Monday, February 2, 2009

Is College Aid Stimulating?

Andrew Taylor of the Associated Press had a 'news analysis' this weekend that states that $15 billion for college scholarships is not stimulating the the economy (this was published in The Oregonian on Saturday). As someone who has been sounding the drumbeat for education spending I take issue with this statement.  

I would argue that rather than being no stimulus, this is the very best type of stimulus. This money would go immediately to consumption spending and would also be an inexpensive way to keep unemployment down (working age adults that take this money and enroll in college would stay out of the labor market - not the same as job creation but limiting the supply of job seekers helps those left in the labor market).  As a bonus it is a huge investment in the nation's human capital and thus its long term growth prospects, more important and more long-lasting than infrastructure.  Money spent on college will translate into jobs in academics so I see no reason to expect the multiplier to be lower in this area then in infrastructure.

I am not really sure why this reporter doesn't think college scholarships is stimulating - after all, think of all the stimulated minds that will eventually drive the economy forward.


jessibeaucoup said...

I couldn't agree more!

Dave Porter said...

I tend to agree, but three thoughts:
(1) Why do the Higher Ed infrastructure funding at all? Why not just put all the higher ed funds into Pell grants, and let the universities prioritize how to spend them (after they get them all from the students)?
(2) Just how temporary (one time stimulus) would/could an increase in Pell grants be? Won’t there be big political pressure to continue them at the increase rate? More pressure, certainly, than from infrastructure projects (once completed, they’re done).
(3) How quickly would Pell grant increases give a stimulus?