This is a lightly edited transcript of the January 16 edition of Right Now With Perry Bacon. You can watch the video here or by following this show on YouTube or Substack.

Perry Bacon: Marshall Steinbaum is an economist at the University of Utah. He’s a fellow at the Jain Family Institute. If you have a Twitter account, overall he’s just a very smart guy who has a lot of interesting insights—mostly about economics, some about higher education—but just somebody I’ve enjoyed following and reading. So, Marshall, thanks for joining.

Marshall Steinbaum: Great to be here. Thanks for having me. That’s a very flattering introduction.

Bacon: What I want to get into today is that you co-wrote a memo—a proposal—70 pages long. I’m trying to think of the right way to describe it. Anyway, it was co-written by you and a fellow named Andrew Elrod, and it’s a look at what higher education policy should be. The title is Rebuilding American Higher Education: From an Engine of Inequality to a Pillar of the Public Interest.

The reason I was so interested in this is that we’re having a higher education discourse in which the Republican Party and the Trump administration are very opposed to college and higher education as we know it—it’s too liberal, it’s too woke, whatever words they use. But if you listen carefully, a lot of their criticisms are shared by what I would call centrist Democrats, for now. In more polite language, they say colleges are wrong, colleges are too elite, colleges are too radical, and so on. And you, of course, saw the repression on campuses that happened when Joe Biden was president.

So I think there is a critique of higher education on the right, and there’s a critique on the center left that are different versions of the same thing. And what you bring is a different critique of higher education, with different solutions. So I want to start there. In your view, what are the main problems of American higher education?

Steinbaum: So I think it all comes down to the phrase institutional stratification and segregation. And that is on all sorts of dimensions, like income and wealth as well as race and ethnicity and nativity, for that matter.

Basically, what we have now in this country is a higher education system that consists of heterogeneous institutions that each enroll homogeneous student bodies. And what was different in the past is we had at least a more egalitarian system where you had more homogeneous institutions relative to now, enrolling a more heterogeneous student body.

So in economics terms, I call that a pooling equilibrium that has collapsed to a separating equilibrium by means of cream skimming. That is to say, due to the privatization and plutocratic takeover of higher education, institutions are increasingly trying to pick and choose their students for getting the maximum ability to pay so they can charge the highest tuition.

For public institutions, that typically means trying to recruit—or I should say for public flagship institutions, that means trying to recruit across state lines, enroll out-of-state students because they’re worried about a budget model that relies too much on state appropriations.

There have been some cuts, although I think the degree to which there’s been austerity in higher education is actually somewhat overstated in the discourse. There’s certainly been austerity in some sectors and some reaches of higher education, but it’s really what is being funded as opposed to the amount of funding.

And the institutions that we have are trying to accommodate themselves to this world where there’s less public funding available or it’s key to different programming that the institutions put together. And instead they’re trying to reach out and get the students that come with the dollars that they think will keep the doors open.

And that means basically whereas there used to be a place in the public systems for a variety of different students, each of them able to access a high quality of education, now it’s more like where you start in life dictates the type of institution they are going to have access to. And that’s behind a lot of the public dissatisfaction and loss of trust in the higher education system that isn’t articulated by the elites either of the right or of the center left as you described to begin with.

Bacon: OK, let me say this in super-simple terms. Community colleges and non-flagship institutions often enroll a lot of lower-income students and a lot of students of color.

Then you have flagship schools—say, the University of Michigan at the high end, but even places like the University of Alabama—these more elite, publicly funded state schools that are trying to enroll higher-income students. They tend to have whiter student populations who can pay their way, and they even recruit out of state.

Then you have the Harvards and Dartmouths, which of course enroll very few students, but are very homogeneous. They talk about diversity a lot, but in reality they have a very homogeneous population, particularly in terms of income, wealth, and whether their parents went to college.

So you have that. And there was a period in America when a lot of colleges enrolled all three of those groups at once.

Steinbaum: Yeah, that is a very good summary. I would say the one point that neither of us has made so far is the calibration, the reengineering of the sort of mid-tier state school away from providing an academic education that’s broadly applicable to a student population that is mostly in state, both in the past and in the present. They’re not offering that anymore, and they have accommodated themselves to the world of plutocracy and privatized funding by converting solely to a sort of workplace training model.

And that’s especially important to highlight in the present discourse where a lot of political elites are saying the problem with higher education is that it’s not keyed to the real world enough, that you have woke professors teaching unimportant subjects to students that don’t need that kind of an education in order to do the jobs that are actually available on the market.

The fact is that is the way in which the higher education system has already been reengineered. This is why I say the elite reaction to the current loss of trust seems to be more of the same. “More of the same” means disinvestment from academic programs serving a nontraditional population by means of the broadly accessible state four-year institution, and instead replacing that curriculum entirely with workplace training. And it doesn’t even serve students’ interests narrowly in the workplace.

That’s the point that I would make about this as a labor economist, which is, you think this is supposedly more relevant because it’s teaching you the skills for the jobs that are actually available. But what it’s actually doing is letting employers dictate the curriculum and transferring the cost of training for the jobs that those employers are offering from the employers themselves to the students in the form of tuition and student debt.

They figured out how to transfer the job training to the students and they dominate the curriculum. And that kind of ties students to being pre-dedicated to a given career and specifically a given employer.

What I study from my work on labor economics is the dependence of workers on employers and the coercive ability that confers on employers. Basically, I view this erosion of the academic potential of the mid-tier state university as one mechanism by which employers exercise control over their workers. Teaching workers the curriculum that they need for the jobs of tomorrow—or whatever the buzzword is—is really tying workers to their future employers and eroding their ability to earn money in the labor market because basically they don’t have any broadly applicable skills or fewer of them.

