Matt and I went hiking in Grand Teton National Park last summer. Here we are on the Cascade Canyon trail. We made it all of the way from the trailhead at Jenny Lake to the western end of the canyon, about a 9 mile round-trip. I thought the hike was going to kill a sleep-deprived Ladner, but it was nothing that buffalo burgers and drinks at the Cadillac Grille couldn’t heal. (edited for clarity)
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Mike Petrilli has an excellent piece on Flypaper about lessons for the next administration on the limits of federal involvement in education policy. He’s reacting to a report by Sara Mead and Andy Rotherham laying out an agenda for the federal government, which presumably they will be helping administer for an Obama administration.
Having learned these lessons the hard way, Mike warns that Sara and Andy are falling into old traps despite the best of intentions. Mike argues that giving money to favored organizations, such as KIPP charters and Teach For America to “Grow What Works” will suffer from the same flaws as the Bush administration’s efforts to give money to favored organizations, such as Reading First. Even if the favored groups are doing great work, giving money to them will be portrayed by opponents and the media as cronyism and pork.
In addition, Mike notes that expanding Teach For America and KIPP requires cooperation from state and local agencies to lift caps on charters, equalize funding for charters and traditional public schools, and relax certification requirements. The problem is that state and local agencies have perfected the art of subverting federal mandates. At best unwilling state and local agencies will minimally comply with federal requirements while eviscerating their spirit. At worst they will defy the requirements and dare the federal government to withhold funds. The feds generally lack the political nerve to risk the political fallout from actually applying a sanction to a local or state education agency.
Let me expand Mike’s observations to draw lessons for the future of No Child Left Behind. Like Mike, I once believed that the federal government could use the carrots and sticks (mostly sticks) in NCLB to motivate local and state education agencies to improve. Since I was convinced by evidence that incentive systems worked, why shouldn’t the federal government do what works?
My mistake and the mistake of NCLB was in not considering how much implementation of those incentive systems matters. The federal education bureaucracy lacks the familiarity with local circumstances, the nimbleness to respond to changing circumstances, and the political will to apply sanctions to properly implement an incentive system. Incentive systems are good for education reform but the federal government is too big, slow, far-away, stupid, and cowardly to do it right.
The same is likely to be the case when the federal government tries to expand Teacher For America and KIPP under an Obama administration. As Andy and Sara will soon discover and as Mike has warned them, the federal government will be obstructed by unwilling local and state actors. And the mandates the Feds issue to overcome that resistance will trample upon or fail to anticipate local circumstances.
So what can the federal government do right? First, they can continue to improve the availability of information about the school system. NCLB deepened and entrenched the testing requirements that 37 states had already adopted before NCLB was adopted. Improving transparency facilitates better policy evaluation and the development of effective state and local accountability systems.
Second, the federal government can facilitate “redistributive” efforts that localities cannot pursue without being punished by collective action issues. For example, no locality can operate a substantial special education or English language learner program without attracting more students needing services, which then drives up the costs of the programs and drives away the local tax base that pays for those programs. (See Paul Peterson’s The Price of Federalism for a great discussion of this). To the extent that we want redistribution, we need the federal government to mandate it. And I fully confess that I depart from my Cato colleagues in that I think we need some (but very limited) redistribution.
Third, the federal government can fund pilot programs to experiment with new ideas and approaches. But I should emphasize that I think the federal government has no business evaluating or paying for evaluations of those efforts. The evaluation process in the US Department of Education and the small number of contract-research firms is far too politicized to be reliable. Instead, the federal government should play its role of improving transparency by making data on the pilot programs it sponsors available to any qualified researcher rather than to a favored research firm. The Feds should heavily be in the data collection and distribution business, much as the Department of Commerce makes economic data available, but they should leave analyses of those data to the market of ideas.
The failures of the Bush administration have been a humbling experience. But we are doomed to repeat their mistakes if we do not learn from them and limit the federal role in education to what the Feds can actually do well.
(edited for typos)
9 Comments | NCLB | Tagged: Andy Rotherham, Best of Jay, Jay Greene, Jay P. Greene, Mike Petrilli, NCLB, Sara Mead | Permalink
Posted by Jay P. Greene
Just days after I wrote about how teachers enjoy exceptional job security, even in hard economic times, the Dallas Independent School District (DISD) lays off 375 teachers. The 135 stories about it found by Google News emphasize the harship and turmoil that these layoffs are causing.
