If it’s the summer of an election year, it must be time for campaign promises. Republicans will promise absurd tax cuts. Democrats will promise to, as PJ O’Rourke once wrote, “make you richer, smarter, taller and get the chickweed out of your lawn,” with expensive programs funded entirely by taxing a small number of distant theoretical rich people.
And right on schedule, Hillary Clinton has come forward with a plan to make college cheaper — for some folks, anyway. It will become much more expensive for the taxpayers who have to foot the bill, but they’re richer than you and you’ve never met them anyway, so who cares?
The specifics of the plan are as follows: In-state tuition at a state college will be free to anyone whose family makes less than $125,000 (initially the cap will be $85,000, then phasing in over four years). There will be a three-month “moratorium on student debt to get millions of borrowers relief from crushing debt,” the campaign says — which apparently means borrowers can use the time to refinance their loans or enroll in income-based repayment. There will also be no tuition at community colleges.
The cost of this program? As far as I can gather, about $450 billion over 10 years. Or maybe $520 billion. It is paid for by “closing high income tax loopholes,” including limiting deductions for folks whose income puts them in the 33 percent tax bracket: about $190,000 for singles and $215,000 for married couples. Well, I shouldn’t quite say “paid for”; this math comes up a bit short. But what’s $50 billion or $100 billion among friends?
Which deductions would be hit? Practically all of them, according to the Tax Policy Center:
All itemized deductions (except for charitable contributions), tax-exempt state and local bond interest, employer-sponsored health insurance paid for by employers or with before-tax employee dollars, health insurance costs of self-employed individuals, employee contributions to defined contribution retirement plans and IRAs, the deduction for income attributable to domestic production activities, certain trade or business deductions of employees, moving expenses, contributions to health savings accounts and Archer MSAs, and interest on education loans.
There are a few things worth noting about this. The first, and most obvious, is that this is a sop to the Sanders people, an attempt to co-opt his “free college” plan without making it quite so expensive. Since completion of a four-year college degree is skewed toward the children of those with higher incomes, means-testing the college tuition benefit at even a fairly high level will reduce its cost by more than you’d necessarily expect.
The second is that this solves a “problem” that’s just not that big a problem. The fact is that most graduates don’t have much student debt. The median amount of school debt is just $12,000, the price of an OK used car. Yet no one writes articles about how new grads are having their lives stunted — never able to marry, change jobs, buy a home — by the outrageous cost of Toyota Camrys.
Yes, millennials, I know that you are even now preparing to write me angry notes saying that surly old people like me don’t understand the crushing weight of debt under which you labor. Frankly I wish you were right, but I do understand. Today’s basement dwellers are not pioneers.
The political logic is simple enough: Yes, people would like to have their tuition paid for. They’d also like it if you gave them the same amount of money in cash. But spending almost half a trillion dollars over 10 years usually requires a somewhat higher public policy rationale than “people would like it.”
And what is that rationale? I see this plan as part of a broader Democratic push to spend a lot more money on education (Clinton also wants to spend about $65 billion on early childhood education) in the hopes that this will solve the problems of a society that has largely stopped generating opportunity, or even a decently stable work pathway, for people who don’t have college diplomas.
I’ve remarked before that education has become the ginseng of the cosmopolitan policy elite: a broad-spectrum nostrum that can solve every problem you’re worried about, and some problems you don’t even know you have. The last two administrations undertook ambitious plans to improve the performance of our nation’s primary and secondary schools, to disappointing effect, and now policy makers seem to be giving up on quality in favor of quantity: If we can’t fix the problems in K-12, then perhaps the remedy is to expand the educational system at both ends. Anyone who says, in however small and tentative a voice, that maybe education simply isn’t the remedy for all of our economic and social ills, can expect to meet with a storm of outrage.
But let me say it anyway: The evidence for early childhood education isn’t very good, and neither is the evidence for making college free. And this matters, because in fact we do have other problems, and spending a lot of money on things that aren’t necessary will make it harder for us to fix those problems.
For while it is true that these programs are paid for, that doesn’t mean that the budget math is sound. The government’s spending capacity is, in the end, limited, and every dollar that you spend on one thing is a dollar that cannot be spent on something else. Virtually all of Clinton’s “pay fors” are concentrated on a relatively small number of affluent-to-rich people, and because of that, they represent a large cut of those incomes; if she managed to enact all of her plans, her top bracket would be inching close to a marginal tax rate of 50 percent before you factor in state and local taxes that can easily add another 10 percentage points to that figure.
Even if you think that it would be politically possible to extract taxes at those levels, and that you could do so without causing any unwanted economic side effects, the question remains: What do you do for an encore? After enacting Clinton’s agenda, America will still need to fix Medicare, Social Security, state and local pensions, the disability insurance program, and so forth. And given that Democrats have proven as unwilling as Republicans to raise taxes on the middle class, where are we going to get the money?
What America needs, much more than free college tuition, is a comprehensive plan to bring our outflows roughly in line with our inflows over the long term. A sensible agenda would first figure out how to pay for the things we’ve already promised to do, and then see if we have the stomach for even higher taxes to cover new spending. Instead we keep piling on the new spending while ignoring the old promises. When the bill comes due, it will be a humdinger. And the politicians who ran up the total will be long gone.
To be fair, the mean amount of debt is higher than the median — $30,000, or the price of a pretty good new car. But that’s largely driven by people who go to graduate school, not folks getting bachelor’s degrees at their friendly state college. The highest default rates are among people with fairly small outstanding loans, because those are the folks who didn’t finish school. And a substantial chunk of all loans are driven by living expenses and the inability to work full time, not tuition.
I finished graduate school in 2001 with nearly $100,000 in student loans. And we surly old people didn’t have income-based repayment, so when I finally found a (not-so-high-paying) job (in so-high-cost New York City), I had to come up with the full whack no matter how many holes developed in my shoes or my monthly budget.