In a speech last Wednesday, Obama lamented that "people have seen schools as sort of a political spoil having to do with jobs" and declared that "we are putting our resources behind the kinds of reforms that are going to make a difference."

What "reforms" was he talking about? The ones states are encouraged to make to get part of the $4.35-billion "Race to the Top" Fund, a kitty of stimulus cash controlled by the U.S. secretary of education, for which official guidelines were announced this week.

To compete, the administration has said states must end prohibitions on using student achievement data to evaluate teachers. They should also eliminate caps on charter schools, adopt "internationally benchmarked" curricular standards and prepare to "turn around" bad schools.

It's these seemingly tough stipulations that have education reformers on both the left and right applauding. Even former House Speaker Newt Gingrich called Obama "courageous" for taking these positions.

The only problem is, there's no there there.

Consider teacher evaluations. While states are being told they can't prohibit the use of achievement data in evaluating teachers, there's nothing pushing schools to go ahead and actually use the data. But shouldn't that be the ultimate goal? Of course, but it's also what teacher unions really want to avoid, so Race to the Top avoids it, too.

How about lifting charter caps? It's certainly a good idea, but a lot more than that goes into getting good charter schools. Unfortunately, points out Jeanne Allen, president of the charter-advocating Center for Education Reform, "the president and his education secretary are...giving states credit for talking about charter schools rather than actually changing laws to improve the likelihood that children will have real school choice."

So Race to the Top is great talk but little substance. But at least it isn't making matters worse. The same can't be said for the one substantive thing that Obama has done in education: Deliver a gargantuan $100 billion in direct stimulus to schools.

The stated rationale for doing this was to save schools from financial devastation, including deep cuts to the most fundamental educational functions. But few public schools were likely facing such a dire scenario.

According to the most recent federal data, inflation-adjusted, per-pupil expenditures in public schools nearly doubled between the 1975-76 and 2005-06 school years. Similarly, in 1990 there were 9.2 students per public-school employee. By 2006 there were only 8.

The schools have been anything but starving. They've also been anything but improving: According to the National Assessment of Educational Progress -- the so-called "nation's report card"--academic outcomes have stagnated since the 1970s.

The situation in higher education is no different. Obama's announced goal for the United States is to have the world's highest proportion of college graduates by 2020. This has translated into colleges getting their own part of the stimulus windfall, as well as creation of the Student Aid and Fiscal Responsibility Act, a bill that would funnel yet more money into tuition-inflating student aid and other bankrupting federal programs.

Like K-12 resources, the evidence shows that we already push college too much, not too little.

According to the Bureau of Labor Statistics, 25 percent of all jobs in 2006 required at least a bachelor's degree, but as of March 2007 roughly 29 percent of Americans had one. And most new jobs in the coming years will require not a college education, but on-the-job training.

But don't we have to keep up with the Chinese? Hardly. China has certainly been pushing higher education, but to its detriment. According to a September report from the Chinese Academy of Social Sciences, China has such a glut of degree holders that college grads are earning wages on par with migrant workers.

There's no valid reason to emulate that.

Okay, there's one, and it's been serving Obama well since his campaign: Talking about great education--but doing little to actually get it--appears to be a surefire political winner. But that's hardly change we should believe in.

The bill is the Student Aid and Fiscal Responsibility Act (SAFRA), the focal point of which is elimination of the Federal Family Education Loan Program — which uses federal bucks to back student loans from private lenders — and replacement with lending straight from Uncle Sam.

But that's hardly all it would do. The bill would use the savings from the transition to fund a plethora of new or expanded federal programs. But how much will going from guaranteed to all-direct lending really save, and will it be enough to pay for the bill's new spending?

The savings figure SAFRA supporters have been using is $87 billion over 10 years, a number generated by a June Congressional Budget Office estimate. Touting that figure, the full House approved the bill a couple of weeks ago. The Senate is now working on its version of SAFRA.

But here's the thing: A series of CBO reports released after the initial estimate have indicated that the savings are likely to be much lower than advertised, and the bill's total burden on taxpayers much heavier.

CBO assessed the total cost of the bill — not just the expected savings from transitioning to all direct lending — last summer. The estimate: Rather than saving them anything, the bill would likely cost taxpayers $5.7 billion over 10 years, and that didn't include a dime for deficit reduction.

That was just the beginning. Three days after his office released its official scoring, CBO Director Doug Elmendorf answered an inquiry by Sen. Judd Gregg, R-N.H., about estimated savings were the CBO to fully account for lending risk. Elmendorf's reply: The savings would be about $33 billion less than originally predicted. Finally, in September, the CBO determined that the cost of ramping up Pell Grants, a major component of the bill, could be $11 billion greater than initially thought.

Sadly, rather than acknowledging that SAFRA would impose new burdens on taxpayers, supporters have attacked Republicans as dirty tricksters for requesting CBO's additional estimates. They also continue to imply that the entire bill would save money despite no CBO analysis showing that.

Unfortunately, the major temptation for bill opponents has been to declare that removing "private" companies from federal lending somehow undermines free enterprise — as if having Washington guarantee lenders' profits and push artificially cheap money at students is what freedom is all about.

No, the most important part of this story is that despite promises of fundamental change in Washington, we're getting bankrupting and deceitful business as usual.

The bill is the Student Aid and Fiscal Responsibility Act (SAFRA), the focal point of which is elimination of the Federal Family Education Loan program -- which uses federal bucks to back student loans from private lenders -- and replacement with lending straight from Uncle Sam. But that's hardly all it would do. According its author, Congressman George Miller, D-Calif., the bill would use the savings from the transition to fund a plethora of new or expanded federal programs, all while putting $10 billion toward deficit reduction.

But how much will going from guaranteed to all-direct lending really save, and will it be enough to pay for the bill's new spending?

The savings figure SAFRA supporters have been using is $87 billion over 10 years, a number generated by a June Congressional Budget Office estimate. Touting that number, in mid-July Miller introduced SAFRA in the House Education and Labor Committee. Soon after, it was moving on to the full House.

Here's the thing: That all took place before the CBO had estimated the total cost of the bill, not just the expected savings from going to all-direct lending.

CBO figured out the total cost three days after Miller's committee approved SAFRA and estimated that the bill would likely cost taxpayers another $5.7 billion. And the cost didn't include a dime for deficit reduction.

That was just the beginning. Three days after his office released its official estimate, CBO Director Doug Elmendorf sent a letter to Sen. Judd Gregg, R-N.H., answering an inquiry about what the estimated savings would be were the CBO to fully account for lending risk. Elmendorf's reply: About $33 billion smaller.

Suddenly, it was clear that a bill touted as a taxpayer helper would much more likely be a new, roughly $40 billion burden.

Rather than acknowledging that SAFRA is a net burden, supporters have attacked Republicans as dirty tricksters for requesting CBO's risk estimate. They also continue to imply that the entire bill would save money, though they typically only cite savings from the transition to direct lending to make their case.

"It's clear that Republicans didn't like the truth -- that our legislation generates almost $90 billion that could be used to help students, families, and taxpayers -- so they shamelessly decided to have a little fun with the numbers," Miller said in a July 28 press release.

The temptation is to focus on the dollar amounts or how removing "private" companies from federal lending somehow undermines free enterprise. Indeed, many Republicans, to their discredit, have zeroed-in on the latter, as if having Washington guarantee company profits is what freedom is all about.

The most important part of this story is that despite promises of fundamental change in Washington, we're getting foul business as usual. Rather than using the rare opportunity to reduce the deficit without hurting anyone's opportunity to receive benefits, our politicians lavish even money on special interests while insisting they're doing the opposite.

Thankfully, as the numerous demonstrations against federal health care legislation have shown, many Americans aren't taking politicians at their word anymore. But the really hard, long-term work will require stopping not only a few, huge government expansions but halting all the smaller pushes, like SAFRA, that quietly inch us over the edge of the financial debt abyss.

Odds are you haven't heard much about it, maybe because of the deafening health care clamor, but it would do something pretty big, ending the 44-year-old Federal Family Education Loan (FFEL) program--which uses federal bucks to back tens of billions of dollars of student loans from private lenders--and replacing it with lending straight from Uncle Sam. In other words, it would destroy what little chance there was of student loans being constrained at all by economic realities.

"First, we saw a drive toward complete government takeover of our nation's health care system," lamented ranking Education and Labor Committee member Rep. John Kline, R-Minn., during deliberation over the bill. "Now, we see government seizing control of student lending, forcing the private sector out and welcoming in a mountain of public debt."

Contrary to what Kline suggests, guaranteed lending is about as close to a free market as a biplane is to the Starship Enterprise. Under FFEL, Washington guarantees lenders--including Fannie's cousin, Sallie--a profit on student loans, reimbursing them almost completely on defaults and paying big subsidies. Making matters worse, legislation was enacted last year that lets the feds more or less directly finance FFEL loans if lenders can't access sufficient funds through private capital markets.

So SAFRA's major problem isn't that it would kill guaranteed lending. It's that it would replace it with federal direct lending--which currently amounts to about a quarter of FFEL's size--and completely cut out private capital markets, making Uncle Sam your sole choice of lender. With the government acting as lender, there is no reason for economic realities to constrain student loans.

