Things that Cost $8 Billion a Year

The House Democrats introduced President Obama’s free community college proposal into Congress yesterday. The total cost for the first 10 years is just short of $80 billion. That’s an average of about $8 billion a year, and a touch over $14 billion for 2025 and each year thereafter.

Sure, that sounds like a lot. But keep in mind the scale. This is a government that serves 319 million people, about 4.4% of the world’s population; it governs 6.6% of the world’s land. It takes a lot of money to do anything for something that big. I like to apply the ham and cheese test: how many ham and cheese sandwiches could we buy the American population with that money. A quick estimate from Costco puts the price of a sandwich, chips, and soda at about $2. One cheap-ass lunch for everyone would thus run $638 million.

In other words, we can’t buy every American lunch for even two weeks for the price of free community college for all many students.

What else can we buy for somewhere between $8 billion and $14 billion?

Some of these are silly, but none are cheap; $8 billion is a lot of money regardless of context. The point is to say that we spend that kind of money on things a lot less likely to get us the economic return that free community college will, let alone the other social benefits that come from education.

And we should not forget that, political rhetoric aside, the United States taxes very little. On average, federal receipts have been 17.2% of GDP in the post-war era, and 17.5% between 1951 and 2000. Right now we’re at 17.7%, and that follows four years of tax revenue lows that have not been seen since 1950. To be sure, we need to consider who will be taxed to make this happen, but it isn’t like the money is just plain not there. We are not all Greece.

Federal revenue as a percentage of GDP, 1947-2015

We waste a lot of money. We don’t ask much in taxes. Making community college free is money well spent.

Note: Some restrictions apply; see Congress for details. It turns out that there are some pretty big holes in eligibility, ones that I worry about a lot. But that’s another post. (Back)