Tag: data

The Paucity of Poor Kids in Many Public Schools

There’s a widespread belief that public schools are homogeneous and all inclusive while private schools are bastions of the elite. This was proven to be a myth decades ago by the renowned sociologist James Coleman, and as far as I know, that pattern of findings hasn’t changed in recent years.

Nevertheless, the myth continues. A new Fordham Institute paper provides a partial antidote, pointing out that quite a few public schools enroll virtually no low-income kids, making them bastions of the elite. Where the Fordham paper trips up a bit is in calling these elite public schools “private public schools.” As already noted above, private schools are, on average, better economically integrated than their government counterparts, so this phrase is exactly backwards and, as Sara Mead points out, is quite a slap in the face to the many private schools that do yeoman’s work serving large numbers of low-income students. Still, good to have folks taking note of these data.

Obama Ringing the Pell

As part of his ill-considered credentialing-to-compete initiative, President Obama wants to greatly increase both the size and availablity of Pell Grants. Under his proposed FY 2011 budget, the total pot of Pell aid would rise from $28.2 billion in 2009 to $34.8 billion in 2011; the maximum award would go from $5,350 to $5,710; and the number of students served would rise by around 1 million.  

A critical question, of course, is whether increasing Pell will ultimately make college more affordable or self-defeatingly fuel further tuition inflation. The New York Times took that up in yesterday’s Room for Debate blog.

Economist Richard Vedder has long educated people about the inflationary effect of student aid, and does so again with great clarity. It’s higher-ed analyst Art Hauptman, however, whom I think best captures what likely occurs when Pell is combined with all the cheap loans and other aid furnished by Washington, states, and schools themselves:

The degree to which student aid affects what colleges and universities charge varies between the Pell Grant and student loans. The Pell Grant has not had much effect on tuition levels in part because the amount of the awards does not vary with where a student enrolls. Institutions cannot affect how much a student receives, and the institutions that charge the most enroll the fewest Pell Grant recipients.

By contrast…there are several good reasons to believe that student loans have been a factor in the rising cost of a college education. Tuition has increased by twice the inflation rate for the past three decades while annual loan volume has increased tenfold in constant dollars.

Unlike Pell Grants…colleges have some control over how much students borrow as loan amounts. Moreover, just as one couldn’t imagine house prices being as high as they now are if mortgage financing were not available, it is difficult to believe that colleges and universities could have increased their charges so rapidly over time without the ready availability of students’ ability to borrow.

[W]e should worry…that increases in Pell Grants may lead institutions to reduce the amount of discounts they would otherwise have provided to the recipients, who are from poor families, and move the aid these students would have received to others. This possibility…is supported by the data showing that public and private institutions are now more likely to provide more aid to more middle-income students than low-income students.

So what’s likely going on? Cheap federal loans – which are available to students of all income levels and vary according to a college’s price – are probably the main direct tuition inflator. More indirectly, Pell probably encourages schools to move other aid from poorer to wealthier students, enabling the latter to pay ever-higher “sticker” prices. In other words, student aid powers tuition inflation!

Which brings me to a quick comment about the submission from College Board economist Sandy Baum, who trots out the standard “declining state appropriations”  to explain our college-price pain.

How many more times do I need to disprove this? Apparently, at least once more:

(Source: State Higher Education Executive Officers)

Public funding is a roller coaster and tuition revenue an incline. Over the last quarter century, per-pupil state and local funding for public colleges and universities went up and down, but dropped overall by a mere $8 per year. In contrast, public colleges’ per-pupil revenue from tuition (net of state and local student aid) rose more or less unabated, growing by about $73 per year. 

This – as well as the fact that private colleges are also guilty of huge price inflation – clearly belies the notion that colleges raise prices because skinflinty governments make them. That might be part of the explanation, but an even bigger part is almost certainly that colleges raise prices because, thanks to ever-growing student aid, they can.

Government and GDP

The expansion in government and poor state of the economy got me thinking about how government growth is reflected in measured gross domestic product. So here is a wonky look at the treatment of government in the Bureau of Economic Analysis GDP data.

Data notes: By “government,” I mean total federal, state, and local. For 2009, I’m using the average of second and third quarter data. All data from BEA Tables here.