This is especially troubling because too many people are pursuing degrees. About a third of college students take at least one remedial course, only 56% graduate within six years and 29% of Americans have bachelor's degrees even though only a quarter of American jobs require them.

Another sad consequence of moving entirely to direct lending is that it would likely crowd out what little non-governmental lending currently occurs. Many lenders would likely have to shutter their non-government arms if they couldn't continue participating in much bigger, federal lending operations.

All that said, this is hardly the destruction of capitalism. But then there's what this bill wouldn't do.

SAFRA supporters assert that transitioning from guaranteed to direct lending would save $87 billion over 10 years. That is doubtful. The cost of quintupling the volume of direct lending is, at best, tough to predict, and bureaucracies have a strong, inherent tendency to grow. Still, there should be some savings. But SAFRA wouldn't give it to taxpayers, or dedicate most of it to paying down the nation's staggering deficit. Instead, any saving would be spent.

Among numerous recipients, SAFRA would direct $47 billion to Pell grants and require that grant amounts rise annually at the rate of inflation-plus-one-point. That would assist low-income students better than federal loans, but also set an ever-rising floor under which schools would never lower tuition prices, negating its value.

Next, SAFRA would send about $9.5 billion to community colleges; $2.5 billion would go toward improving facilities, and the remainder toward grants intended to push schools to improve their program-completion and job-placement rates. But don't get your hopes up: Community colleges could qualify for the money simply by providing "student support services" and implementing "other innovative programs"; that's legislative jargon for "free money."

And much to the ivory tower's chagrin, Congress has other groups it wants to pay off. So $8 billion is slated to go to early-childhood education and $4 billion to repairing and modernizing not just public college buildings, but elementary and secondary schools as well.

Finally, roughly $10 billion is supposed to go toward reducing the federal government's deficit, a ludicrously small figure considering that it recently surpassed $1 trillion for fiscal year 2009 and the SAFRA bill supposedly creates savings without causing current beneficiaries any pain. If all the proclaimed savings don't appear, the last two words in "Student Aid and Fiscal Responsibility" become an even bigger joke.

All of which explains why SAFRA is flying below the radar. Yes, bigger things are going on in Washington. In the end, what seems like a transformative bill might be nothing but business as usual. But for students, "business as usual" is not affordable any longer.

"[T]he growth of college tuition is far outpacing that of family income," Biden said at the report's unveiling. "This is something we are genuinely, genuinely committed to changing."

In fairness to the Veep, the possibility that aid would drive tuition inflation might be something he's never heard before. After all, the higher education community has long denied that growing aid, especially from government, fuels inflation by letting schools raise prices without consumers feeling much of the pain. But it makes perfect sense.

Suppose I'm willing to buy a hotdog for one dollar, but then get a dime in frankfurter assistance. Now I'll happily pay $1.10. And then suppose my local wiener retailer, from whom I've always bought one-dollar dogs, knows I've got that aid. By charging $1.10 he can make himself richer without making me any worse off. It's tuition inflation in a nutshell or bun, as the case might be.

College pricing and aid data strongly suggest this dynamic is at work. For instance, between 1986 and 2006, published tuition, fees, room and board prices at four-year private colleges rose an inflation-adjusted 68 percent. But students didn't cover most of the increase with their own money. They got grants, cheap loans, and other forms of assistance that made their perceived increase only about half that of the published amount. That big difference gives strong reason to believe that "sticker prices" were only able to rise so high because consumers felt just a fraction of the pain, and schools knew it.

Of course, college pricing isn't driven only by student aid. There are several variables in play. Unfortunately, the Middle Class Task Force failed to acknowledge this, largely glossing over the potentially inflationary effect of aid, and piling blame primarily on one, all-too-popular scapegoat: cheap state and local governments.

"[T]he majority of the rise in tuition in recent years is increasingly attributable to cost-shifting," the report asserts. "The use of increased tuition to offset lost revenue from elsewhere is particularly pronounced in public higher education, as falling state and local appropriations have forced institutions to increase tuitions in order to maintain their revenues."

This theory is popular with ivory tower folks and politicians, giving the former cover to cry poverty when lobbying state legislatures, and the latter a tremendous opportunity to buy votes by increasing aid. But the theory is seriously flawed.

For one thing, stingy state and local spending can't explain tuition inflation in private schools, which the task force itself puts at 154 percent between 1979 and today.

In addition, total taxpayer burdens for public institutions haven't fallen. According to the federal Digest of Education Statistics, between 1990 and 2005 (the latest year with available data), real state and local appropriations to public degree-granting institutions rose almost 15 percent, hitting nearly $67 billion.

The only way state and local funding has dropped has been on a per-pupil basis thanks to growing enrollment, which the report ultimately notes. Even on that score, though, one can't lay most of the blame for tuition inflation on state and local governments – tuition revenue per-student has risen much faster than government allocations have dropped.

Between 1987 and 2007, according to data from the State Higher Education Executive Officers, inflation-adjusted state and local outlays per student decreased about $33 a year. Per-pupil revenue from tuition, however, increased almost $67 – a $2 increase for every $1 in lost public funding. And a lot depends on what years you start and end the trend: Between 1982 and 2007, the public funding trend was essentially flat, while per-pupil tuition revenues increased about $72 per-year.

Which brings us back to the Vice President. If you "genuinely, genuinely" want to change something for the better, you first have to be honest about the problem. But Biden's Middle-Class Task Force was far from that in its analysis of college affordability, rendering any change it might support – especially vastly increasing student aid – almost certain to make matters worse.

Obama opened his speech with a surefire political winner, promoting pre-kindergarten education. Among the specific proposals he listed was instituting Early Learning Challenge Grants, which would provide educational and other supports starting in infancy. The inclusion of these specifics suggests that, at least on pre-k, his talk is likely to be followed by concrete policy action.

Which is not to suggest that he didn't practice some dubious political salesmanship. Most notably, Obama asserted that taxpayers would save ten dollars in welfare, prison, and other costs for every buck invested in early education. What he didn't say is that this rosy scenario is based on a few tiny, expensive, hyper-intensive programs that would likely prove impossible to replicate on a large scale.

Next, Obama discussed elementary and secondary academic standards, a much more perilous realm than funding pre-kindergarten education. He again took the most politically promising stance, and this time that required avoiding any concrete proposals – not exactly a promising sign that real change is to come. Obama offered always-lauded tough talk about challenging "our states to set world-class standards," but dodged completely the politically hazardous question of how, exactly, that would be done. He left that until later, saying that the public will have to wait for specifics until he gets to work revamping the No Child Left Behind Act.

It was on his next topic, however, that Obama has been most politically adroit. Since he addressed the National Education Association two years ago and dared mention teacher merit pay – NEA members booed him for it the following year – he has been getting the best of both worlds. The media and even some conservative commentators have declared him brave and un-beholden to his party's most powerful constituency, while they've largely ignored the wink and nod that has typically accompanied his purported heresy.

"I want to work with teachers," Obama told the NEA in 2007. "I'm not going to do it to you, I'm going to do it with you."

Political perfection: Obama gets feted as courageous and bold while assuring the old guard that nothing gets done without it. His most recent address did little to change that. He talked about rejecting "a system that rewards failure and protects a person from its consequences," but said nothing about how failure is actually defined or what consequences it should carry. Nothing concrete was said allowing everyone to feel safe and happy.

Charter schooling is another area in which Obama threw overboard any substantive proposals, enabling him to skillfully navigate tricky political waters and achieve maximum political gain. Calling for both the removal of caps on charter schools and greater charter "accountability," the President ensured that everyone would be happy. Charter supporters could celebrate cap-lifting and call Obama a friend, while opponents could expect to gain greater control over the schools they find so vexing.

Finally, there's college for all. Like pre-kindergarten education, this is a political slam-dunk. In February, the polling outfit Public Agenda found that 89 percent of Americans agree that "we should not allow the price...to keep students who are qualified and motivated" from attending college. Not surprisingly, in this safe zone the president once again furnished specific proposals, most notably to make Pell Grants an entitlement and index their growth above inflation.

But this isn't real change – Washington has been increasing student aid for decades. Indeed, college has become less affordable in part because enabling students to pay more has allowed colleges to charge more. One of the best things to do to make college more affordable, then, would be to cut student aid. But that kind of real change is politically hard.

So on education, is President Obama an intrepid reformer, as his words might suggest and many believe, or just a savvy politician? It's too early to know for sure, but so far nothing that he's said – or left unsaid – suggests he's anything but the latter.

But isn't education one of the best public investments we could possibly make? After all, doesn't spending on education give our students the skills and knowledge they need not just to spur economic recovery, but long-term growth?

No. More and better education may indeed be a good thing, but government spending doesn't give us that. What it gives us is more waste.

Consider elementary and secondary education, which receives the biggest share of the bill's education stimulation.

The average, inflation-adjusted, per-pupil expenditure in the United States was $5,393 in 1970 according to the U.S. Department of Education's Digest of Education Statistics. By 2004 it had more than doubled to $11,470.

And what did we get in return? Almost nothing.

