A limited constitutional government calls for a rules-based, freemarket monetary system, not the topsy-turvy fiat dollar that now exists under central banking. This issue of the Cato Journal examines the case for alternatives to central banking and the reforms needed to move toward free-market money.
Americans are finally enjoying an improving economy after years of recession and slow growth. The unemployment rate is dropping, the economy is expanding, and public confidence is rising. Surely our economic crisis is behind us. Or is it? In Going for Broke: Deficits, Debt, and the Entitlement Crisis, Cato scholar Michael D. Tanner examines the growing national debt and its dire implications for our future and explains why a looming financial meltdown may be far worse than anyone expects.
The Cato Institute has released its 2014 Annual Report, which documents a dynamic year of growth and productivity. “Libertarianism is the philosophy of freedom,” Cato’s David Boaz writes in his book, The Libertarian Mind. “It is the indispensable framework for the future.” And as the new report demonstrates, the Cato Institute, thanks largely to the generosity of our Sponsors, is leading the charge to apply this framework across the policy spectrum.
Across the country, districts are struggling with shortages of teachers, particularly in math, science and special education — a result of the layoffs of the recession years combined with an improving economy in which fewer people are training to be teachers.
So do we really have a shortage of teachers today, compared to historical levels? How big were the recession layoffs in historical context? I offer an updated chart below of the % change, since 1970, in the number of teachers and students, as well as the change in the cost per graduate of a public school K-12 education.
As the chart reveals, the recession layoffs were tiny when compared to the massive growth in our teaching workforce since 1970. To this day, we employ over 150% as many teachers as we did in 1970, to teach only 109% as many students. In other words, the number of teachers has grown 5 times faster than enrollment. That does not mean that there couldn’t be a small portion of districts in the U.S. that really need to hire teachers, but it does mean that there is no “national teacher shortage” compared to historical levels of employement. To anyone who claims otherwise, we can only ask: a shortage compared to what?
Over the next couple of days, Democratic presidential candidate Hillary Clinton will be playing up her new, $350-billion proposal primarily intended to make paying public college tuition a debt-free experience.
According to early information about the plan – I couldn’t find details on Clinton’s campaign Web page yet – under the proposal the federal government would spend $200 billion over ten years on public colleges and universities, with a condition that states also increase their higher ed outlays. The goal would be to make paying public college tuition debt-free for all. In addition, the plan – called the “New College Compact” – would give $25 billion to historically black colleges and universities, and other schools with low endowments, over ten years. Next, the proposal would allow all current student debt holders to refinance loans at lower interest rates and sign up for income-based repayment plans capping monthly payments at 10 percent of discretionary income and forgiving whatever remained after 20 years. The loan-term plan is estimated to cost $125 billion over ten years.
Of course, as with any politically good plan, it seems details on how all this would be paid for – other than to say the rich will cover the $35-billion annual price tag – will be announced at some later, likely quieter date. Ditto details on how the plan will ensure colleges spend all the new, forced taxpayer largesse on instruction rather than fluff like climbing walls and water parks that students demand and schools, increasingly, deliver. Putting off these latter details could be especially important politically because while colleges love money, they do not love strings. To keep maximum support from the Ivory Tower – typically a welcoming edifice for Democrats – you’ll want to keep the downside hazy.
Of course, the estimated price tag is just the most immediate, obvious cost of the plan. The more hidden cost would be the plan’s deleterious effects: encouraging yet more people to spend more time in programs even less tethered to real-world needs. Quite simply, when someone else pays your bills you are more likely to consume, and less likely to think efficiently about what you are consuming. That’s been the higher education problem for decades, and this plan would have someone else foot even more of the bill.
Already we see massive overconsumption of higher ed: About a third of bachelor’s degree holders are in jobs that don’t require the credential. Lots of employers seek people with degrees for jobs that don’t appear to need college-level learning. And “college-level learning” has come to mean less and lessactual learning. In other words, thanks largely to third-party funding, we appear to have a vicious cycle of credential inflation that would almost certainly get even worse as more and more people saw college as “free.” And no, it does not appear that spending more on higher education automatically increases human capital and, hence, economic growth. Indeed, government college spending may well hamper growth by taking money from the individual taxpayers who earned it – and would have used it for their real needs – and giving it away to colleges regardless of what people need.