GDP measures total production. In 2009, government production was 20.7 percent of U.S. GDP.  Government production is roughly the sum of government value-added (the stuff it produces itself) and government purchases. The first item, government value-added, was 12.4 percent of GDP and mainly consists of employee compensation. For example, the Pentagon produces output by adding together fighter pilots, which it hires, and fighter jets, which it buys.

A more commonly cited measure of government is total government spending. In 2009, that was 38 percent of GDP. The difference between this number (38 percent) and the production number (20.7 percent) is 17.3 percent, and represents the sum of government interest payments and transfer payments to individuals and businesses.

Figure 1 shows how the three measurements of government size have changed over time. Government production has remained fairly stable as a share of the economy, but total government spending has soared. The growing gap between these two lines mainly represents the massive growth in transfer (or subsidy) programs, such as Social Security.

12-10-09 edwardschart

How Does Government Growth Affect Measured GDP?

Consider how the recent rise in government spending might have affected measured GDP. First, let’s look first at the production part of government spending. The important thing here is that we don’t know how much government workers actually produce because their output is generally not sold on the market. As a consequence, the BEA measures their output as the sum of their compensation amounts. Also, we know the dollar value of the things the government buys, but we don’t know how much those intermediate goods actually produce when in the hands of the government. So the government production portion of GDP seems kind of shaky, despite the superb efforts of the BEA to assemble all the data.

Anyway, let’s say the government adds a new worker with pay of $100,000, the BEA measures GDP being boosted by $100,000. But it might be that the worker doesn’t actually produce anything useful, and he adds zero to the economy’s actual output.

If the government hires that worker away from the private sector, private GDP would go down by about $100,000. As a result, overall measured GDP would be unchanged. But that would be incorrect because the economy’s actual output fell by $100,000.

So let’s say the government spent $100 billion to hire a million new government workers. Let’s say half of those workers produced as much value as their salaries, but the other half produced nothing of value. The result of this government expansion would be that the BEA would overestimate U.S. GDP by $50 billion. (I am assuming that the government’s hiring doesn’t change the unemployment rate. I’m also ignoring the distortionary effects of higher taxes).  

Now let’s look at the transfer or subsidy portion of government, which equals 17.3 percent of GDP.

Let’s say the government increases transfers by $100 billion, perhaps by increasing Social Security benefits, and funding it by higher taxes on wages.

If there are no behavioral responses among taxpayers and benefit recipients, measured GDP would be unchanged, which would be the correct answer.

But of course there would be behavioral responses. The higher taxes would induce people to work less and the higher Social Security benefits would induce people to save less and retire earlier. The results would be that output would fall, and that would be accurately reflected in measured GDP.

In sum, my purpose here was not to explore how a growing government affects the economy, which is a huge subject. Instead, it was to explore whether measured GDP accurately reflects changes in the size of government. The answer appears to be that the transfer part of government spending (17.3 percent of GDP) would be accurately reflected in a shrinking GDP, but that the production portion of government spending (20.7 percent of GDP) may not be. If workers produce less output when they work for government than when they work in the private economy, the latter portion of measured GDP will be overstated.

Copenhagen: Let the Games Begin!

25,000 bureaucrats, factota, hangers on, and representatives of various environmental organizations have just converged on Copenhagen for the UN’s latest “Conference of the Parties (COP) to its infamous 1992 climate treaty. Expect a lot of heat, not much light, and a punt right into our next election.

President Obama says that the US will agree to a “politically binding” reduction of our emissions of carbon dioxide to a mere 17% of 2005 levels by 2050. This will allow the average American the carbon dioxide emission of the average citizen in 1867. Obama’s pronouncement has stepped all over the toes of the US Senate, which really doesn’t want to vote on similar legislation this election year. Jim Webb, a democrat heretofore very loyal to the President recently wrote Obama a very tersely worded note reminding him that the power to commit the nation to such a regulation lies with the Senate, not with the Commander-in-Chief.

The UN’s own climate models show that even if every nation that has obligations under the failed Kyoto Protocol (which is supposed to be replaced by the Copenhagen Protocol) did what Obama wants, that only 7% of prospective warming would be prevented by 2100. The world’s largest emitter—China—was exempt then, and won’t agree to these reductions now.