Between 1973 and 2004 mathematics scores on the National Assessment of Educational Progress rose just one percent for 17-year-olds. And math achievement was the good news. Between 1971 and 2004, their reading scores were completely flat.

So much for K-12. How about higher education?

Here too, there's been no dearth of money. According to the State Higher Education Executive Officers, the overall trend for state and local expenditures per full-time-equivalent college student held steady at around $7,000 over the past 25 years. Enrollment, however, increased by more than a third, inflating the overall taxpayer bill. And student aid - most of which came through government - nearly tripled, hitting $10,392.

What are the returns on this outlay? Nada or negative. There isn't much systematic data on higher education outcomes, but what we do have looks discouraging.

Forty percent of people whose highest educational attainment was a bachelor's degree were proficient readers in 1992 according to the National Assessment of Adult Literacy. By 2003, only 31 percent were. For Americans with graduate degrees, 51 percent were proficient readers in 1992. Eleven years later, only 41 percent were. This lack of improvement is not limited to reading. Between 1992 and 2003 bachelor's degree holders saw no change in quantitative proficiency, and graduate scores dropped.

Of course, we did get a few things for our money, like campus-based rock climbing walls, nicer dormitories, and ballooning administrative ranks. But these don't increase human capital or confer economic benefits. In fact, economist Richard Vedder has shown that greater state expenditures on higher education are correlated with lower economic growth.

So spending more on elementary, secondary, and postsecondary schooling is a waste. How about pre-kindergarten education? Isn't getting to kids as early as possible is the key to success?

Not so. Head Start, the federal government's flagship early-education program, has received billions of inflation-adjusted dollars every year since 1966, including almost $7 billion last year alone. But there is little evidence that Head Start produces lasting benefits either to society or the children it's meant to help. Indeed, the government's own comprehensive review of the research concluded that while Head Start kids get some initial boosts, "in the long run, cognitive and socio-emotional test scores of Head Start students do not remain superior to those of disadvantaged children who did not attend Head Start."

There is more evidence supporting programs featuring very intrusive and intensive family interventions starting when children are under a year old, at least according to some small-scale research. But no large-scale program has ever accomplished this, and the programs that states have implemented have proven ineffective.

We've spent billions of dollars of public cash on elementary and secondary, higher, and pre-K education, and have received hardly any positive educational returns. Why?

Because politicians spend money so they appear to "care" and to be "doing something" about problems, but once that message is out, whether the money is wasted is of little political importance. Just look at the first round of President Bush's financial bailout - no one is sure where the money went. And education is one of the worst areas for this: Every politician wants to "help" the innocent children, so they've constantly poured good money after bad.

In the end, though, that's neither helped the children nor the economy. It's only helped the politicians.

The cries for more money have certainly been abundant. In October, the New America Foundation's Michael Dannenberg declared that states should deficit spend on higher ed to keep tuitions low and economies running. In November, the Center for Studies in Higher Education implored Washington to fight recession by spending big on scholars. This month, the College Board, National Association of State Universities and Land-Grant Colleges, and National Center for Public Policy and Higher Education all decried states' tight outlays.

Finally, on Wednesday, a commission chaired by Del. John L. Bohanan Jr., a St. Mary's County Democrat, proposed that Maryland expend an additional $760 million on its ivory towers to keep the state competitive.

But colleges, despite their claims, are not great growth-makers. Yes, individuals with college degrees tend to do better than those without, but that doesn't mean forced higher ed spending is an economic good.

For one thing, we put more people into universities than can benefit from them. Nationally, about one-third of college students need remedial work (Maryland's rate is roughly the same) and many never graduate. In fact, the six-year graduation rate for all bachelor's students is just 56 percent.

But isn't the problem that college prices keep rising, forcing students to work when they should be learning? And isn't that rooted in ever-skimpier state support?

It's true that prices have ballooned. According to the College Board, nationally the inflation-adjusted costs of tuition, fees, room, and board have risen about 52 percent at public four-year schools over the last 15 years, going from $9,460 to $14,340. Four-year private schools have seen a 42 percent price leap, from $24,060 to $34,130.

But shrinking public funds aren't to blame. For one thing, state appropriations have little impact on private institutions. For another, according to the State Higher Education Executive Officers, nationwide the nearly three-decade trend is essentially flat. And, between 1992 and 2007, real (inflation-adjusted) state and local government expenditures per student in Maryland increased roughly 23 percent.

So, what accounts for rampant tuition inflation? Many things, but one of the biggest is student aid. Nationally, real sticker prices rose 52 percent at public four-year institutions between 1993 and 2008, but the increase was a more modest 35 percent after accounting for grants and tax benefits such as credits and deductions - essentially free money. At private institutions, the after-free-cash increase was 34 percent. And those numbers ignore cheap federal loans, which after adjusting for inflation grew from $2,830 per pupil in 1993 to $4,841 in 2007.

Of course, all this forced largesse might be worth something if it actually strengthened the economy. But there is evidence it doesn't. Economist Richard Vedder has isolated the effects of higher ed spending and found that the more states spend, the lower their rates of economic growth.

Why is this? In part, it's a function of the bureaucratic inefficiencies - and special-interest payoffs - that accompany almost anything government does. More fundamentally, taxpayers know their needs better than anyone else, and when they can keep their money attend to them more effectively than does the ivory tower.

Scholars and politicians might not like to hear these things. But before the state drops three-quarters of a billion dollars on its universities, they're worth considering.

Unfortunately, the only major analysis of teacher salaries and student debt published to date is based largely on borrowers' subjective feelings about debt manageability. Likewise, more traditional methods of determining how much debt is too much offer little help because they are based primarily on general risks of default predicted by debt-to-income ratios rather than the ability of specific borrowers to handle their debts and other expenses.

To provide legislators with a more objective basis for policymaking, this paper assesses first year teachers' ability to pay back college loans given their actual salaries and expenses. This method eliminates both the subjectivity of determining debt burdens on the basis of debtors' feelings, and the imprecision of using correlations between debt-to-income ratios and overall default rates.

The findings presented here reveal that first year teachers in even the least affordable of the 16 districts examined can easily afford to pay back their debts. Indeed, with just some basic economizing, a first-year teacher could not only pay back average debt, but could handle debt levels nearly three times the national average. This does not mean that current teacher salaries or student debt burdens are "right"—only markets can determine that—but it does mean that there is no need for policymakers to intervene in either teacher pay or student aid to assure that college graduates can afford to become public school teachers.

So what's any of this got to do with the price of tomatoes, as they say? Well, nothing, but it's got a lot to do with the price of college and your taxes. On Tuesday night, a congressional conference committee passed legislation to reauthorize the Higher Education Act (HEA) that if enacted - and it seems it will be - will drive up both the price of college and your tax bill. But don't bother trying to nitpick it; the legislation is 1,158 pages long and is expected to be voted on by the full House and Senate today. It is doubtful many members of Congress will read even a little of the bill before it's given a final yea or nay.

And what's the significance of 452 billion, you ask? In dollars, it's the newly projected size of the federal deficit, a huge shortfall to which the new HEA will only be adding digits.

Consider just some of the broad lowlights, which is all that are available given the bill's sheer, mountainous size, and the time constraints under which it's being rammed through Congress.

First and foremost, the new HEA would increase the Pell Grant maximum from $5,800 to $9,000, a 55 percent leap. If the same number of Pell recipients as we had in 2008 - almost 5.6 million - were to receive maximum benefits under the new bill, it would cost more than $50 billion. The chances of that happening aren't huge - most Pell recipients don't qualify for maximum awards, and Congress rarely appropriates full authorized amounts - but Pell outlays will almost certainly rise, and their potential is fiscally frightening.

Still in the direct-costs-to-taxpayers column, the bill would simplify the process for students to get federal aid, easing the way to government money for students who are so unmotivated they won't even go through the current process to get college dough. There's also a new loan fund for colleges damaged by natural disasters, and added cash for graduate programs serving large minority populations.

Next, we have new rules and regulations. Colleges will have to report a lot more information about what supposedly drives their costs and prices. The U.S. Department of Education will get new authority to regulate private loans, which use no taxpayer money and are, as a result, the only truly fair student aid because both lender and borrower voluntarily agree to terms. There's even a requirement that colleges come up with plans to enable students to legally download music and movies.

And then there's the real kicker: This bill would do nothing to rein in rampant tuition inflation, by far the biggest problem in higher education. Indeed, by giving students yet more taxpayer-furnished aid, it will just keep exacerbating the problem, heaping more cheap money on kids so that they can demand bigger hot tubs, more famous professors, and fancier dining-hall food.

Just look at the numbers: It's no coincidence that while the inflation-adjusted price of college has gone up roughly 70 percent over the last two decades, aid per-student rose almost 140 percent. The more money students get from others, the more they're willing to pay and the more universities are happy to charge.

Unfortunately, this all seems inconsequential in Washington. The conference committee passed its HEA monstrosity 40-4. The bill is expected to breeze through the House and Senate - if it can physically be squeezed through the doors - on its way to a presidential signature. It's just another sign that numbers like 1,158 and $452 billion mean nothing in D.C. Vote counts are the only numbers that really matter.

