Taking Note

Wall Street Back to Its Old Tricks

One might have thought, given recent credit market debacles, that bankers might have tamped down the ingenuity quotient on new products, especially those sold into troubled markets – like today’s very shaky municipal bond market.

Not at all.  A recent "Citi Outlook" on the municipal market sees "An Exciting Year Ahead" for "Muni Derivatives." For example, they expect a burgeoning market for credit default swaps on munis, and especially in muni synthetics.  They also expect "a fruitful environment for TOBs," although they lament that investors "still vividly remember their 2008-2009 experience and are not willing to jump aggressively into this trade."  Hmmm.  What might that "2008-2009 experience" possibly have been?  And what on earth is a TOB anyway?

Drug testing welfare recipients: Another bad idea that keeps showing up

Miller-McCune reporter Emily Badger called me yesterday, asking about states' renewed interest in drug-testing applicants for cash assistance. You can read Badger's story and my comments about these issues here.

To tell you the truth, I was surprised to get Badger's call. I and my colleagues Sheldon Danziger, Lisa Metsch, Peter Reuter, and Rukmalie Jayakody published a series of papers on this topic in the aftermath of welfare reform. For awhile, we got some attention for this work. Then everyone seemed to have forgotten about this issue until a few months ago, when legislators in several states (and Senator Orrin Hatch) re-opened things.

Alcohol and illicit drug disorders are not common among welfare recipients. These disorders are important within specific populations--most crucially, welfare recipients facing child abuse or neglect issues. They are not widespread among low-income single mothers who need cash aid. In our work, using data that's now admittedly getting a little old, about one in ten welfare recipients satisfied screening criteria for substance abuse or dependence. Other psychiatric disorders, physical health problems, and educational deficits were more common threats to well-being and economic self-sufficiency.

The harder question about welfare is simply this: why are so few people receiving help?  In 1996 when the economy was doing well, 12.3 million Americans received Aid to Families with Dependent Children (AFDC). Today, in the midst of deep recession that has brought 9+ percent unemployment, only 4.3 million Americans receive assistance under AFDC's successor program Temporary Assistance for Needy Families (TANF).

There is no evidence that widespread testing will uncover large numbers of women with drug use disorders. Indiscriminate testing is not a smart way to bring substance users effective help, either. Done wrong, such practices could easily overwhelm treatment and service systems with casual marijuana users.

Drug testing applicants for public aid is, quite deliberately, punitive and insulting. Intentionally or not, such policies reinforce harmful and inaccurate stereotypes about who welfare recipients are and why they need help. Lack of available jobs, not substance abuse, is the most critical concern.

Debating Michelle Rhee

 Earlier this week, I reviewed in Slate Magazine a new biography of former D.C. Schools Chancellor Michelle Rhee called The Bee Eater, written by former USA Today editorial writer Richard Whitmire.  In my review, I noted that Rhee is wildly popular among members of the elite media, even though there is very little evidence to back up Rhee’s claim that low quality teachers, and their union protectors, are bigger impediments to equal educational opportunity than poverty and segregation.  I was critical of Whitmire’s highly favorable treatment of Rhee’s tenure.
 
In the old days, authors took their lumps when their books were reviewed, but now they routinely respond, which is a healthy development.  Whitmire, who is a good and clear writer, responded to my review on his Bee Eater blog.  He makes some interesting points and raises some good questions, which I’ll try to respond to here.

The two central questions posed by Whitmire’s book are: Why do D.C. schools perform so much worse than many other big city school districts?  And was Rhee’s the right approach to improving the schools? 

Why Do D.C. Schools Perform Poorly?

In comparing school districts, virtually every education researcher will point to poverty levels and segregation as the key factors in why certain districts do better than others.  Districts are made up of schools, and schools which have high levels of poverty consistently perform far worse than those with lower levels of poverty.  These differences outstrip the much-discussed achievement gap between the U.S. and other countries.  For example, on the recently-released 2009 Programme for International Student Assessment (PISA), Stephen Krashen, professor emeritus at the University of Southern California, notes that 15-year-old Americans in low poverty schools (those with less than 10 percent of students eligible for free or reduced price lunch) scored 551 on reading, higher than the overall average of any participating country.  By contrast, students in schools with more than 75% of students from low-income families, scored  446 on average, second to last among the 34 nations in the Organization of Economic Cooperation and Development (OECD).

The biggest reason that D.C. scores poorly overall is that it has higher numbers of students coming from low-income backgrounds and attending high poverty schools than most other American school districts.  But Whitmire then narrows the question to ask, if we take poverty and race off the table, why do poor black students in D.C. perform two years behind poor black students in places like New York?

