January 06, 2020
Dean Baker
Truthout, January 6, 2020
Recently, Washington Post columnist Catherine Rampell reported on the negative reactions of college presidents to the idea of free public college. The context was a media dinner with a dozen college presidents, most of whom were leading non-flagship public schools, according to Rampell.
The presidents were asked if they thought it was likely that the government would adopt free college along the lines proposed by presidential candidates Senators Bernie Sanders and Elizabeth Warren. Rampell reports that no one raised their hand. When asked whether they thought free college was a good idea, again, no one raised their hand.
The negative response to the proposal of free college from a group of college presidents, assumed to be authorities on the issue, was presented as evidence that it is a policy without merit. But my experience on a completely difference issue — the case of pay-by-the-mile auto insurance – offers an alternative perspective.
A bit over two decades ago, Jim Barrett, my then-colleague at the Economic Policy Institute, and I became interested in the idea of pay-by-the-mile auto insurance. The logic is that insurance generally is paid as a lump sum, even though accident risk obviously increases with miles driven. If people paid insurance on a per-mile basis, rather than as a lump sum, it would provide a substantial disincentive to drive. (Most insurers offer low mileage discounts, but these don’t come close to capturing the difference in risk, and people still pay a lump sum for their policy.)
The arithmetic on shifting to pay-by-the-mile policies is striking. A typical policy costs roughly $1,000 a year. With most drivers traveling close to 10,000 miles in a year, this would mean that insurance would cost 10 cents for each mile driven. Having insurance paid on a per-mile basis would provide an equivalent disincentive to drive as a $2.00 a gallon gas tax for a car that gets 20 miles a gallon, and the same disincentive as a $3.00 a gallon gas tax for a car that gets 30 miles to a gallon. (The per-mile charge would vary depending on age, driving record, and other risk factors.)
Given the enormous political obstacles to a gas tax, pay-by-the-mile insurance seemed like a more politically feasible way to discourage driving and reduce greenhouse gas emissions. Jim and I decided to talk to the auto insurance industry group to get their thoughts on the issue. We hoped that they would be open-minded since the proposal didn’t in any way directly threaten their profits; it would just mean changing the way they charged their customers.
We had a couple of useful meetings where they raised potential problems in design. We tried to work through these issues and got helpful feedback.
Our next step was to have a roundtable, where we would include industry people and various policy types interested in the issue. As we tried to arrange the event, we were surprised to get a letter from the industry group telling us that they were not interested in pay-by-the-mile insurance and would not be involved in further discussions on the topic.
As a longtime Washington insider explained to me, the insurance industry was doing fine with the current system. Saving the planet was not their concern. Why should they play around with an alternative billing system?
What does this have to do with the college presidents and free college? Simple: These college presidents are all collecting high six-figure (and possibly seven-figure) salaries. Free college would be a major disruption of the way their schools operate. Why would they be interested in making their lives more difficult?
That might seem an overly cynical view of these college presidents, but if there is one lesson learned from spending a quarter of a century in Washington, it is that you can never be overly cynical about the motivations of people with power. Assuming they take the path of least resistance is generally the best bet. That doesn’t mean that these presidents don’t care about expanding access to a college education. Rather, they would prefer routes that do not seriously disrupt their institutions.
Rampell did note serious objections the presidents raised. Most importantly, she pointed out that if the actual provision of free college was left to the states (with massive federal subsidies), many might leave the money sitting on the table, as they have done with the expansion of Medicaid under the Affordable Care Act.
This and other design issues must be taken seriously by the proponents of free college. However, no one should take the negative reaction of the college presidents as a decisive factor in rejecting the proposal. Instead of being the best people to ask about free college, these presidents, given their self-interest, might well have been the worst.
