Debunking Liberal Economics Volume 1 "A College Degree is Key to the Middle Class" Issue 1: Government Inflated a Bubble

Before I begin I also would like to welcome our new writers and thank them for their time to helping Matt and I out on this crazy project we envisioned. To our readers, I hope I am turning you. 

(Matt, I would love to put up a poll to find out the ideological skew of our readers, my guess is at least 70-30 against me. Maybe even 95-5…) 

Now, I will dive into the issue at hand: liberal policies of just throwing money at the problem have created an issue and the only way to solve it is by completely re-envisioning the model.

I didn’t mean to make this post a response to Matt, but I later decided to just focus this post on something Matt wrote in his last post in what has shaped up to be “Education Week at CR”. Matt wrote, “Whenever anything goes wrong, you can always expect conservatives to blame the government.” Matt, there’s probably a cause-effect problem here. You see if A constantly causes B, one would be correct to say that A caused B. However, what you are asserting in that statement is that A did not actually cause B. So let’s take a look at whether A did cause B, shall we?

My thesis is that increased federal spending towards higher education has created a negative feedback loop that has increased the cost of such an education and by increase propagation of college degrees, has created a new requirement where necessity does not exist.

My argument breaks down as follows:

1-      Increased federal funding for college, mostly in the form of Pell Grants, has driven up the cost of college

a.         It is an undeniable truth (that I know Matt acknowledges) that when you increase the demand for something, but the supply is limited (or cannot grow fast enough to meet new demand), the cost will go up. (*I will throw in the caveat here that price caps can stop it obviously, but they also then deter the suppliers from truly increasing their supply past its profitability).

b.      Calling for everyone to attend college (including its glorification in public opinion, federal promotion, considering it the ultimate end game of primary education, and telling people that college is the way to achieve higher wages) has increased demand.

c.       Since demand has risen by such an extreme, price has also risen exponentially

d.      This rise has further caused a negative feedback loop in which higher prices for a college education require the government to increase funding in order to fund the same quantity of goods.

e.       Results: government supply of Pell Grants (which mind you were intended to increase student enrollment, so if you disagree that they have done this, you would be actually arguing that the government was ineffective at implementation) has increased demand, which has resulted in higher prices. Higher prices, in turn, have led to increased student debt.

f.       Therefore, we are correct when we say that government, once again, created a bubble. Additionally, this student debt is threatening to boil over. Two possible scenarios appear likely:

                                                              i.      Tremendous student debt can destroy future purchasing power (as debt is so inclined to do) resulting in reduced savings/investment and consumption = lower GDP

                                                            ii.      Alternatively, government can wipe out the debt through paying it down on its own. To do this the government would be forced to borrow (debt which will reduce future GDP) or take it from the taxpayer to pay the current debt, and thereby reduce current GDP.

Now that the case for why we are correct in blaming the government for the bubble is made, I will next focus my attention on some other flaws in this thinking.