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January 27, 2015


As my followers know, most of my blogs have to do with what does or does not happen at the intersection of economics and government (taxes, adoption of austerity or Keynesian policies, wage inequality, public spending and investment etc.). This essay will involve the economics of education from another angle beyond the usual school board arguments in re curriculum, school-skipping, teaching Genesis, Darwin, local tax loads resulting from lopsided and often discriminatory per-pupil state reimbursement in rich and poor districts etc.

I hope to show in this effort that education as we know it is not spending but investment, and further, that there is a direct connection between years of education attained and taxes paid, crimes not committed, an enhanced stimulation of aggregate demand in the marketplace due to larger salaries commanded by the educated, reduced incarceration rates, better housing, retirement etc. I hope to show finally that the paybacks to the larger society when they invest in education are such that the ultimate costs to educate its children are negligible in economic terms of cost-benefit analysis resulting in financial as well as social profit for the larger society.

That claim, of course, is stoutly challenged by naysayers, who correctly claim that the U.S. already spends as much on public education as many other developed countries – 5.5 percent of GDP, compared with only 3.5 percent in Japan, 4.9 percent in Canada, 5 percent in South Korea and 5.9 percent in Finland (per Noah Smith, professor of finance at Stony Brook University and a contributor to Bloomberg News). These are the same people who say that you can’t fix the problem by “throwing money at it.” (I would here note with greater certainty that you plainly cannot fix the problem by starving education budgets, either, a short sighted tactic which, along with adoption of other wrong-headed “policy” initiatives, amounts to turning your back on innovation and economic growth). Brilliant move!

Smith correctly notes that many of such politicians who refuse to prioritize education appropriations in state legislatures view increased education spending as a giveaway to powerful and greedy teachers’ unions. Such people conveniently neglect to note that the U.S. has more inequality and more poor people than those countries above named, and that just as some countries naturally need to spend more on health care than others, the U.S. naturally needs more education spending to make up for such social deficits (which are in turn brought about by wage inequality, union-bashing, entrenched poverty, integration of immigrant children, decimation of the middle class etc.)

Thus ours is neither a homogenous nor a relatively affluent society as compared to the ones measured by Professor Smith; we don’t start from the same starting place when educating our children. We are not homogenous in our makeup; we as Americans are not all of an ethic grouping like Finns or Koreans  are and have additional costs to educate our young because so many of the young are poverty-stricken and/or are immigrants who must be integrated into our society who may have language difficulties as well. It is no surprise that our education costs are higher than those of most other advanced countries given the position of our children on the ethno-socio-economic ladder, a ladder that wrongly allows plutocracy and massive poverty to exist within the same society where children of the plutocrats start the baseball game on third base and are Ivy League-bound while the rest of our children are still at the plate with two strikes against them. All of us, including the plutocrats, are ultimate losers in this game.

Parenthetically, and beyond the reach of this essay devoted to K-12 funding, I note here that no other nation on earth of which I am aware calls on its students to shoulder the horrific costs for college educations that we do nowadays, which alone renders the concept of equal opportunity a fiction and a loss for all of us as good young minds cannot afford to reach their full potential and both they and we are deprived of the energy and innovation and economic growth they could otherwise bring to the marketplace in which we must all live. A case in point is the story of a bankrupt Scottish farmer’s son who saved 8-year old Winston Churchill’s life by pulling him out of a quicksand bog in Scotland where young Winston and his family were on holiday, a young Scot whose college education was financed by the thankful father of Winston, Randolph Churchill. The poverty-stricken Scottish lad, Sir Alexander Fleming, discovered penicillin, the father of all antibiotics, whose use has saved the lives of billions of people, including mine. Sir Alexander Fleming was destined to follow in his father’s footsteps as a poor Scottish farmer, but with the education provided by Randolph Churchill he can be said to have literally saved the world (or a large portion of it). Talk about a return on investment!

Randolph Churchill’s investment paid off big time – for all of us – and if naysayers want to call that “spending,” let’s have lots more of it. Why? Well, as I often blog, how many potential Einsteins do we have working second shift at the 7-11 who will never be identified or educated – to the loss of all of us. I am of the view that public investment in public education is a far better use of public funds than, for instance, provision of tax loopholes for zillionaires who use such corporate welfare to buy a new mansion or send our largesse off to China or Swiss banks – speaking of spending for the public good.

Part II of this essay will get to the numbers compiled by economists to prove my point that education should enjoy budgetary priority and that it not only is not spending but investment that we can now quantify due to recent studies on the effects of education on the economy as well as its beneficial effects on the larger society. Stay tuned.   GERALD    E


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