I wouldn’t want to minimize that suffering in any way, but it is worth noting that the layoffs were not caused by tough economic times. Instead, the teachers were let go to address an $84 million deficit that “was caused by a massive miscalculation in the budget.” It seems that Dallas public schools had to fire 375 teachers because they couldn’t do the budget math properly. Maybe they could even out their errors by issuing a press release about the layoffs filled with grammatical mistakes.
So I guess teachers can lose their jobs. But, to put it in perspective, this was only 3% of DISD’s teaching workforce and a tiny fraction of the nation’s 3 million public school teachers. My point that teachers are remarkably insulated from economic downturns still holds, even if a number of teachers in Dallas lost their job due to gross budget mismanagement.
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Education finally came up in a presidential debate and I heard something that I never heard before — the standard-bearers for both parties agreed that competition was good for public schools. Sure, past Democratic candidates have endorsed school choice with charters, as Obama did. But Obama did something new. He specifically said that competition from charter schools was important for improving traditional public schools.
Clinton, Gore, and Kerry embraced school choice with charters as an escape hatch for students condemned to failing public schools, sounding very much like Sol Stern, Mike Petrilli, and Rick Hess. But Obama left previous Democratic candidates and these fellows at market-oriented (?!) think tanks in the dust by saying that choice was desirable because of competition.
Here are Obama’s exact words: “Charter schools, I doubled the number of charter schools in Illinois despite some reservations from teachers unions. I think it’s important to foster competition inside the public schools.”
Of course, Obama wants to limit choice and competition to public schools (which include charters), while McCain wants to include private schools in the mix. But they agree on the big idea: public schools are improved when they have to compete to earn students and the revenue those students generate.
Just think. Only twenty years ago school choice and competition was hardly a glimmer in Ronald Reagan’s eye. Now the idea is so widely accepted as reasonable that the leaders of both parties differ only on the mechanism for producing choice and competition. We’ve come a long way, baby.
Correction — Rick Hess emailed to say that he did not want to be counted among those who are unpersuaded by competitive effects from choice. He does think that almost no current choice program is designed properly to produce competitive effects, but he thinks such effects are possible and desirable.
9 Comments | competitive effects | Tagged: charter, competition, Jay Greene, Jay P. Greene, McCain, Mike Petrilli, Obama, Rick Hess, Sol Stern | Permalink
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Actually, he doesn’t. But what he does suggest is almost as crazy.
In an interview with Chuck Norris on his new Fox News show, Huckabee says that a friend of his in the financial business told him that the pattern of trading suggests that the crash may be the result of “economic terrorism.” The Huckster emphasizes that his friend is not just some guy on the internet and that the theory is a “plausible argument.” Norris then adds that the Chinese may have received some secret deal in exchange for our trade deficit with them that allows the Chinese to drill for oil off of the Florida coast without our knowing it.
I’m not sure my summary could capture the full craziness of it, so David Kinkade at that great new blog, The Arkansas Project, has found a video of the exchange.
I hope stuff like this drives a stake through the vampire heart of Huck in ’12 talk.
Why would Huck suspect the market dive to be caused by economic terrorists rather than the more obvious popping of the housing bubble and a credit-quality panic among banks? Why is he asking Chuck Norris for his opinion? Why does Norris offer an additional conspiracy involving the Chinese and drilling off of the Florida coast? Why was this man ever considered a serious presidential candidate?
I have to add that it is especially scary when people who ought to be responsible start spinning conspiracy theories on TV. The popularity of conspiracy-obsessed web sites, like Daily Kos, and Andrew Sullivan’s promotion of conspiracies about Palin show that “elites” are increasingly comfortable with conspiratorial thinking.
Unfortunately, when elites peddle conspiracies, it lends credibility to all of the run-of-the-mill wacko-conspiracy theorists out there who feel legitimized. In just the last month I’ve had two people freely offer their conspiracy theories to me about the Trilateral Commission, the neo-cons, etc…
When will people learn that we have a hard enough time pulling off normal, openly-stated goals, like winning a war or regulating banks, to pull-off elaborate secret missions? Human beings can barely walk upright let alone control global events.
8 Comments | politics | Tagged: Check Norris, conspiracy theories, David Kinkade, Jay Greene, Jay P. Greene, Mike Huckabee, The Arkansas Project | Permalink
Posted by Jay P. Greene
We’ve previously discussed how teachers are relatively well-paid and how the structure of their pay does not promote quality teaching. To be sure, teachers aren’t paid like doctors, but they also aren’t paid like fast food workers. If computed on a weekly basis, teachers are paid slightly above the average professional specialty and technical worker (the group in which they are classified by the Bureau of Labor Statistics). But on an annual basis they are paid less.
