Today, Sen. Ted Cruz (R‑TX) and Rep. Bradley Byrne (R‑AL), in conjunction with U.S. Secretary of Education Betsy DeVos, will unveil a bill to create a $5 billion scholarship tax credit, an unprecedented federal school choice effort. An op‐ed all three have in USA Today spells out both the good of federal school choice, and inadvertently, the potential bad which makes it too dangerous to justify.
First, the good. DeVos, Cruz, and Byrne argue, quite rightly, that “education isn’t about school systems. It is about school children.” If you recognize basic reality, you’ll know that all children and families are different — different talents, values, dreams — hence it makes no sense to say all should get uniform education. But opposing school choice is de facto endorsing the idea that education should be largely uniform. One size must fit all.
They also make another crucial point, one that is starting to elicit push‐back from public schooling advocates who insist that public schooling and public education are synonymous. DeVos, Cruz, and Byrne write that their proposal is not “an attack on public education.” Of course it isn’t. For one, they say their proposal would allow credit‐eligible funds to be used for public school options. More broadly, just as public assistance doesn’t mean every recipient of help must go to a government grocery store, nothing about public education implies government must supply the schools. Indeed, we’ve been moving away from things like government housing projects for decades.
Now the bad. School choice is about individualization and freedom, and almost certainly that is what DeVos, Cruz, and Byrne want. But federal initiatives are a terrible way to deliver that. The reality is that what the feds fund, even indirectly, they inevitably want to control. DeVos, Cruz, and Byrne specifically acknowledge that historical reality in federal education policy. They write, “A series of administrations on both sides of the aisle have tried to fill in the blank with more money and more control, each time expecting a different result.” Note that the primary vehicle for that control, the Elementary and Secondary Education Act, started aimed just at funding low‐income districts. It eventually became the uber‐controlling No Child Left Behind Act.
DeVos, Cruz, and Byrne are looking to skirt the control problem, sticking with tax credits instead of vouchers, and letting states opt in. But not only is this unconstitutional — taxes are authorized to execute specific, enumerated powers, not to lightly engineer state policy — it won’t, ultimately, prevent encroaching federal control. If enacted, the credit would spur people to demand their states participate, and as more schools benefited from federally connected scholarships all schools would be financially pressured to use them. But the federal government will have the power to decide which state programs are or are not eligible, and on what grounds. As Corey DeAngelis and others have noted, what happens when, instead of a President Trump, we have a President Sanders or Harris and they don’t like the policies of religious schools, or maybe how economics is taught? Suddenly lots of private schools and other options will be federally pressured to look very similar — shape up or credit eligibility goes away — and true choice will be curtailed.
Even the roll out of the proposal raises the specter of federal control. Though the great benefit of tax credits is they do not use government money, and hence are less prone to regulation than vouchers, DeVos, Cruz, and Byrne write that through their proposal they “are putting forward a historic investment in America’s students.” That sure sounds like the federal government is doing the funding, and what government funds it tends to control. Also, that Secretary DeVos is so prominent in the proposal release at least symbolizes not only federal intervention in education policy, but a strong connection to the executive — the dangerously regulatory — branch of the federal government.
School choice is great, and DeVos, Cruz, and Byrne recognize that. But as with so many policies, we cannot let our hearts overcome either our adherence to the rule of law — the Constitution — or make us underestimate the potentially crushing unintended consequences that the product of our pure motives may have.
Senator Elizabeth Warren is right: Child care services in America can be extremely expensive.
In certain areas, child care can be difficult to find at all. High prices have perniciously regressive effects on low‐income families, causing them to miss job opportunities, use unlicensed relatives to care for their children or else forego high amounts of their hard‐earned income.
So the presidential candidate’s new promise of universal child care subsidies will no doubt resonate with many families. She would have the federal government cover the costs of child‐care from birth to school age entirely for any family earning below 200 percent of the federal poverty line, provided they use government‐approved local providers. Federal funding would also be available above that, with a cap on out‐of‐pocket spending on child‐care at 7% of any family’s income. According to Warren’s explanation, this would come coupled with providers being held to government educational standards and a desire to push up pay for child care workers to levels seen for public school teachers.
This would have dramatic consequences for the child‐care sector. A few observations:
- Warren’s plan will significantly reduce out‐of‐pocket costs for many families. It represents a huge new subsidy. Take care for 4 year‐olds as one example; at the moment, data from Child Care Aware of America show just two states (Alabama and Mississippi) have average full‐time care costs below 7% of median income. For infants, no state has average costs below 7% of median income. For families with 2 or more children in these care settings, the subsidy will be massive. Such a large, universal subsidy will bring significant deadweight (people using the scheme who would otherwise have paid for their own care anyway). But it is so generous that it will encourage many new users of child care too.
