Op Ed - School Vouchers

This was in The Daily Item on January 26, 2011.

An Economist’s View of School Choice Funding

Matthew C. Rousu

Many political leaders have recently proposed using public money to give “vouchers” to parents who wish to send their children to public schools. Both parties have their proponents, as Democrat Gubernatorial candidate Anthony Hardy Williams, along with Republican Tom Corbett both expressed some support for a voucher system. While there are different ways a voucher program could be implemented, the general idea is that parents would receive a voucher that would either completely or partially offset the costs of sending children to a private school. Many economists, both those who are educators (like me) and those who are not, are among the most ardent supporters of voucher programs. To see why, let’s examine both the benefits and costs of a voucher system.

Benefits of a Voucher System

Under a voucher system, we would expect more private schools to emerge to help offset the increased demand for private education. This competition across schools and parents’ ability to choose their children’s school will force schools to maintain high quality teaching and keep unnecessary costs low.

Another benefit of a voucher system is that currently controversial issues no longer become controversial – like whether to allow prayer in school and mandatory school testing. Some families want prayer in school, while others do not. As a voucher system becomes more widespread, this won’t be a concern anymore. If you want your child to pray every day before classes, you can send him or her to a school that implements prayer. If you do not – you can choose that option.

Every critic of the testing involved in the No Child Left Behind law should consider supporting voucher plans, as government-imposed school testing could be abolished if a voucher system is enacted. The current rationale for mandatory testing is that schools need to be accountable for their performance. Under a voucher system, schools would be much more accountable. Parents can remove their kids from one school and send them elsewhere at any point. If parents demand a school uses mandatory testing, they could, or the school could prove their worth to parents in other ways.

Costs of a Voucher System – Perceived and Actual

One commonly cited drawback by opponents of voucher plans is that vouchers would violate the separation of church and state. In fact, a well-designed voucher plan would do the opposite. The current plan is forcing all parents into a “one-size-fits-all” type of school. If you think it is wrong that your tax dollars go to a school that holds no organized prayers – you have no recourse. You either pay double by sending your child to a private school or you accept the government’s restrictions. Under a voucher plan, however, parents could choose whether to send their child to a school that requires prayer or not – and could choose a school for their particular religion, whether Christian, Jewish, or Muslim. The government in no way would be promoting one religion over another under a voucher plan.

The costs of voucher plans are a more reasonable objection. In the shorter-term, when transitioning away from the state-controlled school system, there would likely be an increase in costs. However, these transitional costs should start to disappear over time and eventually a voucher system should cost less once a full market system is up-and-running.

Let the Market System Work for Education

Colleges and Universities in the United States are the envy of the world, while primary and secondary schools are not. One likely reason is that there is real market competition across colleges and universities for students, but not for grades K-12. By allowing a voucher system, parents could expect greater quality education for lower costs. Also, parents will have more input on the values it wants the schools to (help) teach their children. It won’t be an instant fix for all of our education problems, but implementing a voucher system is a step in the right direction.



The author is an associate professor of economics at Susquehanna University. The views here do not necessarily represent those of Susquehanna University.

Final reading list for Political Economic Thought

This semester I am teaching Political Economic Thought, where we study writings on the economic from people from multiple ideological perspectives.

Here is the reading list. 

Cowen, Tyler. “Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.” Dutton Adult. 2007.


Friedman, Milton. “Capitalism and Freedom, Fortieth Anniversary Version.” The University of Chicago Press. 2002.

Krugman, Paul. “The Return of Depression Economics and the Crisis of 2008.” W.W. Norton & Company Inc. 2009.

Marx, Karl and Friedrich Engles. “The Communist Manifesto.” Signet Classic. 1998.

Powell, Jim. “FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression.” Three Rivers Press. 2003.

Sowell, Thomas. “The Quest for Cosmic Justice.” Simon & Schuster. 1999.

Sowell, Thomas. “The Housing Boom and Bust.” Simon & Schuster. 2009.

Stiglitz, Joseph E. “Freefall: American, Free Markets, and the Sinking of the World Economy.” W.W. Norton. 2010.

Thaler, Richard H. and Cass R. Sunstein. “Nudge: Improving Decisions About Health, Wealth, and Happiness. Revised and Expanded Edition.” Penguin Books. 2009.

 
As we move through the semester, I may post comments on each book after we finish the class discussions. 