Instead they will agree to reduce “carbon intensity”—the amount of carbon dioxide emitted per unit GDP—by 20% per decade. This is nothing but business as usual for a developing or robust economy. In fact, when President George W. Bush said that was our global warming policy, he was roundly booed. The Chinese announcement—already telegraphed, is being greeted with unmitigated praise by the same environmentalists who beat on Bush for the exact same policy. India has just announced that there is no way that they will agree to any emission reductions unless we pay them lotsa money. Obama thinks that’s a good idea, too. Polling data, anyone?

Since there’s no way that India and China will agree to large reductions, the real result of Copenhagen is that the climate can will be kicked down the road to the next COP, which begins on November 8, 2010, right down the road in Mexico City. That’s six days after our Congressional election, guaranteeing that cap-and-tax will be on the voters’ minds when they close the curtain on the current Congress.

Three Keys to Surveillance Success: Location, Location, Location

The invaluable Chris Soghoian has posted some illuminating—and sobering—information on the scope of surveillance being carried out with the assistance of telecommunications providers.  The entire panel discussion from this year’s ISS World surveillance conference is well worth listening to in full, but surely the most striking item is a direct quotation from Sprint’s head of electronic surveillance:

[M]y major concern is the volume of requests. We have a lot of things that are automated but that’s just scratching the surface. One of the things, like with our GPS tool. We turned it on the web interface for law enforcement about one year ago last month, and we just passed 8 million requests. So there is no way on earth my team could have handled 8 million requests from law enforcement, just for GPS alone. So the tool has just really caught on fire with law enforcement. They also love that it is extremely inexpensive to operate and easy, so, just the sheer volume of requests they anticipate us automating other features, and I just don’t know how we’ll handle the millions and millions of requests that are going to come in.

To be clear, that doesn’t mean they are giving law enforcement geolocation data on 8 million people. He’s talking about the wonderful automated backend Sprint runs for law enforcement, LSite, which allows investigators to rapidly retrieve information directly, without the burden of having to get a human being to respond to every specific request for data.  Rather, says Sprint, each of those 8 million requests represents a time when an FBI computer or agent pulled up a target’s location data using their portal or API. (I don’t think you can Tweet subpoenas yet.)  For an investigation whose targets are under ongoing realtime surveillance over a period of weeks or months, that could very well add up to hundreds or thousands of requests for a few individuals. So those 8 million data requests, according to a Sprint representative in the comments, actually “only” represent “several thousand” discrete cases.

As Kevin Bankston argues, that’s not entirely comforting. The Justice Department, Soghoian points out, is badly delinquent in reporting on its use of pen/trap orders, which are generally used to track communications routing information like phone numbers and IP addresses, but are likely to be increasingly used for location tracking. And recent changes in the law may have made it easier for intelligence agencies to turn cell phones into tracking devices.  In the criminal context, the legal process for getting geolocation information depends on a variety of things—different districts have come up with different standards, and it matters whether investigators want historical records about a subject or ongoing access to location info in real time. Some courts have ruled that a full-blown warrant is required in some circumstances, in other cases a “hybrid” order consisting of a pen/trap order and a 2703(d) order. But a passage from an Inspector General’s report suggests that the 2005 PATRIOT reauthorization may have made it easier to obtain location data:

After passage of the Reauthorization Act on March 9, 2006, combination orders became unnecessary for subscriber information and [REDACTED PHRASE]. Section 128 of the Reauthorization Act amended the FISA statute to authorize subscriber information to be provided in response to a pen register/trap and trace order. Therefore, combination orders for subscriber information were no longer necessary. In addition, OIPR determined that substantive amendments to the statute undermined the legal basis for which OIPR had received authorization [REDACTED PHRASE] from the FISA Court. Therefore, OIPR decided not to request [REDACTED PHRASE] pursuant to Section 215 until it re-briefed the issue for the FISA Court. As a result, in 2006 combination orders were submitted to the FISA Court only from January 1, 2006, through March 8, 2006.

The new statutory language permits FISA pen/traps to get more information than is allowed under a traditional criminal pen/trap, with a lower standard of review, including “any temporarily assigned network address or associated routing or transmission information.” Bear in mind that it would have made sense to rely on a 215 order only if the information sought was more extensive than what could be obtained using a National Security Letter, which requires no judicial approval. That makes it quite likely that it’s become legally easier to transform a cell phone into a tracking device even as providers are making it point-and-click simple to log into their servers and submit automated location queries.  So it’s become much more  urgent that the Justice Department start living up to its obligation to start telling us how often they’re using these souped-up pen/traps, and how many people are affected.  In congressional debates, pen/trap orders are invariably mischaracterized as minimally intrusive, providing little more than the list of times and phone numbers they produced 30 years ago.  If they’re turning into a plug-and-play solution for lojacking the population, Americans ought to know about it.

