Billionaire investor Warren Buffett became a controversial figure last week when his provocative op-ed, “Stop Coddling the Super-Rich,” landed prominently on the New York Times editorial page. “My friends and I have been coddled long enough by a billionaire-friendly Congress,” Buffett wrote. “It’s time for our government to get serious about shared sacrifice.” His suggestion, that the government immediately raise taxes on Americans making more than $1 million—and even more so on those making in excess of $10 million—set off a firestorm of criticism from conservatives.
Among the more misguided attacks was a CNN.com opinion piece by Jeffrey Miron, a senior fellow at the Cato Institute and director of undergraduate studies at Harvard University, who outright dismissed the significance of increased government revenues. “The first problem with Buffett’s view,” Miron writes, “is that the number of super-rich is too small for higher rates to make much difference to our budget problems. . . . Imposing a 10% surcharge on this income would generate at most $73 billion in new revenue—only about 2% of federal spending.”
Miron is right that $73 billion won’t solve our “budget problems,” which I take to mean our $14.4 trillion national debt. Nobody is arguing that. But that hardly means $73 billion is inconsequential. In order to illustrate just how much money $73 billion is, I did some research to discover some of the things you could buy with that kind of money. The graphic below shows just a few examples.
If you were more militarily inclined, $73 billion could also buy you sixteen Nimitz-class nuclear-powered aircraft carriers—the largest and most powerful capital ship in the world—or 1,327 brand new F/A-18 Super Hornets from Boeing. And $73 billion could quintuple NASA’s operating budget, providing enough funds to develop and maintain an international lunar base for the next five years, according to CSIS cost analysis. Less than half that amount would provide safe drinking water for the entire planet, helping save the nearly 6,000 children who die every day from diseases associated with contaminated water supplies.
No matter how you choose to look at it, $73 billion is a lot of money. With all of the problems our country is facing today, can we afford to turn it down?
View more from the Graph of the Day Series.
With the fragile U.S. economy struggling to recover and millions of Americans still out of work, many pundits and policy makers have taken to claiming that high unemployment is a structural, not cyclical problem. In other words, the issue is not that there is low consumer demand -- and therefore low demand for workers -- but rather that unemployed workers do not have the skills or education that employers require. Further, it is claimed that as the economy returns to full employment, businesses will be stymied by a significant lack of qualified college graduates.
However, a recent report (PDF) by the Economic Policy Institute shows that there is little evidence to support the claim that higher education is the solution to the current jobs crisis, including rising wage and income inequality.
According to Lawrence Mishel, the author of the report, there have been far too few job openings for all of the unemployed looking for work, suggesting the underlyling economic problem remains cyclical low demand. As the above graph from the report shows, the ratio of unemployed workers per job opening remains nearly twice as high as at the peak of the 2001 recession. And the current jobs shortfall is not just in one or two affected industries, like construction, but across all sectors. Neither does one education group account for the increase in long term unemployment, as the structural argument would suggest.
If high unemployment was truly a result of a wider skill-biased technological shift, then we should expect that the median wage of workers with a bachelors degree be improving relative to workers without any college experience, following the law of supply and demand. However, as the following graph from the EPI report illustrates, neither college graduates nor high school graduates saw increased median weekly wages during the last decade; in fact, wages actually declined slightly from 2000 to 2009.
The immediate problem, Mishel concludes, is that workers face "a wage deficit, not a skills deficit," as a result of the slow economy, which could be temporarily helped by further stimulus through government spending. However, he warns that the larger problem of stagnant wages may be explained by the immense widening of the income gap since the late 1970s. While the wages of the bottom 90 percent have grown only 16 percent in the last three decades, wages grew twenty times faster for the top 0.1 percent -- up 324 percent since 1979.
As I explained in a previous post, wages stopped tracking productivity in the mid 1970s. Around 1973, wages for the bottom 90 percent began to stagnate, while wages for the top 10 percent and productivity nearly doubled. Clearly, expanding higher education alone will not solve the current unemployment crisis, nor the more fundamental disparity between income levels and productivity in this country. To address those underlying issues will require progressive policies, political courage, and the grass-roots renewal of those American values that we seem, in recent years, to have forgotten: collective responsibility and civic duty.
