News reports indicate that Covid-19 deaths and hospitalizations are falling sharply as much of the most vulnerable population receives one of three available vaccines, and that there is good reason to hope that colleges should be able to operate relatively normally this fall simply by requiring students and staff to be vaccinated. The economic (as opposed to political) rationale for a big “stimulus” package such as the $1.9 trillion bill passed by both the House and Senate is diminishing daily, with employment rising a robust 379,000 in February.

The House and Senate bills provide funds totaling about $400 billion directly or indirectly benefit education—most for general aid to state and local governments, some of which might go to state subsidized universities, along with $40 billion or so in direct college aid. The Republicans want to spend dramatically less, opposing any subsidies for state and local governments and wanting reduced earmarked aid for colleges.

I find most “stimulus” talk dubious on multiple grounds. For example, my state of Ohio is not unique in actually having better state government finances now than usual because of previous stimulus funds and because tax revenues are above pre-Covid levels. The congressional bills would give states even more money, funds borrowed by the Feds, perhaps from foreign investors. Unemployment is not extraordinarily high and is falling, so special payments to unemployed, given during worsening recessions, seem inappropriate. News reports of massive unemployment stimulus check fraud from the previous pandemic relief effort strengthen the case against big further initiatives. We are recovering from the pandemic supply shock very nicely without much additional stimulus.

But this space concerns higher education: if stimulus funds are coming, should the universities get some of them? It is true that many colleges are facing fiscal difficulties aggravated by the pandemic. But it is also true that already some aid has been provided colleges, and the return to in person instruction in the fall should both be practical, likely, and will ease somewhat collegiate financial problems.

But the biggest argument for no additional financial aid is that we have overinvested in a highly inefficient higher education sector. Universities have faced negative productivity growth in modern times, and vast resources are wasted, as evidenced by high dropout rates and sizable amounts of underemployment amongst recent graduates. If ever there was a sector needing Schumpeterian “creative destruction,” it is higher education. The recent uptick in college closings and mergers is a healthy sign reflecting needed retrenching, aligning our higher education needs to resources available.

That said, further stimulus assistance is inevitable, containing at least some higher education component. How should the money be distributed? One thing that progressive Democrats and conservative Republicans might agree upon is that relatively rich schools do not really need additional funding. Use spending and/or endowment per student data to rule out assistance for rich schools like Harvard whose net worth well exceeds that of the U.S. government.

Second, provide assistance to schools without regard to whether they are private not-for-profit, private for-profit, or public institutions. The form of collegiate ownership is of trivial importance: what is important is whether the institution is accredited and serving student needs. The House bill reportedly discriminates against for-profit institutions that in some cases provide good educational opportunities to students.

Third, more controversially, reduce aid to schools using a disproportionately large proportion of their resources on things other than direct instruction or research, such as funding extra large administrative staffs, or ones where subsidies for intercollegiate athletics are of gargantuan proportions. I think any school subsidizing intercollegiate athletics at over $1000 per student probably should receive fewer federal pandemic relief dollars, since the school has a record of diverting substantial resources away from core academic missions arguably deserving governmental support.

Care needs to be taken in drafting subsidy relief, since universities are creative in evading rules and not always strictly adhering to standards of ethical conduct when large numbers of dollars are involved. If the Federal Reserve/government’s policy of dropping borrowed dollars out of airplanes does not throw the economy into crisis, I think markets will dramatically reduce our economic problems, including for higher education. However, unwise federal relief is likely, but keep it moderate and responsible.