During these times of economic turmoil and anxiety, it is worth emphasizing a non-monetary aspect of teacher compensation that also adds to the relative appeal of the profession — teachers are essentially guaranteed continued employment with a gradually increasing salary regardless of economic conditions. That certainty of employment with an ever-increasing wage makes up for some of the perceived or real shortcomings of teacher salaries. If you don’t believe me, just ask the bank employee, insurance agent, or restaurant manager who are about to find themselves out of a job how much salary they would forsake for the guarantee of continued employment.
Teachers are essentially guaranteed employment despite economic conditions because education spending is almost never cut and, even if it is, teachers are the last thing to be cut within the education budget. In more than half the states the courts have intervened in education budgets, interpreting vague clauses in state constitutions about an “adequate” or “efficient” public education system as compelling certain levels of education spending. In those states policymakers dare not cut education spending for fear of being slapped by the courts. In Arkansas, the court has even compelled the state legislature to increase K-12 education spending by at least the level of inflation. Colorado has a similar mandate.
No one else has this guaranteed claim on resources. Even other essential state functions, like law enforcement or road construction can be cut if state revenue drops. Not education. They’ll get more almost no matter what.
And within the education budget tenured teachers are essentially guaranteed their jobs and ever-increasing pay. In almost every school district the contract or state law mandate a step and lane pay schedule that pays teachers more every year they remain employed. If teachers basically can’t lose their jobs and if the system pays them more each year, they enjoy a benefit that almost no other profession enjoys. When thinking about whether more tax dollars should be devoted to increase teacher compensation further, we should remember these non-monetary benefits of guaranteed employment with ever-increasing salaries.
I should note that university professors are another occupation that enjoy essentially guaranteed employment, although not with a guarantee of annual salary increases. And I admit that I benefit from this assured employment, even as I think it has negative effects on higher education. But at the same time you won’t hear me arguing that university professors are woefully underpaid and are entitled to an ever-increasing amount of tax-payer dollars.
Right now almost all tax-payers are suffering in their own economic circumstances. It is just unseemly to see educators demanding more and more even as the pool of available resources becomes smaller and smaller.
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Congress passed the Emergency Economic Stabilization Act (EESA), but the markets have hardly stabilized. Don’t the markets know that it is against the law for things not to be stable now that Congress passed a stabilization act?
I think recent events demonstrate that the EESA was completely unhelpful if not counter-productive. But others interpret events as showing that the EESA didn’t go far enough. I’m sure that there are also Marxist academics out there still arguing that full communism has never really been tried because the Soviets didn’t go far enough. And there are education interest groups saying that the doubling in real per pupil spending hasn’t yielded academic improvement because we haven’t spent enough yet. Something didn’t work? Just try more of it!
Well, I came across a very sensible op-ed in the WSJ yesterday that offers an explanation for why the crisis continues and what might be done to really bring about stability. Manuel Hinds suggests that the problem at this point is that financial institutions are refusing to lend to each other. The problem is that some of those institutions won’t repay money that is lent to them because they are truly insolvent, but no one knows for sure who those institutions are. So the safe thing to do is not to lend to any other banks. But this lack of inter-bank lending is having a negative spiral effect. Hinds likens the problem to playing poker with ten people knowing that a few aren’t good for their chips. No one will play until you figure out who can settle at the end of the game.
The solution is to improve transparency so that we all more clearly know who is and who isn’t able to repay money that is lent to them. One of the best ways to gain that transparency is to allow insolvent institutions to go bankrupt so that we know the ones still standing are healthy. Efforts to prop up insolvent institutions just prolong the crisis by disguising who really can repay and who can’t. It would also be essential for transparency to continue mark-to-market accounting, despite calls to do away with it. Without mark-to-market we would have much less information about the value of securities held by financial institutions. More information is the solution and ending mark-to-market subtracts information. There may also be reasonable regulations that would improve the quality of information about financial institutions.
There are real problems in financial institutions but masking them just makes the problem worse.
