Why Obama's Free Community College Education Is Just Another Inane Obama Idea

As we discussed yesterday, President Obama in tonight's State Of The Union address is going to propose that the Federal government raise taxes and fund a Federal government program that would provide a free community college education for any American who wanted it. The estimated cost of this program would be $60 billion over the first ten years of its existence.

Yesterday, we showed how stupid and worthless it would be to raise taxes to fund such a program since the Federal government wastes so much of our tax money as it is already. From the Pentagon to the National Science Foundation to Federal welfare programs, just tightening up the waste and criminal fraud that is rampant in these existing programs would easily pay for the $60 billion cost. 

That is why no American, rich or poor, should pay a penny more in taxes to fund this program. It can easily be funded by Obama and the rest of the Washington political class actually doing their job to protect taxpayer wealth they have control of now.

But just because you can do another government program is no reason to say you should do a new government program. Let's look at some reasons why this is such a bad idea, regardless of how it is funded:

1) First of all, lets be clear that this program, if approved, will not cost $60 billion. I know of no major government program that has ever come in at or below cost. The "Big Dig" road project in Boston was supposed to cost a few billion dollars and ended up costing over $20 billion.

Chris Edwards, writing for Cato back in September, pointed out that the new train station being built at the site of the destroyed World Trade Center towers was supposed to cost under $2 billion. The project is now eight years behind the schedule and the estimated final cost will likely come in between $3.7 and $4.0 billion or about double what the project was sold to the public for.

The Wall Street Journal reported on a bridge that was supposed to connect Oakland to San Francisco at a cost of $1.4 billion. The final cost of the project is likely to be as high as $6.4 billion, more than four times as expensive.

Obama Care was not supposed to "add one dime to the national debt" but in reality will add over a trillion dollars to the national debt.

Former mayor of San Francisco, Willie Brown, at least had the honesty to tell us the truth when talking about a local project he oversaw: "We always knew the initial estimate was way under the real cost. Just like we never had a real cost for the Central Subway or the Bay Bridge or any other massive construction project. So get off it. In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there’s no alternative to coming up with the money to fill it in.”

Obama's $60 billion cost estimate just digs the hole, you can rest assured that more taxpayer wealth will end up being needed to fill it in.

2) We have previously reported on how for-profit schools have taken the American taxpayer for a very expensive ride. The Federal government, using taxpayer wealth, helps to fund the tuition at these schools, many of which are offering very inferior educations. 

The strategy of the schools has been to get as many students enrolled as possible to maximize the revenue they obtain from the Federal government. Once the students are enrolled and their tuition paid for by the taxpayer, the schools could care less if their students get an education, they already have the money.

We outlined how the fraud and money grubbing occurs from a previous post:

- An article in the September 21, 2011 issue of The Week talked about the potential for defrauding the Federal government via scams from the for-profit colleges and schools:

• There are 2,000 for-profit colleges in the country which serve 12% of all American students involved in higher education today, up from 3% ten years ago.
• Critics contend that these colleges mislead applicants about loan costs, overstate the post graduation salaries, target the homeless and disabled veterans to increase enrollment, and provide dubious educations and degrees that do not lead to better paying jobs and careers.
• As an example, they cite the University of Phoenix, the market leader, which graduates less than 9% of its students in six years.
• Bridgepoint Education posted a $216 million profit last year from its 78,000 students despite the fact that 84% of its students drop out within two years of enrolling, the school has 1,700 recruiters but only one job placement person on staff, and according to Senator Tom Harkin, the school is "an absolute scam."
• Many students report worthless degrees with mountains of student loan debt after attending these for-profit institutions.
• The largest for-for profit company has annual revenue of almost five billion dollars and the CEO of another leading for-profit education company took down an annual salary of $42 million, sixty times more than what the president of Harvard University made.