Bacon: So, to be a little bit more reductive again on my end, at least in the political discourse I follow a lot on the right, what you end up with is this: They’re complaining about—again—are they complaining about you in different ways? And when I say you, I mean your work. You’re for forgiving student debt. You’re for a different economic system.

When I listen to Josh Shapiro and other politicians complaining about higher education, what I think I’m hearing is that Republicans don’t like college professors and elite universities because those professors say things that are to the left of them. They advocate for an economy that is less capitalist, and so on.

But I think something similar is happening on the center left. The professors who are “too woke” are actually a very small number of people who have public platforms, who also have a lot of intelligent thoughts. And following your Twitter feed, I do get the sense that Joe Biden’s White House staff probably did not love you, and would probably love to say, All college professors are like that guy.

So we have a class of people—at a lot of colleges—who are highly intelligent and who do not share the views of the elites of either party. That’s what’s actually going on here.

Steinbaum: It’s interesting to think what either the right or the center left think of me in particular as a professor with a public platform who articulates—I like to think—potent criticisms of shared higher education policy consensus. I’ll reserve judgment on what they think of me.... I do think broadly both sets of constituents, what they don’t like about the higher education system is that it permits relatively high-prestige, relatively well-remunerated employment to their critics. So definitely on the right, they think I should be dismissed basically on the basis of my ideology.

On the center left, I would say, as far as I have interacted with this world, it’s really not as much of an ideological critique, but more of a generational one. It’s basically: We senior policy people or professors, or however you want to conceive it, have been trying to defend the higher education system from its critics for 30 years, way before you got here, you young upstart. And the way that we’ve done that is by resting the value of the higher education system on the promise to increase individual earnings.

So labor economists doing new—self-flattering, but I’ll say groundbreaking—work in labor economics, you’re coming into the higher education system and saying, No, you’ve got it all wrong. You’ve misinterpreted what the purpose of higher education is in the labor market.

And they’re like, That’s not helpful. We had a good defense of higher education going on the basis of its promise to increase individual earnings. And now you’re coming in and saying it doesn’t increase individual earnings. You’re the problem because you’re undermining the foundation on which the higher education system that we have defended has reconstituted itself.

Bacon: You made this point about elites versus the public. Why do you think the public is down on higher education? Because this is interesting—your theory is interesting. Why does the public have very different concerns that we’re not addressing? Cost is obviously one concern, and that’s always been there, but what else is there?

Steinbaum: Yeah, so the elite consensus critique of higher education is in the nature of what we’ve already been discussing: that it is a bunch of overpaid, overconfident professors that aren’t doing anything that’s really worthwhile for the public.

And crucially, what is true about the elite critique is that it doesn’t center what I think is wrong with the higher education system, which is plutocracy.

So the public’s critique of the higher education system—what I like to imagine myself more aligned with—is: This system used to be available to us. It used to be part of the local fabric of the economy, both from where I’m going to send my kid that offers an affordable higher education. That’s where I want my kid to go—the university that I’ve been paying tax dollars towards my whole life, and they’re going to be living in this state too. That’s part of what this local, geographically demarcated society is about, is supporting this higher education edifice.

That’s been closed off by the withdrawal of state funding. What I articulate in the papers, what I view as this downward spiral is where state governments that have been taken over by plutocrat-serving legislators say, We’re going to cut higher education.

The state flagship institutions that have some ability to recruit out of state and do the University of Alabama model: OK, fine, just basically deregulate us completely, make us, to all intents and purposes, not a state institution. We’ll absorb the funding cut, or at least the funding reorganization, and we will go out and recruit higher-paying students from out of state. Just don’t make us enroll too many students from in state, because what is wrong with the funding cuts is that we needed that money in order to educate the students you wanted to educate. So if you’re going to cut the funding, don’t make us admit those students that are harder to educate—or whatever line the institutions would come up with.

The state legislatures agree to that because their main priority these days is cutting taxes for rich people. And the institutions basically are no longer available to most of the state’s population other than maybe to children of the legislators themselves.

Then next time the funding cycle rolls around, the state legislature is like, Why would we fund this? It’s basically a private institution at this point. They can support themselves by going out of state or going into partnerships with local employers or whatever. It’s no longer our business.

And that downward spiral bespeaks the alliance and the ideological consensus among the ruling class of whatever nominal ideology you’re talking about, and separates them—the higher education system and the plutocrats who run it—from the public that they’re no longer serving.

I don’t imagine that the broad majority of the United States population shares my left-wing views. But I do think they want a higher education system that they think is affordable, that offers a high-quality education to their children, and is part of the local economic fabric. And I view that as basically requiring a total, pretty radical reform to the higher education system that has come to exist over the last couple of decades.

Bacon: And now let’s come to those reforms. They were very interesting to me. OK, so the first one is direct federal institutional funding.

So you want to have colleges and universities funded by the federal government—feels really weird right now, but even without Donald Trump, it feels challenging—instead of being funded by the states. Unpack why that would be important.

Steinbaum: So not instead of by the states—that is to say, we’re talking about replacing ... there’s basically a three-legged stool in the current system. There’s tuition—student tuition backstopped by federal loans—there’s state appropriations, and there’s federal research grants.

The federal research grants not only fund research, but there’s overhead on top of that. So a big source of specifically the state flagships’ funding is basically 50 percent overhead on top of any federal research grants. So [those are] the three big pots of money that exist in public higher education.

What we propose is replacing the tuition pot with direct federal funding of the institutions. And in fact, we also propose replacing that overhead, so the federal funding would not be tied to research grants through the research agencies. It would come directly as part of the federal government’s education policy through the Department of Education........

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