Tag: Neal McCluskey

Obama Must Not Read Our Stuff

The topic of this weekend’s weekly presidential radio address was education. The message? You guessed it: The federal government needs to “invest” more in education – as do other levels of government – but instead they are making cuts.

At this point I don’t know what more can be said to show how nonexistent is the connection between federal spending and actual education. As we at Cato’s Center for Educational Freedom have pointed out on countless occasions, federal and overall spending on public schooling has skyrocketed for decades as test scores have laid motionless; staffing has ballooned at the same time; Head Start has almost no lasting benefits; and federal higher ed spending largely enables massive price inflation and encourages people to enter college but not finish.

The evidence, frankly, is overwhelming that federal education “investment” is really just flushing precious money down the toilet. Which makes me think that maybe President Obama doesn’t read our stuff. Or maybe he just doesn’t care.

Not Quite Blowing Up the Death Star, but…

For two years the national curriculum blitz has been rolling through states unabated, with “Common Core” standards now fully adopted in all but five states and development of national tests continuing. Of course all of this has been done with heavy federal air support, including making adoption of Common Core crucial for states wanting to access Race to the Top funds, and Washington selecting and funding the national test developers.

Last week, however, national curriculum forces suffered a small but notable setback, with the Utah State Board of Education withdrawing the Beehive State from the Smarter Balanced Assessment Consortium, one of the two consortia developing tests to accompany the Common Core. In terms of its on-the-ground impact, it’s not huge —Utah will still have the Common Core standards—but symbolically it could be big, showing that states can undo decisions they may have made in haste, or in pursuit of federal money or favors. And to be honest, it is more official push back than I expected.

That said, the crucial point will still be when the Elementary and Secondary Education Act—AKA, No Child Left Behind—comes before Congress for reauthorization. That is when it will be decided whether adopting the Common Core will be necessary for states to get huge amounts of annual federal funding, and whether scores on the national tests will determine whether districts, schools, or children get rewarded or punished. If those measures are included—especially the high-stakes testing—then it is game over: we will have an indisputably federal curriculum, and no state will dare resist it. They simply won’t be willing to jeopardize billions of annual dollars.

Until then, national standards opponents can take heart in Utah’s small act of defiance.

You’re Destroying the Whole Tower, Stop Blaming It on the Basement

Yesterday Sen. Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor, and Pensions Committee, released his magnum opus on for-profit colleges, the culmination of two years of excoriating, browbeating, shaming, and generally demagoguing that fast-growing but relatively small sector of American higher education. His report is everything you’d expect from a crusade characterized by an almost complete unwillingness to address the central role of the federal government in creating pervasive rot not just in for-profit higher education, but the entire Ivory Tower.

The for-profit college sector is certainly raking in lots of cash and producing very little for it, with big revenues but very low completion rates. It’s probably not as bad as Harkin would have us believe—I’ve chronicled much of the exaggeration and misrepresentation that has punctuated his attack—but there’s little question that lots of students drag heaps of taxpayer dough into for-profit schools and get little of value for it.

The thing is, that happens across higher education, including the profit-taking.

As I’ve cited ad nauseum, completion rates throughout higher education are abominable. Looking at first-time, full-time students—an imperfect sample, yes, but the best we’ve got—the top completion rate is for bachelor’s students at private not-for-profit schools. But that’s only 65.4 percent completing within six years. The worst is at public two-year institutions—community colleges—which see only 20.4 percent finish their programs within 150 percent of normal time. That’s just one-in-five!

Surprisingly, Harkin’s report mentions the atrocious completion rates at community colleges. But only very briefly, and mainly to assert that “the cost of for-profit programs makes those programs more risky for students and Federal taxpayers.” That proviso is technically correct, but as misleading as much of the behavior for which Harkin condemns for-profit schools. Community colleges are cheaper to students in large part because they get direct taxpayer subsidies, and while those don’t come mainly from Washington they do come from taxpayers, just at the state and local level. In the 2009-10 school year, state and local appropriations to community colleges totaled $5,412 per pupil. Meanwhile, public four-year schools—with six-year graduation rates of just 56 percent—received almost $8,000 per student in federal, state, and local appropriations. And, of course, all “not-for-profit” schools get favored tax status, paying no taxes on most of their revenue and benefiting from tax deductible largess of donors.