Why should the American taxpayer care about this seemingly shoddy education performance and experience? According to the article, about 75% of the revenue for these companies running the for-profit schools comes from the Federal government via grants and loans. At Bridgepoint Education, 87% of their revenue comes from the Federal government.

A recent Congressional committee report stated that "Some for-profit schools are efficient government-subsidy collectors first and educational institutions second." Some critics claim that the for-profits intentionally target poor and minority students for the express purpose of leveraging their status to get Federal government aid money, which has grown from $4.6 billion in 2000 to $26 billion today.


Don't think for a minute the same thing will not happen when the Federal government incrementally moves tens of billions of dollars into the community college world. Getting Federal dollars will overwhelm the desire to provide a good education at a reasonable price.

3) Simple economics and basic human psychology will cause another problem when something is free. Supply and demand relationships tend to keep price rational and reasonable in a free market. 

However, much like what happened with four year colleges and the massive amount of Federal money that goes to them, by increasing demand for community college educations by reducing the end user/student price by at least $60 billion, the cost for a community college education will go up substantially. It is simple economics, increase demand without increasing the supply, price has to go up. That is why college education costs at four year colleges continually outpace inflation.

When the community college education price goes up, the Federal government will need to put more money into the program to stay whole which will cause more upward price pressure and the death spiral continues on with artificially higher and higher costs.

As with most government projects and programs, the exact opposite happens from what is intended: government interference in a free market transaction results in higher prices and costs, not lower.

4) Let's assume that the the $60 billion cost estimate is really twice as much or about $120 billion, based on our discussion above. I think the cost will be much, much more but let's stay conservative for the sake of discussion.

This comes out to just over $1,000 per U.S.household if the cost was evenly spread out across everyone. Which raises an issue: why should every American household have to kick in over $1,000 so that someone else might get a free community college education? In a free country shouldn't everyone pay for what they want and desire and not rely on the government confiscating wealth from everyone else to give them what they want for free?

5) As we previously reported in this blog, the number of college graduates that are returning home to live with their families is at an all time high since they cannot find jobs in the economy that are commensurate with their college degrees. 

Do we really want to finance more college educated people who cannot find a job because the jobs that the economy needs do not require a college education? I remember reading a story a little while back about how welders had to be imported from China to work on a California bridge project because the buidlers could not find enough American welders to do the work. 

Seems we have plenty of unemployed or under employed college graduates but not enough welders in this country. Why would we want to create more artificial demand for a college education and not be able to do anything with it relative to real jobs  and careers in the real economy?

6) If you really want to improve education int his country, I am sure that if properly spent, that $60 billion would do a much better job if spent on elementary education long before our kids are college aged. We do a horrible job educating our kids relative to the rest of the world, as measured against standardized testing results from other countries.

Find an innovative way to better educate our kids in grammar and high school and the return on that $60 billion investment would be far greater than wasting it on free community college ideas. I emphasize, though, that the $60 billion would have to be spent better and differently than how we currently spend education dollars. History shows that our current status quo way of spending education dollars is basically a failure.

7) And finally, what exactly are we investing in? According to the Community College Research Center website and Federal guidelines, only 22% of community colleges attendees get their community college degree three years of beginning their attendance. Thus, only about one in five community college attendees actually get their degrees, about an 80% failure rate.

Furthermore, only about 15% of community college attendees go on to get a four year degree within six years of first attending a community college, an 85% failure rate. You can bet that these failure rates will go even higher once the Federal government starts subsidizing community colleges with $60 billion. 

Those colleges will look to bring in as many students as possible to maximize their portion of the $60 billion and many of those incremental students will never go on to get a college degree, the same sad story that occurred with the for profit colleges we discussed above.

There you have it, seven good reasons why Obama's free community college idea is a bad idea. And really, nothing in life is free. A free community college education is not free, those costs have not gone away, they have just been redistributed to other taxpayers. And those costs could easily be picked up by government efficiencies, not more taxes as we saw yesterday.

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