Monday, May 31, 2010



Washington Post Editorial

Friday, May 28, 2010 -- IN A SPEECH MONDAY on the Obama administration's economic policy, National Economic Council Director Lawrence H. Summers argued that deficit spending is still needed to boost growth -- but must be designed to produce maximum "bang for the buck." "There is no macroeconomic rationale for wasteful spending," he insisted.

So why are Mr. Summers and Christina D. Romer, chair of the White House Council of Economic Advisers, along with the rest of the Obama administration, promoting the $23 billion education jobs bill now before Congress? Its sponsors on Capitol Hill have labeled it "emergency" legislation, worthy of exemption from President Obama's anti-deficit pay-as-you-go rules. But it's certainly not a uniquely effective way to stimulate the economy. Ms. Romer suggests on the opposite page today [“How To Prevent Huge Teacher Layoffs”/following]  that keeping teachers at work will enable them to maintain their spending, thus supporting economic growth -- and saving on unemployment benefits and the like. The real question is whether this bill promotes more growth than other possible uses of $23 billion. Ms. Romer did not explain why retaining teachers stimulates the economy better than retaining, say, construction workers. Nor does she weigh the costs and benefits of not borrowing another $23 billion from China.

Ms. Romer argues that the bill is less costly than it seems because it ensures a better-educated, and hence more productive, populace in the future. Fair enough -- though you could say the same for construction workers, since better roads and bridges boost economic efficiency, too. She is right that school districts around the country, having run through $100 billion from the February 2009 stimulus bill, face a crunch. Officials have issued more than 100,000 layoff notices, according to data compiled by teachers unions. The unions predict layoffs could go as high as 300,000. It's hard to imagine losing that many teachers without some damage to learning.

But that many teachers almost certainly are not going to lose their jobs. For technical reasons, school districts must send notices in the spring to more teachers than they actually expect to let go in the fall. What's more, the unions' 300,000 estimate includes not only classroom teachers in kindergarten through 12th grade but also support staff and college professors. The bill would distribute money to states according to their population, not expected layoffs; states where no layoffs are imminent would get checks anyway, and the majority of states would receive more than they could possibly need to avoid layoffs. The Senate version of the bill permits them to spend the excess on other things.

If the goal were to preserve the maximum number of good K-12 teachers at minimum cost, the bill would encourage states to lay off teachers according to ability, rather than seniority -- as current rules, sacrosanct to unions, dictate. In Los Angeles, Mayor Antonio Villaraigosa, a Democrat, has been fighting stiff union resistance to achieve such a reform. But the bill's sponsors, Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.), say there's no time to waste on that problem. Many jobs could be saved if more teachers accepted wage and benefits restraint, as workers in other hard-pressed industries have done. New Jersey Gov. Chris Christie (R) has urged teachers to take a one-year wage freeze, but the vast majority so far have refused. And the bill places no such conditions on aid.

Instead of passing a bill that perpetuates the status quo, Congress should use its power of the purse to leverage reform. As Mr. Summers also said on Monday, "excessive budget deficits, when associated with spending that is wasteful, erode confidence in government and trust in public institutions. Ironically, this may make it more difficult to bring about reforms that are necessary to make the public sector function better and enhance our long-term productive capacity." That strikes us as a near-perfect description of this bill and its likely impact.



Op-Ed in The Washington Post By Christina D. Romer

Friday, May 28, 2010  -- The emergency spending bill before the House would address the education crisis facing communities across America -- and the jobs of  hundreds of thousands of teachers are at stake. Because of continued high unemployment, state and local budgets are stressed to the breaking point. Many states and localities are drastically cutting education spending. This year school districts in Hawaii went to only four days of instruction a week. In many other districts, officials are ending the school year early to save money.

Most worrisome, hundreds of thousands of public school teachers are likely to be laid off over the next few months. As many as one out of every 15 teachers could receive a pink slip this summer, the White House Council of Economic Advisers estimates. These layoffs would be spread throughout the country -- in urban, rural and suburban districts.

Such layoffs are terrible for teachers, for communities and, most important, for students. For the families directly affected, layoffs mean not only lost wages but often lost homes and postponed dreams. Because unemployed teachers have to cut back on spending, local businesses and overall economic activity suffer. And the costs of decreased learning time and support for students will be felt not just in the next year or two but will reduce our productivity for decades to come.

Additional federal aid targeted at preventing these layoffs can play a critical role in combating the crisis. Such aid would be very cost-effective. There are no hiring or setup costs. The teachers are there, eager to stay in their classrooms. The American Recovery and Reinvestment Act of 2009 included some of this aid for 2009 and 2010. The recipient reports filled out by states and school districts show that, last quarter, Recovery Act funds supported more than 400,000 education positions.

Furthermore, by preventing layoffs, we would save on unemployment insurance payments, food stamps and COBRA subsidies for health insurance, and we would maintain tax revenue. Accounting for these savings, the actual cost of the program is likely to be 20 to 40 percent below the sticker price -- perhaps even lower when one considers the spillover effects of maintaining employment. And the country will recoup much of the cost in coming years, as a better-educated workforce leads to higher tax revenue and less reliance on the social safety net.

The American economy has made tremendous progress over the past year. We have gone from job losses of three-quarters of a million per month, in the first months of 2009, to now adding jobs -- nearly 300,000 in April. But we still have a very long way to go. Overall employment is down almost 8 million from its December 2007 peak. And for the millions of Americans who are struggling to make ends meet without a paycheck, this is still an economic crisis.

Further targeted actions to speed the recovery and reduce unemployment, such as the teacher layoff prevention fund that is included in the emergency spending bill, are good for the economy and good for families. With teacher layoffs imminent, the time to act is now, before schools send out more layoff notices and make their staffing decisions for the fall.

Yes, we all understand that our budget deficit is too large. Profligate policies of the past and rising entitlement spending have created a mess that simply must be dealt with as we return to full employment. But it would be penny-wise and pound-foolish to deal with that issue by failing to allot essential spending on teachers at a time when the unemployment rate is still near 10 percent.

The right way to deal with a budget problem that was years in the making is by formulating a credible plan to reduce the deficit over time and as the economy is able to withstand the necessary fiscal belt-tightening. That is what President Obama is doing.

Let's also do what we need to do now -- keep hundreds of thousands of teachers in the classroom and prepare our students for the challenges of the future.

The writer is chair of the White House Council of Economic Advisers.

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