Tag: poor families

Inflation and Injustice

More than a few places in this world people are trying to better themselves by saving money. Many people without access to formal financial services (or awareness of their benefits) are trying to amass capital by squirreling away cash. If wariness and luck prevent that money from being stolen, their nest-eggs might provide life-saving health care, seed capital for businesses, the means to move, education for children, and numerous other enhancements to poor people’s well-being. I say good for them. But there are people out there who don’t care if government policy stands in the way.

Unknown to many cash-hoarders—unsophisticated investors who should have our sympathy—official government policy in many countries is to inflate the currency. Under stable conditions, such policies might reduce the value of the existing stock of money at a rate of about 2% per year.

That is a boon to governments, of course, which are typically debtors. The policy quietly reduces real government debt by 2% annually without need of raising official taxes. And whether they spend the money themselves or infuse their banking sectors with liquidity, governments use monetary policy to curry favor with important political constituencies, thus solidifying power.

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.

How ObamaCare Would Keep the Poor Poor

Suppose you’re a family of four at or near the federal poverty level.  Under current law, if you earn an additional dollar, you get to keep around 60-70 cents.

Under the House and Senate health care bills, however, you would get to keep maybe 38 cents.  Or 26 cents.  Or maybe just 18 cents.

The following graph (from my recent study, “Obama’s Prescription for Low-Wage Workers: High Implicit Taxes, Higher Premiums”) shows that under the House and Senate bills, the combination of (1) a mandate tax and (2) subsidies that disappear as income rises would impose implicit tax rates on poor families that reach as high as 82 percent over broad ranges of income.

This graph actually smooths out some rather bumpy implicit tax rates that spike as high as 174 percent.

In the 1980s and 1990s, the public saw that too-generous government subsidies can actually trap people in a cycle of poverty and dependence.  President Obama and his congressional allies seem not to have learned that lesson.

Thursday Links

  • How Obama’s plan for health care will affect medical innovation in America: “Imposing price controls on drugs and treatments–or indirectly forcing their prices down by means of a ‘public option’ or expanded public insurance programs–would reduce the incentive for innovators to develop new treatments.”
  • Register now for the upcoming Cato forum featuring author Tim Carney and his new book, Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses. Buy the book, here.

Democrats Favor Trade Sanctions on Americans

Scott Lincicome sharpens his pencil today and calculates that Congressional failure to ratify the U.S.-Colombia Free Trade Agreement–a deal that was signed almost three full years ago–has so far cost American exporters $2 billion.  That tally increases $1.9 million each and every day.

Since that time [the trade agreement signing], American exporters have paid approximately $1.9 million per day in Colombian tariffs that they wouldn’t have paid if the Democrat-controlled Congress had just passed the FTA back then and thus allowed it to enter into force. By my math, that means that Congress’ and (now) the President’s partisan stalling has resulted in a pointless tax on American businesses of almost $2 billion ($1.9798 billion = 1042 days times $1.9 million) and counting.

My colleague Dan Griswold explained yesterday how U.S. trade policy punishes poorer people abroad, and amounts to a regressive tax here at home:

America’s highest remaining trade barriers are aimed at products mostly grown and made by poor people abroad and disproportionately consumed by poor people at home.  While industrial goods and luxury products typically enter under low or zero tariffs, the U.S. government imposes duties of 30 pecent or more on food and lower-end clothing and shoes – staple goods that loom large in the budgets of poor families.

The Obama administration and Congress could easily remove the sanctions that burden America’s exporters and lower-income consumers.  But until they’re convinced that they can make up the revenues lost by crossing Big Labor, the Democratic Party playbook counsels more of the same disingenuous rhetoric of fraternity with the common man and more exaggerations about evil foreign labor practices.

A Dialogue on School Choice, Part 3

A tax credit bill was recently proposed in South Carolina to give parents an easier choice between public and private schools. It would do this by cutting taxes on parents who pay for their own children’s education, and by cutting taxes on anyone who donates to a non-profit Scholarship Granting Organization (SGO). The SGOs would subsidize tuition for low income families (who owe little in taxes and so couldn’t benefit substantially from the direct tax credit). Charleston minister Rev. Joseph Darby opposes such programs, and I support them. We’ve decided to have this dialogue to explain why. The previous installments are here and here. The final installment is here.


