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Bail Out Our Schools

Robert Reich, professor of public policy | March 15, 2010

Any day now, the Obama administration will announce $4.35 billion in extra federal funds for under-performing public schools. That’s fine, but relative to the financial squeeze all the nation’s public schools now face it’s a cruel joke.

The recession has ravaged state and local budgets, most of which aren’t allowed to run deficits. That’s meant major cuts in public schools and universities, and a giant future deficit in the education of our people.

Across America, schools are laying off thousands of teachers. Classrooms that had contained 20 to 25 students are now crammed with 30 or more. School years have been shortened. Some school districts are moving to four-day school weeks. After-school programs have been cancelled; music and art classes, terminated. Even history is being chucked.

Pre-K programs have been shut down. Community colleges are reducing their course offerings and admitting fewer students. Public universities, like the one I teach at, have raised tuitions and fees. That means many qualified students won’t be attending.

Last year the nation committed $700 billion to bail out Wall Street banks, the engines of America’s financial capital, because we were told we’d face economic Armageddon if we didn’t.

We’ve got our priorities backwards. Our schools are the engines of our human capital, and if we don’t bail out public education we face a bigger economic Armageddon years from now.

Financial capital moves instantly around the globe to wherever it can earn the best return. Human capital – the skills and insights of our people – is the one resource that’s uniquely American, on which our future living standards uniquely depend.

Starting immediately, the federal government should give states and local governments interest-free loans to make up for all school and university budget shortfalls. The loans can be repaid when the recession is over and local and state tax revenues revive.

Over the longer term we must shift incentives away from financial capital toward human capital. A tiny one half of one percent tax on all financial transactions would generate about $200 billion a year, according to the Economic Policy Institute. That might put a crimp on Wall Street bonuses but it’s enough to fund early childhood education, smaller K-12 classes, and lower tuitons and fees for public higher education.

The Street’s financial capital is important to the American economy, but over the long term the classroom’s human capital is absolutely crucial.

Comments to “Bail Out Our Schools

  1. Couldn’t agree more. Governments these days want to go to 100% privatized education. Their priorities have changed and unfortunately the less well off will be more poorer because of it. Interest free loans are definitely a way to help.

  2. Investing in education is the only way to keep the productivity in developed countries on a high level so industry will not get overtaken by cheap labour in China and other developing countires.

  3. College is becoming increasingly difficult to afford.
    Borrowing money for college is a big responsibility but college remains a smart investment for obtaining a satisfying career that earns a competitive salary.

  4. The more I listen to mainstream media, talk radio, tv news, and read the newspapers and blogs, the more I am convinced that there is almost unanimous agreement that our entire educational system is being allowed to deteriorate, without intervention of the powers that be, or the average citizen. Apathy, lack of accountability, and disillusionment rein supreme.

  5. Fed can bail out banks but when it comes to universities where our country flourish, no money is available. Fed should help state governments to keep colleges and universities budget balanced and keep tuition low so next generation is NOT burdened with hefty student loans.

  6. I couldn’t agree more. After 12 years in operation, our state’s largest public university’s pioneering online degree program has been shut down due to a lack of funding. This is a huge blow in a state where people are scattered all around and who in a down economy can’t necessarily afford to move and pay room and board on top of tuition.

    I’m afraid we’re mortgaging our future with short sighted decisions and token funding such as this.

  7. Yea everything is plummeting [why]GDP 08 thirteen trillion,Iraq War,Afghan War six years nine trillion,bail out of banks conservative figure three trillion,tax cuts for “Rich”five trillion W administration.Middle class purchasing power down from 1978 twelve times not adjusted for inflation,wages flat for middle class 32 years no Joke.Now let me get this right need money for growing the economy,how bout China,borrow some from them maybe not they are holding trillions of dollars of our t-bills already.Tax the non working mans unemployment insurance[has been considered]
    tax the working people whose credit card dept on and average is a staggering 24,000 for family of three,maybe not because, just to break even on that kind of credit card dept takes a minimum payment of 500 to service the interest only.Hows this for a solution tax the “Rich” the ones that work on Wall Street practicing their default swaps,derivatives,hedge fund after hour trading, criminal activities against the tax paying American people who payed for the bail out even though the money came from private banks.Bring back the American treasury,through out the federal reserve,restore the Brenton Woods act gold standard,impose tariffs,renegotiate Nafta,Gat.Suspend the tax credit to corporates for taking corporations global,reindustrialize,with and emphasis on environmental quality of life.just for beginners!

  8. Robert, this is one of the greatest articles I have read on the importance of education in a really long time. Everything you said was spot on. If only our government was willing to put more focus on education…

  9. The big problem of new taxes is that they prejudice more people who have lower incomes and slow down the economy flow as consequency, here in South America it´s a very hard problem that every government have trouble to deal with.

