"The Fiscal Cliff" Really???

[kandrathe]

It seems to me to be almost the best compromise possible to allow the budget to get cut broadly by 1/37th of its size, and allowing the tax rates to revert back to the Clinton era.

Can the ~$ 650 billion Pentagon budget suck up a 50 billion dollar cut? I'm sure they can. Can we find the other 50 billion somewhere in the remaining ~3.5 trillion? I'm sure they can. Can the economy thrive under Clinton era tax rates? I don't see why not, they did under Clinton.

What is this cliff? It seems more like a reasonable compromise. If anything, it doesn't cut enough, nor raise enough to balance the budget. What we really need will be impossible for this Congress and President to implement.

[Taem]

What we really need will be impossible for this Congress and President to implement.

Like what? Germany induced austerity measures of the likes imposed on Greece?

[DeeBye]

Like what? Germany induced austerity measures of the likes imposed on Greece?

Massively decrease spending on defense and foreign aid.

[Jester]

What is this cliff? It seems more like a reasonable compromise. If anything, it doesn't cut enough, nor raise enough to balance the budget. What we really need will be impossible for this Congress and President to implement.

Balancing the budget right now is surely not a good idea, with unemployment still way above 4%? The US' recovery, anemic though it is, is outpacing Europe. Retrenching now would endanger that.

-Jester

[kandrathe]

Like what?

How about that the government is taxing and spending 1/4th of the nations GDP (~3.7 trillion)? How about that the debt to GDP ratio is nearing 100%? That does not include $45.8 trillion in unfunded obligations without forecasted offsetting tax revenue.

It's pretty easy to see the problem. Too much pay out, and not enough pay in. We need to milk more revenue, without killing the cow. We can't spend our way out of this mess, we have nothing left to spend. Both personal debt, and government debt have left us in a hole, so we need to grow our way out. More people, more jobs, higher paying jobs, etc.

[Jester]

We can't spend our way out of this mess, we have nothing left to spend.

Could you justify the statement "we have nothing left to spend"? Preferably in some way coherent with US bond yields being at historical lows?

-Jester

[kandrathe]

Could you justify the statement "we have nothing left to spend"? Preferably in some way coherent with US bond yields being at historical lows?

Multiple factors explain the low yield;

A) Boomers retired and retiring will still see T-bills as safer than other investment vehicles, especially in shorter terms. Ergo, demand is high. People are willing to let the government use their money for this low yield.

B) The shell game. As long as the US borrows in its own currency, which can be created at will, the market isn’t going to assign any kind of credit risk to US debt.

C) At 1.66% yield per annum over ten years is better than the BEST savings account rates of 0.9% interest per annum. My bank is offering 0.3% for a premier account. Why are bank savings rates so low?

So, to correct my statement. "we have nothing left to spend", which is technically wrong. We can spend the fiat money we create out of thin air. We have had a small recovery over the summer, however I fear that time is over. Europe is weak. China's economy is crashing (if you call going from 16% to 6% GDP growth crashing). Our recovery has been buoyed by bubble re-inflation, bailouts, and debt write offs. The last 4 years have been an exercise in everyone cleaning up after the economic storm of 2008 destroyed the capital and equity infrastructure. Here is a article on the results of a shocking study by the Federal reserve. "The stunning drop in median net worth -- from $126,400 in 2007 to $77,300 in 2010 -- indicates that the recession wiped away 18 years of savings and investment by families."

To re-iterate what I've said often; Public investments that result in future job-growth and productivity are justifiable as long as the return on those investments result in a properly educated and useful labor pool, or a reliable and efficient national infrastructure. This will enable us to increase the GDP, producing more and better goods and services with our smaller work force and fewer precious resources (like energy).

And, then this is where I get more utilitarian and harsh. Everything else we spend is suspect if it does not promote the general welfare of the nation as a whole. So, while we expect to keep people from dying in gutters from disease or starvation, we shouldn't expect to make everyone "happy". We need to dial our spending on entitlements down to what people "need", and not as it's been, making them "comfortable". We individually pursue happiness. It is not given to us.

[Jenjan]

Congress has to authorize the treasury to borrow more money. Everyone knows this. It would be virtually impossible to balance the budget before the deadline hits, and the results would be painful if not catastrophic. The results of hitting the deadline, after a period of wiggle room through accounting maneuvers, without letting the treasury borrow would also be horrible.