In its latest beg for a fix, Higher Ed cries that the credit crunch will make it harder for students to get loans. Last week, Education Secretary Margaret Spellings rushed in to enable the junkies - announcing that, if needed to keep aid flowing, her department will buy loans and forward federal money to guaranty agencies to ensure that every eligible student gets as much aid as possible.

Spellings got the go-ahead to keep the aid flow going back in May. In the same law, Congress (responding to Ivory Tower panic) raised the limits on some federal loans and made it easier for parents with bad credit to borrow from Washington.

This is just the latest chapter in Higher Ed's government dependency.

A college can only charge as much as students are willing and able to pay. In recent decades, though, federal (and some state) lawmakers have forked over ever-more money to student aid - enabling colleges to charge exorbitant prices.

Consider the per-pupil cost of tuition, fees, room and board, as tracked by the College Board. At private US four-year institutions, the "price" of college rose to an average of $30,367 for the 2006-07 school year - up 208 percent over the last two decades. At public four-year institutions, the rise was almost 216 percent.

Overall inflation in that period? Consumer prices rose about 84 percent. It's clear that Higher Ed's got a big problem.

How do we know the problem isn't just that colleges' own expenses are rising?

Consider two costs - energy and staff.

Energy costs have ballooned nationwide - but they've risen faster on campus. A recent Forbes analysis found that the cost of "heating, cooling and powering" colleges rose 124 percent between 1983 and 2007, while businesses saw only a 60 percent rise. Our colleges and universities plainly haven't felt the same pressures to achieve energy efficiency.

And, in an era when the private sector has been pruning management fat, Higher Ed's been adding it: Federal education statistics show that the number of campus executives and administrators per hundred students grew by more than a fifth from 1976 to 2005.

In other words, colleges and universities have been able to raise prices with impunity - and even add to their fat - because government's ensured that students can pay.

It's a vicious cycle: Parents and students complain that the cost of college is too high. Politicians, seeking votes, boost aid. Colleges, competing for better-heeled students, offer nicer amenities and charge higher tuition. Parents and students complain again - and the addiction deepens.

The only people with the power to force Higher Ed into rehab are the politicians, who could slow down aid and get the Ivory Tower on the road to recovery. But few pols are willing to engage in "tough love."

Indeed, the credit crunch offered politicians built-in cover to begin weaning Higher Ed off of easy money - by claiming that bigger problems forced their hands. Instead, they once again increased the flow of taxpayer dollars.

There's no other conclusion: The Ivory Tower is addicted to taxpayer cash, and Washington is happy to keep the junkie hooked.

The seemingly eternal crisis is the ever-escalating price of higher education, and now students and parents fear the disaster will be made even worse by the nationwide credit crunch, which could shrink the amount of money available for student loans as companies and investors get out of the lending business.

Last Thursday, the House of Representatives passed legislation that would add more fuel to the fire, approving the Ensuring Continued Access to Student Loans Act. Only a week earlier, Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, and ranking member Rep. Howard "Buck" McKeon (R-CA) introduced the bill, which would put taxpayers on the hook to finance increased student aid no matter what happens with lending companies. Senator Teddy Kennedy (D-MA) is pushing similar legislation in the Senate.

Yet according to a statement released by none other than Miller himself, no students have actually reported an inability to get federal loans. And while several large firms, including HSBC and CIT Group, have recently stopped originating federal loans, J.P. Morgan Chase and other companies reportedly plan to expand their student lending operations. So while a shortfall in federal loan funding is possible, it's far from a clear and present danger.

Whether or not the credit crunch causes a student loan shortage, the House bill would increase yearly limits on unsubsidized federal loans by $2,000 per borrower; allow parents holding federally guaranteed, low-interest PLUS loans to defer payment for six months after their children graduate; and change eligibility rules so that parents who've been delinquent on mortgage payments for up to 180 days can qualify for PLUS.

As bad as these provisions are for the taxpayers who'll have to finance them, the parts that kick in if lenders do fall short on funds are even worse. The House legislation makes clear, for instance, that if guaranty agencies operating as "lenders of last resort" can't generate sufficient funds to finance loans themselves, the Secretary of Education can advance them federal dollars. In addition, the Secretary would be authorized to purchase loans from lenders in the federal guaranteed loan program, a power that would supposedly only apply if the purchases wouldn't "result in any cost to the Federal Government," but how that would be determined is unclear.

The stated intention of Miller's legislation is to protect student loans from the nation's mortgage-centered credit squeeze. Ultimately, though, this is just another episode in our vicious, never-ending tuition-inflation cycle, which is driven by the attitude that everyone should be able to go to college wherever and whenever they want, even when others are unwilling or unable to help them pay for it. Indeed, it's the vicious cost-escalation cycle that has made loans increasingly important: students and parents complain that higher education is too expensive, vote-seeking politicians increase grant and loan aid, colleges raise tuition to gather the new money, students and parents complain again, and around we go.

Taxpayers bear the biggest burden of these expenditures, and reap little to none of the educational rewards. Over the last ten years, students' real, after-aid educational costs -- tuition, fees, room and board -- increased approximately 24 percent at private four-year colleges, and 35 percent at public institutions. Federal aid furnished by taxpayers, meanwhile, increased much faster, rising 77 percent in the last decade, from $48.7 billion to $86.3 billion.

In light of all this, the funny thing about the as-yet nonexistent student loan crisis is that taxpayers should actually hope it materializes. The only way to slow the vicious tuition-inflation cycle is to cut down on the cheap aid that fuels it, and since politicians are going to act as if there's a crisis no matter what, we might as well benefit from some of the market discipline a real crisis could bring.

Why this talk of a lawsuit now, after the scholarships have been operating for seven years? The union worries that the program might offer educational choice to too many poor children.

The Legislature is considering raising the cap on the amount that businesses can donate toward scholarships, and the public-school-employee union is seeing red. Ron Meyer, lead counsel for the FEA, told the media recently that if the program were to triple in size over the next five years, "they may go to court" to kill it.

Meyer doesn't cite the best interests of children or families in this decision. The union's concern is simply that the program might grow too large. But the only way the program can grow is if poor parents want it to. The Legislature can raise the cap on donations, but the law requires all funds be assigned to recipient students in the same year they're given. And scholarship organizations cannot carry over more than a quarter of total donations from one year to the next. So unless demand triples in the next five years, the program couldn't triple.

Of course, demand for the program really is growing. In the past three years, the number of children benefitting from the scholarships has nearly doubled, to 19,416, according to the Florida Department of Education.

Why does the union want to stop poor families from getting access to independent schools?

Look at it from the union's perspective. There were 837,000 public-school union members in 1961. There are more than 4 million today — two-thirds of public-school workers. By contrast, during roughly the same period, union membership has fallen from 39 percent to just 7.4 percent of the private-sector workforce. If large numbers of families can easily choose independent schools for their kids, public-school union membership could be decimated — and with it the guaranteed revenues and political clout union leaders now enjoy.

Our public-school system is designed such that the interests of teachers — and union leaders — are pitted against the interests of families. Parents want the best, most appropriate education for their children, so the scholarship-tax credit has been growing in popularity. But unions want to protect their members' jobs, raise their salaries and reduce their workloads (i.e., class sizes). If protecting union jobs means killing a scholarship program serving poor kids, well . . .

It doesn't have to be this way. There's more than one way to organize a school system. Think of tutoring schools like Sylvan Learning Systems, and Kumon, that are freely chosen by parents and have to compete to attract students. They have only three ways to increase their profits: Enroll more students, offer the same quality of service at a lower cost, or raise the quality of their services so parents will be willing to pay more. What's good for them is good for families.

The tutoring sector is growing fast in the United States, but it has a long way to go to catch up to most Asian nations, where the vast majority of families pay for tutoring services that teach whatever and however they want, and set their own prices.

That system rewards success, encourages innovation, and treats teachers like professionals. Most important, it unites the interests of educators with those of parents. Want more job security or higher pay? Just figure out how to serve families better.

Florida could reap similar benefits by eliminating the cap on tax credits for scholarship donations, and by letting families take tax credits directly for their own children's tuition. Or the state can just sit back as public schools continue their downward spiral, and watch as the teachers union leaves poor families with even fewer educational choices.

In particular, it's not happening for kids from lower-income families — kids who are disproportionately black or Hispanic. As of 2003, 80 percent of high school seniors from families in the top 20 percent of income enrolled in college the fall after graduation, while only 49 percent from families in the lowest 40 percent did so. That class divide translates directly into big disparities along ethnic lines. In 2006, 34 percent of white Americans aged 25- 29 held college degrees, compared to 19 percent of African Americans and only 10 percent of Hispanics.

The obvious reason for this education gap is that college is too expensive. After all, tuition costs have galloped far ahead of inflation, while many in the working class have seen their incomes stagnate or slip. But, in truth, the source of the problem lies much deeper: in the way parents raise their children.