(edited for typos)
4 Comments | economics | Tagged: Bailout, Jay Greene, Jay P. Greene | Permalink
Posted by Jay P. Greene
In my last post I described Jennifer Jennings as the blogger formerly known as Eduwonkette. I had thought we only had to call her Eduwonkette when we didn’t know who she was. But I guess she continues to go by her rapper name, Eduwonkette. And Aaron Pallas, an otherwise respectable scholar, continues to call himself Skoolboy — with a k! And I guess they are both cribbing (in the non-rapper meaning) from Eduwonk, who we’ve always known to be Andy Rotherham.
I find the use of rapper names by bloggers to be downright silly. It’s especially silly when accompanied by self-aggrandizing cartoons and graphics. Here at Jay P. Greene’s Blog we’ve gone for a minimalist approach, both out of laziness and an aesthetic vision that tried to put the focus on content.
But if a bunch of other folks are going to continue to call themselves rapper names and have cartoon graphics to represent themselves, maybe I should do the same. Perhaps I should go by my rapper name — DJ Super-Awesome. And maybe we should use Thundarr the Barbarian graphics to represent ourselves. I call the image of Ookla and I’ll let Greg and Matt fight over who gets to be Ariel.
11 Comments | blogging | Tagged: Eduwonk, Eduwonkette, Jay Greene, Jay P. Greene, Skoolboy, Thundarr | Permalink
Posted by Jay P. Greene
George Carlin compares football and baseball.
The congressional bailout isn’t the only scheme that redistributes resources, punishing excellence and rewarding failure. The National Football League’s revenue sharing scheme does the same. All football teams, regardless of their performance or fan base, draw an equal share of the TV revenue, which is the lion’s share of all revenue in football. Doing so rewards teams that flop and undermines the incentive to excel.
The arguments for revenue sharing are unpersuasive. People say that revenue sharing produces parity, where all teams have an equal chance of winning, which makes it more exciting to watch. But flipping a coin also has parity, with an equal chance of either side “winning.” Who wants to watch a coin being flipped?
I think what people really want — or at least should want — is excellence. That is, sport offers fans the chance to see excellence in athletic achievement. If all we wanted to see was parity, people would fill stadiums to see little league games where the players are randomly assigned to teams. Instead, people fill stadiums to see the very best athletes doing the very best they can.
Now, it’s true that we wouldn’t see excellence if one team could beat the other without effort. If teams could simply buy so much superiority that they didn’t have to try to win, we would be disappointed. But the reality is that without revenue sharing teams still cannot be assured victory, especially over an entire season.
Just look at Major League Baseball, which has limited revenue sharing and historically had none. The highest spending baseball teams cannot assure themselves a spot in the playoffs, so they must regularly try hard. There is a relationship between how much a baseball team spends on its payroll and how many games it wins, but that relationship isn’t very strong. In 2008 the correlation between team payroll and regular season games won was only .33. Consider that the top three payroll teams (Yankees, Mets, and Tigers) aren’t in the post-season, while the Tampa Bay Rays, who spent 1/5 as much as the Yankees, are.
We shouldn’t want to see no correlation between team payroll and success because the revenue partially serves as a reward for winning, motivating excellence. It’s also true that larger media market teams get more revenue without necessarily winning more games. But we should want larger market teams to have a better chance of having the resources to win. After all, those teams have more fans. We wouldn’t want to shut large market teams out of the post-season and turn-off the bulk of the nation’s fans. So, it is altogether fitting and proper (as A. Lincoln would say) that Los Angeles and Chicago each have two teams in the baseball playoffs even while NY has none. And small market teams like Tampa Bay and Milwaukee clearly still have a fighting chance.
Obviously, it wouldn’t be any fun to have a team that never had a hope of winning because its market was too small to generate the revenue for a competitive team. But if there were such a team the solution would be to move that team to larger market rather than to move revenue to the market that wasn’t viable.
So, this weekend I’ll be watching the baseball playoffs rather than the NFL. I’d rather watch excellence than a coin being flipped.
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Posted by Jay P. Greene
Greg and Matt had some excellent posts yesterday on the bailout. Matt described how we got into this mess and Greg outlined the issues in dispute. Today I want to talk about where we go from here.
I do not believe that a Congressional bailout is necessary to avert a catastrophe nor do I believe that it will effectively stop the economic damage that remains to be inflicted. All that Congress is likely to do is shift the cost of the economic damage to a broader pool and hinder future growth with unwise regulations and new programs.
Despite scare-mongering to rush a bill through Congress, the reality is that the current turmoil is a normal popping of a speculative bubble fueled by Fannie and Freddie (government) guarantees on mortgages and artificially low Federal Reserve interest rates. No matter what Congress does, a fair number of people are in homes they cannot afford and a number of banks own mortgages that will never be repaid.