For Whitmire the answer is obvious: teacher quality.  He says that “experts” inside and outside of the D.C. school system estimated that two-thirds of teachers needed to be fired when Rhee came in. He provides no explanation for how this astonishing figure was arrived at, nor does he provide a comparable figure for the percentage of teachers he considers sub-par in New York City.  Whatever one thinks of Rhee’s IMPACT teacher evaluation program, it didn’t exist when she first came on so it can’t be the source of the two-thirds figure.

Whitmire spent many hours visiting Washington D.C. public schools – something I have not done – and so it should count for something when he indicates that based on his visits he found “no reason to dispute” the two-thirds figure.  But I would be far more convinced if Whitmire’s observations and interviews were backed up by published research.  I don’t think the evidence presented by Whitmire supports his declaration that Rhee “fired too few teachers, not too many.”

Whitmire is correct that teacher quality is very important, but other factors are also relevant – such as the standards and curriculum in a district, the availability of support services and pre-K programs, access to extended learning time, levels of segregation, class size in the early grades, the quality of professional development provided to teachers, and on and on. According to Diane Ravitch’s analysis of research, teacher quality, by itself, accounts for between 10 and 20 percent of overall achievement outcomes.  


Was Rhee’s the right approach to reform?

Let’s assume, however, that Whitmire is right and the central reason that D.C. performs worse than  systems like New York City's is that it has a lower quality of teacher on average.  Does that vindicate Rhee’s approach?

Hardly.  As I pointed out in the Slate review, there are good ways and bad ways to get rid of poorly performing teachers.  Peer review programs can weed out low performers in a way that is considered fair and doesn’t demoralize large segments of the teaching population.  Likewise, merit pay can be structured in a way that encourages, rather than discourages, the sharing of good teaching ideas.  Rhee didn't go about her program of upgrading teacher quality in the right ways.

Moreover, once a school district removes poor performers and institutes a credible system of rewarding high performers, there is still the question of how to connect the best teachers with the disadvantaged students who need them most.   In D.C., there is evidence that using Rhee’s own measure of teacher effectiveness – the IMPACT analysis – the strongest teachers are in the most affluent schools.  According to the Washington Post, the District’s most affluent ward has four times as many “highly effective” teachers as the poorest ward.

Rhee instituted a good and progressive program to provide the biggest bonuses to highly effective teachers who go into higher poverty schools.  But there are limits to this approach.  Research finds that teachers care more about working conditions than salary, which is why bonuses have to be very large – as much as 40% of salary – to effectively keep great teachers in high poverty schools for sustained periods of time. 

A more cost-effective way to connect strong teachers and low-income students is to integrate schools by economic status.  That’s part of why I wish Rhee had followed through on her good and productive efforts to attract more middle-class families to the public schools with a conscious strategy of school integration that would reassure low-income families that the middle-class influx would help, not hurt, them.  It’s telling that in a recent interview with Seyward Darby of The New Republic, Rhee declined to spell out a position in favor of integration.  Integration is “a very tricky situation,” Rhee told Darby.  “StudentsFirst is not at this point going to take a policy stance on the issue.”

In his blogpost, Whitmire suggests that Rhee had to be tough on teachers because “Michelle Lite,” which he defines as “Rhee’s reforms with more cooperation and smiles,” has not produced “Rhee-like gains” in other districts.  But as I noted in the Slate review, recent research by Alan Ginsburg, the former Director of Policy and Program Studies at the U.S. Department of Education, finds that in fact the two prior superintendents in D.C., Paul Vance, and Clifford Janey, produced “Rhee-like gains” without all the fireworks.  What does that do to Whitmire’s unsubstantiated theory that “Part of the resentment against Rhee in some parts of D.C. appears rooted in the fact that it took a Korean American to actually improve schools—after a long string of black schools chiefs produced no improvements”?

Income Volatility and The Design of Insurance Exchanges

This piece is cross-posted at the Reality-Based Community.

If you read one piece of health policy wonkery today, you should read this article by Ben Sommers and Sara Rosenbaum. Rosenbaum is a familiar national voice in Medicaid and health reform. You may not know Sommers as well. He is a gifted health services researcher who has done great work on CHIP transitions and takeup (e.g. here).

Their article goes public about a technical but important, issue that's been kicking around below the public's radar screen in the health policy community. How do we serve people whose incomes vary over the year? You may be snoozing already, but if you stay awake for a moment, you'll see why this is both important and complicated to address.

