When the Philippine government announced last December that free tuition program will now cover state universities and colleges for this year (2017), I wrote: [Wow, BSP Chief Sees The Rise of Populist Politics/Retreat from Multilateralism as Scary Developments, Scary Stuff for 2017! December 18, 2016]
What is great news for populism signifies a HORROR for economics.
Yet how will free lunch welfarism not impact the government’s balance sheets, and consequently, affect the peso and interest rates and the real economy?
It appears that I am not alone after all!!!
Three of the incumbent government’s ministers submitted a position paper to excoriate or reject the free tuition program
From the Businessworld: “ECONOMIC managers said a free tuition policy for State Universities and Colleges (SUCs) will be ineffective, noting that tuition forms only a portion of a student’s expenses, while also putting the budget under pressure. In a joint position paper sent to Executive Secretary Salvador C. Medialdea on Tuesday, Socioeconomic Planning Secretary Ernesto M. Pernia, Finance Secretary Carlos G. Dominguez III, and Budget and Management Secretary Benjamin E. Diokno withdrew their support for the Free Higher Education Act, which will institutionalize free tuition for all SUCs…” [Businessworld Economic team rejects free tuition in state schools February 10, 2017]
Part of the objection from the paper was predicated on technicalities: tuition fees do not cover the entire expense of the poor: “According to the economic managers, the proposed free education is not expected to have much of an impact on enrolment by poor students. “Tuition does not comprise the biggest share of college education cost... tuition constitutes merely one-third of the total cost per student per annum,” the economic managers said. Tuition covered by the grant is only P20,000, a third of the total cost of P60,000 per student yearly. They added that the larger portion of tertiary education cost is living expenses. According to the position paper, living expenses amount to P35,000 for 10 months while instructional materials cost P5,000. “Accordingly, we argue that with the government’s provision of free tuition to all SUC students, poor families would still be unable to pay for the remaining two-thirds balance of college education cost, thereby still preventing them from sending their children to college,” they said.”
Yet the problem of technicality will likely be solved superficially with technicality: in particular, plug such holes by throwing money at them. This will hardly “sell” to a committed or dogmatic welfarist.
Then the admission of the likely gaming of the system through legal loopholes and administrative inefficiencies: “The position paper also said that the proposal for free tuition will mostly benefit those who are not poor. “An untargeted tuition subsidy to all undergraduate students enrolled in SUCs will mostly benefit those who belong to the upper 80% who can otherwise afford to pay for college education, while many deserving and qualified poor children, who are unable to enroll in SUCs due to financial constraints, will be left out,” said the economic managers.”
Again, technical problems will be addressed with technical solutions; the likely answer to this by a doctrinaire welfarist will be a means tested program
Finally, this should serve as a centerpiece of position paper:
Moreover, using government funds to subsidize tuition will only transfer the financial burden of free education to the poor as the country’s overall tax system is “regressive” in nature.
Amen!
I have made this argument repeatedly here. THERE IS NO SUCH THING AS A FREE LUNCH (TINSTAAFL)!
Nevertheless, to see key cabinet members vehemently balk at one of the core planks of the leftist dogmashould signify a momentous praiseworthy development!
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