We spend about twice as much as other developed countries as a fraction of national output. Yet our results are mediocre. Public and private spending is growing much faster than our income ? putting us on a course that is clearly unsustainable. It appears we are buying quantity instead of value. Outcomes vary wildly from state to state. And programs that target the poor seem to be backfiring instead.
I could easily be talking about health care. Instead, I'm speaking about higher education ? making some of the same points that President Obama made the other day. Unfortunately, both fields have the same problem. The entity paying for the service all too often tends to be different from the person who is supposed to be benefiting.
Spending on higher education as a percent of GDP in the United States is about twice the OECD average (3.1% versus 1.5%). Yet our results are far from the top:
The U.S. once led the world in college graduates. As an example of this, Americans age 55-to-64 still lead their peers in other nations in the portion with college degrees (41 percent). But this number has flat-lined for Americans. In 2008, the same percentage of Americans age 25-to-34 and age 55-to-64 were college graduates.
Meanwhile, other nations have caught up, and some have pulled ahead. Among this younger age group, 25- to 34-year-olds, all of the following nations now have a larger percent of college graduates than the U.S.: Australia, Belgium, Canada, Denmark, France, Ireland, Israel, Japan, South Korea, Luxembourg, New Zealand, Norway, Sweden and the United Kingdom.
Our mediocre ranking is not for lack of funds. According to Richard Vedder in the Wall Street Journal on Saturday, the explosion in college costs began about the same time as the cost explosion in health care ? with the Higher Education Act of 1965:
In 1964, federal student aid was a mere $231 million. By 1981, the feds were spending $7 billion on loans alone, an amount that doubled during the 1980s and nearly tripled in each of the following two decades, and is about $105 billion today. Taxpayers now stand behind nearly $1 trillion in student loans.
And the trend is ominous. According to President Obama, over the last three decades, fees at public universities have risen 250%, compared with a 16% rise in average family incomes.