An Investment in Our Future

Enthusiasm for Senator Bernie Sanders’ message during the 2016 Presidential Race has put the entire country on notice that the younger generation of Americans support many of the issues that he has championed. One of the cornerstone issues of his campaign is free public college education for all Americans. The Senator’s critics have argued that this will put a greater burden on the Federal budget which is operating at a large deficit already. And he has time and again been asked, “How will this be paid for?” But this is a myopic question.  The answer requires a long view.  An initial investment of capital on the part of the American tax payers must fund this initiative in the short term, but in the end who ultimately will pay for it? In short, the beneficiaries of this program will ultimately be the ones paying for it, while at the same time increasing the purchasing power of the middle class and reducing the deficit overall.  To enact a free college tuition program would meet the standard for one of the obligations of the Federal government…to promote the general welfare.

Why we need more education.

There has been a shifting economy over the last 25 years, both nationally and globally. In an increasingly technology driven world the middle class is no longer primarily supported by the manufacturing and agricultural industries.  Also, most Americans no longer want to go into these industries. Why take a blue collar job, when you can take a comparably paying, or even better paying, white collar job that does not require as much physical labor? The majority of newly created middle class jobs during this 25-year period have been in the financial services and IT sectors.  The IT sector will most likely be the greatest area for potential job growth in the 21st Century.  Both of these fields often require advanced education, beyond high school.

However, there is an obstacle standing between American workers and these job opportunities. Namely, they are not qualified for the positions in large part due to lack of sufficient education.  No longer, is a 12-year basic education enough to keep up with the changing economic needs of the 21st Century.   So many companies, including some of the U.S.’s leading IT firms, are in desperate need of qualified employees. This forces companies to apply for visas for workers from other countries to fill these positions, since there are not enough American workers qualified to fill them.   As Americans we lose twice.  Manufacturing jobs continue to be shipped overseas where corporations can pay less wages for more work.  But the jobs that remain here are not being filled by American workers either. Therefore, it is necessary that the U.S. begin educating its students beyond their current collective education levels in order for us to compete for jobs in the 21st Century.

The incredible cost of higher education

In order for American students to keep up with the increased educational needs of the 21st Century global economy, student loans are currently a necessary evil.  The cost of college tuition has increased substantially over the last 25 years.  Students today must often take out tens of thousands of dollars in student loans because most of them cannot afford to pay for college any other way.  Repayment of student loans decreases the buying power of those with a financed college education. Money must be set aside in household budgets for repayment, meaning that college grads have less money to spend on purchases of goods and services that could be driving stronger economic growth. These loans in many cases take decades to pay off. Leading to a stunting of economic growth on a national scale.

Default of student loans also hurts the general economy. First, because students that later default on their loans also have their purchasing power diminished. Their credit is negatively affected, making it harder to get approved for financed purchases or increasing their interest rates on financing, meaning higher payments and again less money to spend on other purchases. Secondly, because most of the student loans in this country are subsidized or the risk is mitigated by the Federal government, default again contributes to higher government costs.

Many potential college students see higher education with the prospect of years, even decades, of debt as a poor value proposition. This, in particular, dissuades those students from poorer families from seeking a higher education. In effect, free paid college tuition could help level the playing field and reduce the increasing problem in this country of income inequality. No longer would a higher education and the increased earning power it brings be illusive to many poor, even middle class children.

How we pay for it

The idea that has been touted by Senator Sanders is free college tuition to public colleges and universities for all Americans. But many, including his opponent for the Democratic nomination for the Presidency, has said this idea, while it sounds good, is not realistic and cannot be paid for without putting undue burden on the American taxpayer, despite his claims that he will pay for it by putting a tax on Wall Street speculation.  There have been other possible solutions to this problem that have been put forward in the last several years. President Obama in a State of the Union speech suggested a loan forgiveness program or paid college or vocational school education for anyone that commits to and fulfills two years of public service work. This is similar to the tuition assistance offered to teachers who will work in the inner city public schools once they graduate from college. This idea has the added benefit of increasing the number of people going into the public sector which is often undermanned and in great need of workers.

Unfortunately, none of these ideas are seen as realistic in the face of a Republican majority Congress which, in words anyway, is hawkish on government spending and opposed to any Federal involvement in the education system.  However, argument against government spending falls short when this idea is thought about logically and Sanders’ own claims that we need a new tax to pay for it is actually only necessary in the short run (although many progressives agree that there should be a permanent tax on speculation regardless).

The most commonly quoted statistic that relates a college education to income is that a college graduate earns $1 million dollars more over their lifetime than a person with only a high school diploma. Assuming a 20% effective tax rate, the college graduate pays $200,000 more in taxes than a high school graduate over their life. Also, it is presumed that there is less need for public assistance for people with a college education. If we also assume that the average college tuition at a public college or university for 4 years is $100,000, then the return on investment is 200%.  That is an investment almost any Wall Street investor would recommend as a quality investment.  It would work similar to Social Security, only in reverse.  The college educated’s earnings would be taxed for the next generation’s-their children’s-education, increasing the competitiveness of the younger generation in an ever more competitive job market.

What is truly required on the part of the President, Congress, and the American people is not more spending as much as it is a shift in thought.  An understanding that we are exist in a symbiotic relationship.  The more successful the younger generations the better they can support the older generation when it comes time for them to retire.  Will this mean a greater burden for us in the short run…perhaps the next 10-20 years?  Possibly.  But we are willing to work 50 or more years of our life for the betterment of our children’s lives in this country.  Why is this such an large leap for us to make?  Much of the developed world’s education systems have surpassed ours.  When the same thing happens in the Olympic Games we are willing to spend ridiculous amounts of money to get back on top.  Why not for a better education system?  Why not for our children to better compete in future job markets?  The only losers in this idea are the banks, who make money off the interest earned on the student loans but have their risk of loss mitigated by the Federal government.   Again, not exactly a negative for progressives, dare I say, even most conservatives.  Americans remain angry at the banking system for taking billions of dollars in tax payer bailout money.  The banks continue to engage in predatory lending practices and have yet to bailout the average American tax payer who continues to suffer as the income gap widens.  The middle class, the working people of this country who toil 40+ hours a week, for the betterment of their families and their children’s futures need a golden parachute.  Nothing would be more of a relief to the father, the mother, the grandparent, to know that their dependents’ education is secured and no longer have to stay awake at night wondering how they will pay for their children to go to college.