View more from the Graph of the Day Series.
Social mobility in the United States has fallen as the country's income distribution has grown more unequal, meaning that it is now less likely that children of the lower and middle classes will grow up to live better lives than their parents did. According to the Center for American Progress, children from low-income families in the United States now have only a 1 percent chance of reaching the top 5 percent of the income distribution, while the children of the rich have about a 22 percent chance. Children born into families in the middle quintile of the income distribution (the 40th-60th percentile) actually have a higher chance of ending up in a lower income bracket (39.5 percent) than a higher one (36.5 percent), while their chance of reaching the top fifth percentile is under 2 percent.
International comparisons show that along with Italy and the United Kingdom, which also have relatively rigid class structures, the United States ranks among the least socially mobile countries in the OECD, and has the highest income inequality to boot. This graph looks at various countries based on a measurement of intergenerational income elasticity in which a level of one indiciates that the average child's eventual income will be the same as that of his or her parents, ranging to zero when there is no correlation between family background and adult earnings.
Although the "American Dream" has long been a critical facet of our national identity, by international standards, the United States actually has an especially poor degree of intergenerational mobility - worse than France, Germany, Canada, and Australia, not to mention the "social" market economies of Sweden, Norway, and Finland.
The Center for American Progress also found that education, race, health and state of residence were the four key factors in determining to what degree economic status was transferred from parents to children, with race and education being particularly important. In the United States, African American children born into the bottom quartile are nearly twice as likely to remain in that position as their white peers, and four times less likely to advance into the top quartile.
View more from the Graph of the Day Series.
(Cross-posted at the Reality Based Community)
I was eating dinner the other night, and the phone rang. It was an undergraduate classmate noting that I had yet to contribute to our class’s annual giving. She’s a nice person. I also have warm feelings towards Princeton, which opened valuable opportunities and treated me well. So I gave seventy-five bucks.
I gave, not entirely happily. My electronic and snail mail boxes are stuffed with fundraising missives presented with an urgency more appropriate to Oxfam than for one of America’s very wealthiest nonprofit institutions—one that educates some of the most privileged young people in the world. (My favorite: “Great news! If you are making a concerted effort to not pay your $50 class dues, you are well on your way to success!”)
Last year, my own undergraduate class donated $5,101,985 to Princeton’s annual giving. It was a big reunion year. And I don’t begrudge anyone’s charitable giving. Still, this is out of proportion. As of June 30, 2010, Princeton’s endowment totaled $14.4 billion. That’s almost $3 million for every enrolled student. Princeton is a great university, a national treasure. It just doesn’t need the money.
I posted an item on the New Republic website about state policy trends in intellectual/developmental disability (I/DD) services. I draw on the recently-released compendium The State of the States in Developmental Disabilities 2011, which includes data up to 2009. (Thanks to David Braddock of the University of Colorado, who provided additional data for the piece.)
Between 2008 and 2009, 23 states reduced their inflation-adjusted I/DD spending. If one excludes the federal portion of such spending, forty-seven states reduced their spending on such services. (See the chart below the fold). State budgetary retrenchment is the deepest anyone has seen since the late 1970s when records were first kept. These trends are really concerning--not least because things are likely to be even worse today than they were two years ago, given the sunsetting of federal subsidies and enhanced Medicaid matching rates provided within the 2009 federal stimulus bill.
When Albert Shanker first proposed charter schools in 1988, he envisioned institutions where teachers could try new and creative pedagogical approaches to reach students. Part of the idea, as Minnesota state legislator Ember Reichgott Junge noted, was to make teaching a more attractive occupation. “Many teachers were frustrated with their work and were leaving the profession,” Reichgott Junge explained. “I wanted to give them more ownership.”
But, according to an interesting new paper published by the Thomas B. Fordham Institute, one of the “innovations” some charter schools have adopted is recent years is the no-pension plan. According to researchers Michael J. Podgursky and Amanda Olberg, “a significant number of charter schools not participating in their state retirement plans offer no alternative retirement plans at all for their teachers.”
