New America’s New Entitlement

The Bill and Melinda Gates Foundation has delivered a lot of money for ideas to make higher education more affordable. One of the many papers it funded came out of the New America Foundation last week, and the report contains lots of proposals for Gates to work with. Unfortunately, its backbone – making the Pell Grant an entitlement program – is a complete nonstarter. Not only does Washington need a new entitlement like the Super Bowl needed a sudden spike in hair dryer use, the Pell Grant is utterly unjust, taking from Peter and giving to Paul so that Paul can make a million extra bucks.

The first point should be self-evident. Entitlements such as Medicare and Social Security are already gigantic fiscal asteroids hurtling directly at us. Indeed, at their present rate of growth, by 2050 entitlements will likely eat up every single cent the federal government brings in, leaving not a dime for defense and other discretionary spending.

A Pell entitlement would certainly be small compared to, say, Medicare. If I’m reading NAF’s report right, the total Pell cost in 2022, after all their recommended reforms, would be about $53.3 billion. (NAF says its plan would cost $94.4 billion over the next ten years "compared to current policy." For simplicity, dividing $94.4 by ten and adding the resulting $9.4 billion to the CBO-projected 2022 Pell cost of $43.9 billion yields $53.3 billion.) In contrast to that $53.3 billion, Medicare is expected to cost about $1 trillion in 2022. But while the cost would be relatively tiny, the root pathology would be the same: a program with funding put on autopilot.

And don’t think Pell won’t sneak up to include increasingly higher-income people. No one likes seeing others get free taxpayer money, and no politician will let the "middle-class" – whoever that is – get "squeezed." Indeed, NAF tries to soften the blow for those who would lose tax deductions and credits under their plan (very good proposals, by the way) by noting that "some of the aid that these benefits provide to families with middle incomes will be replaced with the significant increases to the maximum Pell Grant that are proposed in this paper."

All that said, the root objection to Pell applies, whether it is an entitlement or not: There is no just reason for taking money from Paul and giving it to Peter so that Peter can get much wealthier. But that is precisely what Pell is intended to do: Take money from taxpayers and give it to other people so that they can get degrees and earn "$1 million more over their lifetimes." If any entity other than government were to do that, we’d call it "stealing."

The Pell Grant program absolutely should not be an entitlement – we have way too many of those as it is. Even more important, though, Pell shouldn’t exist at all. It is, essentially, legalized theft.

Comments

Entitlements such as Medicare and Social Security are already gigantic fiscal asteroids, fine. But Pell Grants would not be an entitlement "such as" Medicare, it is minuscule compared to medicare. Also if this one is theft, so is any other government program, one has no more reason to oppose Pell than one does to oppose the school lunch program or agricultural subsidies or veterans benefits. It's a government program, funded by taxes. That's just how government programs work.
All those other subsidies are bad, too. But Pell is explicitly about paying for people to go to college, and that is done explicitly, for the most part, for people to greatly increase future earnings. It's like investor seed money for others to turn a big profit, only the investor is forced into it and never gets his money back.

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Posted by: Neal McCluskey

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