Friday, May 28, 2010;
IN A SPEECH MONDAY on the Obama administration's economic policy, National Economic Council Director Lawrence H. Summers argued that deficit spending is still needed to boost growth -- but must be designed to produce maximum "bang for the buck." "There is no macroeconomic rationale for wasteful spending," he insisted.
So why are Mr. Summers and Christina D. Romer, chair of the White House Council of Economic Advisers, along with the rest of the Obama administration, promoting the $23 billion education jobs bill now before Congress? Its sponsors on Capitol Hill have labeled it "emergency" legislation, worthy of exemption from President Obama's anti-deficit pay-as-you-go rules. But it's certainly not a uniquely effective way to stimulate the economy. Ms. Romer suggests on the opposite page today that keeping teachers at work will enable them to maintain their spending, thus supporting economic growth -- and saving on unemployment benefits and the like. The real question is whether this bill promotes more growth than other possible uses of $23 billion. Ms. Romer did not explain why retaining teachers stimulates the economy better than retaining, say, construction workers. Nor does she weigh the costs and benefits of not borrowing another $23 billion from China.
Ms. Romer argues that the bill is less costly than it seems because it ensures a better-educated, and hence more productive, populace in the future. Fair enough -- though you could say the same for construction workers, since better roads and bridges boost economic efficiency, too. She is right that school districts around the country, having run through $100 billion from the February 2009 stimulus bill, face a crunch. Officials have issued more than 100,000 layoff notices, according to data compiled by teachers unions. The unions predict layoffs could go as high as 300,000. It's hard to imagine losing that many teachers without some damage to learning.
But that many teachers almost certainly are not going to lose their jobs. For technical reasons, school districts must send notices in the spring to more teachers than they actually expect to let go in the fall. What's more, the unions' 300,000 estimate includes not only classroom teachers in kindergarten through 12th grade but also support staff and college professors. The bill would distribute money to states according to their population, not expected layoffs; states where no layoffs are imminent would get checks anyway, and the majority of states would receive more than they could possibly need to avoid layoffs. The Senate version of the bill permits them to spend the excess on other things.
If the goal were to preserve the maximum number of good K-12 teachers at minimum cost, the bill would encourage states to lay off teachers according to ability, rather than seniority -- as current rules, sacrosanct to unions, dictate. In Los Angeles, Mayor Antonio Villaraigosa, a Democrat, has been fighting stiff union resistance to achieve such a reform. But the bill's sponsors, Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.), say there's no time to waste on that problem. Many jobs could be saved if more teachers accepted wage and benefits restraint, as workers in other hard-pressed industries have done. New Jersey Gov. Chris Christie (R) has urged teachers to take a one-year wage freeze, but the vast majority so far have refused. And the bill places no such conditions on aid.
Instead of passing a bill that perpetuates the status quo, Congress should use its power of the purse to leverage reform. As Mr. Summers also said on Monday, "excessive budget deficits, when associated with spending that is wasteful, erode confidence in government and trust in public institutions. Ironically, this may make it more difficult to bring about reforms that are necessary to make the public sector function better and enhance our long-term productive capacity." That strikes us as a near-perfect description of this bill and its likely impact.