Krugman, Higher Education, and the Myth of Spending Restraint

March 12, 2016 by Dan Mitchell 

When I accuse my left-wing friends of deciding policy on the basis of feelings, intentions, and ideology, that’s not because I think those are bad motives.
After all, I’m also guided by many of these factors. I have empathy for others, especially the disadvantaged. My goals are to have a more peaceful and prosperous society. And I’m guided by the libertarian non-aggression principle.

What makes libertarians different is that we also think evidence matters. For instance, I like lower taxes and believe that the right kind of tax cuts produce revenue feedback, but I openly admit that the vast majority of tax cuts nonetheless lose revenue.

And I’m even willing to admit that some types of government spending may be associated with better economic performance.

Leftists, by contrast, seem very dogmatic. Government is good, they reflexively think, so more government is always better. And because they’re so committed to bigger government, they are prone to cross the line from fact to exaggeration and then from exaggeration to untruth.

For instance, when an article in the New York Times asserted that “public schools are starved of funding” back in 2012, I couldn’t help but point out that this was utter, complete, and ridiculous nonsense.

Leftists also think that higher education is starved of funding, which is perversely ironic since they created all the subsidies and handouts that have given colleges and universities carte blanche to dramatically increase tuition and fees.

As you might expect, any effort to restrain government spending on higher education is treated like the end of the world. Paul Krugman, for instance, claims that there’s not enough money being diverted to finance the school where he teaches.

Here’s some of what he recently wrote in the New York Times.

Governor Cuomo’s sudden proposal, seemingly out the blue, to cut half a billion dollars in state funding for CUNY and shift the burden to the city…would be a terrible idea. …CUNY as an institution is doing such obvious good, especially in an era of growing inequality and hardening class lines, that it’s hard to understand why anyone who isn’t the hardest of hard-line conservatives would want to undermine it. …If you look at the student body today, you see a portrait of the American dream in action: hundreds of thousands of students, roughly 40 percent of whom are their family’s first generation in college, come from households with income less than $20,000, or both, all getting an affordable education that leaves them far less burdened by debt than all too many of their contemporaries.

But it’s absurd to argue that politicians have been stingy with taxpayer funding of higher education. There have been large increases in recent decades.

Indeed, politicians have created a third-party-payer-fueled explosion in college costs because of all the subsidies and handouts.

Here are the federal numbers, as calculated by the College Board. And keep in mind these are inflation-adjusted numbers.

And here are the state numbers, also in real dollars.

To be fair, Krugman’s specific complaint is about the amount of money being spent on CUNY, so it’s possible that this institution is the exception that proves the rule.

But I would be utterly shocked if the long-run numbers showed that CUNY was being weaned off the dole. Indeed, if anybody can show a reduction (even using inflation-adjusted numbers) in the amount of government-provided handouts to CUNY over the past 10 or 20 years, I’ll commit to doing something utterly disgusting and unpleasant, such as posting a picture of myself wearing a Florida Gators cap.

It’s not just that statists are wrong about the amount of spending on education. They also appear to be remarkably unconcerned about the quality of such expenditures. For all intents and purposes, they fixate on inputs and are oblivious to outputs.

For instance, we know that a big chunk of the additional money that’s been funneled to colleges and universities has been used for bureaucratic empire building rather than classroom instruction.
One would think that this would upset folks like Krugman, at least if he’s serious about what he wrote about places such as CUNY being a “portrait of the American dream in action.”

But good luck finding a column where he criticizes a bureaucracy for squandering money. That would not be consistent with a polemical career based on feelings, intentions, and ideology.

By the way, this isn’t the first time that Krugman has pushed an agenda that’s inconsistent with real-world evidence.

• Earlier this year, Krugman asserted that America was outperforming Europe because our fiscal policy was more Keynesian, yet the data showed that the United States had bigger spending reductions and less red ink.
• Last year, he asserted that a supposed “California comeback” in jobs somehow proved my analysis of a tax hike was wrong, yet only four states at the time had a higher unemployment rate than California.
• And here’s my favorite: In 2012, Krugman engaged in the policy version of time travel by blaming Estonia’s 2008 recession on spending cuts that took place in 2009.

And if you enjoyed those examples, you can find more of the same by clicking here,here, here, here, here, here, here, and here.

P.S. For what it’s worth, I think libertarians are very intellectually honest. Most of us think that government should be providing national defense and legal protection, for instance, but that doesn’t stop us from pointing out that the Pentagon wastes money or that local police forces can be inefficient or unjust.

Unlike leftists, we go out of our way to demand accountability and performance from government, especially for programs we think are necessary.