Tag: Neal McCluskey

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.

It’s All Your Fault, Fickle Friends of the Constitution

There’s an interesting convergence in the news this morning, with Kimberley Strassel in the Wall Street Journal and an article in the New York Times tackling President Obama’s trampling of the separation of powers. Strassel is dubbing Obama’s an “imperial presidency,” and while the Times offers a straight news piece about No Child Left Behind waivers, it too features a strong whiff of presidential imperialism:

Congress has tried and failed repeatedly to reauthorize the education law over the past five years because Democrats and Republicans cannot agree on an appropriate role for the federal government in education. And so, in the heat of an election year, the Obama administration has maneuvered around Congress, using the waivers to advance its own education agenda.

It’s easy and fun, of course, to cry imperialism when it’s the other guy’s party in power, and as Strassel points out many on the left employed such condemnation—not without cause—against George W. Bush.  But that’s precisely the problem: Liberals and conservatives both shunt aside the Constitution when it serves their purposes, but act shocked—shocked!—when the feds or the president employ unconstitutional power to do things they don’t like.

Well guess what, fickle friends of the Constitution: You all righteously shut down the containment unit. You’re all at fault for the demons running rampant.

There’s no better example of this than education, an area over which no federal authority exists yet politicians of both parties have ”helped the children” whenever they’ve felt they could get what they wanted. A heavily Democratic Congress and White House gave us the original Elementary and Secondary Education Act—liberals love spending money on schools—and conservatives decried the wasting of taxpayer dough. With NCLB, a largely Republican Congress and White House  escalated federal control—conservatives love being seen as tough guys who impose “accountability”—and many on the left became apoplectic.  Now President Obama is handing out NCLB waivers contingent on states adopting his favored reforms, and many on the right are rhetorical constitutionalists again.

Here’s the lesson: The next time the guy you despise does something you don’t like, remember when you’ve looked the other way as the Constitution was shoved in a drawer, or torn up, in pursuit of what you wanted. Remember, and heap blame on yourself, because it is your fault.

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Want a Disproven Belief? Government Schools Teach Good Science

Much is being made by school choice opponents of a report that a Christian school in Louisiana eligible to receive students in the state’s new voucher program uses a textbook that asserts the Loch Ness Monster is real and a dinosaur. Writes Washington Post education columnist Valerie Strauss:

This is where support of vouchers is leading us — to the public paying for a child to learn that the Loch Ness Monster was a dinosaur and co-existed with humans. This is important to Young Earth Creationists, who believe that Earth was created no longer than 10,000 years ago, not the 4.5 billion years estimated by science. They also believe that dinosaurs were on Noah’s Ark.

If people want to believe this and they want their children to learn it in school, that’s fine. The public shouldn’t have to pay for it.

I can certainly see why paying for this sort of thing would disturb a lot of people – it’s a major reason tax-credit programs, which let individuals and corporations choose to whom they will donate, are preferable to vouchers. Let’s, however, use this to confront another, extremely dubious belief that many would never challenge:  Government schooling leads to good science instruction.

First, no matter how loudly government-failure deniers might protest – the government is omnipotent, dammit! – government schooling does not overcome religious belief. The latest Gallup poll assessing views on human origins came out a few weeks ago, and found as it has since 1982: The vast majority of Americans believe that God created human beings, and a plurality believes that God created us in our “present form.” Only 15 percent hold that human beings evolved without any divine involvement. And this is with roughly 85 percent of students attending public schools.

Next, take a look at overall science achievement. According to the latest National Assessment of Educational Progress results, only 32 percent of U.S. eighth graders are “proficient” in science. And private versus public schools? 43 percent of private school students are proficient, versus 31 percent for public schools. A significant part of the difference is likely that private schools tend to serve better prepared kids, but the data certainly doesn’t suggest that public schooling beats private when it comes to science instruction.

Finally, there’s the reason government schools are so inept at teaching science: All people, no matter what their beliefs, are forced to support public schools – a perfect recipe for wrenching conflict. To avoid war without end, some 60 percent of high school biology teachers gloss over the mega flash-point that is evolution. The result is that no one, no matter what their beliefs, gets coherent biology instruction.

The solution to this is obvious: Let the people go! Let them freely choose what their children will learn, eliminating the need to fight. No longer force them to pay for “free” government schools, then pay again for education they like.

Unfortunately, all too often the self-proclaimed logic-driven defenders of science reject this argument. In part this is because of their heart-felt conviction that all children must learn proper science. That, however, has shackled them to the utterly illogical belief that some way, somehow, human and government reality will be magically overcome.

That’s more than just a little ironic.

Did My Student Loan Rate Rise? I Barely Noticed

We should all be so lucky as to have our crises be like the looming interest rate change on some student loans. Yes, the rate on subsidized federal loans will double on July 1 absent congressional action, but that needs to be put into context to see that it’s a potential “crisis” – as I heard it described on a radio news report last Friday – akin to your yacht sinking. Your toy, bathtub yacht.

Starting July 1, rates on subsidized loans – a subset of federal loans in which taxpayers eat beginning interest payments as well as bearing non-repayment risk – are set to rise from 3.4 percent to 6.8 percent.

That might sound bad, but note that the rates have only been at 3.4 percent for a year. A 2007 law set them on a gradual decline from 6.8 percent to 3.4 percent over five years. So it’s not like 3.4 percent has been the norm for decades…or even two years.

Next, the rate increase will only affect loans originated after July 1. People with existing loans won’t suddenly see the rates on all their subsidized loans double.

Third, while a rate doubling sounds big, the practical effect according to the White House’s own calculations will be to add about $1,000 to an average loan over its lifetime, which is about ten years. That translates into an additional $8.33 per month – less than the cost of a DC movie ticket.

Finally, freezing the rate for another year will do almost nothing for currently suffering middle-class families, unlike what the White House intimated in President Obama’s most recent weekly address. The large majority of loans originated after July 1 won’t even begin to be repaid for at least another year-and-a-half, after rising seniors have graduated and gone through the six-month repayment grace period.

It’s well known that a crisis is extremely useful for affecting political change – just ask Chicago’s mayor – but it often translates into bad policy. And that’s exactly the kind of policy that creating artificially cheap student loans is. They help fuel skyrocketing college prices, subsidize massive college waste, and contribute to millions of people enrolling who either never complete their studies or who finish largely worthless degrees.

All those consequences are problems that Washington really should worry about. But that’s the other thing about a crisis: It’s usually only embraced when it means giving stuff away to buy lots of votes.