  10. Thank you Sir Robert for sharing…The system of our country has been fueled by innovative ideas that began in classrooms around our state. If we do not ply the incoming generation with the tools to win in an economic environs where rivalry is planetary and only locomote on large debt we are doing them a dying disservice.

  11. This is so true. Banks will do fine either way – they have ways to scrape the last penny from you. Schools, on the other hand, are always struggling. There needs to be an increase in the funding of schools, not a decrease.

  12. Hi Robert. I find it hard to believe there is always money for bailing out financial institutions or funding wars and national security. If for once, governments looked at their own human resources and invested in there development. We may be able to change the thought patterns that drive the behaviors that create the current results in and around the world. This would create a better world for all. Thanks for highlighting what I feel is a major contributor to the current situations occurring around the world today.

  13. This is so true. Banks will do fine either way – they have ways to scrape the last penny from you. Schools, on the other hand, are always struggling. There needs to be an increase in the funding of schools, not a decrease.

  14. Robert, thank you for opening this discussion. Investment in education and our human capital is the only way for our country to maintain the economic success of the past century. The economy of our nation has been fueled by innovative ideas that began in classrooms around our country. If we do not provide the next generation with the tools to succeed in an economic environment where competition is global and only pass on tremendous debt we are doing them a grave disservice. Hopefully your words will be heard and education will become the priority it deserves to be.

  15. Hi Robert. Great ideas. Human resources and experiences can never be bought or replaced. I share your views in the investment back into our own population. An across the board tax of all payrolls regardless of size including financial institutions and the large companies would yield a similar return. Pauline Hanson Down under in Australia raised this same proposal in the lead up to an election. She lost the election and after the media had finished with her she was out of politics and facing a jail sentence. Hard game to play sometimes.

  16. Totally agree with you. But I think the government has long been concerned about the nation only on TV, but in reality they are interested in these things minute interests, in particular money and oil. But the most precious thing a nation is people and their clever ideas. And as they become available, unless there is a good education?

  17. Agreed, which is why we should privatize all education to where teachers actually have an incentive to perform. Per-pupil spending over the last 30 years has more than tripled while graduation rates and test scores remain flat.

  18. I believe that educational institutions should be funded directly from the state budget in spite of the crisis or other global issues. Otherwise our country will have no future as we compete internationally. And as the author said we attain Armageddon!

  19. Personally, I don’t like bailouts in general. But, the way the money system is set up is that the name of the game is bailout. There’s a great book that Explains this in detail, called “The Creature from Jekyl Island.” It’s about how the Federal Reserve was created. Spooky stuff!

  20. housing, recent real estate , foodstuff, pleasure funds, and basic living commodities. Taxing is a great idea, but people have no employment in California ( 18% in Oakland, and 20% in many Californian cities). It keeps getting worse

  21. Totally agree with you Robert, if we continue to devalue education we will be left with no real creativity in our ranks.
    The Government seems to have priorities that don’t really support the community. Thanks for sharing your views

  22. “[…] financial capital toward human capital.” Not sure there is a difference. According to Marx, all capital is human capital. After healthcare is ‘self-executing ruled’ (or the “Slaughter rule”) passed the middle class will be hit with forced purchase of Universal Health Care, which in-and-of-itself is another hidden tax. The financial aid- student loan portion, hidden into this ‘new’ Healthcare bill will help lower-class student off-set student loans, but major banks will be forced not to help middle-class students to obtain loans for schools — thus they will have to be either rich ( families) or work through school. A ‘one half of one percent tax’ plus forced car insurance, federal tax, property tax, gas tax, commodity tax, business taxes, and Social Security taxes and now the Health Care forced insurance tax (e.g. forced to pay for it) will take a huge bite out of everyone’s paycheck. Unless Obama and the Democrats come up with a plan to start ‘capitalism’ again ( his recent comments on the inequality of the China Commodities import-export imbalance) there will be no recovery from this recession. In a globalized society, exports is the only way to bring in money to any said state ( i.e. The state of the United States of America). If the U.S.A. tends toward an inclusionist society, then it can skip that export/import duality. However, Obama, and recently Bill Clinton who was on campus and spoke recently stated that ‘we know live in a globalized economy.’ It would be nice to have a study that illustrated the said take home of minimum wage and ‘all taxes’ and pivot against the living costs of affordable housing, recent real estate , foodstuff, pleasure funds, and basic living commodities. Taxing is a great idea, but people have no employment in California ( 18% in Oakland, and 20% in many Californian cities). It keeps getting worse.

    undergrad history

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