for students from households earning over $106,000. While I don’t doubt that many households in the $106,000-plus range will welcome not having to pay for their children’s community college education, I’m hard-pressed to see why this initiative will have a “huge” impact, given that we’re presumably most concerned about improving community college access for students from disadvantaged backgrounds.

My comments:

1. Just based on my gut feeling, I think that the vast majority of students attending community college do not have favorable outcomes. (But note this study,pointed to by Tyler Cowen.

Attending a community college increased the probability of earning a bachelors degree within eight years of high school graduation by 23 percentage points for students who would not have attended any college in the absence of reduced tuition.

My guess is that it does not replicate.)

I am not even sure that students in the lower tier of four-year colleges have favorable outcomes. Instead, the true cost, including what the students pay out of pocket plus subsidies plus opportunity cost, exceeds the benefit for many who attend college. In contrast, President Obama seems to endorse the fairy-dust model of college, where you can sprinkle it on anyone to produce affluence.

He said a high school diploma is no longer enough for American workers to compete in the global economy and that a college degree is “the surest ticket to the middle class.”

He describes the U.S. as a place where college is limited to “a privileged few.” I think a more realistic assessment would conclude that the U.S. errs on the side of sending too many young people to college, not too few.

2. At community colleges, most of the favorable outcomes are middle-class students who, if community college were not available, would find some other path to success. (Possibly related: Philip Greenspun writes,

Amanda Pallais of Harvard presented “Leveling Up: Early Results from a Randomized Evaluation of Post-Secondary Aid”, a paper on the Susan Thompson Buff ett Foundation scholarship for lower income Nebraskans who have a high-school GPA of at least 2.5 and maintain a college GPA of at least 2.0. It turns out that people who are going to attend college and graduate will do so even without this grant and people who were marginally attached to academic will become only slightly more attached. The cost of keeping one student in college for an additional semester is $40,000 of foundation funds.

Pointer from Tyler Cowen.

3. For the students that you want community college to help, I think that the case for community college is sort of like the case for last-ditch cancer therapy. Every once in a while it works, and you want to give people hope. But looking at the overall costs and benefits involved, the money is not well spent.

4. Rather than expand community colleges, I suspect the best approach would be to contract them by making them more selective. Try to find the students who are most likely to benefit, and concentrate on those. Robert Lerman, who is far from an anti-opportunity meanie, suggests apprenticeships.

5. If I were President Obama, of course, I would champion universal “free” community college. Worst case, my proposal becomes law. A lot of money gets wasted, but it’s not my money. Best case, the Republicans vote it down and I call them anti-opportunity meanies.

Reihan Salam on Melting Pot Failure

He writes,

I’ve gone from being a rah-rah enthusiast for mass immigration to one who is more skeptical of its virtues. That’s because I think the melting and fusing of different ethnic groups is essential to building a more cohesive and humane society, and that slowing down immigration would help this process along.

I am sympathetic to his concern that immigrants may be assimilating too slowly. I am not convinced that his solution of slowing the pace of immigration is aligned with the problem.

Gregory Clark on Immigration and Income Distribution

Self-recommending, although I could raise many objections to his conclusion. Some excerpts:

There is reason to believe that many recent migrants to both the United States and Europe will have a much more difficult time than their predecessors. Meanwhile, the countries in which they settle are less likely to see the benefits of immigration as they experience heightened social tensions and widening social inequality. Policymakers would be wise to take those risks into account. Rather than focus on policies for integrating new immigrants, they should concentrate on avoiding selection policies that threaten to create near–permanent ethnic or religious underclasses.

…countries that selected elite immigrants to begin with now have high-performing immigrant classes. For example, the United Kingdom selects immigrants based more on education and skills. As a result, African, Chinese, and Indian immigrants outperform their British counterparts; although children of white British parents born between 1963 and 1975 attained on average 12.6 years of education, children of African migrants stayed in school for 15.2 years, those of Indian migrants for 14.2 years, and those of Chinese migrants for 15.1 years.

Pointer from Reihan Salam.

UPDATE: Also self-recommending is this Greg Clark podcast. Pointer from Jason Collins.