Podgursky and Olberg note that of the 40 states with charter schools, 24 states require charter teachers to participate in state pension plans for public school teachers, and 16 states let charters decide whether to participate in the state retirement system or opt out. The author surveyed charter schools in six “opt-out” states to find out what proportion availed themselves of alternatives to state retirement systems, and what those alternatives looked like. The six states accounted for 75% of charters in opt-out states and 46% of charters nationwide.
In states where charters could opt out of state pension plans, many charters chose to participate in the state plan nevertheless; and many provided teachers with familiar defined-contribution plans such as a 401(k) or 403(b). But the authors also find that 14% of charters offer no retirement plans, and 9% offer alternative plans with no employer contribution. In total, almost one-quarter of charters in opt-out states don’t provide a nickel for teacher pensions.
On the plus side, I suppose one might say, giving college-educated employees no money towards pensions could be considered an effective “cost-cutting” device. But the education reform community is supposed to be all about boosting teacher quality. In the long term, what kind of talent can a school attract – and then retain over time -- when one of the basics of the employer-employee social compact is simply eliminated altogether?
The charter school movement has a teacher retention problem. As researchers David Stuit and Thomas M. Smith have found: “The odds of a charter school teacher leaving the profession versus staying in the same school were 130 percent greater than those of a traditional public school teacher. Similarly, the odds of a charter school teacher moving to another school were 76 percent greater.” Some charter advocates have tried to spin the higher turnover rates as a virtue, but according to researcher Gary Miron “attrition from the removal of ineffective teachers—a potential plus of charters—explains only a small portion of the annual exodus.”
Some of the best charter schools offer stimulating work environments and the chance to experiment that Shanker and Reichgott Junge envisioned. But overall compensation – including pensions – matters too. The Fordham report, to its credit, shines light on a largely unexamined issue and exposes a deeply unattractive feature of our grand experiment in education deregulation.
This post first appeared on the Fordham Institute's Flypaper blog.
Over at Think Progress, Matthew Yglesias raises an interesting issue about charter school skeptics. On the one hand, he says, successful charter schools, such as those that are part of the Knowledge is Power Program (KIPP), are accused of skimming the most motivated students. On the other hand, KIPP is also accused of segregating students by race and class with an authoritarian No Excuses approach that is unappealing to most middle-class families. KIPP is damned if it does take more advantaged students and damned if it doesn’t, Yglesias says. He writes: “if KIPP’s not condemned for skimming the easiest cases, it’s condemned for promoting segregation by declining to make itself appealing to the easiest cases.”
But for me, the problem with KIPP is precisely that it does both simultaneously – skims motivated students and yet is pointed to as a segregation success story. Some observers see high rates of achievement in KIPP schools, which are overwhelmingly poor, and conclude that poverty and economic segregation don’t matter that much after all. At their most hyperbolic, charter enthusiasts like Davis Guggenheim, director of “Waiting for Superman,” point to KIPP and conclude “we’ve cracked the code” in educating low-income students. Yglesias is only somewhat more measured when he writes that the success of charter networks like KIPP “demonstrates that it’s possible to overcome challenging demographics.”
But KIPP schools in no way demonstrate that the devastating effects of poverty and segregation have been “overcome.” KIPP’s predominantly low-income students do very well compared with other low-income students, which is a wonderful thing, but the effects of poverty remain, as two-thirds of the KIPP students who graduated eighth grade 10 or more years ago haven’t earned a bachelor’s degree. That’s not what happens to more affluent students.
And KIPP hardly demonstrates that with the right teaching approach, economic segregation matters little in public education, because, just below the surface, KIPP schools are demographically nothing like regular high poverty public schools. By definition, KIPP students are from self-selected families who chose to enter a lottery; and KIPP has very high attrition rates. Yglesias points out that some research finds that KIPP lottery losers also are highly mobile, which is true, but the difference is that unlike a regular public school, KIPP takes in very few new students in the 7th and 8th grades of middle school. Think about the difference in the KIPP environment compared with a typical high poverty school. In KIPP, students are surrounded by other self-selected students, and, over time, enjoy a cohort including only those peers who have survived what all acknowledge to be a very rigorous and demanding program. In terms of peer values and norms, KIPP schools more closely resemble economically mixed schools than traditional high poverty schools.