“Free” always sounds so good. Until, that is, you think through how costly “free” can be.
In last night’s GOP presidential debate, Sen. Marco Rubio (R-FL) said in response to a question about the Common Core national curriculum standards that, sooner or later, the Feds would de facto require their use. If you know your federal education – or just Common Core – history, that’s awfully hard to dispute.
Said Rubio: “The Department of Education, like every federal agency, will never be satisfied. They will not stop with it being a suggestion. They will turn it into a mandate. In fact, what they will begin to say to local communities is: ‘You will not get federal money unless you do things the way we want you to do it.’”
That is absolutely what has happened with federal education policy. It started in the 1960s with a compensatory funding model intended primarily to send money to low-income districts, but over time more and more requirements were attached to the dough as it became increasingly clear the funding was doing little good. Starting in the 1988 reauthorization of the Elementary and Secondary Education Act (ESEA) we saw requirements that schools show some level of improvement for low-income kids, and those demands grew in subsequent reauthorizations to the point where No Child Left Behind (NCLB) said if states wanted some of the money that came from their taxpaying citizens to begin with, they had to have state standards, tests, and make annual progress toward 100 math and reading “proficiency,” to be achieved by 2014.
The answer, of course, is that they know they get what they pay for. As one father in poverty-stricken Makoko, Nigeria put it:
“Going to the public school here in Nigeria, particularly in this area in Lagos State, is just… wasting the time of day… because they don’t teach them anything. The difference is clear… the children of the private school can speak very well, they know what they are doing but there in the public [schools], the children are abandoned.” (Page 129, emphasis in the original.)
THE Ken Ade Private School is not much to look at. Its classrooms are corrugated tin shacks scattered through the stinking streets of Makoko, Lagos’s best-known slum, two grades to a room. The windows are glassless; the light sockets without bulbs. The ceiling fans are still. But by mid-morning deafening chants rise above the mess, as teachers lead gingham-clad pupils in educational games and dance. Chalk-boards spell out the A-B-Cs for the day. A smart, two-storey government school looms over its ramshackle private neighbour. Its children sit twiddling their thumbs. The teachers have not shown up.
What’s the difference? It mostly comes down to a matter of incentives. Asked why parents choose to pay private school tuition when the government schools are “free,” one government school principal in Ghana explained:
It’s supervision. Proprietors are very tough. If teachers don’t show up and teach, the parents react. Private schools need to make a profit, with the profit they pay their teachers, and so they need as many students as they can get. So they are tough with their teachers and supervise them carefully. I can’t do that with my teachers. I can’t sack them. I can’t even remove them from [the payroll] if they are late or don’t turn up. Only the District Office can. And it’s very rare for a teacher to be sacked. (Page 71.)
It’s no wonder then that private schools are proliferating in the world’s poorest areas. According to The Economist, hundreds of new private schools are opening in Lagos, Nigeria, many of them charging less than $1 a week. In poor countries, official estimates show that private schools now educate more than one-fifth of all students, double the proportion a decade ago. And even that figure probably underestimates private school enrollment since a high proportion of private schools in poor countries are unregistered. As The Economist notes, “A school census in Lagos in 2010-11, for example, found four times as many private schools as in government records.”
The market is still emerging and although the private schools tend to outperform the government alternatives, that isn’t a very high bar. Parents often lack access to information about school performance from reliable sources. Schools have an incentive to exaggerate their performance, so some in the international aid community want the government to set and enforce national standards and mandate national exams. However, there is no good evidence that national standards or testing drive performance. Moreover, as The Economist observed, ”where governments are hostile to private schools, regulation is often a pretext to harass them.”
The absence of government standards does not imply the lack of any standards. In a competitive market, schools have an interest in demonstrating to parents that they provide high-quality education. The rapidly expansion of the private sector will create opportunities for non-profit or for-profit private certifiers to separate the wheat from the chaff. Indeed, as The Economist highlights, there are low-cost ways to provide parents with the information they need:
In a joint study by the World Bank, Harvard University and Punjab’s government, parents in some villages were given report cards showing the test scores of their children and the average for schools nearby, both public and private. A year later participating villages had more children in school and their test scores in maths, English and Urdu were higher than in comparable villages where the cards were not distributed. The scheme was very cheap, and the improvement in results larger than that from some much pricier interventions, such as paying parents to send their children to school.