Reihan Salam interviews Lane Kenworthy on Poverty Policy

Interesting interview, difficult to excerpt. The focus is on comparisons of U.S. policy with those of other countries. For example, Kenworthy says

Unemployment benefit levels are determined by state governments. In many instances, the benefit level is a “replacement rate,” which means the payment is a certain fraction of the unemployed person’s former wage or salary. Because real wages in the bottom half of the distribution have not increased in the past several decades, unemployment benefits for Americans in low-wage jobs have failed to keep up with growth in the economy. Other programs, such as the Earned Income Tax Credit, the Supplemental Nutritional Assistance Program (food stamps), Social Security Disability Insurance, and Supplemental Security Income, are indexed to prices. This means they keep up with inflation, but not with economic growth…As a result, government transfers for low-end households have increased less in the US than in many other affluent countries.

Later, he says

Sweden and Denmark often pressure benefit recipients into employment. Because individual circumstances vary so much, this is best done by giving caseworkers considerable discretion to decide which people can be effectively pushed into paid work, when, and with what kind of help. Doing this well requires an investment — in well-trained caseworkers who remain in their jobs and thereby build expertise, in having a sufficient number of caseworkers so that they aren’t overwhelmed with clients, and in ensuring that caseworkers have access to sufficient resources to help their clients enter and remain in the paid workforce (retraining, transportation, temporary housing, treatment for addiction, etc).

That sounds like an argument in favor of Paul Ryan’s latest proposals, although somehow I suspect that Kenworthy would not see it that way.

Callie Gable on Avikcare

She writes,

Roy’s plan changes the structure of Obamacare’s subsidies by benchmarking them to a high-deductible plan with a health-savings account — providing a powerful incentive for people to move into consumer-driven health plans. The HSA would be funded in part (depending on income level) by federal subsidies, which would roll over from year to year, giving consumers incentives to stay healthy and to make cost effective health-care decisions when they do need care.

The difference between subsidizing Singapore-style health insurance and mandating Obama-style health insurance is significant.

This is even more significant:

Medicare eligibility age would increase by four months every year until the program is totally phased out, to be replaced by putting seniors on the reformed exchanges.

Actually, with longevity increasing by 3 months per year, I am not sure that Medicare would phase out as rapidly as they think. And any step-up in anti-aging innovation could mean that longevity increases faster than 4 months per year. Still, better to be raising the age of eligibility gradually than not at all.

Another Alternative to the FDA Process

Alex Tabarrok writes,

MelaFind was submitted for marketing approval in Europe in May 2011. It was approved just five months later. One key reason for Europe’s efficient approval process is that European governments don’t review medical devices directly. Instead they certify independent “notified bodies” that specialize and compete to review new products. The European system works more quickly than the U.S. system, and there is no evidence that it results in reduced patient safety. Rather than tweak the current system, why doesn’t the U.S. just adopt the European model and call it a day? Our health and our economy would be better off for it.

Reihan Salam points to a review by Daniel Klein from 2001 of a book by Henry I. Miller.

Miller develops a reform proposal that would attempt to institutionalize the cooperative virtues of the European systems. Drug development and application would be overseen by nongovernmental “drug certifying bodies.” They would compete with one another for hire by companies developing a new drug. The hired drug-certifying body would oversee investigation, help develop the new drug application, and then make an initial decision on the application—that is, decide whether to certify the drug. The European agencies would also be permitted to serve as drug-certifying bodies. The company and its certifying body would then go together to the FDA for final approval of the new drug. The FDA, therefore, would retain final authority, but would rely on a set of trusted drug-certifying bodies, which would compete to get it right, do it quickly, and keep fees low. Under such a regime, says Miller, the FDA “becomes primarily a certifier of certifiers, rather than a certifier of products.”

Speaking of the FDA, apparently, as soon as someone writes an app for a mobile phone that does something like monitor glucose levels, this threatens to make turn the phone into a medical device, inviting the FDA to regulate.Scott Gottlieb and Colleen Klasmeier write,

The ambiguity created by the guidance and the agency’s premarket review processes forces innovators to seek the FDA’s nod for every new launch and every small advance. This slows progress to a crawl. Worse, the lag may be almost entirely unnecessary, as most of these products are not properly regarded as a medical device in the first place.

Doubts About Devolution

Callie Gable finds that John J. DiIulio, Jr., has concerns with Paul Ryan’s idea of turning anti-poverty funds to the states.

He mentions Pennsylvania’s Summer Food Service Program, a federal program intended to replace the nutrition kids get during the school year from free or subsidized lunches, to illustrate how complicated tracking aid and its impacts can be. The program is funded through the U.S. Department of Agriculture, which gives the money to the state of Pennsylvania, which then distributes the money to three major cities in Pennsylvania, which pass it on to Pennsylvania school systems, which give it to individual schools, which then work with any number of local providers.