If you’re interested enough in this stuff to have made it through that discussion, incidentally, come check out our debate at Cato this afternoon, either in the flesh or via webcast. There will be a simultaneous “tweetchat” hosted by the folks at Get FISA Right.

Feds Giveth Jobs & Cars, Then Taketh Away Again

The bad news this morning on the impact of both the federal stimulus and the Cash for Clunkers program should not come as a surprise to anyone who has paid attention to the history of government intervention in the economy.

New data that the jobs created by the stimulus have been overstated by thousands is compelling, but it’s really a secondary issue. The primary issue is that the government cannot “create” anything without hurting something else. To “create” jobs, the government must first extract wealth from the economy via taxation, or raise the money by issuing debt. Regardless of whether the burden is borne by present or future taxpayers, the result is the same: job creation and economic growth are inhibited.

At the same time the government is taking undeserved credit for “creating jobs,” a new analysis of the Cash for Clunkers program by Edmunds.com shows that most cars bought with taxpayer help would have been purchased anyhow. The same analysis finds the post-Clunker car sales would have been higher in the absence of the program, which proves that the program merely altered the timing of auto purchases.

Once again, the government claims to have “created” economic growth, but the reality is that Cash for Clunkers had no positive long-term effect and actually destroyed wealth in the process.

Right now businesses and entrepreneurs are hesitant to make investments or add new workers because they’re worried about what Washington’s interventions could mean for their bottom lines. The potential for higher taxes, health care mandates, and costly climate change legislation are all being cited by businesspeople as reasons why further investment or hiring is on hold. Unless this “regime uncertainty” subsides, the U.S. economy could be in for sluggish growth for a long time to come.

For more on the topic of regime uncertainty and economic growth, please see the Downsizing Government blog.

Lies Our Professors Tell Us

On Sunday, the Washington Post ran an op-ed by the chancellor and vice chancellor of the University of California, Berkeley, in which the writers proposed that the federal government start pumping money into a select few public universities. Why? On the constantly repeated but never substantiated assertion that state and local governments have been cutting those schools off.

As I point out in the following, unpublished letter to the editor, that is what we in the business call “a lie:”

It’s unfortunate that officials of a taxpayer-funded university felt the need to deceive in order to get more taxpayer dough, but that’s what UC Berkeley’s Robert Birgeneau and Frank Yeary did. Writing about the supposedly dire financial straits of public higher education (“Rescuing Our Public Universities,” September 27), Birgeneau and Yeary lamented decades of “material and progressive disinvestment by states in higher education.” But there’s been no such disinvestment, at least over the last quarter-century. According to inflation-adjusted data from the State Higher Education Executive Officers, in 1983 state and local expenditures per public-college pupil totaled $6,478. In 2008 they hit $7,059. At the same time, public-college enrollment ballooned from under 8 million students to over 10 million. That translates into anything but a “disinvestment” in the public ivory tower, no matter what its penthouse residents may say.

Since letters to the editor typically have to be pretty short I left out readily available data for California, data which would, of course, be most relevant to the destitute scholars of Berkeley. Since I have more space here, let’s take a look: In 1983, again using inflation-adjusted SHEEO numbers, state and local governments in the Golden State provided $5,963 per full-time-equivalent student. In 2008, they furnished $7,177, a 20 percent increase. And this while enrollment grew from about 1.2 million students to 1.7 million! Of course, spending didn’t go up in a straight line – it went up and down with the business cycle – but in no way was there anything you could call appreciable ”disinvestment.” 

Unfortunately, higher education is awash in lies like these. Therefore, our debunking will not stop here! On Tuesday, October 6, at a Cato Institute/Pope Center for Higher Education Policy debate, we’ll deal with another of the ivory tower’s great truth-defying proclamations: that colleges and universities raise their prices at astronomical rates not because abundant, largely taxpayer-funded student aid makes doing so easy, but because they have to!

It’s a doozy of a declaration that should set off a doozy of a debate! To register to attend what should be a terrific event, or just to watch online, follow this link.

I hope to see you there, and remember: Don’t believe everything your professors tell you, especially when it impacts their wallets!