Greg Mankiw on Unemployment Insurance

His view is close to mine.  When I spoke to the reporter on Monday about this issue, I told her I didn't know what the right amount of time for unemployment insurance was and that both the pro- and anti- arguments have merit.

I also mentioned that those who failed to see both sides likely have a political agenda driving their views.  Mankiw, of course, says this much more eloquently than I do.



My Agnosticism about UI (by Greg Mankiw)


A few readers have asked me to opine on the current debate over the extension of unemployment insurance benefits. I have avoided commenting on the topic because I am ambivalent on the issue, largely because I am agnostic about what economists know about optimal UI. But perhaps it would be useful to explain my agnosticism.

UI has pros and cons. The pros are that it reduces households' income uncertainty and that it props up aggregate demand when the economy goes into a downturn. The cons are that it has a budgetary cost (and thus, other things equal, means higher tax rates now or later) and that it reduces the job search efforts of the unemployed. To me, all these pros and cons seem significant. I have yet to see a compelling quantitative analysis of the pros and cons that informs me about how generous the optimal system would be.

So when I hear economists advocate the extension of UI to 99 weeks, I am tempted to ask, would you also favor a further extension to 199 weeks, or 299 weeks, or 1099 weeks? If 99 weeks is better than 26 weeks, but 199 is too much, how do you know?

It is plausible to me that UI benefits should last longer when the economy is weak. The need for increased aggregate demand is greater, and the impact on job search may be weaker. But this conclusion is hardly enough to tell us whether 99 weeks is too much, too little, or about right. It is also conceivable that the amount of UI offered in normal times is higher than optimal and that a further extension would move us farther from what is desirable.
I should note, by the way, that economists who strongly favor the extension of UI benefits, such as those who signed this letter, also tend to favor more income redistribution in general. I suspect, therefore, that the foundation of their support comes not from having weighed the specific pros and cons of UI per se, but rather from a more general desire to "spread the wealth around." That issue is, as I tell my students, more a matter of political philosophy than it is of economics.

Quoted in two articles in the Daily Item

Quoted here and here

The Daily Item, Sunbury, PA


November 30, 2010

Worker has request for Santa: a job


133,000 Pennsylvanians to lose aid as federal programs expire

By Evamarie Socha

The Daily Item



— SHAMOKIN — The only hunting David Bidding was doing Monday was job hunting, the Shamokin man said with a slight laugh while filling out paperwork at the Northumberland County CareerLink office.



Smart move: About 133,000 Pennsylvanians will be cut off prematurely from supplemental unemployment benefits in December after federally funded programs run out today, based on U.S. Labor Department data from the National Employment Law Project.



Federal benefits run up to 53 weeks and begin after state unemployment compensation ends, usually at 26 weeks.



After December and the initial cut, more than 1 million more people per month will fall off the rolls. By April, unless the employment picture improves, 6 million workers will be without federal benefits.



"These are people who will see their unemployment end ... where it wouldn't have if Congress had acted" to extend the benefits, said George Wentworth, senior staff attorney with the employment law project, based in New York.



Meanwhile, U.S. Sen. Bob Casey, D-Pa., announced Monday that he will hold a conference call today to discuss the need to preserve unemployment insurance as well as tax cuts.



"Without action, unemployment benefits for workers who lost their jobs through no fault of their own will begin to expire," Casey said in a statement. His office estimates about 83,000 Pennsylvanians would be left "without vital support to help them keep food on the table and pay their bills next month."



The U.S. House of Representatives failed to pass a $12.5 billion bill Nov. 18, after a vote of 258-154 fell short of the needed two-thirds approval. This means about 2 million people nationwide will lose their benefits after today.



The news that federal unemployment benefits likely will end today wasn't what Bidding wanted to hear.



"At this point, anything is a hit," said the 36-year-old who has been out of work for about two years since losing his job when Fleetwood Motor Homes left Paxinos in December 2008.



The national unemployment rate is near 10 percent, according to the Labor Department.



The federal Emergency Unemployment Compensation program began in July 2008, adding 13 more weeks of benefits to those out of work whose state benefits ran out. At the time, unemployment nationwide was about 6 percent.



As the recession deepened and the national unemployment rate kept rising, Congress passed legislation several times to increase the number of weeks for benefits.



