This spring, when Mitt Romney was campaigning in Youngstown, Ohio, a high school senior asked him what he would do “with regards to college tuition … to make it easier for me and my classmates.”
Romney responded, “The best thing I can do for you is to tell you to shop around … In America this idea of competition, it works. And don’t just go to the [school] that has the highest price. Go to the one that has a little lower price where you can get an education and hopefully you’ll find that and don’t take on too much debt and don’t expect the government to forgive the debt you take on.”
For most Americans, this probably sounds like perfectly acceptable common-sense advice. But not for President Obama.
Campaigning in Reno, Nev., this week, Obama used the “shop around” line to launch an attack on Romney’s education policies.
“Gov. Romney didn’t say anything about grants or loan programs that have helped millions of students earn a college education,” Obama began. “Here’s what he said: ‘The best thing I can do for you is to tell you to shop around.’ To shop around. … That’s his answer to a young person hoping to go to college.”
So you can now add education to the long list of issues on which Romney and Obama have starkly different worldviews. Romney believes college can be more affordable if students are given more information and take the time to shop around and get the best value for their money. Obama believes college will be more affordable if government just keeps giving students more money.
Which solution is better? Let’s look at the data.
Between 1982 and 2008, the cost of attending college increased 439 percent, more than four times the rate of inflation. Over that same time frame, federal spending on higher education also increased 355 percent. Correlation does not equal causation, so we can’t definitively say that higher government spending has driven higher college costs, but it definitely has not made college any more affordable. As Obama has himself admitted in the past, colleges know they can charge more because the government money is there — and charge more they do.
The same story has played out in the health care sector, as well. In 1960, the government accounted for less than 10 percent of all health care spending, and health care spending as a percentage of gross domestic product was just 5.2 percent. Today, the federal government accounts for almost 50 percent of all health care spending, and health care spending has risen to 18 percent of GDP.
It is no coincidence that the two sectors of the American economy most dominated by government, and therefore least accountable to consumers, have also become the two most costly and inefficient sectors.
In his book The Venturesome Economy, Amar Bhide makes the case that one of the factors that makes the U.S. economy exceptionally innovative is the “venturesome consumption” of its citizens. From laptops to coffee shops, Bhide documents how consumers who are willing to take risks on new products and “shop around” are a major driver of U.S. economic growth.
He even quotes a Harvard economist who argues that one reason why the U.S. health care system is so “bloated” and “inefficient” is that government interference in the market doesn’t “allow consumers to reward entrepreneurs who lower costs by improving health.”
So by all means America, follow Mitt’s advice. Shop around.