A lack of money is the most common explanation for why lower-income children don't go to college, and it's the impetus for proposals, like those put forward by Hillary Clinton and Barack Obama, to increase tuition subsidies. But James Heckman, the Nobel Prize-winning economist from the University of Chicago, is convinced that additional subsidies would do little good. Heckman recognizes the strong correlation between family income and college matriculation, but he argues that income is just a proxy for more fundamental differences in family and environmental conditions — like parental education — that ultimately show up in test scores and scholastic achievement. In a 2001 study co-authored with Stephen Cameron from Columbia University, Heckman tested the attendance gap between blacks, whites, and Hispanics, controlling for academic ability using scores from the Armed Forces Qualification Test (afqt), and found that family income did not really matter when it came to getting kids into college. In fact, "at the same afqt level Blacks and Hispanics enter college at rates that are substantially higher than the White rate," regardless of how much money their families made. The problem was that relatively few blacks and Hispanics reached a sufficiently high afqt level in the first place. In other words, the main reason fewer African Americans and Hispanics go to college isn't that they can't afford it. It's that they lack the skills to do the work.

Not all scholars share Heckman's skepticism about additional tuition assistance. David Ellwood and Thomas Kane of Harvard are two prominent proponents of improving access to college financing. Yet even they concede that "the single most powerful determinant of college-going remains high school achievement."

Of course, even if lack of money isn't preventing many well-qualified students from matriculating, it could still explain why less-advantaged kids aren't gaining the abilities that going to college requires. For one thing, lower-income kids tend to go to under-funded schools that offer a poorer quality education. However, going back to the Civil Rights Act-sponsored Coleman report of 1966 (named for its principal investigator, sociologist James S. Coleman), study after study has shown that most of the variation in scholastic achievement occurs within schools, not among them. The abilities students bring with them to class matter more than any differences in school programs.

On the other hand, those same studies show that students' abilities correlate strongly with their families' socioeconomic status. So another possibility is that wealthier parents invest more financially in their children, spending money on tutors, extracurricular travel, and so forth, thus helping them get better grades. Alternatively, more money could mean less stressed-out parents — parents with more time and energy to help with homework, go to school events, and just generally be around.

But University of Chicago sociologist Susan E. Mayer has found otherwise. In her book What Money Can't Buy, she examined the connection between parental income and child outcomes, including school performance. She concluded that, "once children's basic material needs are met, characteristics of their parents become more important to how they turn out than anything additional money can buy." The condition is emphasized for a reason. Mayer is not suggesting that existing government programs for the poor ought to be cut. Rather, she is saying that those programs have been relatively successful at meeting kids' basic needs. Consequently, having the government or parents spend more money on children is unlikely to have much impact on how they do in school and beyond.

If more money isn't the answer, what does have an impact? In a word: culture. Everything we know about high performance in all fields of endeavor tells us that, while natural talent is a plus, there is no substitute for long hours of preparation and hard work. That commonsense notion has been confirmed by the findings of the so-called "Expert Performance Movement," led by Florida State University psychologist Anders Ericsson. Ericsson and fellow researchers have spent years studying top performers in a whole host of different domains, and they've found a common denominator: practice. Chess grandmasters, concert pianists, and other superstars are distinguished from less-accomplished performers by two main things: starting their chosen fields earlier in life, and logging more hours per day of training over the course of many years.

Apply these lessons to doing well in school, and it becomes clear that the class divide in academic achievement is fundamentally a cultural divide. To put it in a nutshell, the upper-middle-class kid grows up in an environment that constantly pushes him to develop the cognitive and motivational skills needed to be a good student; the low-income kid's environment, on the other hand, pushes in the opposite direction.

Child psychologists Betty Hart and Todd Risley have tested the effect of class on the differences in how parents interact with their young children. After observing several dozen families with toddlers over the course of a couple of years, they were able to document dramatic differences in the intensity and nature of the verbal stimulation the kids were getting: Professional parents directed an average of 487 "utterances" per hour toward their children, as compared to 301 for workingclass parents and only 176 for welfare parents. The quality of those utterances was also very different: Among professional parents, the ratio of encouraging to discouraging utterances was six to one; for working-class parents, the ratio slipped to two to one; and welfare parents made two discouraging utterances for every encouraging one. The consequences were predictable: By the time the children in the study were around three years old, the ones from professional families had average vocabularies of 1,116 words; the working-class ones averaged 749; the welfare kids, 525.

Money isn't the issue here, since talking to your kids is free. What does matter is the parents' inclination to nurture their child's development and the resulting verbal practice that the child gets. Kids from well-off homes get more chances to interact verbally, and that practice is an essential ingredient of developing a large vocabulary.

Once kids reach school age, the growing influence of peer groups reinforces the early patterns established at home. The relative clout of parents and peers in shaping personality and values is a subject of hot debate, but here they generally work in concert. College-educated professional parents make sure their kids are in college-bound peer groups, while working-class and underclass kids tend to gravitate toward others like them. Consequently, children on either side of the class divide grow up with very different attitudes about the importance of school achievement — which leads to different expectations about future life plans and different self-conceptions in relation to larger society.

The "acting white" stigma reported among groups of black students was recently tested by Harvard economist Roland Fryer. Fryer used data on high school friendship groups to determine that, while white kids were more popular the higher their GPA, blacks and Hispanics whose average exceeded a certain level were increasingly unpopular.

These findings are controversial, to be sure. Other quantitative studies, using different methods, have reached different conclusions. But the phenomenon identified by Fryer has been corroborated by a large number of ethnographic studies — not only of blacks and Hispanics, but also of other less-advantaged groups, such as the Buraku outcastes in Japan, the Maori in New Zealand, the British working class, and Italian immigrants in 1950s Boston. It's a bedrock fact of social psychology: Humans have a powerful and universal tendency to form self-policing social groups. With groups that are marginal to begin with, the tendency to enforce group solidarity can express itself through stigmatizing anything that looks like mainstream success.

The idea that class-based cultural differences contribute to academic underachievement is cause for consternation across the ideological spectrum. Let's start with me and my fellow libertarians. We insist on the central importance of individual responsibility for the healthy functioning of a free society. Yet, by the time people become legally responsible adults, circumstances not of their own choosing — namely, how they were raised and whom they grew up with — may have prevented them from ever developing the capacities they need to thrive and flourish. Which raises the possibility that government intervention to improve those circumstances could actually expand the scope of individual autonomy.

For example, preschool enrichment programs — along the lines of Head Start, but more intensive and beginning with even younger kids — offer some promise in counteracting the negative influences of a disadvantaged upbringing. So do housing programs that encourage relocation from areas of concentrated poverty. Meanwhile, additional wage subsidies for low-skilled workers might help to shrink the underclass and promote the gradual assimilation of middle-class norms.

Progressives, for their part, should recognize that libertarians have their own good ideas for boosting human capital and fostering assimilation. Among them are: greater competition in the school system, cessation of the drug war that so needlessly fosters criminality, and elimination of occupational licensing restrictions that block opportunities for entrepreneurship among the less credentialed.

Furthermore, progressives need to understand that the rise in skill-based inequality is not some populist morality play of capitalism run amok. On the contrary, in many ways it can be seen as a capitalist success story. For a generation now, our economy has been creating more opportunities for the productive use of highly developed cognitive skills than there are people able to take advantage of them. That is what the run-up in the college wage premium is telling us. Economic development has raced ahead of cultural development; as a result, culture is now acting as a brake on upward mobility. So, instead of railing against the economic system, we need to do a better job of helping people to adapt to it and rise to its challenges. The rules of the game aren't the problem — we just need more skillful players.

By now, probably everyone has heard the righteous wailing from Washington, led by Sen. Charles Grassley (R-IA), over well-endowed institutions of higher education that don't spend their cash to keep to tuition low.

"Parents and students have a right to expect these universities with big endowments to end the hoarding and start the helping with skyrocketing tuition costs," Grassley declared last month.

Grassley's assault on wealthy colleges has generated lots of press and made for great grandstanding, and there's certainly something wrong when ivory-tower endowments, which are tax exempt because colleges supposedly serve the "public good," lose hardly a tuppence in service of the public. But the fault lies with government for giving colleges favored status, and endowment hoarding is hardly driving tuition costs.

Just look at the number of schools with big endowments. A few weeks ago, Sen. Grassley and Sen. Max Baucus (D-MT) sent a letter requesting information to every college and university with an endowment over $500 million. How many schools was that? Just 136, or about 3 percent of the nation's nearly 4,300 colleges and universities. That's hardly enough to make much difference on overall average tuition levels.

Despite the small number of schools being directly harassed over their endowments, most higher education lobbyists are on high alert, especially against threats from Grassley and others to make colleges spend 5 percent of their endowments annually. Unfortunately, to protect themselves colleges and their Washington defenders are pointing at an even more popular scapegoat for rampant tuition inflation than Harvard and Yale: tight-fisted states.

"A primary reason that tuition has been rising is that state funding has been flat," Sen. Lamar Alexander (R-TN) told a gathering of higher education officials in Washington last week, exhorting them to close the "communication gap" between themselves and politicians on Capitol Hill.

But Washington pols, as the HEA reauthorization bill proves, have been hearing that message loud and clear. If the bill passed yesterday is enacted, the federal government would withhold funds from any state that cut higher education spending below its previous five-year average. In other words, states would have to spend taxpayer money to make taxpayer money.