But don’t think those schools aren’t profiting. Harkin’s report blows off the possibility that putatively not-for-profit schools make profits simply by stating that “by definition” such schools “do not retain any revenue as profit.” But as Vance Fried illustrated in his 2011 policy analysis, most public and not-for-profit private colleges make thousands of dollars per-undergraduate beyond the cost of educating them. They just use the money to reward the people in the school, or to pay for things that often make the school more bloated, instead of distributing the profits to investors.

Putting the for-profit sector in the context of all of higher education, it’s clear the witch hunt has been on. But there’s also been major scapegoating: by enabling students to pay for school with other people’s money, and with almost no regard for their ability to do college work, it is federal student aid that largely causes the rot in higher ed, quashing both school and student incentives to economize, and student incentives to think critically about consuming higher ed. By demonizing institutions that dare admittedly make profits, politicians like Sen. Harkin shift the blame from where it belongs—themselves—to those who do what the politicians want: ”educate” people regardless of their ability. It’s exactly like housing: the politicians demand that everyone be able to buy a home, condemn anyone who might fail to furnish the uncreditworthy with mortgages, then blame the lenders when things go horribly wrong. They seem to want the votes—their profits—but no blame when things go south.

Sen. Harkin, the fault for what ails not just for-profit higher education, but the entire Ivory Tower, sits largely with you and your colleagues. Please quit shifting blame and do what must be done: phase out student aid and make all schools earn their money.

Note to Education Reporter: GDP Is HUGE, Just like Education Spending

Last week I testified before the Senate Appropriations subcommittee that deals with education. The topic was sequestration, and my case was, frankly, overwhelming, showing that education spending has ballooned for decades while achievement for 17-year-olds – our schools’ “final products” – hasn’t budged.

At least I thought it was overwhelming. But apparently a Huffington Post reporter was underwhelmed by it and wrote the following:

Some lobbyists in the education reform camp note that U.S. education spending has skyrocketed, while test scores have stagnated. Neal McCluskey – an expert witness who serves as associate director for the Cato Institute’s education center – took this line, but a recent report from the nonpartisan Center on Education Policy shows that education spending has actually not grown at all as a share of the gross domestic product.

Aside from the odious implication that I am either a lobbyist or take my cues from them, the big problem with this rebuttal is that it is flat-out wrong. Open the link to the CEP report, go to page 35, and there you will see that the share of GDP taken by elementary and secondary education in fact grew between 1999 and 2009, from 4.4 percent to 4.6 percent.

Perhaps the writer thinks a 0.2 percentage point uptick isn’t big enough to constitute growth. If so, she should really take a look at the Digest of Education Statistics table that furnished the GDP data. It reveals just how big a spending increase that seemingly dinky rise was, a function of GDP starting very large and growing  substantially. Indeed, there was an increase of over $237 billion, or a 57 percent ballooning, with spending rising from $413 billion in 1999 to $650 billion in 2009!

Those are current dollars so we should really adjust for inflation. Doing that moves the 1999 figure to $531 billion, but that still means there was a real increase of $119 billion, or a 22 percent move. That’s no growth by no means.

To her credit, the Huff Po reporter included one piece of context that’s crucial when discussing cuts to federal education spending, context that belies the irresponsible rhetoric of people like Education Secretary Arne Duncan, who said sequestration would “jeopardize our nation’s ability to develop and support an educated, skilled workforce that can compete in the global economy.”

Surely to justify such doomsaying cuts would have to be very large – perhaps 10 or 20 percent – right?

Nope. As Sen. Shelby (R-AL) rightly noted at the hearing – and the Huff Po reported – the 7.8 percent cut to federal education programs likely under sequestration would only translate into about a 0.84 percent cut in total education spending. Why? Because the Feds – though spending far too much on education – still only supply about 10.8 percent of the total. Most funding comes from state and local governments.

When you look honestly at the numbers there really is no question: Sequestration should fully include education.

Federal Irony Alert!

The nation’s biggest subprime student lender–your federal government!—has just called out private “subprime” lenders.

This morning the Consumer Financial Protection Bureau and U.S. Department of Education released a report examining private student loans. It concludes that private lenders were out of control, just like all of Wall Street, before the “Great Recession” hit, a fact largely evidenced by high default rates. It was, the report argues, a part of the overall subprime lending debacle and it hurt innocent students.

“Subprime-style lending went to college and now students are paying the price,” said U.S. Education Secretary Arne Duncan in a release accompanying the report.