Shifting those bad mortgage securities from financial institutions to the government balance sheet changes nothing. Someone is going to have to eat those losses. If the bailout pays the banks above the market value for those securities, then the taxpayers will bear those losses, either in the form of raised taxes or higher inflation. If the bailout pays market value, then the banks will not have any additional capital on their books and they will be no better off. Either way, the economic damage of these bad mortgage securities on the economy will remain the same.
The only way that the government bailout could help is if the government pays above market value for the mortgages, strengthening bank balance sheets, but the amount that is paid turns out to be less than the intrinsic value of those securities, so the mortgages can later be resold without a loss to taxpayers. But there is no reason to believe that the market value of those securities is less than their intrinsic value or that the government knows what the true intrinsic value of those securities is and will pay less than that amount.
To believe the case for the bailout you would have to believe that the government is the smartest hedge fund out there. Keep in mind, there are potential buyers with capital willing to buy the bad mortgage securities, but not at a price that banks are currently willing to sell. The banks don’t want to sell for the price that buyers would buy because they would have to write down the losses and be forced to raise capital themselves, which they are currently unable to do easily. Instead, the banks are holding on, hoping that the government will pay them a higher price or that the market for these mortgages will somehow improve.
Instead of a bailout we should allow the market to work out these losses. The government cannot stop the losses; it can only move them around. And it can do some extra damage in the process, such as imposing new regulations and introducing moral hazard for future financial mistakes.
Despite elite opinion in the media and from many on Wall Street that a bailout is necessary, the passing of each day without a catastrophe demonstrates otherwise. Sure, the markets have been volatile, but short-term market movements don’t indicate the long-term wisdom of policies.
And let’s put things in perspective. The economy grew last quarter. Credit-worthy consumers can still get mortgages, car loans, and business loans. The stock market is still higher than where it was a decade ago. Things are painful but they are not catastrophic.
As Peter Robinson over at National Review’s The Corner says, “it has become impossible—simply impossible—to dismiss opponents of the bailout as mere hayseeds and (what to a lot of people amounts to the same thing) House Republicans.” And a group of 200 academic economists from all ends of the political spectrum have come out against the bailout.
The hardest thing to do in a moment of crisis is to do nothing. But in this case nothing is probably exactly what we need.
Update: Alan Reynolds has a great piece at Forbes in which he documents that consumer lending has not declined. He writes:
“On CNBC Monday, Democrat majority leader Steny Hoyer said the objective of the rescue package is to “unlock the credit” for consumers and business. And a Wall Street Journal editorial writer told CNBC, “Until we get the banks lending again, the economy will continue to contract.”
Such alarming comments never mention any facts. Why not? As Neil Cavuto recently noted on Fox Business News, the Fed reports bank loans every week.
U.S. Bank Loans (Billions of Dollars)
| Week Ending Wednesday | Business (Commercial & Industrial) | Real Estate | Consumer | Interbank (Other Than Fed Funds) |
| Aug. 13 | 1,514.5 | 3,639.4 | 841.6 | 77.6 |
| Aug. 20 | 1,509.1 | 3,653.3 | 845.6 | 75.3 |
| Aug. 27 | 1,515.1 | 3,650.6 | 848.0 | 76.3 |
| Sept. 3 | 1,514.8 | 3,631.3 | 846.8 | 77.2 |
| Sept. 10 | 1,512.0 | 3,630.3 | 850.5 | 74.0 |
| Sept. 17 | 1,531.2 | 3,625.2 | 847.1 | 72.3 |
| Year Ago: | ||||
| Aug. 2007 | 1,311.1 | 3,498.4 | 774.0 | 82.7 |
Federal Reserve Board, “Asset and Liabilities of Commercial Banks in the United States” (H.8).
In August, bank loans to consumers were 9.5% higher than they were a year earlier–the fastest increase since 2004. The year-to-year increase in consumer and industrial loans was 15.5%, down only slightly from a recent record high of 21.6% in March. Real estate loans were up 4.1% for the 12-month period ending this August–flat lately, but not down…
Contrary to many comments, consumer and industrial loans actually increased in the latest week. Troubled giant banks have cut back on lending, but smaller banks have picked up the slack. Consumer and real estate loans dipped insignificantly through Sept. 17, remaining much higher than they were a year earlier. “
14 Comments | politics | Tagged: Bailout, Jay Greene, Jay P. Greene | Permalink
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