Lake Wobegon Economics and the Welfare State

Gary North reports:

The major beneficiaries of the welfare state from age six to graduation are local government employees through high school, and state government employees through college. The educational services that are actually delivered to the students through upper division in college are probably worth less than 10% of total expenditures. If we count Salman Khan's Academy as a legitimate and effective source of education, which is delivered free of charge to over 26 million enrolled students, then the entire public school system above the fourth grade to high school graduation is mostly wasted. This money goes to bureaucrats who are the primary beneficiaries of the wealth transfer. The great beneficiaries are the administrators. Then come the teachers. Then come janitors, school bus drivers, and support personnel.

In other words, with respect to the educational expenses, most of these expenses are not given to the poor; they are given to the middle class. The welfare state system, age six to age 18, is built in the name of the poor, but the great beneficiaries of the entire educational system are middle-class people who have gone through certain bureaucratic hoops. Some of them are upper middle class in terms of income.

The growth of compulsory education after World War II has been the main source of the wealth transfer through high school. Above that, it was the G.I. Bill of Rights, which expanded primarily tax-funded state universities. Again, as we can see with online education, something in the range of 95% of the entire collegiate educational expenditures benefit the tenured bureaucrats who have gained their offices through bureaucratic survival. The benefits are not going to the students or their families. We know that the first two years of college are essentially wasted academically. The students don't learn much of anything. The net returns on the collegiate educational experience is limited to those students who make it into upper division, and who then graduate.

So, with respect to where the money goes, the welfare state prior to graduation is primarily a transfer of wealth from taxpayers to bureaucrats. The net return for the alleged beneficiaries is in the range of 10% of the wealth extracted from the taxpayers.

An article well worth your time.