Obama, the suburbs, higher education, and HENRYs

Peter Wood ties Stanley Kurtz’s new book about Obama and the suburbs to another interesting issue: the higher education bubble.

I have argued that among the factors most likely to precipitate the crash is the disaffection of families earning over $100,000 a year. Many of these families have seen the value of their home equity fall but have, with hard effort, kept their noses above water during the recession. The income bracket of $100,000 to $250,000—called “HENRYs” in marketing parlance, for High Earners who are Not Rich Yet—are a key sector for colleges and universities. These are the folks who borrow to the hilt to afford overpriced college tuitions. The bracket above the HENRYs, those earning over $250,000, are another key to higher-education finance. There are only about two million such families, but they are the top-end consumers of expensive colleges. Their willingness to pay top dollar is what signals to the HENRYs that the tuitions must be worth it.

These high income families—$100,000 and above—are concentrated in the suburbs. I have already written (Helium, Part 2) on the likelihood that these families will be forced to rethink their longstanding assumptions about the value of expensive colleges in light of the huge tax increases set to kick in after the 2012 presidential election. In the “ecology of higher education,” we are about to see what happens when we torch the canopy.

Kurtz’s book suggests that the assault on the HENRYs and the $250 K plus crowd goes beyond income and capital-gains taxes. We are in an era of emergent policy aimed at deconstructing what makes the suburbs attractive to the affluent. The “regionalists” advocate something called “regional tax base sharing,” which essentially means using state legislative power to take tax receipts from the suburbs to pay for services in the cities. The suburbanites will be faced with the unpleasant choice between lower levels of service for their own communities or raising their own taxes still higher to make up for the money they will “share” with their urban neighbors…

These are matters that faculty members, even those who enjoy life on campuses idyllically tucked away in verdant suburbs, will probably weigh lightly. But the regionalists are, in effect, working hard to diminish the attractions of the communities that form the social base for the prestige-oriented upscale colleges and universities that have for the last sixty or seventy years defined the aspirational goals of the American middle class. The war on the suburbs combined with the large increase in the tax burden may be the pincers that pop the bubble.

America is a suburban country so it makes sense that HENRYs and some of the colleges that appeal to them are located in the suburbs.

There are larger issues here. College is tied to a key foundation of suburban life: children should be cared for and given the opportunities that will help them get ahead in life. Particularly in the post-World War II era, going to college is a necessary suburban rite of passage that insures a middle-class or higher lifestyle. If college becomes too expensive for this group, it will be fascinating to see how they adjust.

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