Saturday, January 18, 2014

Crying wolf over spending cuts

If there is an official advice manual for interest groups in Washington, it surely offers the following counsel: Portray the slightest reduction of government spending--even after years of steady growth--as cuts so draconian that a national crisis is upon us.

He's come to abolish the government... again!

Crying wolf is an effective way for lobbying groups to mobilize supporters, but it certainly doesn't serve the public interest. For example, the New York Times, a major wolf-enabler, recently warned of "jammed" public schools because of a small up-tick in student-teacher ratios. As I wrote for National Review:
How about some long-run perspective? Student-teacher ratios — not the same thing as class size, but a similar concept that’s easier to measure — have dropped substantially in the last 50 years, according to the National Center for Education Statistics. There were 26 students for every teacher in 1960. The ratio was reduced to 22 by 1970, and then it went down to 19 in 1980, to 17 in 1990, and to 16 in 2000.

The long-term declining trend line is bumpy, of course, and once in a while it will plateau or even briefly tick upward. After dipping to a little over 15 in the middle of the last decade, the student-teacher ratio was back up to 16 in 2010. Each time something like this happens, the media tell alarming stories about “overcrowded” schools and “exploding” class sizes.... Needless to say, the public-education establishment, which constantly demands more money for schools, is in no hurry to clear up the misconception.
Here's another example, courtesy of the graphics team at the Heritage Foundation. This is a chart of inflation-adjusted welfare spending over time. (Welfare is defined here as all means-tested aid, not just AFDC or TANF.)

As Robert Rector is fond of pointing out, the Reagan and Clinton welfare cuts were both attacked at the time as being so severe that our nation would never be the same again. The reality is that they were just hiccups on a generally upward trend. And so it goes for much of what the government does.

Saturday, January 4, 2014

New book chapter on teacher pensions published by Brookings

I recently had the privilege to contribute a chapter to a new volume edited by Paul Peterson and Daniel Nadler. The Global Debt Crisis: Haunting U.S. and European Federalism was published by the Brookings Institution Press in late December.

Read chapter four!
The book tackles some intriguing questions: In countries with federalist systems, what happens when sub-national governments go bankrupt? Should central governments bail them out? Will they? And, if so, will central governments seize power from the local governments in exchange? Would that process cause federalism itself to unravel?

My own chapter, coauthored with Andrew Biggs, looks at the issue of teacher pensions. As with all public defined-benefit (DB) plans, the cost of teacher pensions is dramatically underestimated by government accounting. With another economic downturn, teachers could find their pension funds short of cash, even though the benefits are legally guaranteed. To avoid risking a messy bankruptcy of the kind we're now seeing in Detroit, DB plans for teachers could be replaced with less costly 401k-style retirement plans, while still keeping overall teacher compensation competitive with the private marketplace.

I've posted a pdf of my chapter for interested readers. A hard copy of the book can be ordered directly from Brookings here. And, just as a reminder, all of "My Published Work" can be found via the sidebar links to the left.