The debate about balancing the budget should be largely separated from allowing the treasury to borrow. I get that the debt ceiling creates some urgency and forces congress to draw some attention to it, but right now borrowing really isn't high on the list of problems. The US government can borrow at historically low rates. There is no danger right now of running out of people to borrow money from. There is also little danger of interest payments being unsustainable. Since treasury bonds are fixed terms, there is no risk of somebody "calling up" the debt early.

The way to deal with the debt seems obvious to me. Spend now to accelerate economic growth, then let time, inflation and economic growth slowly shrink the debt relative to the size of the budget. What seems like a lot of money now will seems much more reasonable in a few decades. In 1950 debt was 257 billion and 94% of GPD, in 1980 it was 907 billion but only 33% of GDP. The US didn't pay down the 1950 debt, in fact they borrowed a lot more, but that borrowing was vastly outpaced by economic growth.

The wealthy generally borrow money to invest. They leverage their assets and multiply their returns. Although there is some risk associated with this, it is not financial suicide; done properly it is in fact very wise. If you wait to save up the cash you miss the investment opportunity. The US government has the ability to borrow at amazingly low rates and invest that money directly into the US economy, multiplying the return. They could invest in the infrastructure that would give the economy the foundation to grow in the coming decades: an upgraded electrical grid, high speed internet, mass transit, high speed rail, energy production, a world class education system etc.

It’s not a favour to the budget or to future generations to fail to maintain existing infrastructure just to balance a budget. An infrastructure debt, either badly maintained or never built, is just as much a debt and a problem that is passed on to future decades as a pile of owed treasury bonds is. In fact, I would argue that it's much worse.

[kandrathe]

Congress has to authorize the treasury to borrow more money. Everyone knows this. It would be virtually impossible to balance the budget before the deadline hits, and the results would be painful if not catastrophic. The results of hitting the deadline, after a period of wiggle room through accounting maneuvers, without letting the treasury borrow would also be horrible.

It's a given. The proposed budget increase is 901 billion which is largely unavoidable entitlements, and even if they "hit the wall" on sequestration they will only cut 100 billion of which 50 billion is from DOD. They will need to increase the debt ceiling by at least another trillion this year.

Since treasury bonds are fixed terms, there is no risk of somebody "calling up" the debt early.

I don't disagree generally, however there is risk in that the preponderance of our debt is held in short term notes. We roll about half our debt every two years. If inflation and interest rates spike up, we are at risk to pay higher service on our debt exacerbating our problems. Why don't they lock in on 30 year t-bills now at 2.7%?

The way to deal with the debt seems obvious to me. Spend now to accelerate economic growth, then let time, inflation and economic growth slowly shrink the debt relative to the size of the budget.

Yes. But, that spending clearly needs to result in economic growth.

They could invest in the infrastructure that would give the economy the foundation to grow in the coming decades: an upgraded electrical grid, high speed internet, mass transit, high speed rail, energy production, a world class education system etc.

Tricky, tricky though. By choosing the winners and losers, they may not see, for example, that air transport options, or trucking may be more viable. Worse, interference may disrupt and skew the market causing a non-viable choice to become a temporary winner, as long as the subsidies continue. This is our problem with ethanol currently.

And regarding education... There is no evidence that just throwing more money at education results in better educated people. Other societal issues, such as lack of parenting, use of drugs or alcohol, teen pregnancy, poor nutrition & health, crime, etc. may be as much a problem with poor educational attainments. Often, I feel there are myriads of local issues that a one size fits all "education" mandate can not solve. What is wrong in urban Detroit may be entirely different than what is wrong in rural Minnesota. And, then, with education, what is the end goal of our investment? For example, we have a "failing" school here in Minneapolis called Anishinabe Academy -- a which is 90% American Indian school, and 95% of the students are from poor homes. Their goal is to immerse students in native language and culture. They are "failing" according to statewide MCAIII tests, but are they failing in their mission? I think not, and I support what they are doing. Is it an investment that will benefit our workforce and create jobs? It is hard to tell if they aren't creating the types of standard worker widgets that fit the traditional work force.

And, in the end, these choices of winners and losers are made by bureaucrats who's concepts of ROI are mired in favoritism to win elections.

n infrastructure debt, either badly maintained or never built, is just as much a debt and a problem that is passed on to future decades as a pile of owed treasury bonds is. In fact, I would argue that it's much worse.

True. Whatever we build we must continue to spend to rebuild and replace over its life cycle. Depending on the "thing" it may be more efficient and fairer to assign the cost to those that use it, rather than to the public at large. Here we have HOV lanes, that rich people can also use for a fee.

[Jester]

Multiple factors explain the low yield;

A) Boomers retired and retiring will still see T-bills as safer than other investment vehicles, especially in shorter terms. Ergo, demand is high. People are willing to let the government use their money for this low yield.

