Daniel Bennett recently analyzed the educational subsidies in the proposed federal budget for the 2009-2010 fiscal year. Bennett focuses on programs aimed at particular minorities and, using demographic statistics and poverty rates, compares the funding of various groups. His methodology finds large disparities in funding, with some groups receiving more than 400% more funding than others, adjusted per child living in poverty.
While Bennett focuses on racial and ethnic groups, his post demonstrates a larger and more important point: government aid goes to the politically powerful. We have already blogged about wasteful subsidies to banks. A different kind of distortion occurs when government funds are distributed: even well-intentioned government aid will not always reach those who need it most or who would use it best, and too much of it will go to those with the strongest lobby. The process is at best inaccurate and at worst corrupt.
The DiscoverScholars model offers an alternative to government distribution of aid: a direct line from the donors to the students they prefer. Donor choice eliminates the misallocation endemic to government funding, as donors can choose exactly where their money goes and what it is used for. Given all the other problems of government aid, we find the donor-driven model the clearly superior alternative.