Rev. Darby Rev. Joe Darby

Second Response

We agree on something, Andrew – you don’t lock kids in a burning building while you try to put out the fire. Dangerous buildings can, however, be expeditiously made excellent and secure while occupied and before they catch fire, as was the case with the first church I pastored - all it took was will and commitment. The chronic inequities in public education can be expeditiously addressed with will and commitment. The most shameful thing about my state’s five year fight for scholarships and tax credits is that our legislators have spent time, energy and resources debating privatization, but haven’t taken a single step toward improving public education. They’ve simply chosen to argue over the merits of a new house while the old, still occupied house deteriorates.

I commend your zeal in gathering and noting studies, but like Biblical Scriptures, scholarly studies can be carefully chosen, subjectively interpreted and tactically presented to gain one’s desired result. At the end of the day, studies on the success of privatization and its impact on public schools are a “wash” – each of us can find support for our positions.

I remain convinced that privatization in South Carolina would not benefit low income families. Struggling parents who could claim tax credits would still have to pay tuition “up front,” and those tax credits would not cover the tuition for most quality private schools in South Carolina. Scholarships might help, but they aren’t guaranteed. I recently learned, however, of another troubling alternative beyond the proposed law from a parent in a state where privatization is a reality. She wrote me a letter telling how she received mailings touting private schools, noting that only bad parents leave their children in public schools, and offering to put her in touch with helpful tuition lenders. She took the bait, and is now in greater debt because of predatory lenders who preyed on a mother who simply wanted the best for her child.

You also said, based on expenditures in Charleston, that we’re already adequately funding our public schools – although Charleston is now facing a $10 million shortfall for the coming school year. Look beyond Charleston, Andrew, for South Carolina’s public schools are funded with a mix of state and local revenue. We have excellent schools along our state’s urban, businesses rich, predominately white and politically conservative I-85 corridor. The I-95 corridor, however, is rural, has a limited tax base, is predominately African-American, is politically progressive to liberal, and is bordered by some of the most underfunded and needy schools in our nation.

The I-95 corridor, however, was the site of a recent blessing. A mid-western businessman was so touched by the story of the J.V. Martin School in Dillon, SC, that he donated new desks and equipment to the school and paid for their installation and for campus painting. His voluntary and genuine generosity is a reminder that businesses with conscience and good motives don’t have to wait for statutory privatization to make a difference – they can make a difference in the public schools right now.

You also noted that resourceful parents have found ways to augment government funds for their children in private schools for things like providing transportation and buying uniforms. I’m not surprised by that, because good parents will go to great lengths for their children’s well being. They’ve been doing so for years – without public funds going to private schools. I can testify to that, because my wife and I did so when our sons were young and we were struggling parents, but I’ll save that story for my last installment in our dialogue.

***

The Rev. Darby is senior pastor of the AME Morris Brown Church in Charleston, and First Vice President of the Charleston Branch of the NAACP.

Andrew Coulson Andrew Coulson

Second Response

You’ve cited two historical examples to suggest that school choice might hurt kids who remain in public schools. But as I noted last time, the evidence from actual choice programs shows that doesn’t happen.

Still, let’s take a closer look at the historical record. Public schools discriminated against and segregated black children for more than a century. Worse yet, an 1850 Massachusetts supreme court ruling upholding segregation in public schools was a key precedent cited by the U.S. Supreme Court to establish the “separate but equal” doctrine in Plessy v. Ferguson (1896). Jim Crow laws rested, in part, on a legacy of racist public schools.

It was common in the 19th century for public schools to require reading of the Protestant King James version of the Bible, and Catholic children who refused were sometimes whipped or beaten for the offense. Such punishments were upheld by the Maine supreme court.

And while it is true that some racist whites tried to use private schools to flee integration, their more common tactic was to move to areas where the public schools remained overwhelmingly white. As I wrote in Market Education, “during the height of white flight… total private school enrollment actually decreased by 17 percent (public enrollment also decreased, but only by 3 percent).”

