Daily Archives: January 26, 2011

President Obama: “We do big things”

By William K. Black

President Obama’s State of the Union address stressed how we should be training future scientists and engineers.

And over the next ten years, with so many Baby Boomers retiring from our classrooms, we want to prepare 100,000 new teachers in the fields of science, technology, engineering, and math.

In fact, to every young person listening tonight who’s contemplating their career choice: If you want to make a difference in the life of our nation; if you want to make a difference in the life of a child – become a teacher. Your country needs you.

Obama correctly identified a critical need and stated that we must make dramatic changes to meet the need. Are we acting to add 100,000 (net) new teachers in those fields? Obama emphasized in his address that we need to respect teachers. So let’s ask the teachers what is happening. On May 27, 2010, the National Education Association warned.

Without $23 billion from Congress to keep public schools running next fall, 300,000 teachers … and support professionals will lose their jobs.

Everyone knew that the Great Recession would cause a disaster at the state and local government level because states and localities cannot run substantial deficits. Recessions cause tax revenues to fall and needs for social services to rise. In a Great Recession both effects are severe. School districts suffer the worst when home prices (and property tax revenues) fall after the collapse of the largest bubble in history. Virtually all economists support automatic stabilizers at the federal level, which reduce the length and severity of recessions and inflation. We want the federal government to spend in a countercyclical fashion, particularly during a serious recession. The federal government should increase its expenditures while tax revenues fall. Substantial federal deficits are vital and desirable to reduce the harm and length of recessions. Indeed, the automatic stabilizers are not large enough on their own against a severe recession. One of the reasons the automatic federal stabilizers are not large enough is that state and local financing is pro-cyclical. States and localities cut their expenditures and employment during a recession. That pro-cyclical pattern seriously reduces the anti-cyclical nature of the federal government’s expenditures. The result is that recessions last longer and are more severe. But another set of results is that state and local governments add to unemployment and reduce vital services.

There was an obvious, elegant answer to this suggested by many of us – revenue sharing. To its credit, the Obama administration proposed that answer as part of its stimulus bill. Revenue sharing was a good old-fashioned Republican idea (President Nixon). It would have prevented the terminations of over 100,000 teachers and hundreds of thousands of other public employees, including police officers. It would have reduced the severity and length of the recession. It was a win-win-win. Naturally, conservative Democrats (Blue Dogs) and Republicans decided to oppose revenue sharing. Had Obama fought for revenue sharing he would have developed tens of thousands of local government allies. He would have had the support of the great bulk of economists. Instead, Obama folded on a winning hand without a fight.

Obama premises our national strategy on education and research. That strategy is premised on hiring 100,000 new teachers. Instead, we are firing up to 300,000 teachers. And Obama’s answer to closing up to a 400,000 teacher gap – essential to the success of his entire strategy – is to encourage students to become teachers. What he doesn’t propose is anything that would give the school districts the money to retain and hire the 400,000 teachers. One of Obama’s applause lines was: “We do big things.” Yes, that is part of what has made America great. Indeed, we do giant things. Obama’s address was his chance to set out the big things he would do. We got instead an aspiration: “we want to prepare 100,000 new teachers….” Budgets are policies made real. If you don’t have a plan to get the money, what you “want” doesn’t happen. Obama isn’t even trying to get the additional money to the states and localities. He’s freezing those kinds of federal expenditures.

Obama also froze federal employees’ salaries, knowing that it will put political pressure on states and localities to freeze their employees’ salaries. How are we going to recruit “100,000 new teachers in the fields of science, technology, engineering, and math” when we’re firing hundreds of thousands of teachers and freezing the salaries and cutting the pensions of those that stay? Those four fields are highly sought after and command premium salaries in the private sector. Under Obama’s proposal to greatly increase research grants in science and engineering those salaries will rise materially. The gap between teacher salaries and private sector salaries in those four fields, already large, will increase sharply. The school districts are in acute financial distress. No one believes they can afford to raise salaries to compete with the private sector in these fields without large increases in federal aid.

Obama’s plan to increase college graduates also fails to live up to the promise that “we do big things.”

Of course, the education race doesn’t end with a high school diploma. To compete, higher education must be within reach of every American. That’s why we’ve ended the unwarranted taxpayer subsidies that went to banks, and used the savings to make college affordable for millions of students. And this year, I ask Congress to go further, and make permanent our tuition tax credit – worth $10,000 for four years of college.

Many students are graduating with over $100,000 in student loans and Obama’s answer is a tax credit “worth $10,000.” Not $10,000 annually – total. It’s a very bad thing when Obama knows he needs to come up with a “big thing”, tries to think of a “big thing”, and the only thing he can come up with is a small thing. Obama’s education plan is far superior to the Republican’s, but it is puny compared to the scale of the problem he sets out. A bold scholarship program would ensure that no student who had the ability to succeed would be denied a collegiate education.