- This is significant, because state‐level government regulations – not least on staff:child ratios and qualification requirements for carers – currently make providing child‐care more expensive. This reduces the number of child‐care facilities available in low income markets and increases prices for families. Warren’s subsidy response amounts to a classic case of government restricting supply through policy, on the one hand, and then labelling the resulting high prices a “market failure” that needs to be corrected. In fact, Warren’s plan would worsen the supply problem through its promise to raise pay rates for carers substantially. This would restrict supply further while the subsidies induce demand, raising underlying market prices – higher prices now overwhelmingly paid by taxpayers.
- In the U.K., child‐care subsidies drove providers in some areas out of business. Why? The government‐provided subsidy rates to deliver “free” care were often lower than market prices, meaning providers had to cross‐subsidize government‐guaranteed places by charging more for unsubsidized families. As “free” care expanded, the opportunity to engage in this cross‐subsidization fell, and some companies found the government‐funding rate uneconomic as it took over more of the sector.
- In the U.S., the average cost of child care varies dramatically by state. For a 4 year‐old, the cost of full‐time center‐based care ranges from $5,061 in Alabama, right through to $18,657 in D.C. Warren’s plan would cap the proportion of income any family paid on child‐care. But no government would put taxpayers on the hook for a blank check for any family’s spending habits. Otherwise providers would have every incentive to provide extremely luxurious care on the basis that taxpayers would foot the bill. Instead, the federal government would either likely try to fix rates to prevent over‐spending (risking big distortions in certain markets through de facto price controls, as seen in Britain), control what services child‐care facilities provide very prescriptively or else cap the overall amount any family could spend while still benefiting from the subsidy.
In short, instead of reducing the costs of providing care through much‐needed supply‐side reform, this new demand‐side scheme will further drive up the market price of child‐care, with taxpayers on the hook now for increased use of formal care.
Given the cost implications of capping the per income amount spent by any family, the federal government would inevitably have to circumscribe the nature of care, fix the rates taxpayers would finance or cap the total amount families could spend on child‐care within the scheme. These would fundamentally change the types of care available or used in the sector.
Mathew Kelly and I provided a new ranking of state educational systems that was published as a Cato Policy Analysis in November of 2018. Our goal was to provide a ranking that did not treat all states as if their student populations were identical, unlike traditional state rankings. Instead, students of a particular ethnic group were compared across states and the state ranked based on its average of the group rankings. These rankings were further extended to provide evidence of how much student learning ‘bang’ states were getting for their expenditures (‘bucks’). Finally, we ran some regressions of state performance, measured in this manner, to see which factors appeared to be related to successful educational outcomes.
Rutgers University professor Bruce D. Baker responded to this work in a review published by the National Education Policy Center. While scholars often feel gratified to see their work discussed by other academics, this gratification can turn to annoyance if the discussion becomes unreasonably hostile or unprofessional, especially when the discussion is filled with errors, as Baker’s discussion is. Fortunately, Baker’s commentary, though replete with nasty slights, mostly deals with questions that were already answered in our report, making my response easier.
Before responding to Baker’s critiques, however, some housekeeping items are in order. Baker reports several times that our study was published by the Reason Foundation as a “policy brief”. This is incorrect. We did publish a short article in the November 2018 issue of the monthly Reason Magazine which summarizes our results and methods and was written for a lay audience. At the end of that Reason article we steered readers to the more complete, academic style article published as a Cato Policy Analysis on November 13th of that year, and Baker does reference this Cato report in his first footnote. Nevertheless, he mislabels this Cato Policy Analysis as a Reason Policy Brief over a dozen times throughout his text. He refers over thirty times to our “reports” in the plural when we have only one academic style published report, the Cato Policy Analysis, which obviously replaces the prior working paper that we had uploaded on a working paper website. Baker should know that academics routinely improve working papers into final published articles and that references should be made to the published article. This ‘housekeeping’ error is a minor issue in the larger scheme of things, but at a fundamental level it reveals a sloppiness that permeates Baker’s overall analysis.
All of my discussion here is based on the Cato Policy Analysis, which is the complete finalized published work, not a short magazine article or an unpublished working paper.
