‘The One Percent’ and the Rewards of Education: Collecting the Revenue Necessary to Send More Americans to College Is Vital

Posted in: Education

One of the most worrying aspects of the Great Recession and its aftermath is the anger and vindictiveness that we now see in so many areas of our civic life.  Hard economic times understandably bring out the worst in people.  Thus, it is unsurprising that, with the economy still hurting, some Americans would become receptive to misleading arguments that they would otherwise never find convincing—arguments that, in many cases are directly harmful to their own interests.

Even worse, far too many politicians see opportunity in fomenting anger among the populace, in order to advance their own longstanding ideological agendas.  The current extreme turn in the Republican Party is a good example.  Republicans have adopted some of the mostly shamelessly opportunistic political agendas that American politics has yet seen—inciting hatred of immigrants, imposing self-defeating budgetary austerity, and attacking the environment (and science more generally).

As I discussed in my Verdict column last week, another of these concerted attacks on the best interests of the American people involves an extended assault on our educational system, both at the K-12 and at the college level.  The argument we are hearing from Republicans is that taxpayers should not pay for other people’s college educations (and maybe not even their primary and secondary educations), because college is supposedly a waste of money.

We are told that colleges in the United States are inculcating the young with crazy lefty ideas, and that people who want an education should pay for it all by themselves.  Yet this argument ignores the basic economic insight that college is one of those goods that deserves to be supported broadly, because of the benefits it confers on all of us, not just on the college graduates themselves.

“College is a waste!” is the right’s rallying cry.  Bizarrely, however, there is a contradictory claim that is also being voiced by the political right.  That claim holds that college is not only of value, but also so valuable that it explains all of American inequality.  This faulty chain of reasoning then leads to a completely bizarre twist, with Republicans asserting that the value of higher education requires us not to raise taxes on the wealthy.

Hence, we hear that college is not a waste, after all.  It might seem that, when faced with two contradictory claims, one of them would have to be right.  In fact, however, both of these claims are wrong.  College is not a waste.  And college is not, as some claim, the reason that “the one percent” has pulled away from the rest of us.

We can, and we should, make our tax system more progressive.  Doing so would not only directly address the current gross inequality of incomes in the United States, but also allow us finally to fund America’s educational system adequately.

The Value of Education: America Stands Still, While the World Goes to College

In the dying days of his obviously doomed Republican Presidential bid, Rick Santorum has been caught making the utterly false claim that California’s state universities are not offering any American History courses.  He was completely wrong, of course—and even if he had been right, his claim was not that we should support those universities to the point where they can hire enough historians to teach a full curriculum, but rather that universities are simply too un-American to teach American History.  His was a Culture War claim, not a call for more support of higher education (which, as I mentioned in my column last week, Mr. Santorum associates with snobbery).

Even though Santorum’s clumsy falsehoods were easily debunked, it is true that colleges and universities in this country are being forced to cut back on their offerings.  The result of conservatives’ longstanding attacks on the funding of American colleges and universities is predictable:  We are falling behind.  Our once-great universities are being bled dry, with curricula being cut, and departments being shuttered.

The results of this long-term conservative assault on higher education—an assault that is being intensified by the ugly public mood of the post-Great Recession economic slog—are showing up in our loss of international competitiveness.  Data from the OECD (the organization representing all the world’s advanced economies) shows that, for people aged 55-64 in 2009, the United States stood with Israel, Canada, and Russia as the only countries in which over 40% of that age group had attained college-level educations.  (See the chart here.)  This was more than 10% higher than any other major country, including the United Kingdom, France, and Germany.

The decades since those early Baby Boomers went to college, however, have not been good ones for the U.S.’s competitiveness when it comes to higher education.  Rather than progressing, we have simply stagnated, with the same percentage of 25-34 year-olds attaining college as their parents’ generation.  These statistics are bad enough, in that they represent the reality that no progress was made over an entire generation.  What is worse, however, is that we have now dropped to sixteenth in the world in this crucial indicator of future economic progress.

In short, we have rested on our laurels.  Convinced that our great universities were either adequately funded or (in the preferred story of the conspiratorial right) undermining American greatness, this country has allowed our educational system to decay.  The unprecedented damage over the last few years, moreover, promises that things will become much worse, unless we change course.

The One Percent and College Degrees: Applying a Little Bit of Statistics 101 to the Claim That Education Explains American Inequality Disproves That Claim

The emergence of the Occupy Wall Street movement in 2011 put a spotlight on America’s extreme levels of inequality, moving them back to the forefront of public debate.  The responses from conservative defenders of the wealthy, when this dramatic inequality is raised, has ranged from (1) denying that there is a meaningful definition of what it means to be “rich” (which is simply a weak attempt to say that, when it is difficult to draw lines, we should not even try to do so), to (2) claiming that there is enough mobility among the American population to make inequality tolerable, to (3) claiming that taxing rich people will simply make them fold up their tents and go home.  Each of these three core claims has been repeatedly and soundly refuted, and there is no need to go back over them here.