What’s the report’s solution to the problem? Push people into federal loans to the maximum extent possible. After all, those loans have low, taxpayer-backed interest rates; generous repayment terms, including speedy forgiveness for anyone going into “public service”; and essentially no requirement that borrowers offer evidence of creditworthiness.

Wait—essentially no evidence of creditworthiness? Isn’t that subprime lending in its very purest form? Indeed it is, which is perhaps why the report offers no comparison of default rates on private and federal loans.

Basically, the report is pushing for even greater subprime lending, only with taxpayers on the hook rather than voluntary investors.

The report tries to further portray the fate of private lending as part of an exclusively Wall Street-driven recession by arguing  that a big drop in private lending between the 2007-08 and 2008-09 academic years was  entirely the result of private lenders suffering from the collapse of credit markets. No doubt that had a significant role, but the report somehow manages to not discuss numerous changes to federal law in the 2007-2010 time frame that pushed private lenders out of the way, including:

  • The College Cost Reduction and Access Act (2007), which set federal subsidized-loan interest rates on their halving path from 6.8 percent to the current 3.4 percent.
  • The Ensuring Continued Access to Student Loans Act (2008), which increased unsubsidized loan maximums, reduced eligiblity criteria for PLUS loans (the only loans requiring some demonstration of creditworthiness), and offered federal money when guaranteed lending participants couldn’t get it through capital markets.
  • The reauthorized Higher Education Act (2008), which increased Pell Grant maximums, authorized forgiveness of up to $10,000 in debt for anyone working in an area of “national need,” and added new regulations for private lending.
  • The Student Aid and Fiscal Responsibility Act (2010), which ended federal guaranteed lending in favor of federal lending directly from the U.S. Treasury

Fully private lending probably was reined in thanks to the recession, which is a good thing, with private lenders taking less risk when it didn’t pay off. But it is no doubt also important that Washington enacted many laws that made it much harder for private lenders to compete. The fact is the Feds can subprime-lend without any major concern about losing big bucks. It’s only taxpayer money, after all, and there’s always more of that! Plus the political dividends are sizable, enabling politicians to heartily and repeatedly congratulate themselves for “making sure everyone can go to college!”

That gets us to the next critical point: In addition to reinforcing the utterly discredited notion that the recession was all the fault of “greedy Wall Street fat cats,” a report focusing on private lending is just a distraction from the 800-pound gorilla in higher education: the federal government. At their peak in 2007-08, private loan originations were less than one-third the size of federal loans, and about one-fifth the size of all federal aid. Today they are slightly more than one-20th the size of federal loans, and about one-30th the size of all federal aid.

In other words, private loans are but bit players in a student-aid show dominated by Washington. It is super-abundant federal aid, not private lending, that signficantly fuels tuition inflation, enables dreadful college completion rates, and fosters a glut of degree holders. Yet it’s those same federal lenders who dare scold private companies and warn us about their subprime failures.

Oh, the irony!

Remember: The Feds Fund Students

It’s so fun and easy to bash for-profit schools: on the whole their outcomes aren’t good; they don’t look like the ivy-covered institutions we envision when we think of “college”; and it’s easy to assume that anyone who openly seeks profit must have zero compunction about duping the innocent. But guess what? Openly for-profit schools are no more rapacious than putatively not-for-profit institutions, and it’s not the schools that federal money is funding, anyway. It’s students, and if you want to place blame for wasted time and dough, it should be placed on Washington giving college money to anyone with a high school diploma or GED—and that’s a newly heightened level of restriction.

Look at the whole profit thing. It’s true that for-profit schools want to take in more money than their operations cost. But guess what? So do other colleges. As Oklahoma State University professor Vance Fried has estimated, not-for-profit institutions typically bring in between $2,000 and $13,000 more per undergraduate student—depending on school type and inclusion of various subsidies—than it costs to educate him or her.

Of course those schools don’t call this “profit,” primarily because they don’t send it to investors. Instead they spend it on themselves—bolstering administrative ranks, raising salaries, paying more for journals—then call those things “costs” the next year. But the self-interest underlying it is the same: people are making themselves better off through the bills they send to students.