All this week, the Center for Educational Freedom has been posting clips from Andrew Coulson’s award‐winning documentary School Inc., which takes viewers through time and around the globe to explain how freedom is the key to transforming education for the better. Of course, a few clips can’t convey the entire case. If you want to soak in the whole journey you can do so on the website of Free to Choose Media, which finished production of School Inc. when Andrew became ill, and is the home to all three episodes. If that doesn’t satisfy your desire to better understand how free markets can work in education, or if you want to learn more about Andrew and his ideas — including disagreements with them — read Educational Freedom: Remembering Andrew Coulson, Debating His Ideas. You can get Kindle or print‐on‐demand editions on Amazon, or download a PDF version right from Cato’s website.
I hope you had a happy and informative National School Choice Week!
When did economic growth, and the standard of living of average people, really begin to take off? What caused it? There are many theories, but as Andrew Coulson discusses in the School Inc. clip below, there is good reason to believe not when banking was invented, or factories, or some technological change, but when earning a living through free enterprise — profitable commerce — stopped being seen as, well, kind of tawdry. It is a feeling we continue to struggle with when it comes to education.
There is, of course, profit made throughout public schooling, if that’s defined as taking in more revenue from providing a good or service than is spent to produce it. Whiteboard manufacturers, construction companies, publishers—all are typically for‐profit. Indeed, while absent a free market we don’t know what the “right” amount is to pay educators, and many public school teachers may well be underpaid, few likely lose money on their jobs. In other words, they make profits. Which is not to say they are “in it for the money.” No doubt they care about and enjoy working with kids, but they do need money to live. And it turns out the primary motivation of successful entrepreneurs and business people is not raking it in, but producing something they care about. Does anyone think Steve Jobs was actually indifferent towards computers and just wanted to get rich?
More important than who is making a profit are the overall incentives if profit is matched with funding through students. While the first‐blush reaction to profit is understandable — shouldn’t children trump mammon? — thinking it through reveals why profit and paying customers are beneficial to all. They incentivize schools to respond directly to parents, who control the money and best know their children, while also making schools compete for teachers’ services. In addition, they encourage schools to compete with each other, incentivizing them to try new ways of educating to attract more families. And when schools find better ways to educate and are more profitable, it incentivizes others to copy the innovations, taking them to scale. Freedom also allows educators to specialize in the needs of unique subsets of kids and, of course, is crucial to achieving social harmony and equality in our diverse society.
As School Choice Week 2019 nears an end, perhaps no message is more important than, simply, “embrace freedom.” It is the key to so much that we need in education.
One of the most common myths in education is that school choice is somehow bad for public school teachers. In fact, teachers started striking against school choice in Los Angeles just last week. However, basic economic theory tells us that school choice is actually good for teachers because it introduces competition for their employers. In a competitive education labor market, employers must compete for talent by offering teachers smaller class sizes, more autonomy, and higher salaries.
In fact, the five studies that exist on the subject all find that charter and private school choice leads to higher salaries for teachers in traditional public schools. For example, a study published in the Journal of Public Economics finds that charter school competition increases teacher salaries by about 3.4 percent in difficult‐to‐staff public schools. None of the five studies indicate that school choice competition is bad for public school teachers.
But that’s not all. As shown in Andrew Coulson’s School Inc. documentary, teachers in private institutions in South Korea are highly satisfied with their jobs because their students actually want to be there. And, of course, it’s easier for teachers in private educational institutions (“hagwons”) to tailor their lessons to students because the children “are matched with classes based on their performance levels” and interests.
Highly demanded teachers in South Korea are also financially rewarded for a job well done. As shown in the clip below, some of the teachers make well over $1 million each year. Now that’s an incentive structure that’s good for both students and teachers.
Maybe the teachers in Los Angeles should have been striking for more school choice, not less.
Only a few years ago, if you’d been, say, dining out with friends, had a drink or two, and wanted to go somewhere else, like maybe home, you pretty much had one choice: call a taxi and hope you got a good one. Today you’ve got lots of options including the good ol’ cab, but also ridesharing networks like Uber, Lyft, and others that connect riders to regular people who are drivers and want to make some money, while often enabling both parties to rate their experiences. It was an idea that started with embryonic efforts in San Francisco around 2010, and just a few years later it is nearly ubiquitous. Innovation went quickly to scale.
As Andrew Coulson explains in the School Inc. clip below, we’ve seen this phenomenon — innovations in goods and services quickly made accessible to basically everyone — over and over. But there is one place where we haven’t seen it. Can you guess what it is? It might be where our assumption has long been that government has to supply a uniform service to everyone.
The clips coming in the next two days of National School Choice Week will give you a little more insight into how free enterprise can transform education for the good, but you’ll need to watch the entire series to get a full understanding of how embracing freedom would unleash transformative innovation. And while you watch, why not have some snacks? Thanks to the free market, you can order just about anything.