Runaway cost of college hurts Americans more than the China trade war
If college professors are genuinely worried about the costs of President Donald Trump’s tariffs, here’s an idea. Why don’t they help out by… er… cutting the cost of college?
It’s one thing to hear complaints about the burden of rising prices on the average American household. It’s another to hear them from people who raise their own prices by twice the rate of inflation every year.
New estimates from the Federal Reserve of New York suggest — guess, actually — that the latest round of tariffs will raise prices on an average U.S. household by about $830.
The calculations are based on research from economists at top schools such as Columbia, Princeton, UCLA and Yale. These are institutions that now charge kids as much as $200,000 for a liberal arts degree.
Consumer price inflation so far this millennium has been about 2% a year.
Private colleges: Try 4.6%.
Sure, the tariffs might end up adding to the costs of things like clothing, technology, and household appliances. But the prices of these things have been falling for years anyway.
According to federal data, clothing costs less than it did 25 years ago. Ditto consumer durables . And technology costs are in free-fall. They’ve halved in 10 years.
Consider: Apple’s AAPL, -0.38% iPhone X was $999 when it was launched 2017. You can get it today, new, for $699. During the same period, says the College Board, private colleges have jacked up the cost of a degree by another $9,300. But heavens, yes, let’s worry about the crushing burden of rising iPhone prices. How will kids ever be able to afford their professors’ compulsory textbooks?
If graduates end up being crushed under their student loans, well, let’s pass those costs onto the taxpayers instead. The one thing we could not possibly do, of course, is actually cut the costs of the degrees.
Related: 20 elite universities received 28% of college donations last year — they educate 1.6% of undergraduates
At this point it seems almost gratuitous to add that these estimates about the tariffs’ “costs” from the Department of Wild Guesses and Economic Astrology anyway. They rely on a tottering mountain of questionable assumptions, piled one on top of another.
While the trade war may put some prices up, it’s far from clear which ones and by how much. People and companies adapt. Trump now wants to subsidize farmers precisely because many food prices are falling.
Read: New Fed survey finds Americans in better financial shape as expansion continues
Retailers who talked about the trade spat on their recent Wall Street earnings calls said, yes, that prices might rise. But they also said they were replacing Chinese sources with those from other countries, such as Vietnam.
And discount retailer TJX TJX, -1.04% — owner of TJ Maxx, Marshall’s and Home Goods — said of the trade dispute, in effect, “bring it on.”
Meanwhile gasoline is down 7% in a month. Crude oil is down even further. Oh, and the Chinese currency USDCNY, +0.0000%USDCNH, -0.0058% is down 6% against the U.S. dollar DXY, -0.25% in the past month.
So that will effectively result in a 6% fall in the dollar-cost of Chinese imports.
When the cost of a U.S. college degree falls 6%, call us.
Read: Why Robert F. Smith’s pledge to pay off Morehouse loans is a turning point for colleges and the billionaires that support them
Also: Happy graduation! Billionaire pays off Morehouse College grads’ student-loan debt
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