Suppose that you are a single mom who earns about $30,000 per year. Maybe you are a waitress. Maybe you work in a retail outlet and are given fluctuating hours by your employer. On average, you earn about $2,500 per month. Only you don't earn that every month. You earn a lot around the holidays and during peak vacation periods. You don't earn much in other months when hours are scarce or tips are fewer.

Based on your monthly income, you are sometimes eligible for Medicaid, and you sometimes earn more than that and belong on a health insurance exchange. Depending how these issues are handled, you could be placed into one of these arrangements or the other. Worst of all, you could churn back and forth as your personal circumstances push you above or below the line for Medicaid eligibility.

Such income volatility poses administrative challenges for the people insuring you. This may also disrupt your healthcare if Medicaid and your plan within the health insurance exchange have different provider networks or different policies regarding your care.

Sommers and Rosenbaum use longitudinal data from the Survey on Income and Program Participation (SIPP) to examine how common such volatility really is. (I'm annoyed at myself that I didn't write this paper, since my colleagues Luke Shaefer, Colleen Grogan, and I have used SIPP to examine related issues at the interface between CHIP and private coverage, e.g. here.)

Their numerical findings speak for themselves:

We estimate that within six months, more than 35 percent of all adults with family incomes below 200 percent of the federal poverty level will experience a shift in eligibility from Medicaid to an insurance exchange, or the reverse; within a year, 50 percent, or 28 million, will.

States need to account for this in their design health insurance exchanges, and to allow a more permeable boundary between the new exchanges and Medicaid. Sommers and Rosenbaum provide some pretty sensible policy suggestions. I'll let you read their take and decide for yourself.

The Affordable Care Act is pretty silent about how these issues should be handled. For all the criticism of passing a huge bill, a few-thousand page bill can provide only a basic structure and roadmap for health reform. Much serious Midrash remains to be written. The federal government and the states need to be talking, because 2014 is not far away.

Obama Mideast Wave Hits Traditional Rocks

Just ten days ago Barack Obama had re-captured the imagination and hopes for change of much of the Muslim world.  Adroitly redeploying American influence to help Egyptians send the fossilized Mubarak regime into well earned retirement, Obama reawakened the sense of a new beginning that had propelled his foreign policy initiatives in his first year in the White House.

But the wave of reborn enthusiasm has quickly broken on the rocks of traditional formulas that could only alienate the Muslim world as the administration has stumbled its way through two awkward situations in quick succession.

The Snapshot: Public Backs Infrastructure Investment

It’s no secret that our country’s infrastructure is in urgent need of repair and serious modernization. Conservatives, in their mania for cutting government spending, have lost whatever little interest they once had in addressing this problem. But the public hasn’t.

Eighty percent declared themselves in agreement with President Barack Obama’s State of the Union call for a major effort to rebuild and modernize America’s infrastructure in a new Hart Research/Public Opinion Strategies survey for the Rockefeller Foundation.

Warning: New Jersey Could Go Red: Chris Christie’s Conversion from Pragmatist to Ideologue

Republicans have a new hero in New Jersey governor Chris Christie. His YouTube hits routinely outnumber those of Mitt Romney, Newt Gingrich, Mike Huckabee, never mind Tim Pawlenty. He has appeared on two national Sunday morning talk shows. Limbaugh loves him. During the fall campaign, he was in heavy demand as a fund-raising speaker across the nation.

Governor Christie is less popular with New Jersey voters than national Republicans, but his favorable rating bounces around 50 percent. He has the Democratic majorities in both legislative houses playing back on their heels, unsure how to respond to his very clear demands for action. So far, he’s gotten most of what he has sought.

This New Jersey story is scary because it plays out in a relatively progressive, affluent, well-educated state that tilts Democratic. New Jersey was the first state to ratify the (failed) Equal Rights Amendment, publically fund gubernatorial primary and general election campaigns, rescind the death penalty, and fully fund preschool for all three- and four-year-olds in poor districts. It has never elected a confessed right-winger statewide in the modern era, though Republicans have nominated four since 1973.

New Jersey’s economic advantage is that it borders New York City and Philadelphia, and that a lot of smart, well-educated, affluent people want to live in one of its pleasant small towns. The key is to provide excellent public schools so that, through their quite high property taxes, their children will be welcomed at the nation’s most selective colleges and universities. It works. New Jersey’s diverse students perform better on national assessments than the students in any state except Massachusetts, which is not nearly as diverse. Its black and Latino students consistently achieve at higher levels than their peers in other states.

