
Elizabeth Warren: Universal free public college and cancellation of student debt - nnx
https://medium.com/@teamwarren/im-calling-for-something-truly-transformational-universal-free-public-college-and-cancellation-of-a246cd0f910f
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jawns
In case you're wondering where the money will come from to cover this plan,
here's the explanation, buried halfway down the article:

> The entire cost of my broad debt cancellation plan and universal free
> college is more than covered by my Ultra-Millionaire Tax — a 2% annual tax
> on the 75,000 families with $50 million or more in wealth.

It sounds like this is not an income tax but a tax on assets. Which becomes
very interesting when your assets are not liquid.

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chumali
Warrens premise is that college should be treated in the same manner as the
public school system and be made free to all. Whilst her aims are noble, the
economic rationale is weak and there are better ways of achieving the goals
making higher education available to all whilst reducing the regressive
impacts of the student loan debt.

Public school education serves two main purposes. It (hopefully) furnishes
kids with the necessary foundations to be able to function in society and
determine their own future. It also serves to keep kids safe and allow adults
to get on with work. Both these function provide a large social benefit. This
is precisely why the provision of primary education by the state should be
free and compulsory. The external benefits are real and significant. They
manifest as more productive parents, better informed citizens, higher social
mobility, etc.

For higher education however the vast majority of benefits are captured by the
individual through increased earnings potential. There are certainly some
spillover benefits to society but not enough that society should completely
shoulder the cost. Social mobility is an obvious concern here however higher
education only needs to be free at the point of consumption to alleviate these
concerns (as it is in the UK for example). If implemented correctly this
should give everyone who wants to the opportunity to undertake higher learning
whilst not introducing large amounts of moral hazard and free riding in to the
system. There is simply little reason why tax payers should be required to
fund everyone's degree (although a specific case could be made for subsidising
certain degrees with a high social return). In fact, subsidising all degrees
as Warren suggests leads to inefficient allocation given the mismatch between
supply and demand for certain jobs (and a loss in productivity from people
taking degrees they wouldn't otherwise have taken for jobs that may not be in
large supply and where employment rather than further education might have led
to better lifetime returns).

The solution proposed is appealing due to its simplicity but also fails on
this account. What is needed is regulation which aligns the incentives of
students, employers, colleges and lenders. College education should not be
politicised and used a tool for redistribution. If it does then it will fail
to serve its primary purpose as a market for producing the individuals with
the skills required by society (a purpose it already struggles to achieve).
Redistribution and consumer protection are obviously needed as in most markets
and these should be strengthened through existing channels such as subsidies,
loan forgiveness programmes, regulatory protection agencies, increased
transparency, etc. The current system is certainly riddled with market
failures but the what is being proposed is no better.

~~~
js2
> Young people from poorer families are badly underrepresented in higher
> education. That risks exposing them to a lifetime of reduced earnings and
> undermines the foundations of wider economic growth. What can be done?
> Economically disadvantaged students benefit from a mix of grants and loans
> in third-level education, but they also need better support from the
> earliest years of their school careers.

[http://www.oecd.org/forum/education-for-
all.htm](http://www.oecd.org/forum/education-for-all.htm)