Sadly, just like the endowment blow-up, blaming tuition inflation on impecunious state spending is a dodge.

State financing of public institutions, for one thing, has no direct effect on the nation's roughly 2,600 private colleges or their tuition prices. Moreover, state spending on higher education hasn't actually been flat. According to the latest federal "Digest of Education Statistics," after adjusting for inflation state higher-education expenditures rose from $46.8 billion in academic year 1990-91 to $53.9 billion in 2003-04, a 15 percent increase. Despite that, the average real cost of in-state tuition and fees at public four-year institutions rose 86 percent in that time, from $2,460 to $4,587.

So much for the cheap states theory. But what, then, is the real cause of the college cost crisis?

There are many cost-driving excesses in higher education — luxurious dorms, unused classroom space, growing bureaucracies, expensive academic journals, and the list goes on — that are intermediate causes of the college cost problem. They are all, however, undergirded by a single reality: You can't charge an arm and a leg unless people can pay it, and to curry favor with colleges, kids, and parents Washington ensures that those limbs keep coming, taking them from taxpayers and giving them to students and schools.

The growth in federal student aid makes this clear. According to data from the College Board, real federal aid — including grants, loans, and tax credits — ballooned from $48.7 billion in the 1996-97 academic year to almost $86.3 billion in 2006-07, a 77 percent leap. On a per-pupil basis, aid per full-time equivalent student — most of which came through Washington — rose from $6,627 to $9,499, a 43 percent increase. Meanwhile the per-pupil cost of tuition, fees, room and board rose 29 percent at private four-year schools, from $25,031 to $32,307, and 41 percent at public four-year institutions, from $9,657 to $13,589. In other words, college prices kept rising because aid made sure they could.

So who are the real culprits behind higher education's ever-higher price tag? Not endowment hoarders or cheap states, but the Washington politicians who blame everyone else for the problems that they themselves have caused.

Let's start with ISI. This is the second year that it has given a U.S. history test to freshman and seniors at a sampling of American colleges and universities, and the results, by ISI's account, were both abysmal overall, and worst at prestigious institutions.

"Higher education is a $325 billion business where at many prestigious universities presidents earn half-a-million dollars a year or more," lamented ISI's Josiah Bunting. "Ironically...the lowest gains in knowledge in America's history and institutions are found at many of these elite universities where their presidents are simply not doing enough to help preserve our traditions of freedom and representative government."

Sadly, ISI decided to grind its American-values ax on a misshapen stone. While in no school was knowledge of U.S. history great, in most cases scores were higher for seniors than frosh. That's actually a pretty good outcome considering a critical factor that ISI chose to ignore: Most students go to college to study fields that have little if anything to do with U.S. history, which they should have covered in high school anyway. Moreover, while some elite schools did see seniors do worse than freshmen, their scores had the best chances of going down because they were the highest to begin with. Yale saw a three percent drop, but had the highest freshman score at 68.94. Princeton dropped almost two points, but started at 63.60. Meanwhile, Eastern Connecticut State University produced the biggest improvement, but its freshmen started at 31.34.

ISI's complaints about U.S. history would be okay if its intent were just to argue that academia needs a different focus. But ISI doesn't want to just persuade higher ed to change. At least in part, it wants government to force that change, with Bunting calling on state legislators, among others, "to hold the nation's colleges and their presidents accountable for teaching...America's history and institutions."

Unfortunately, it seems government intervention has become many conservatives' strategy of choice when it comes to academia.

Education Secretary Spellings' commission was a clear shot across higher ed's free-market bow, with commission chairman Charles Miller—a friend of Spellings and President Bush who helped develop the Texas predecessor to the extremely intrusive No Child Left Behind Act—talking openly about colleges needing to test students and publish the results to show what they were learning.

After vociferous objections to mandated testing from many people inside academia, the commission's final report did not call explicitly for it. But the administration didn't give up, trying for months to rewrite regulations to force accreditors to require that schools publicly provide "outcomes" measures that are comparable across schools. That's also failed so far, but as Secretary Spellings made clear in a recent Chronicle of Higher Education interview, the war is just beginning.

"Are we done? Heck no," she said. "But we've started."

The war is being fought by Republicans in Congress as well. In the beginning of October, Republicans on the House Education and Labor Committee, led by Ranking Member Howard P. "Buck" McKeon (R-CA), introduced the College Access and Opportunity Act, which among other things would publish on a federal website schools whose tuition and fees rose for any three-year interval at a rate at least twice the Consumer Price Index.

The goal, says McKeon, is to "empower consumers and make college costs more transparent," but the end result would be at best a soft price control on a system that thrives on market freedom.

There is great irony in conservatives' assault on the ivory tower, of course. For decades, conservatives battled to get government out of education, but today not only have many decided to end that fight, they want to use government to control arguably the freest—and most envied—education market in the world, with its thousands of largely independent colleges and universities. Indeed, it seems the world has a better appreciation for American higher education than we do: In August, the Organization for Economic Cooperation and Development—an association of industrialized nations—reported that far more students studying abroad were in the United States than any other country.

So what will happen if conservatives succeed in hog-tying academia with federal regulations? American higher ed will be turned into a bureaucratic, lifeless hulk just like American elementary and secondary schooling—which fails to teach our kids subjects like U.S. history in the first place—and conservatives, who once sang the praises of educational freedom, will deserve all the blame.

Over the past quarter-century or so, the return on human capital has risen significantly. Or to put it another way, the opportunity cost of failing to develop human capital is now much higher than it used to be. The wage premium associated with a college degree has jumped to around 70% in recent years from around 30% in 1980; the graduate degree premium has soared to over 100% from 50%. Meanwhile, dropping out of high school now all but guarantees socioeconomic failure.

In part this development is cause for celebration. Rising demand for analytical and interpersonal skills has been driving the change, and surely it is good news that economic signals now so strongly encourage the development of human talent. Yet -- and here is the cause for concern -- the supply of skilled people is responding sluggishly to the increased demand.

Despite the strong incentives, the percentage of people with college degrees has been growing only modestly. Between 1995 and 2005, the share of men with college degrees inched up to 29% from 26%. And the number of high school dropouts remains stubbornly high: The ratio of diplomas awarded to 17-year-olds has been stuck around 70% for three decades.

Something is plainly hindering the effectiveness of the market's carrots and sticks. And that something is culture.

Before explaining what I mean, let me go back to the squid ink and clarify what's not worrisome about the inequality statistics. For those who grind their ideological axes on these numbers, the increase in measured inequality since the 1970s is proof that the new, more competitive, more entrepreneurial economy of recent decades (which also happens to be less taxed and less unionized) has somehow failed to provide widespread prosperity. According to left-wing doom-and-gloomers, only an "oligarchy" at the very top is benefiting from the current system.

Hogwash. This argument can be disposed of with a simple thought experiment. First, picture the material standard of living you could have afforded back in 1979 with the median household income then of $16,461. Now picture the mix of goods and services you could buy in 2004 with the median income of $44,389. Which is the better deal? Only the most blinkered ideologue could fail to see the dramatic expansion of comforts, conveniences and opportunities that the contemporary family enjoys.

Much of the increase in measured inequality has nothing to do with the economic system at all. Rather, it is a product of demographic changes. Rising numbers of both single-parent households and affluent dual-earner couples have stretched the income distribution; so, too, has the big influx of low-skilled Hispanic immigrants. Meanwhile, in a 2006 paper published in the American Economic Review, economist Thomas Lemieux calculated that roughly three-quarters of the rise in wage inequality among workers with similar skills is due simply to the fact that the population is both older and better educated today than it was in the 1970s.

It is true that superstars in sports, entertainment and business now earn stratospheric incomes. But what is that to you and me? If the egalitarian left has been reduced to complaining that people in the 99th income percentile in a given year (and they're not the same people from year to year) are leaving behind those in the 90th percentile, it has truly arrived at the most farcical of intellectual dead ends.

Which brings us back to the real issue: the human capital gap, and the culture gap that impedes its closure. The most obvious and heartrending cultural deficits are those that produce and perpetuate the inner-city underclass. Consider this arresting fact: While the poverty rate nationwide is 13%, only 3% of adults with full-time, year-round jobs fall below the poverty line. Poverty in America today is thus largely about failing to get and hold a job, any job.

The problem is not lack of opportunity. If it were, the country wouldn't be a magnet for illegal immigrants. The problem is a lack of elementary self-discipline: failing to stay in school, failing to live within the law, failing to get and stay married to the mother or father of your children. The prevalence of all these pathologies reflects a dysfunctional culture that fails to invest in human capital.

Other, less acute deficits distinguish working-class culture from that of the middle and upper classes. According to sociologist Annette Lareau, working-class parents continue to follow the traditional, laissez-faire child-rearing philosophy that she calls "the accomplishment of natural growth." But at the upper end of the socioeconomic scale, parents now engage in what she refers to as "concerted cultivation" -- intensively overseeing kids' schoolwork and stuffing their after-school hours and weekends with organized enrichment activities.

This new kind of family life is often hectic and stressful, but it inculcates in children the intellectual, organizational and networking skills needed to thrive in today's knowledge-based economy. In other words, it makes unprecedented, heavy investments in developing children's human capital.