New Jersey’s activist Supreme Court has set the education funding rules to benefit districts with lots of poverty but little taxable real estate. The result is that per pupil spending in one of the nation’s highest-spending states is higher in poor cities than wealthy suburbs.

While the court’s intrusion has produced grumbling, New Jersey governors and legislators of both parties have made support for K–12 education a high priority. For years, a fragile equilibrium prevailed between affluent suburbs, which ran their own schools paying for them via high property taxes, and urban areas, which benefited from a predominant share of state aid—until Christie.

Christie’s message on public education has been evolving from blaming teacher unions for most of Jersey’s economic woes and its stubborn achievement gap to attacking the foundations of public schools. This is the red flag for the rest of the nation: the attack goes beyond the usual reformist rant about ineffective teachers and charter schools to what is now a concerted effort to privatize K–12 education.

The Good and the Bad in Obama's Education Budget

On Monday, President Obama released his proposed budget for the fiscal year 2012. The good news is that education fared well. Obama's decision to release the budget at a school underscored that education is a priority. And in a year of cuts, the education budget increased by 11 percent.

The education budget seeks to leverage federal funds through a competition for research-based initiatives, as the Washington Post's Ezra Klein has noted. The administration is proposing another round of Race to the Top funding and Investing in Innovation grants, as well as introducing new competitive grant programs such as the "First in the World" program to fund innovation in higher education access, quality, and degree completion.

But if the Obama administration is serious about allocating more funding for education initiatives backed by research, then this budget shortchanges one of the most successful strategies for improving academic performance: socioeconomic school integration.

More than 40 years of research show the educational benefits for all students of attending middle-class schools over high-poverty ones. On the National Assessment for Educational Progress (NAEP) in math, low-income fourth graders attending more affluent schools are two years ahead of low-income fourth graders in high poverty schools. A 2010 Century Foundation study of Montgomery County Maryland public schools finds that low-income elementary students randomly assigned to public housing units in lower poverty neighborhoods and who attend low poverty schools perform far better than those assigned to higher poverty neighborhoods and schools, despite extra investments in the latter for smaller class sizes, extended learning time and better professional development for teachers. When the study was released, an Education Department spokesperson said, "This study confirms what we've long believed."

Looking for Tahrir in Tian'anmen

Sometimes analogies don’t work. The rising tide of democratic revolutions and popular reawakening throughout the Middle East has led many China watchers to consider just how far this might go.  Some predict the end of autocracy and hereditary rule in Muslim-dominated states.  Others go further, expecting oppressive states in the Far East to be swamped by the coming storm.  Some have even gone as far as to suggest that China will be next.  China’s leaders have showed some signs of insecurity, blocking online references to Egypt, but, in its case, the rising democratic tide will not lift all boats.

At first blush, the similarities between Egypt and China are striking.  Both nations have seen unprecedented economic expansion in recent years.  Likewise, the results of this expansion – the gain in fortunes for the few but not the many – are evident in both states.  Both nations also share a trend of an expanding educated class and the bottleneck of recent graduates finding few or poor jobs.  The laboring classes in Egypt, long in crisis, have a growing similarity to China where recent unsuppressed wage protests reveal a structural problem.  Corruption, too, is rampant in both China and Egypt with an entrenched ruling class and one-party rule.  Lastly, both nations have high levels of media censorship. If one were merely to look only at the similarities of the problems that face both nations, the conclusion that China is next would be an easy one to draw.

On Social Security, Obama's Budget Looks Good

After President Obama’s debt commission produced a report late last year recommending deep cuts to Social Security, it seemed plausible that the administration’s proposed budget would include at least some of those reductions to the federal government’s most successful and effective program. But even though there were leaks as recently as January suggesting that major Social Security changes would be put on the table, the actual budget released on Monday includes no benefit reductions. Even better, it proposes desperately needed funding increases to enable the Social Security Administration to improve its processing of disability claims, which have experienced severe backlogs due to the recession and understaffing.

With the House of Representatives now in control of Republicans who support deep spending cuts and no tax increases, political conditions aren’t conducive to policies that would address either continued high unemployment in the short-term or long-term fiscal challenges. So it’s to the administration’s credit that it did not offer up Social Security reform proposals in hopes of reaching a moderate compromise that would never be accepted by conservatives anyway. Because government projections show that the program will be able to continue making payments in full until 2037, there is no urgency to reaching agreement with Republicans now – especially when the Tea Party has gained ascendance.