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Four More Years (of the College Bubble)

President Obama's re-election means the college bubble will continue to build rather than burst.

By Jay Schalin

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January 01, 2013

(Editor's note: A version of this article appeared on Forbes.com on December 12, 2012.)

A few years ago, the country became aware of a “bubble” building in higher education, as it had in housing.

Excessive demand—based largely on easy credit, government subsidies and the overselling of a college education—caused academia to expand unsustainably.

Then came the economic downturn. With underemployed graduates and dropouts increasingly unable to repay loans, state legislatures cutting appropriations, and innovative competition taking market share from traditional colleges, the bubble appeared ready to burst, or at least deflate.

That could mean—so the theory goes—devastation for traditional academia: declining enrollments, with some colleges forced to close, perhaps; a shift in emphasis from academic to vocational courses; more online education; an end to faculty tenure, and other drastic changes.

Now, however, it might be time to rethink that scenario. President Obama’s re-election could postpone any such bubble deflation. Given his penchant for rewarding big supporters, he is likely to make sure academia is taken care of—at great public expense.

Certainly, the President’s successful election campaigns owe a great deal to academia. University employees gave overwhelmingly to the president’s reelection campaign. Indeed, four of the ten largest donors to his campaign, according to Federal Election Commission records reported on the CampusReform.org web site, were the collective employees of the University of California, Harvard, Columbia, and Stanford.

According to the political transparency website, OpenSecrets.org, Princeton employees gave 157 donations to Obama, while Romney received just two—one of them by a janitor. Such one-sided giving appears to be the norm, not an aberration.

But cash donations may be the least of academia’s contribution to the president’s reelection. Universities provide Democratic votes. Registered Democrats outnumber Republicans by three or four to one among faculty; in some departments avowed communists outnumber registered Republicans.

Students, too, are overwhelmingly in the Democratic camp. Given such lopsidedness among university staff and the many stories of classroom proselytizing by liberal professors, it is hard to imagine that there is no effect on students’ political leanings. However, studies that suggest such shifts are ambiguous. According to one study by the Center for Information and Research on Civic Learning and Engagement at Tufts University, 66 percent of young people who have attended college voted for President Obama while 65 percent of their non-college counterparts voted for him. At the same time, a study by the Intercollegiate Studies Institute showed a significant leftward shift on five of thirty-nine issues.

The real effect may be one of opportunity cost: perhaps the absence of conservative ideas on campus is keeping students from shifting to the right. After all, there is a statistical tendency for age groups to move to the right as they gain experience and mature: over 60 percent of seniors and a majority of voters over age 40 voted for Romney, and an ISI survey showed almost no gains in civic knowledge by college students in their time on campus. If students were more informed about our Constitution and its foundations, perhaps they would be more likely to vote for preserving our tradition of limited government.

Whatever higher education’s real effects on young people’s political leanings are, the president is not one to forget the help given his cause by universities. His tendency to reward supporters showed in the 2009 federal automobile industry bailout. The biggest beneficiary was the United Automobile Workers union, one of his party’s most ardent backers. Between 2000 and 2008, the UAW gave $23.7 million to Democrats, but only $193,540 to Republicans.

Once in office, the president acted swiftly to protect the UAW. His administration arbitrarily gave higher priority to union pension funds than to other unsecured claims; unions got $21.4 billion more than they would have under ordinary bankruptcy proceedings, with 55 percent ownership of Chrysler and 17.5 percent of GM. This time around, it is likely that President Obama will come to academia’s rescue, if needed. He already made several moves to bolster higher education funding in his first term. For instance, he nearly doubled the federal Pell Grant Program, from $19 billion in 2009 to $36 billion for 2013.

One likely gift to colleges and universities will be student loan forgiveness. House Democrats introduced a bill (H.R. 4170) this year placing limits on the amounts students must repay annually, forgiving all loans after ten years of repayment, and providing even quicker forgiveness in exchange for work in the public sector. This move, if adopted, will perpetuate the excessive demand, as students realize they can borrow a lot now and repay only a little later on.

The president has also shown an inclination to aid his Ivory Tower benefactors by going after their competition: for-profit schools.

In 2011 the administration proposed a “gainful employment regulation” limiting participation in financial aid programs by for-profit schools that fail to meet certain standards—but not for equally poor-performing non-profit institutions. While that regulation was struck down in federal court, Senator Tom Harkin (D-IA) launched an “investigation”—some would say witch hunt—of the for-profit education industry.

Even more radical ideas occasionally bandied about in academia might see daylight in this administration, such as a federal takeover of higher education from the states or universal free higher education. These schemes aren’t as far-fetched as they sound; the federal government has been incrementally moving into education—both postsecondary and K-12—for many years.

In fact, almost anything is possible, now that President Obama no longer has to worry about re-election. He regularly bypasses Congress through executive orders and bureaucratic regulations, and throws money at problems using such methods as stimulus packages and bailouts. His-first term payoff to higher education may be just a down payment on future largesse. If so, the bubble could continue to expand indefinitely. At least, that is, until the Treasury’s printing presses break or a major financial collapse occurs.

 


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