Consider these data from the National Education Longitudinal Study, an in-depth survey of educational achievement. Among students who received high scores in eighth grade mathematics (and thus showed academic promise), 74% of kids from the highest quartile of socioeconomic status (measured as a composite of parental education, occupations and family income) eventually earned a college degree. By contrast, the college graduation rate fell to 47% for kids from the middle two quartiles, and 29% for those in the bottom quartile. Perhaps more generous financial aid might affect those numbers at the margins, but at the core of these big differentials are differences in the values, skills and habits taught in the home.

Contrary to the warnings of the alarmist left, the increase in economic inequality does not mean the economic system isn't working properly. On the contrary, the system is delivering more opportunities for comfortable, challenging lives than our culture enables us to take advantage of. Far from underperforming, our productive capacity has now outstripped our cultural capacity.

Alas, there is no silver bullet for closing the culture gap. But the public institutions most directly responsible for human capital formation are the nation's schools, and it seems beyond serious dispute that in many cases they are failing to discharge their responsibilities adequately. Those interested in reducing meaningful economic inequality would thus be well advised to focus on education reform. And forget about adding new layers of bureaucracy and top-down controls. Real improvements will come from challenging the moribund state-school monopoly with greater competition.

Cuomo has given us fresh proof that federal officials and administrators at non-profit universities - people who supposedly work for the "common good" - are trying to get as much for themselves as they possibly can. Yet the greed of U.S. higher education goes far beyond that.

Cuomo has shown not only that lenders and colleges cooperate to profit at students' and taxpayers' expense, but top financial-aid officers at major institutions (including Columbia University) personally profited via stock deals from companies on their schools' "preferred lender" lists.

The corruption alone is shameful - but the true scandal goes to the heart of federal aid to higher education (which includes subsidized loans, among much else).

First is the fact that government aid increases the costs it's meant to defray - that is, that a college degree actually costs more because of all the subsidies.

From 1996 to 2006, the College Board reports, the average, inflation-adjusted, per-pupil cost of tuition, fees, room and board rose 28 percent at four-year private schools and 38 percent at four-year public ones. Meanwhile, inflation-adjusted aid provided through federal programs rose 95 percent, from $48.3 billion to $94.4 billion.

The expense might be tolerable if most students were needy, but with graduates who took loans each shouldering an average of less than $20,000 in debt, and a college degree bringing in nearly $1 million in additional wages over a lifetime, even that's debatable.

The fact is that most college students are better off than the average American. Just this month, UCLA's Higher Education Research Institute reported that the families of college freshmen last year had median incomes 60 percent higher than the national average.

The well-to-do get their aid: In the 2003-04 academic year, more than 30 percent of dependent students from families earning $100,000 or more got federal loans.

Schools lobby hard for "student aid" - because it's the colleges and universities that actually pocket the money. As long as aid keeps ballooning, students can pay ever-escalating tuition and fees - and Greedy U. can keep boosting salaries, building new facilities and making life cushier for faculty and staff.

According to the Center for Responsive Politics, education interests spent over $80 million lobbying federal policymakers last year.

When Cuomo testifies before the House Education Committee, congressmen are likely to push for further investigation into corruption and conflicts of interest at lenders and universities, but most likely not into the cynicism of the student-loan system itself.

Of course, Congress is unlikely to turn off the politically popular student-loan spigot any time soon. The truth, however, is that even absent government help, lenders would continue to float private loans to students with promising futures, because both lender and student would profit. But since both lenders and borrowers would have only their own money on the line, the rampant inflation in college costs would halt.

Now, don't get me wrong. Making college more affordable is a laudable goal, especially in light of the stratospheric heights to which tuition has soared over the last few decades. But making student loans cheaper will only exacerbate the problem.

Federally backed loans, for one thing, regularly go to the wrong people – in 2003-04, nearly 30 percent of students from families earning more than $100,000 a year got them – and they make tuition more expensive for everyone. And while federally subsidized loans – on which Democrats are now focusing after promising to cut rates on all federal student loans during the campaign season - go to fewer wealthy families, they still tend to benefit well-off students and those whose parents understand how to game the system

Look at it as a matter of supply and demand. Say the average per-pupil cost of college is $100, and most students are covering it with loans carrying 10 percent interest rates. What would happen if the federal government were to slash those rates in response to complaints that college were too expensive? Almost certainly, students would be willing to pay higher tuition prices.

Of course, with their new purchasing power, many students would no longer be satisfied with their colleges' old amenities. They'd demand nicer dorms, better recreation centers, and tastier food, and colleges that wanted to compete would have to meet those demands. To afford those improvements, however, schools would have to raise their tuition, wiping out the affordability gains of cheaper loans, inspiring new complaints about college costs, and completing yet another turn in the college-cost spiral.

This is not just theoretical. According to data from the College Board, inflation-adjusted aid per full-time equivalent student grew to $10,113 in 2005-06 from $4,108 in 1985-86, a 146 percent jump that more than doubled the rate of cost increases and greatly inflated students' purchasing power.

The result: "They want tuition increases to be basically nonexistent," Tulane University president Scott S. Cowen explained in November about many parents and students, "yet they want Jacuzzis in the dorms, small classes, and a number of other things. What gets lost on them is that these things cost money."

Similarly, former Emory University president William Chace recently wrote that "the more you want us to give to you, the more we will be asking you to give to us. We aim to please, and that will cost you. It's been a long time since scholarship and teaching were carried on in monastic surroundings."

Despite the clear connection between cheap money for higher education, ever-more extravagant student demands, and skyrocketing college prices, many policymakers continue to claim that aid is the solution rather than the problem. Instead, they finger an old favorite: The notion that states have drastically cut funding to their public colleges, forcing schools to raise tuition.

It's baloney.

According to the latest U.S. Department of Education figures, far from dropping, real state funding for colleges and universities has risen dramatically over the last couple of decades, jumping to $62.9 billion in 2000-01 from $40.1 billion in 1980-81. On a per-pupil basis, according to the State Higher Education Executive Officers, while state funding has tended to rise and fall in cycles, in 2001 it actually reached an inflation-adjusted 20-year high of $7,124. So states haven't cut their funding, it's just been eclipsed by the astonishing growth in money coming through students.

Which brings us back to the obvious: A fundamental cause of skyrocketing college costs is that student aid has simply been far too cheap and plentiful, pushing demand ever higher and allowing colleges to charge ever-more exorbitant prices.

But why, if this is so obvious, do politicians continually try to deflect public attention from the real cause of the college costs crisis, and champion the same-old inflationary policies?

The answer is politics, pure and simple. Politicians must have votes, and the best way to get them is to bribe as many Americans as possible. So they offer as much aid to as many people as they can, and give themselves endless credit for helping all citizens fulfill the American Dream. The political payoff is immediate, and besides, they figure, when things get worse there will always be another First 100 Hours to do it all again.]]> Thu, 11 Jan 2007 00:00:00 EST http://www.cato.org/pub_display.php?pub_id=7039 http://www.cato.org/pub_display.php?pub_id=6763 With the November 7th prospects for his party looking bleak, President Bush might already be turning his attention to his legacy, and recent events suggest that he is returning to his first domestic political victory: education.

In a speech last week at a Washington, D.C., charter school, Bush brought education back to the front burner, promoting federal initiatives to train 70,000 new Advanced Placement teachers, help pay the costs of AP exams for low-income students, and furnish vouchers for 28,000 poor children nationwide. The President also devoted his weekly radio address entirely to education, talking up the No Child Left Behind Act, the signature accomplishment of Bush's first year in office, which is scheduled for reauthorization next year.

Bush's education agenda, however, doesn't stop at K through 12. Last month, Secretary of Education Margaret Spellings announced that the administration would also pursue new policies in higher education, including plans to track information on every college student in the country, and to increase federal financial aid. And that's just the beginning. The Secretary will be holding a "summit" next spring to explore even more ivory tower reforms.

The danger of pushing so many education initiatives, of course, is that many voters who have traditionally supported Republicans despise big government, especially federal intrusions into their schools. That's a group, as the upcoming midterms are likely to show, that Republicans can't afford to lose. Which puts the Bush administration in a tight spot: Just as it is attempting to plunge federal tentacles ever deeper into the schools, it must also convince the public that federal control is the furthest thing from its mind.

"Local schools remain under local control," Bush declared in his radio address, though NCLB dictates everything from how reading is taught to teacher qualifications. Similarly, in response to a question about the expansion of federal power during her tenure, Secretary Spellings recently insisted that "I'm a good Federalist and a good Republican."

But the billion-dollar question remains: How can the administration hew to the ideal of local control while simultaneously advocating federal intrusion into the classroom?

They can't. Either they stick to the Constitution and keep the federal government out of education, or they chuck it and run the schools from Washington. Rhetorically, though, the Bush administration is trying to square the circle, dodging the Constitution and asserting that because the federal government spends money on education – an amount that's grown roughly 36 percent under Bush – it has an obligation to force "accountability" on the schools.

"With one-third of higher education investment coming from the federal government," Spellings said recently, "it's right for me as the Secretary of Education...to know what the heck we're getting for it."

