Unexpectedly Intriguing!
September 22, 2010

We didn't set out to go looking for it, but we couldn't help but notice what would appear to be a really unique correlation between the average annual tuition at a four-year higher education institution in the United States and the total amount of money the U.S. federal government spends every year.

U.S. Total Federal Outlays and Average Annual College Tuition (multiplied by a scale factor of 243) vs Median Household Income, 1976 through 2008 To better see that correlation, we mashed up our charts indicating the presence of an unsustainable bubble in U.S. higher education with our chart showing the level of federal government spending, covering the period from 1976 through 2008, which includes all the tuition cost data we have.

We then multiplied the annual tuition cost data by a scale factor of 243, which indexes the data to the year 2000, and show the data plotted against household median income for these years.

What we find is that changes in the average cost of college tuition closely pace the growth of total U.S. federal spending, and has done so almost perfectly since 1998.

This correlation suggests that the U.S. federal government is directly behind the bubble we observe to exist in the cost of U.S. higher education, with federal spending during years of recession effectively insulating U.S. colleges and universities from the nation's economic circumstances by subsidizing their operations.

Nominal Average Annual Tuition and Required Fees vs Median Household Income in the United States, 1976 through 2008 These subsidies, delivered at times of recession, free U.S. higher education institutions to set the price of their tuition independently of their students' ability to pay based upon their or their family's current household income.

The only limiting factor for U.S. higher education institutions then would be the actual growth of U.S. federal spending. This would be why the average cost of college tuition in the United States would appear to have come to track the total level of federal government spending so closely.

As a result, the cost of college tuition has skyrocketed with respect to the typical family's household income. Consequently, when a student attends college today, they must increasingly rely upon subsidies from the federal government that fill the gap between what their institutions charge and what they must pay for out of their own pockets.

And if that spending cannot be be sustained, then what we have is a very large bubble in both U.S. higher education and U.S. federal spending.

Coming Tomorrow

We'll take a more traditional look at how strong the connection is between U.S. federal government spending and tuition....

Labels: ,

About Political Calculations



blog advertising
is good for you

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts

Applications

This year, we'll be experimenting with a number of apps to bring more of a current events focus to Political Calculations - we're test driving the app(s) below!

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

Visitors since December 6, 2004:

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button

JavaScript

The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links
Charities We Support
Recommended Reading
Recommended Viewing
Recently Shopped

Seeking Alpha Certified

Archives
Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.