In a 1955 essay entitled The Role of Government in Education, Milton Friedman, the Nobel Prize winning economist and a leading member of the neoliberal Mount Pelerin Society, argued that universal vouchers for elementary and secondary schools would usher in an age of educational innovation and experimentation, not only widening the range of options for students and parents but increasing all sorts of positive outcomes. Thankfully this idea hasn't been widely adopted though it is being tested in Florida with less than stellar results so far. In his essay, Friedman also touched on the role of government in higher education arguing that government should play no role in subsiding education but rather a free market should govern the sector. He envisioned human capital contracts - an "equity-like" financial instruments - which individuals would use to finance their own higher education. In his conclusion, he wrote that:

The result of these measures would be a sizable reduction in the direct activities of government, yet a great widening in the educational opportunities open to our children. They would bring a healthy increase in the variety of educational institutions available and in competition among them. Private initiative and enterprise would quicken the pace of progress in this area as it has in so many others. Government would serve its proper function of improving the operation of the invisible hand without substituting the dead hand of bureaucracy.

Whereas Milton Friedman's vision for elementary and secondary education has been mercifully been kept at bay, his free market ideas have come to increasingly define higher education in the United States as the GOP successfully cut federal subsidies to education and as state governments also curtailed their sponsorship of public and land grant colleges. For example, since 1986 the purchasing power of the federal Pell Grant program, the nation's largest need-based financial aid program for college students, has decreased by 57 percent. Since 1980, federal financial aid has been transformed-with little explicit policy debate-from a system characterized mainly by need-based grants to one dominated by loans. In 1981, loans accounted for 45 percent and grants for 52 percent of federal student financial aid. In 2000, loans represented 58 percent of federal student financial aid, and grants represented 41 percent. The results have been an unmitigated disaster for the American middle class.

Since the early 1980's, the cost of an education at American universities has been rising steadily, at two to three times the Consumer Price Index (CPI). Since 1980, through 2005, after adjusting for inflation, the average cost of tuition plus room and board at a four year public university has increased by over 120 percent. For the private 4-year institutions, tuition prices have increased by over 140 percent. The College Board reports that private college tuition rose most sharply in the early and mid 1980's, while public tuition increased the most in the late 1980's and early 1990's. If a gallon of milk in 1980 had sustained this level of increase, it would now run just over $15.00; if a gallon of gas in 1980 had sustained this level of increase, it would now run over $9.50. While the cost of a college education has more than doubled, median income in the United States has risen by 18 percent.

This is what Milton Friedman has wrought:

Most American families have lost ground in college affordability. Over the last two decades, the cost of attending two- and four-year public and private colleges (including tuition and other education-related expenses) has grown more rapidly than inflation, and faster than family income as well. As a result, the share of family income that is needed to pay for tuition and other college expenses has increased.

The principal driver of the increased cost of attending college is higher tuition, and only the wealthiest families have seen their incomes keep pace with increases in tuition. The lowest-income families have lost the most ground, and this is a major factor in their lower rates of college attendance. For example, for the lowest-income families in 1980, tuition at public two-year colleges represented 6% of their family income. For the lowest-income families in 2000, tuition at these colleges represented 12% of their income. Likewise, tuition at public four-year colleges and universities represented 13% of income for the lowest-income families in 1980. In 2000, tuition at these colleges and universities equaled 25% of their income.

Today the Washington Post has a story on the impact of all this. I can normally write with an academic detachment on free market disasters but on the subject of education, how does one one quantify the damage inflicted? Milton Friedman wasn't just wrong; he was spectacularly wrong and thanks to his nefarious and frankly crackpot ideas millions are paying the price with dreams deferred and freedoms curtailed.

The implications are actually severe. Because the costs of attending college have risen so fast, students are choosing majors and careers that are remunerative since they are coming out with higher debt loads. So whereas Milton Friedman predicted this flourishing of ideas with positive benefits for society, in fact the very opposite has occurred. English accounted for almost 8 percent of degrees in 1971, but had sunk to 4 percent by 2002; history had 5 percent back then but now gets 2 percent. The number of degrees in foreign languages and literatures has been cut in half, from 2.4 percent to 1.2 percent. Meanwhile, business degrees accounted for 13.6 percent of the nation's bachelor's degrees in 1971, by 2002 they accounted for almost a quarter of all degrees. The outcome has been anything but positive.

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The recent rash of institutional failures plaguing Wall St. has made big headlines and will only serve to reinforce the dominance of economic issues on the campaign trail.  But these high-profile financial diasasters actually obscure a more dramatic development in the economy that is leaving Republicans panicked and speechless with nowhere to turn.  The Republicans would be in deep, existential trouble on the economy even if the major lending institutions were still doing just fine.

The bigger problem for Republicans is that the very way they measure the health of an economy is going the way of the dodo.  What terrifies them (and what should terrify you) is that the economy we live in today (minus recent spectacular failures) is the economy they created by design, partially to win votes. No, I'm not kidding.

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There's a lot of bad economics news breaking now (for example, the big Stock Market drop and more predatory loan stuff, this time about Washington Mutual and Fannie Mae), but some of the best realworld economics punditry was in Counterpunch yesterday. For example, don't miss Welcome to Year 27 of the Reagan Revolution. There, Mike Whitney concludes by tearing into the fundamental problem, that U.S. economic policy for decades has been a Reagan2Rubin anti-Keynesian 'free market' madness (emphasis added throughout):

Is it possible that anyone with a pulse and a minimal ability to reason couldn't see the inherent problems of building a financial edifice on the prospect that millions of first-time homeowners with bad credit history and no collateral would pay off there mortgages in a timely and responsible manner?

No. It is not possible. The real reason that the subprime swindle mushroomed into an economy-busting monster is that the markets are no longer policed by any agency that believes in intervention. The pervasive "free market" ideology rejects the notion of supervision or oversight, and as a result, the markets have become increasingly opaque and unresponsive to rules that may assure their continued credibility or even their ability to function properly.

The "supply side" avatars of deregulation have transformed the world's most vital and prosperous markets into a huckster's shell-game. All regulatory accountability has vanished along with trillions of dollars in foreign investment. What's left is a flea-market for dodgy loans, dubious over-leveraged equities and "securitized" Triple A-rated garbage.

Let's hear it for the Reagan Revolution.

What is striking is how the new "structured finance" paradigm replicates a political system which is no longer guided by principle or integrity. It is not coincidental that the same flag that flies over Guantanamo and Abu Ghraib flutters over Wall Street as well. Nor is it accidental that the same system that peddles bogus, subprime tripe to gullible investors also elevates a "waterboarding advocate" to the highest position in the Justice Department. Both phenomena emerge from the same fetid swamp.

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Cross-posted From Patterns That Connect

With the election behind us, the task before us is enormous, more enormous than most folks realize. In a pre-election post, I raised the issue of realigning elections, wave elections that fundamentally alter the party system from one era to another. A single wave election will not do it, I argued. Past history shows we need two in a row.

But even a party system realignment will not be enough to save us--not from such looming threats as global warming, for example. In this series, I argue we must grapple with something deeper than even bringing about a party realignment: we must grapple with the power of hegemony-a high-faluttin word that basically boils down to meaning a dominant ideology in drag as common sense.  The recent death of economist Milton Friedman provides an opportunity for a glimpse at the workings of hegemony, as I'll explain on the flip.

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Good riddance. Few other intellectuals in modern history have cause such widespread human misery.

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