Fed’s Best Investment: Higher Ed

Americans want not just a fix for the economic crisis, but-characteristic of our national temperament-a quick fix.

It is imperative that we stabilize the financial system and stimulate the economy, and of course we should act quickly. Still, in this singular moment-at the dawn of a new presidency, where the political will exists for enormous public investment-we should pause to reflect on whether we can obtain long-range dividends even as we satisfy our immediate objective.

I am shocked by the failure of the policy discussion to emphasize a form of investment that would both create significant immediate stimulus and provide a serious investment in the preparation of our nation's citizens for the idea economy of this new century. Among the most potent of stimulus ideas would be a serious investment in higher education.

In an earlier time, our leaders acted decisively. Six decades after its passage, we think hazily of the G.I. Bill as a "thank you" to veterans, designed principally to offer them a college education. In fact, it was intended to prevent the severe economic dislocation that could result from millions of returning vets flooding the job market. Yet its greatest effect was felt over the long term: It created a wave of learning and creativity that has lasted for three generations.
In contrast to the most recent stimulus package (which delivered only 40 cents on the dollar), a stimulus package with a strong higher-education focus would put every dollar into the economy.

This very day, millions of families are wrestling to find a way to send their children back to college or graduate school in the spring, and colleges and universities are struggling to find loans to fund construction projects that will enable them to provide a better education to those children. If we provide poor families with grants for education, every dollar automatically will be spent. If we make it easier, through more extensive government loan guarantees for middle-income families, to borrow the money for tuition, every dollar borrowed automatically goes into the economy (and the government spends only the small amount needed over time to cover defaults). If we provide credit enhancements for colleges and universities to build laboratories and classrooms, we generate construction jobs even as we build incubators of innovation and creativity.

Perhaps it is asking too much to request a return to the notion that higher education is a "public good." That would mean making it really possible for every meritorious student to attend the best school for him or her. But it should at least be possible to imagine a world where higher education is viewed as a quasi-public good. This would mean that the government would move aggressively to provide meaningful grants to allow bright young students from poor families to attend whatever college or graduate school was best for them, to provide credit-enhancement guarantees to all families with incomes under $200,000, to provide credit enhancement to qualifying colleges and universities to support construction projects, and to provide more money for peer-reviewed research projects in science and technology.

Our higher-education sector is the envy of the world, but the troubled economy could jeopardize this treasured asset.

Some colleges and universities, major employers in their regions, will face catastrophe if their students do not have the money to return to campus in the spring. Other colleges and universities, strong enough to survive whatever challenges are ahead, are prepared to begin important projects but are hesitating.

We have a small window to change the way we think. The Obama administration will need to make its economic decisions soon, but will quickly face the daily exigencies that nudge even the most disciplined of administrations off the path of pursuing big ideas.

So let's embrace a way of thinking that looks beyond the immediate. Let's create a stimulus package that seizes the unique capacity offered by an investment in higher education.

John Sexton is the 15th president of N.Y.U. and former chair of the Federal Reserve Bank of New York.