Public schools today may be somewhat more racially integrated than private schools in the earliest grades, but private schools are more integrated at the end of high school – no doubt in part because public school dropout rates for black students are astronomical. Private schools have repeatedly been shown to significantly raise graduation rates over those found in public schools, even after controlling for other factors, especially for minority children. And when it comes to truly meaningful, voluntary integration – the peers kids choose to sit with in school lunchrooms – private schools are significantly more integrated than public schools.

A few years ago, a friend of mine was seeking support for school choice among community leaders in the rural south. At one home, the man asked my friend: “So, black kids would be able to attend private schools like the one my kids go to?” My friend answered yes. “And they’d be prepared for the same kinds of jobs as my kids?” Again, my friend said yes. “Well now, I don’t think I can support that,” was the man’s reply.

That was an uncommon reaction, but it offers a glimpse into the mind of the modern racist. They see the upward mobility offered by school choice as a threat.

And there’s no need to make dubious analogies to the banking industry to understand how markets work in education. We can simply look at real education markets in action. Consider the new book The Beautiful Tree: A Personal Journey into How the World’s Poorest People are Educating Themselves. From the shanty towns and fishing villages of Africa, to the slums of India, to the rural farming villages of China, the poor are already abandoning public schools that have failed them and setting up their own private schools. These entrepreneurial schools outperform the local public schools at a tiny fraction of the cost, and the parents love them.

The higher labor costs in this country put private schooling out of reach of many poor families, but an education tax credit bill would change that.

You asked why we can’t fix the public schools before offering parents such a choice. The answer is simple: the way you “fix” a monopoly like public schooling is to inject consumer choice and competition. In other words, school choice IS the solution. We can’t fix public education without it.

 ***

Andrew Coulson is director of the Cato Institute’s Center for Educational Freedom, and author of Market Education: The Unknown History.

A Dialogue on School Choice

The South Carolina legislature is currently considering a tax credit bill intended to give parents an easier choice between public and private schools. It would do this by cutting taxes on parents who pay for their own children’s education, and by cutting taxes on anyone who donates to a non-profit Scholarship Granting Organization (SGO). The SGOs would subsidize tuition for low income families (who owe little in taxes and so couldn’t benefit substantially from the direct tax credit). Charleston minister Rev. Joseph Darby opposes such programs, and I support them. We’ve decided to have this dialogue to explain why. The next installment is here.


Rev. Darby

Rev. Joe Darby

Opening Comment, Con

My local newspaper, The Charleston Post and Courier, recently affirmed their continuing editorial suggestion that we “give School Tax Credits a Try.” I think that’s a very bad idea.

My wife is a public school teacher – and an excellent one at that. She spends much of her time either shaping young minds or preparing to do so, even supplementing meager supplies at her own expense and using creative means to reach and teach children described as “at risk.” Her school is almost 100% “free lunch,” but her students score well on state tests because she’s a good teacher. Most of her colleagues who labor under difficult circumstances are excellent teachers too. Rather than simply blaming an ominous “public education establishment,” we should note the truth – objective studies show that private education is not always a winner. A 2008 United States Department of Education study of the District of Columbia voucher program found that students in the program generally did no better on reading and math tests after two years than their public school peers.

A mass exodus to private schools will weaken public schools by leaving behind parents who have the least ability to advocate for or assist their children, and remove positive peer role models from struggling students. The major beneficiaries of private school choice in South Carolina will not be poor families, for the tuition tax credits and scholarships proposed will not cover the cost of many good private schools and will leave parents to take up the slack and to provide other things like uniforms, transportation and extracurricular activity fees. The major beneficiaries will be affluent parents who will simply have more disposable income when their share of their children’s tuition is decreased.

Before we give school tax credits a “try” we should first give equitably funded, staffed and equipped public schools a “try,” for many southern states have never done so. Excellence in public education for African-Americans was frowned upon after the Post Civil War period of reconstruction. In Paradoxes of Segregation by R. Scott Baker, Charleston, SC School Superintendent A.B. Rhett touted what was Burke Industrial School in 1939 as a place to “supply cooks, maids and delivery boys.”

