Tuesday, June 29, 2004

Smells like price controls 

When a government official keeps saying something isn't price controls, you can pretty well guess that it is. Reporting inThe Chronicle of Higher Education today (subscribers only), Democratic presidential candidate John Kerry announced that he is proposing to spend $10 billion in "fiscal relief" to states who kept public university tuition rate hikes "no greater" than the rate of inflation. Kerry has a smattering of college proposals all of which cost some money. He proposes $25 billion overall in his "State Tax Relief and Education Fund" (of which the $10 billion tie-in to controlling tuition hikes may be a part -- I cannot tell from his website -- and has already proposed a refundable College Opportunity Tax Credit of $4000 per year for tuition for four years. He says this is all fully funded, but I cannot see where the money comes from.

Since the last time someone proposed price controls for higher ed didn't go so well, the Kerry camp is being careful how this new proposal is portrayed. From the Chronicle article:

In a conference call with reporters on Monday, campaign officials said the idea behind the tuition plan was not to put price controls on colleges. Rather, the goal was to give institutions the money they needed since many states have been forced to cut spending on higher education because President Bush's tax cuts have reduced revenues for state governments.

"States were making up for the gap by raising tuition," said Gene B. Sperling, an adviser to Mr. Kerry and a former economic aide to President Bill Clinton. "Senator Kerry does not support price controls."
It doesn't matter what you call it, though. The economics are quite clear: Raise tuition above the rate of inflation, and you lose millions of dollars. Only if there were a very high number of students with highly inelastic demand could one go beyond the tuition rate listed. Just because you use a positive rather than negative incentive scheme doesn't make one price controls and the other not. Unfortunately, the Republicans Hopefully this idea dies the same death that haven't doen much better on this idea.

UPDATE: He better work harder if he wants the Hispanic vote.