President Obama outlined a new plan Aug. 22 designed to make higher education more affordable, the key provision being a new government-run rating system to compare colleges and universities according to a complicated range of factors like tuition, enrollment of low-income students, graduation rates and how well graduates do in the job market. Students enrolled at highly rated institutions would get more aid and lower interest rates.
Given such rating factors, Ivy League and other elite schools are already well-situated to benefit in a system in which federal bureaucrats control the scoring of insitutions and decide which campuses can offer the most favorable terms. In other words, bureaucrats acting at the behest of politicians like Obama will be in the driver's seat in higher education, as they already are in secondary education.
If this sounds somehow reminiscent of Obamacare — and in fact most every program Obama proposes — it should because it takes the same approach. Politicians and bureaucrats decide the priorities for allocating resources, what are acceptable outcomes and the standards underlying the services offered.
Politicizing markets protects incumbent providers and delivery systems, and prevents the innovation and competition required to keep costs down while improving consumer choice. This is true in Obamacare, which favors large corporate insurers and hospitals, just as it is in education where his approach is tilted heavily toward elite private schools and against public state schools.
Obamacare envisions paying providers by health care results instead of by procedures, although the exact formulas for how the federal government will implement this new "pay-for-performance" scheme remain a mystery. Obama hoped that insurance companies and providers would compete in Obamacare's state marketplaces, creating new innovations and cutting costs. But that isn't happening. Hospitals and insurers are consolidating. Obamacare ultimately will transform each state's largest insurer into a semi-public utility that is heavily regulated by the federal government.
Obama's higher education solution takes the same approach. Instead of the current pay-for-enrollment model, Obama wants the federal government to implement a new "pay-for-performance" system based on rating schools. Obama will then force colleges to adopt this new system by tying it to federal education spending.
The flood of new federal regulations that will inevitably follow will impose yet another layer of bureaucratic burdens on universities and make it harder for them to try real experiments that might improve higher education. Like Obamacare, Obama's higher education plan includes "regulatory waivers" for "experimental sites" that promote "high-quality, low-cost innovations in higher education," but change and progress aren't part of the curriculum when regulators have to approve every new approach.
Regulation is the enemy of innovation and change because it responds to political choices, while free markets thrive on innovation and change because they respond to consumer choices. Sad to say, this basic truth eludes Washington's professional politicians, the federal bureaucrats who do their bidding, and liberal journalists who cheer them on.