His views matched those of the political powers that be when South Carolina’s schools were separate and unequal. The U.S. Supreme Court outlawed segregated schools in 1954, but South Carolina held out until the 1960’s. Our legislatively ordained strategies to maintain segregation included allowing parents to “choose” their children’s public schools and giving state “scholarships” to white parents who sent their children to private schools established to maintain segregation – the same essential strategies in the present quest for school tax credits. Many predominately African-American schools were woefully underfunded, and when whites fled the public schools for private schools, public schools sank into a state of chronic neglect. We can’t label public schools as “failures” when we’ve failed our schools. When we fully and equitably fund, equip and staff all public schools, we can then “try” tuition credits, for parents can then choose between quality public and private schools – although that might be bad for the private school business.

I serve as the pastor of a church in peninsular Charleston, where architectural preservation is serious business. Homes and businesses that have been long abandoned or neglected and are all but falling over aren’t torn down – they’re rebuilt and restored in spite of years of chronic neglect. If we can do that for neglected homes, then we should also acknowledge our past failings and do the same for our public schools instead of simply tearing them apart or abandoning them.

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The Rev. Darby is senior pastor of the AME Morris Brown Church in Charleston, and First Vice President of the Charleston Branch of the NAACP.

 

Andrew Coulson

Andrew Coulson

Opening Comment, Pro

On paper, the United States offers its citizens a solemn promise: work hard and you can succeed here – regardless of your race, sex, creed, or family wealth. But there’s a catch. To secure a good job you first need a good education. On paper, we’ve taken care of that, too. Over the past 150 years we’ve built up a monumental system of free state-run schools that aims to ensure every child access to a quality education.

In reality, it’s all lies.

If you’re in the top fifth of wage earners, there’s just a one-in-a-hundred chance that you are functionally illiterate. If you’re in the bottom fifth or have no income at all, the odds are that you cannot understand a newspaper or follow the directions on a pill bottle. Despite the relentless efforts of generations of reformers, America’s system of public schooling has failed in its most essential duty. We are not equipping all children to succeed in private life and participate in public life. America’s meritocratic promise is a lie.

What can we do about it?

There are those who still believe that the existing system can be fixed. Having compared different kinds of school systems from ancient Greece to the modern day, and from the poorest to the richest nations on Earth, I am convinced that that effort is futile. The problems with the status quo are endemic to its design.

Public schooling hasn’t failed so many children for so long because teachers weren’t smart enough, or paid well enough, or because classes were too large, or the federal government played too small a role. It has failed because it lacks the freedoms and incentives that drive progress in every other field. Public school teachers are hamstrung by regulations and are paid based on time served rather than classroom performance. Parents are not free to seek out the public or private educational setting best suited to their children, they are extorted into the state system because of its monopoly on $12,000 per pupil in government funding.

But should we prevent people from trying to fix it? Certainly not. If they think they can bring to public schooling the same incredible progress that other human endeavors have experienced over the past forty years, more power to them.

By the same token, no one who wants what’s best for kids should stand in the way of a program that would give parents educational alternatives today. Our children cannot wait to see if the current generation of public school reformers will somehow succeed where their predecessors failed.

I’m an engineer by training and a geek by nature. I advocate programs like the one under consideration in South Carolina because the evidence overwhelmingly supports them. Scientific studies comparing this kind of free enterprise education system to conventional public schooling favor the free enterprise approach by a margin of 15 to 1.

Others advocate school choice for more personal reasons. DC school voucher recipient Carlos Battle wrote a poem explaining his gratitude and commitment to school choice, and delivered it to the rally here last week in support of that program:

surrender me from the typical stereotype of a

black young man

one who slings rocks, smokes weed, and keeps a

gun at hand

i am a whole different guy

one who reads books and wears a tie

you see, I’m changing the perception of a young

black man

i’m climbing the ladder of success - try and stop

me, try as hard as you can….

 

Please don’t.

Please don’t stop Carlos or the children who would follow him up that ladder.

***

Andrew Coulson is director of the Cato Institute’s Center for Educational Freedom, and author of Market Education: The Unknown History.