An important piece of the puzzle in the crisis of public higher education in the United States is detailed in this New York Times column by Peter Orszag: Federal government shifts in Medicaid costs onto states are correlated with states' cutting higher education budgets. Pull quote:
Our research suggests that states tend to rob education to pay for Medicaid during economic downturns. And when the economy recovers, the money for education usually doesn’t get restored.
The relation between state and federal spending is a refrain of Krugman's pieces in the NYT, such as this one, "1938 in 2010." (It's a testament to the right-ward shift of American politics that a straight-up Keynesian like Krugman is considered a "leftist" by many today. Using "straight-up" in the old-man-desperately-hoping-this-is-still-relevant-rap-vocabulary style that I tend to favor: here's a link to the justly celebrated Keynes vs Hayek rap video.)
On many of the relevant topics of the crisis, an important reference is Christopher Newfield. This article of his at aaup.org on internal university budgeting procedures ("cross-subsidies") is particularly interesting.
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