In a corresponding editorial,The Economist calls on the governments of poor countries to “boost” private education through school vouchers “or get out of the way.” The editorial also argues that “ideally” the governments should “regulate schools to ensure quality” and “run public exams to help parents make informed choices” but also observes that “governments that cannot run decent public schools may not be able to these things well; and doing them badly may be worse than not doing them at all.” Indeed.
Rather than lobby the often-corrupt and/or incompetent Third World governments, the best thing NGOs could do to improve education would be to grant scholarships directly to the poor and provide private certification and/or expert reviews of schools. If we want to ensure that even the world’s poorest children have access to a quality education, schools should be held directly accountable to parents empowered with the means to choose a school and the information to choose wisely.
This is the fifth post in a series covering the advance of educational choice legislation across the country this year. As of my last update in mid-June, there were 13 new or expanded choice programs in 10 states. Since then, South Carolina has adopted a new school choice program and three states–Florida, Ohio, and Wisconsin–have expanded existing programs, bringing the total to 17. That’s considerably more than the 13 new and expanded programs that led the Wall Street Journal to dub 2011 the “Year of School Choice.”
There are many good reasons to oppose a federal school voucher program, but a supposed lack of evidence that school choice improves student outcomes isn’t one of them. Sadly, Sen. Patty Murray (D-WA), the ranking minority member of the U.S. Senate’s education committee, repeated this canard during the debates over a proposed amendment that would have added a federal school voucher program to the No Child Left Behind replacement bill:
What’s more, studies of voucher programs in Milwaukee and the District of Columbia have shown that they do not improve students’ academic achievements, she said. “Study after study has shown that vouchers do not pay off for students or taxpayers,” Murray said.
That’s simply not true. According to Dr. Patrick Wolf, coauthor of the only longitudinal study of the effect of Milwaukee’s voucher program, “school choice in Milwaukee has had a modest but clearly positive effect on student outcomes.”
First, students participating in the Milwaukee Parental Choice (“voucher”) Program graduated from high school and both enrolled and persisted in four-year colleges at rates that were four to seven percentage points higher than a carefully matched set of students in Milwaukee Public Schools. Using the most conservative 4% voucher advantage from our study, that means that the 801 students in ninth grade in the voucher program in 2006 included 32 extra graduates who wouldn’t have completed high school and gone to college if they had instead been required to attend MPS.
Second, the addition of a high-stakes accountability testing requirement to the voucher program in 2010 resulted in a solid increase in voucher student test scores, leaving the voucher students with significantly higher achievement gains in reading than their matched MPS peers.
In the final year of the study, Milwaukee voucher students in grades 3-9 performed about 15 percent of a standard deviation higher on standardized reading tests, “a modest but meaningful educational difference.” Moreover, the study concluded that Milwaukee district-school students were “performing at somewhat higher levels as a result of competitive pressure from the school voucher program.” And contrary to Sen. Murray’s assertion that “vouchers do not pay off for taxpayers,” the study found that the voucher program saved the state nearly $52 million in fiscal year 2011 because the vouchers were worth about half of the cost per-pupil at the district schools.
For a few years, I have been posting an evolving list of empirical studies that have found that federal student aid programs help fuel rampant college price inflation. Why? Because I continually encounter people, often who work for or in higher education, who insist that there is no meaningful empirical evidence of big subsidies enabling big price increases, even if the possibility makes mammoth intuitive and theoretical sense.
A few days ago a new entry arrived for the list, a paper from the Federal Reserve Bank of New York. It finds that student loans have big inflationary effects, especially at four-year private schools not focused on top academic performers, and that Pell Grants have smaller direct effects, but also likely lead to reductions in aid funded by institutions. It is yet one more study that shows that, contrary to the hopes of the American Council on Education–the premiere higher ed advocacy group–the inflationary effect of student aid is absolutely a subject that should “play a major role” in discussions about college affordability.