Similarly, President Bush asserted in last week's radio address that all "the federal government is asking for" with NCLB "[is] demonstrated results in exchange for the money we send from Washington."

Rhetoric notwithstanding, if the Bush administration were really devoted to federalism – or even just plain fairness to taxpayers – it wouldn't expand its powers over the nation's schools.

As far as taxpayers are concerned, it's bad enough that Washington takes our hard-earned cash. Should they also lose control of their schools?

And federalism? If you're a "good Federalist," you know that the Constitution doesn't give Washington any authority to appropriate money for education or to run schools, much less to spend money on education and then use it to buy control of the schools.

Regrettably, the reality is that George Bush has not been a good Federalist. When it comes to education, he has repeatedly flouted the Constitution and expanded the scope of federal power. If he continues to do so for the next two years, his legacy will not be what he had hoped.

We've got "the worst of all worlds" for young adults, declared the moderator at a recent New America Foundation forum. "Problems in the labor market, enormous problems with paying for education, and a level of economic risk that previous generations really didn't encounter."

"Higher degrees mean higher salaries," intoned American University graduate student Sui Lang Panoke in a July lament in the Washington Post. "But...it seems that graduate-level education is open only to the select few who can afford it."

Surrounded by such injustice, only one thing seems to console oppressed young adults: their conviction that if government would just try hard enough, it could set everything right.

Panoke, for instance, suggested that "a federal need-based grant program for graduate students" could make graduate school more affordable. Similarly, a "briefing kit" on "the economic challenges facing young adults" from the left-leaning think tank Demos proposes, among other things, more generous federal aid for low- and moderate-income college students, and a dollar-for-dollar tax credit on down payments for first-time homebuyers who earn less than $50,000 a year.

At first glance, these proposals might sound reasonable; a lot of important purchases are expensive in our economy, so government should help the young pay their bills. But the problem isn't that the economy somehow spawned these problems out of nothing, or out of some kind of cosmic spite against youth. In reality, government interference in the economy -- exactly the kind of interference Demos, Panoke, and others wish to increase -- is the culprit.

Look at college costs, a lightning rod for lamentations, especially with the start of a new school year upon us. According to data from the College Board, over the past 20 years, inflation-adjusted charges for tuition, fees, room, and board rose roughly 80 percent at four-year institutions. But aid per full-time-equivalent student -- the majority of which came through government -- rose 163 percent. Any question what enabled college prices to rise so high?

Comparable dynamics have been at work in the housing market. Mortgage tax deductions, for instance, have induced people to demand more -- and more expensive -- houses than they otherwise would, thus driving up prices. Similarly, while rent controls have kept apartments cheap in many cities that are attractive to young adults, it has also limited the overall supply of rental housing and made non-rent controlled apartments extremely expensive.

Finally, there is the famously skyrocketing cost of health care. Its cause is no mystery. According to the Centers for Medicare and Medicaid Services, in 2002 nearly 46 percent of personal health care expenditures were covered by the government, and after insurance only about 14 percent were covered directly by patients. That's right: the people demanding the treatments picked up only 14 cents of every dollar spent on them. So long, economizing!

Generation X and Y spokespersons probably understand what's going on: when government subsidizes purchases, prices go up. So why do they insist on blaming the economy for young adults' woes rather than the government policies -- and the baby boomer parents -- that created them? Because twenty- and thirty-somethings want the same subsidies their parents got.

Unfortunately, politicians are hungry for new constituents, and they seem prepared to meet the demands of the young. Indeed, only a few weeks ago the Democratic Leadership Council introduced the American Dream Initiative, proposing that the federal government spend $150 billion over ten years to entice states to keep college prices down (read: dump their costs onto state taxpayers), and create a $3,000 tax credit for post-secondary training. The initiative also promises universal health care for children -- a boon for young parents -- and lower patient costs for prescription drugs.

Twenty-something activists, of course, want all of these benefits. But to get them, they have to blame the economy, not the government, for their troubles. Otherwise, at the very least they'd eventually have to explain to their own children why they knowingly saddled them with burdens even bigger than their own.

At first blush, the couple seems sympathetic. We see their tiny apartment. We see them eating modestly, and we see the foreboding amount of money the couple will have to eventually pay back — more than half a million dollars.

But take a closer look. In the report, the two are drinking Starbucks coffee, a pricy habit for a couple so worried about expenses. In another scene, we see a bottle of water on the table where they're eating a modest meal. But it isn't tap water. Or even bottled water. It's Vitamin Water, one of the more expensive brands of water on the market. Between them, the two have attended Columbia, NYU, and MIT, three of the most expensive schools in the world.

And the couple has planned a destination wedding in Jamaica.

My colleague at the Cato Institute Neal McCluskey crunched the numbers, and found that even using the most conservative of income projections, Mr. DeBonis and Ms. Lust can expect to make some $8.2 million over the course of their lives, a tidy $7.7 million profit on the investment they made in their education. If only everyone had it so rough.

Feel free to scoff, then, when the couple mugs for the cameras and delivers lines like, "We'd like to save, but we just don't have any money."

I don't mean to pick on DeBonis and Lust. But their story and their complaints are troubling and all too common. Today's youngest workers have been spoiled by prosperity. They have wholly unrealistic expectations about the professional world, expectations driven by a sense of entitlement and brought on by America's historic prosperity (a good thing) and a political culture that too often turns to government to remedy all of its problems (a dangerous thing).

Unfortunately, the media continues to give the "woe is me" crowd attention. And the result may be policies that are only going to make things worse.

The same CBS News report, for example, also interviewed Anya Kamenetz, author of the book "Generation Debt." Kamenetz has become what you might call the Robert Parker of white, upper middle-class whine.

The 25-year-old began her journalism career with an unpaid internship at the Village Voice, a weekly newspaper in New York City. There, she began writing columns about the burdensome debt looming over the 20-something crowd, and — in a striking fit of self-pity and grand delusion — how it's more difficult to be a young adult today than it's been in generations.

As Slate's Daniel Gross has noted, Kamenetz's self-pity shtick falls far short of authentic. The Yale-educated daughter of two successful novelists is married to a Google engineer and has already had some success in her own right.

When Kamenetz complains that she was forced to send expensive flatware, silver candlesticks, and crystal vases (wedding gifts, you see) into storage because they wouldn't fit in the "insanely narrow" kitchen she rented in a trendy neighborhood in one of the most expensive cities in the world, well, it's hard for many people to sympathize with her "plight." And understandably so.

Since her book came out, Kamenetz has gone on to publish in the New York Times, The Nation, the Washington Post and a host of other esteemed publications. Her most recent was an op-ed in the New York Times excoriating the rite of passage of the unpaid internship, and the exploitation of young college kids' idealism and hard work for — horrors! — corporate gain.

"Unpaid internships are not jobs," Kamenetz wrote, "only simulations."

Of course, Kamenetz herself parlayed an unpaid internship into a regular column at a respected newspaper, lucrative book deals and plenty of op-ed space on the most vaunted real estate in journalism — all of which she uses to bemoan just how tough it is for a kid like her to catch a break.

There are some serious economic issues here. The problem is that Kamenetz and her supporters don't quite grasp the extent of them. Student loan debt is a problem, as is the spiraling cost of higher education. But these problems have been caused by the entitlement culture. Giving more government money to students will only make them worse.

Higher education tuition began to soar at about the same time our politicians decided that the government should make it possible for virtually everyone to go to college — that is, when the federal government essentially created a college-education entitlement.

The widespread availability of federally backed loans and grants created a glut of college applicants. Higher ed became a seller's market. Most colleges today have far more applicants than slots in incoming freshman classes. That means they can charge whatever they please, and there's no incentive to keep costs low (or, for that matter, to experiment, innovate or offer a better education).

It's of no coincidence that the cost of tuition at a private college has risen at a rate just about equal to the federal ceiling on student loans.

The solution is not — as Kamenetz has advocated — more government grants. Grants provide even less accountability than loans. We're more likely to carefully spend money that we have to pay back than money that's given to us. More grants won't force students to shop more carefully for a good education and, therefore, won't reign in the cost of an education.

The solution is to put more consumer pressure on higher education by getting government out of the business of paying for it. Competition made America's colleges and universities the best in the world, not government subsidies. Increasing the government's role in higher education will devolve our institutions of higher learning into something akin to the public schools.

But advocates like Kamenetz have bought into the entitlement culture. They believe that not only do they have the right to an Ivy League education, they have the right to an inexpensive one — and to a chic apartment in a cool neighborhood in an expensive city to boot.

Lust told CBS News, "It makes me upset that I have to maybe not do what I want to do because I won't be able to pay my bills at the end of the month."

Of course, the number of people who actually get to make a living "doing what they want to do" is exceedingly small. The number who get to do it straight out of school is even smaller.

This is the way entitlements work. They create dependence and complacence and then, inevitably, demands for bigger, better and broader entitlements. The only difference with student loans is that we get to see the process at work in people who already have plenty.

Instead of trying to elicit sympathy for young people who are doing just fine, perhaps media outlets could run a segment or two examining the possibility that maybe — just maybe — government is part of the problem, here, instead of the terminal answer.