This money changes hands five times before finally being translated into lunches for kids. And after that, it’s hard to be sure that the community providers are using the funds efficiently and providing a quality service. That’s just one, ancillary program.

My preferred approach to consolidating anti-poverty programs is to send lump-sum funds to individuals, while limiting the use of such funds to “merit goods” such as health care, food, housing, and education. However, I do think that state and local governments must then play a role in identifying specific needs in their jurisdictions and coming up with programs to address those.

Gable point to an article DiIulio wrote in 2012, where he said

About three-quarters of non-profit organizations, including most faith-based ones, spend under a half a million dollars a year and receive little or no government grant or contract money. But the quarter of the sector’s organizations that boast its biggest annual budgets are highly dependent on direct government funding, meaning that one-third of all non-profit dollars are from government, paid through grants or contracts.

This gets back to a point that I have made, which is that I do not think we want to put non-profit organizations on some kind of pedestal.

Robert Doar on the Ryan Plan

He says,

He left out Medicaid, I think, because he recognizes that he couldn’t commit to preserving funding levels for it because it’s unrealistic as a fiscal matter. Unless we address Medicaid’s spending trajectory, we won’t be able to address our fiscal problems.

In other words, if he folds Medicaid in with other anti-poverty programs, he either has to cut the total amount spent on poverty or leave in place a fiscal doomsday machine. I’ll have to think about that argument.

Oren Cass on Paul Ryan

He writes,

Ryan excludes Medicaid from his Opportunity Grants. But truly untangling the safety net requires disassembling Medicaid and allowing that funding to be reallocated, either to new healthcare programs or in some instances to different ends entirely. Our current allocation of spending across healthcare, housing, nutrition, training, etc. is an arbitrary artifact of separate legislative authorizations and bureaucracies evolving over decades. We should not be segmenting healthcare (which is as large as all the other buckets combined) as somehow untouchable, especially when it is not where someone in poverty would likely want to spend a marginal dollar.

I agree.

Cass also writes,

Ryan proposes reforms to the EITC that bring it closer to a wage subsidy (e.g., tying it directly to each paycheck), but for reasons unclear does not go the final step of simply replacing one with the other. More problematic, the expansion he proposes is small in both scope and scale – the result of funding it only through the cancellation of a potpourri of small programs and tax expenditures. For a work-incentives-led approach to be effective, funding to a wage subsidy needs to expand far more dramatically – ideally by reallocating it from existing anti-poverty programs that already go to those who work.

I agree with this criticism, also. But I share Cass’s overall take on Ryan’s proposals, which is that they are good reforms in an area much in need of reform.

Paul Ryan on Education Policy

Federal education spending tends to be concentrated on programs, such as Head Start, that are political sacred cows but notoriously ineffective. Ryan would replace these with block grants, presumably hoping that at least some states will spend the money more wisely. For higher education, Expanding Opportunity, Ryan writes,

The federal government offers 14 tax benefits for higher education; they cost over $36 billion in forgone revenue in fiscal year 2014. By their very nature, most of these tax benefits are ineffective for low-income families. Families must pay tuition before they file their tax returns, so these credits and deductions don’t help cash-strapped students. And research finds that some of these benefits have little effect on enrollment—most recipients would have enrolled without them. Even more disconcerting is that states take advantage of these benefits by spending less on higher education or student aid.68 So not only is the federal government shortchanging other priorities, but these tax benefits are making college more expensive for everyone.

But you can be sure that any attempt to change these programs will run into a hornet’s nest of demagoguery.

Turning to accreditation, he writes,

Building on the reforms offered by Senator Mike Lee of Utah, new accreditors would submit to the Department certification standards as well as reporting requirements, credit transfer plans, and outcome-based
standards. They would also be empowered to accredit specific, high-quality courses rather than just schools or programs. As a result, students would be able to build an online program of their own, the sum of which could add up to a fully accredited degree. David Bergeron and Steven Klinsky describe such a system in which “students who complete the preapproved, tuition-free MOOC and also pass the confirmatory [new accreditor’s] assessment would earn accredited course hours from [the accreditor] itself. Enough such courses in the right scope and sequence (say physics from MITx, poetry from Harvard, theology from Notre Dame and so on) could lead to a fully accredited . . .degree.”