Wentworth said that because of how the law works, the phase-out is graduated in two categories:



n"‰Workers who are exhausting their 26 weeks of state benefits. They will not get federal help at all. "People who got their last regular state check last week don't have a program to go on to if Congress doesn't reauthorize the law," Wentworth said.



n For those on federal extensions, there is a four-tier system that potentially could carry them for 53 weeks. Under the law, these people will "collect the balance of whatever entitlement tier they're on" and that is that, he said.



For instance, someone on the first tier is eligible for 20 weeks of benefits. If that person is on week 10 of 20, he'd get 10 more weeks of benefits and then be cut off, Wentworth said.



The extended benefits program in Pennsylvania also will end, Wentworth said, and that will be a hard stop. Basically, the state will stop that program after the last check is cut Saturday.



Thirty-five states operate the extended benefits program, which gives an additional 13 to 20 weeks of unemployment compensation beyond the EUC program. Extended benefits are normally funded half by the federal government and half by the state.



Under the Recovery Act, Congress authorized full federal funding of the extended benefits program, but when that authority expires today, most states will stop operating it.



Wentworth said that according to his group's projections, come today, 22,000 people in Pennsylvania will exhaust their benefits. In December, another 58,000 will be in that spot.



How it came to this has been a politically contentious issue about paying for the program, which cost about $5 billion per month, Wentworth said.



"But historically, whenever national unemployment has been high, Congress has enacted these additional federal benefits," doing so eight times since the 1950s, he said.



"They've always done it as emergency spending, which means they didn't look to have corresponding offsets in the budget; the idea is you have an economic emergency and it's a stimulus. You want to get money into the economy to mute the impact of the stimulus funding. That seems to be what the debate is about now."



But there may be a better employment outlook ahead, said Matt Rousu, associate professor of economics at Susquehanna University, Selinsgrove. He feels in the next six months to a year, the unemployment rate should drop some.



"Firms have money to spend," he said. "A lot of the reason businesses weren't hiring was the uncertainly about what new laws are passed," such as the health care bill and tax cuts and how those would affect business.



Rousu said that with the Republicans holding the majority in Congress, fewer things will be passed. "It's the sweeping legislation where people don't know what's in it (that scares business)," he said. "I expect we'll see much less of that."



The debate, however, doesn't matter much to Bidding, who said he's interested in any kind of work available to him now.



"When you go from lower from what you were getting to making nothing, what are you supposed to do?" he asked.






November 30, 2010


National debt is big concern, prof says

By Evamarie Socha

The Daily Item



— How long is too long to collect unemployment benefits?



That seems to be the question surrounding the latest debate over extending unemployment compensation. Although Congress has prolonged the aid four times in the past year — most recently in July at $34 billion — paying these benefits has become an ethics issue as well as a political one.



"It's kind of the same argument as last time: the benefits and the drawbacks" to extending the benefits, Matt Rousu, associate professor of economics at Susquehanna University, Selinsgrove, said Monday.



"Reasons you would oppose the extension are you think it gives bad incentives, that people wouldn't look as hard for jobs," he said. "The other is the cost. If we do this, it adds to our debts. We're at a time in this country where everyone seems much more concerned for national debt."



The drawbacks, Rousu said, are that a family who loses the funding also won't have as much money, and therefore will have fewer purchasing opportunities, so the economy is not stimulated.



Congress' timing in ending the funding surprises George Wentworth, senior staff attorney with the National Employment Law Project, an employment advocacy group in New York.



"Congress has had eight programs in 50 years and has never cut one of these when unemployment was this high," he said, noting it cut funding once before when unemployment was at 7.2 percent in 1985.



But unemployment wasn't as long then, either. Long-term unemployment today averages 27 weeks, a record, Wentworth said. More than 42 percent of the unemployed have been jobless more than six months, and close to 23 percent have been out of work a year or more.

Radio Interview

I was a guest on the "On the Mark" radio show today.

You can hear the interview at http://www.wkok.com/roundtable/OTMThursday.mp3.  This link will have my interview until 11/11/2010.  I have an MP3 of the file if you want it after this date (send me an email).

My plea to the uninformed ...

If you are not informed on the issues and don’t know what the candidates stand for, please DO NOT go vote today. Some people will try to make you feel guilty for not voting. Not me. I think all educated voters should thank those who are uninformed yet make the responsible choice of not voting.


Thanks!

I will be on "On the Mark" Thursday

I will be on the "On the Mark" show on WKOK radio Thursday morning at about 9:15 AM.

We are slated to discuss the election, the economy, and my poker adventures this summer.

You can listen here.