It remains telling that on the one occasion when KIPP took over a regular high poverty public school – without a self-selected student population and with new students entering the classroom when they moved into the area – KIPP failed and got out of the business of running regular neighborhood public schools. The lesson that many draw from KIPP – that a No Excuses approach can work in regular high poverty public schools – is completely unsupported.
Moreover, KIPP demonstrably fails the American “common school” test of providing an economically and racially diverse environment, which is important for reasons having nothing to do with test scores. Most American public schools fail this test too, of course, but it’s important to note some schools, including some charter schools, pass it.
Rather than holding KIPP’s segregated high poverty environment out as the ideal, why aren’t more people talking about socioeconomically and racially integrated charter schools – like the Denver School of Science and Technology and the High Tech High schools in San Diego – as exemplars? These schools produce positive results for low-income students and also fulfill the common school ideal. And, unlike KIPP, they don’t lead people to draw false and profoundly conservative conclusions that poverty and segregation don’t need to be addressed. Charter schools that provide teacher voice – as originally envisioned by American Federation of Teachers president Albert Shanker – would also help satisfy charter school critics. At least this one.
David Leonhardt has a superb column in this morning’s New York Times on the efforts of retiring Amherst president Anthony Marx to address economic segregation in America’s elite colleges. The piece, which has been flagged by Jonathan Chait and Matthew Yglesias among others, makes three important points often lost in the debates about equity in higher education.
First, it matters who attends elite colleges because our leadership class disproportionately derives from those institutions. Leonhardt cites the last four presidents of the United States, all nine Supreme Court justices, and several top corporate leaders. These are not anomalies. As we noted in our 2010 volume on the topic, Rewarding Strivers: Helping Low-Income Students Succeed in College, research from Thomas Dye has found more broadly that 54 percent of America’s corporate leaders and 42 percent of government leaders are graduates of just twelve selective and wealthy institutions.
Second, Leonhardt correctly notes that low-income and working-class students are enormously under-represented at four-year institutions generally, and among selective institutions in particular. Leonhardt cites The Century Foundation’s Rewarding Strivers research, conducted by Anthony Carnevale and Jeff Strohl, finding that only 44 percent of socioeconomically disadvantaged students testing in the top quartile attend a four-year college. Twenty-four percent attend a community college, where graduation rates are much lower, and an astounding 31 percent don’t attend college at all. At the most competitive four-year institutions, Carnevale and Strohl found, 70 percent of students were from the richest socioeconomic quartile in 2006 and just 5 percent from the poorest quartile.
Third, it is possible to alter the economic stratification in higher education because there are many highly talented low-income students who can perform well in even the most selective colleges and universities. Between 2005 and today, according to Leonhardt, Amherst increased the proportion of students receiving Pell Grants from 13 percent to 22 percent, a 69 percent increase. At the top 146 colleges and universities, according to Century Foundation research by Carnevale and Stephen J. Rose, the proportion of students from the bottom socioeconomic half could increase from 10 percent to 38 percent, and graduation rates would remain constant.
But addressing the issue of economic disparities at selective institutions requires leadership. The discouraging news is that most wealthy institutions have not followed Amherst’s lead. Despite a great flurry of activity on the financial aid front, The Chronicle of Higher Education recently found that at the wealthiest 50 institutions, Pell percentages remained flat between 2004-05 and 2008-09. At thirty-one of these wealthy colleges and universities, the proportion of Pell recipients actually declined.
Amherst shows what is possible, but as Marx moves on to his new position as president of the New York Public Library, others will need to step up to redeem the promise of higher education as an engine for social mobility.
The New Jersey Supreme Court handed down its first edict about educating poor children in 1973. It promulgated its twenty-seventh published opinion on the issue on May 24, 2011. At issue was whether the court’s definition of what constituted a constitutionally defensible educational opportunity for the state’s poor children had been observed by the governor and legislature in enacting the state budget. Specifically, should the state be mandated to increase funding to conform to the new school aid formula enacted in 2007, a $1.6 billion hole?
New Jersey is litigation central when it comes to equity in school funding. As a result of Abbott v. Burke, New Jersey’s highest spending districts are its poorest.