But aren’t for-profits worse performers than not-for-profits? Seemingly yes, but it is very hard to make apples-to-apples comparisons. Indeed, it makes little sense to make policy based on sectors of higher education at all. What should be important is whether an individual school is working, be it a state flagship, its local branch, or the strip-mall Strayer. But if you want to play the sector vs. sector game, look at community colleges. They appear to be atrocious performers—worse than for-profits—with only one out of every five students completing a program within 150 percent of normal time.

The word “appear,” however, is crucial. Schools might be doing the best they can but are working with many people who simply have too little ability, desire, or a combination of the two to handle college work. But as long as those students can get money to pay for college, it’s crazy to think that there won’t be schools to admit them. Indeed, were all schools to refuse to admit large swaths of students the feds deem college-qualified, major federal investigations would almost certainly ensue.

No, the root problem is not the schools (though all sectors seem happy to make big bucks), it’s that the federal government, first and foremost, will give college aid to almost anyone. Indeed, the one time Washington created student aid programs that required some demonstration of aptitude and success—Academic Competitiveness and SMART grants—Sen. Ted Kennedy (D-MA) objected that they abandoned “the federal commitment to prioritize the neediest students.” That the grants were tied to Pell eligibility was apparently irrelevant; they were allowed to die last year.

If you want to really tackle the problems of noncompletion, debt, and overall waste in higher education, the first thing you must do is cease making cheap aid available to students regardless of their demonstrated aptitude or desire. Do that and you would almost certainly see diminution in the size of both the for-profit and not-for-profit sectors. Much more important, you would cease to have so many people squandering both their resources and those of taxpayers.

Unfortunately, making aid contingent on recipients demonstrating real aptitude is not in the best interest of politicians, who maximize their benefit—getting people to vote for them—by maximizing the number of people to whom they give money. Indeed, as we’ve seen, even if we could get politicians to pass even relatively small programs that require recipients do a little more than breathe, it won’t last. That, in addition to the Constitution giving the federal government no authority to be involved in student aid, is why we must phase out federal aid programs. Unless we have the clarity of an absolute prohibition against federal politicians providing aid, it is almost certain that they will give it out, and will do so without regard for what makes even minimal educational sense.

And when things go badly? They’ll just find easily demonized groups—like honestly profit-seeking schools—to scapegoat.

C/P from the National Journal‘s “Education Experts” blog.

Teachers Unions Are But a Symptom of the Disease

Just as some public schooling defenders like to caricature their opponents as self-important, money-grubbing ”corporate reformers” or malevolent destroyers of “public education,” there is a tendency on the other side to attack teachers unions as the root of all evil. They aren’t. They are a natural symptom of a government monopoly that, because it is a monopoly, strongly favors the monopolization of labor. One employer, one employee representative.

Unless someone has compelling evidence to the contrary—I’ve never seen any—teacher union officials and members are no different than anyone else: they are simply trying to get the best deals for themselves.  What separates them from non-unionized workers—and unionized workers in the private sector—is not their desires, but that their employment comes from a system into which ”customers” must pay, and which is controlled completely by politics. Public-sector unions have big advantages in politics, where organization, numbers, and motivation—millions of people advocating for their very livelihoods—translate into power.

That brings us to today’s Wall Street Journal piece on union political spending. That spending is huge, and manifested in far more ways than contributions to candidates. Between 2005 and 2011 the Journal estimates unions spent $3.3 billion on political activities, which beyond candidate donations included everything from trying to persuade members to vote a certain way, to supplying bratwursts to demonstrators in Wisconsin.

There would be no major freedom issue if all of this were spending by unions with completely voluntary membership, and which operated in truly free markets. There would, then, be no compelled support of politicking. But this is absolutely not the case when it comes to teachers unions and other public sector unions.

For one thing, teachers often are, for all intents and purposes, forced to join unions as a condition of employment, even when they are required to ”just” pay big “agency fees” to cover collective bargaining. Moreover, the ultimately taxpayer-supplied dues money is used to get more dough out of taxpayers who have no choice but to be schools’ “customers.” And we’re not talking pocket change here: according to the Journal’s numbers, between 2005 and 2011 the National Education Association spent $239 million on politics and lobbying, and the American Federation of Teachers spent $138 million. And that doesn’t include the outlays of all their state and local affiliates.

Despite those power-wielding expenditures, the members and leaders of teachers unions still aren’t evil. They are normal, self-interested folks. The effects of their actions, however, are to compel people to fund political speech and activities against their will, and often against their personal interests. But we shouldn’t attack unions for that. We must attack the government schooling monopoly.