The argument that is relevant to this discussion, however, holds that American inequality is the inexorable result of the fact that not all Americans have gone to college.  For example, a recent analysis, after showing that there is a strong correlation between educational attainment and income, drew the following inapt conclusion: “[These data show] about as clearly as you can that America’s income gap is really an education gap and not the result of tax cuts for the rich.”

American inequality, however, does not divide along the college/no college line.  “The one percent” is, if anything, an overestimate of what percentage of the population has been receiving the bulk of the economic gains over the past generation (and, even more extremely, over the past decade).  The real gains have been received overwhelmingly by the top 0.1%, and more extremely still by the top 0.01%.  With roughly 40% of American adults having attained college-level learning, it is thus absurd to claim that the increased inequality that we currently see is caused by differences in educational attainment.

Ironically, this logical error is one that a good college education would allow us to avoid.  Yes, it is true that college is worth the price of attending from a financial standpoint: A higher education raises people’s lifetime incomes well above the levels achieved by most people who stop with a high school education.  That fact, however, tells us nothing about the growth of inequality in this country.

As noted above, college attainment in this country has stagnated.  And, given that college graduates will (because college is a valuable investment) make up the top end of the spectrum, we can be sure that college graduates will tend to dominate the top income levels in this country.  Even so, the share of income received by the top one-fifth of the population—excluding the top one percent—has stagnated since 1979, while the top one percent’s share has more than doubled during that time.  (See chart here.)

College pays, but almost all college graduates saw their (higher) pay stagnate over the course of the last generation, along with everyone else’s—except that of the top one percent.

Moreover, if the argument is really that we have a highly unequal income distribution because we have highly unequal educational attainment, what logically follows from that?  Surely, our conclusion should be that we should try to broaden educational attainment—that is, to try again to expand access to college for all Americans, not just those from families that can afford it.  But the right concludes instead—illogically and bizarrely—that we should leave bad enough alone and cut taxes on the rich, while continuing to bleed our universities dry.

Taxing High Incomes Is Not a Tax on Education, so Progressive Taxation Is Not a Drag on Economic Progress

Even after making such a basic statistical error, some opponents of taxing the wealthy go ahead and double down, arguing that taxes on high incomes are essentially a “tax on education.”  And if we want to encourage education, why in the world, they ask, would we want to put a tax on it?

This bit of sophistry simply tacks on the word “education” to the traditional argument that all taxes are bad.  As I discussed in a recent Verdict column, it is always possible to make the abstract claim that any tax will discourage someone from doing something.  Isolating a tax proposal, and saying “But this could have some bad effects” is a familiar deception.  At best, it is a half-truth.  At worst, it is simply dishonest.

Taxes, like all aspects of life, can affect people’s incentives and alter their choices. We know that.  How much people change their behavior is what we would need to know to evaluate a given proposal.  There is, however, simply no research at all indicating that people choose not to go to college because of changes in the tax rates on high incomes.  The very idea that the Obama Administration’s proposal to allow the Bush tax cuts on the rich finally to expire, increasing the top tax bracket from its current 35% level back to its 1990s level of 39.6%, will cause some people not to go to college is absurd.

And even if there were such an effect, it would have to be weighed against what we could do with the money collected via taxation.  Even if some people are so tax-phobic that they would choose not to become wealthy enough to be subject to a higher tax rate, we could still use the funds collected from the higher tax rates on the wealthy to finance Pell Grants and other forms of public support for higher education.

The net result of such a policy would be that the tiny fraction of people for whom college was an option, but for whom the benefits they would reap from college are insufficient to move them to enroll, would keep their high school diplomas, while those for whom college was otherwise an unattainable dream would be enabled to improve their lives and the lives of their children.  That seems like a more than fair tradeoff.

One of the major problems with America’s system of higher education is, after all, inequality of access.  It is true that college is not the best choice for everyone.  It is essential, however, that those who could benefit from college have the opportunity to make their own choices about whether to enroll, not based on affordability but on their own readiness to tackle a higher education.  The Republicans’ longstanding antipathy to higher education—which has grown in intensity in the last few years—exacerbates the problem of college affordability for millions of Americans.

Increasing taxes on the richest Americans will not make their children opt out of college.  It also will not make college graduates less successful, either in absolute terms, or in comparison to high school graduates.  While high school graduates’ low incomes are a serious problem, that problem can also be addressed by collecting tax revenue from the people who are most able to afford it.

Higher education is essential to the future prosperity of this country.  We can secure that future by understanding that increasing taxes on the wealthiest members of our society will do nothing to harm our educational advancement, and that it will provide crucial funds to undo the damage of decades of malign educational neglect.