Great! Give the boomers what they want: nice, safe US debt. Use the money for stimulus. Those 30 year bills sound like a great idea - they're currently pushing them out. http://online.wsj.com/article/SB10001424...46938.html

Why not even a consul? Just issue perpetual debt at 3%. People would buy it.

B) The shell game. As long as the US borrows in its own currency, which can be created at will, the market isn’t going to assign any kind of credit risk to US debt.

If that were true (it isn't), then why did US bonds go up to double-digit yields in the 1970s? There is little to no *default* risk for a country that prints and borrows in its own money, but there is a compensating *inflation* risk. Investors, aware of this, price accordingly: This is not a shell game, it is not a hoax, it is not a scam, a ponzi scheme, or anything else of the sort. However, markets don't seem to care about that either right now, so: Borrow!

C) At 1.66% yield per annum over ten years is better than the BEST savings account rates of 0.9% interest per annum. My bank is offering 0.3% for a premier account. Why are bank savings rates so low?

If it was more profitable to hold liquid US dollars than US treasury bills, why would anyone buy treasury bills? Ever? That's what treasury bills are - a loan to the government, trading liquidity for returns. The situation you describe, in terms of this relationship, is better known as "always".

Even Bernanke only has so much traction on this, because in theory, if investors are worried about inflation, even if banks get money very cheap, very few people will keep it in savings, and rates will increase. If people thought US dollars (or bonds) were a risky investment, they would drain their bank accounts and sell their bonds, and buy tangibles. This has not happened. The US can still borrow almost unimaginable sums of money. More than 10 years ago.

We can spend the fiat money we create out of thin air.

Yep! Monetary reflation saves the day. Exactly as Milton Friedman said about the Great Depression. Only, with interest rates flattened out barely over zero, you need other tools too.

And, then this is where I get more utilitarian and harsh. Everything else we spend is suspect if it does not promote the general welfare of the nation as a whole. So, while we expect to keep people from dying in gutters from disease or starvation, we shouldn't expect to make everyone "happy". We need to dial our spending on entitlements down to what people "need", and not as it's been, making them "comfortable". We individually pursue happiness. It is not given to us.

The US has the least generous and least redistributive social welfare net of any developed country. If your objective is to reduce social benefit spending, because you're sick of making people happy when they should be suffering in squalor, then make the case for that independently. But don't do it by conjuring up a debt crisis that not only doesn't exist, but exists less than at any time since the 1960s. The US has enormous space left for fiscal expansion.

-Jester

[ErickTheRed]

And regarding education... There is no evidence that just throwing more money at education results in better educated people. Other societal issues, such as lack of parenting, use of drugs or alcohol, teen pregnancy, poor nutrition & health, crime, etc. may be as much a problem with poor educational attainments. Often, I feel there are myriads of local issues that a one size fits all "education" mandate can not solve. What is wrong in urban Detroit may be entirely different than what is wrong in rural Minnesota. And, then, with education, what is the end goal of our investment? For example, we have a "failing" school here in Minneapolis called Anishinabe Academy -- a which is 90% American Indian school, and 95% of the students are from poor homes. Their goal is to immerse students in native language and culture. They are "failing" according to statewide MCAIII tests, but are they failing in their mission? I think not, and I support what they are doing. Is it an investment that will benefit our workforce and create jobs? It is hard to tell if they aren't creating the types of standard worker widgets that fit the traditional work force.

And, in the end, these choices of winners and losers are made by bureaucrats who's concepts of ROI are mired in favoritism to win elections.

I don't understand this argument. Sure there are tricky details to education reform, but some high level facts stand out. College educated people are more employable and earn more than those without a college education. The cost of attending public colleges has dramatically increased. Students are now graduating with considerably more student debt than the previous generation. We spend a lower fraction of government money on public education than previously.

Of course there are a lot of details as to why tuition has increased and why the shifts in spending have occurred, but I think we do know how to spend to make education more accessible and have a better educated population. I benefited from a quality public school education, and now I make a comfortable living. I have considerably lower tax brackets than my parents did. I'm oversimplifying a complex budget process, but I'm paying less and the current generation is graduating with a lot more debt.

[kandrathe]

I don't understand this argument. Sure there are tricky details to education reform, but some high level facts stand out. College educated people are more employable and earn more than those without a college education. The cost of attending public colleges has dramatically increased. Students are now graduating with considerably more student debt than the previous generation. We spend a lower fraction of government money on public education than previously.

I was thinking of K-12, but we can go to colleges too if you like. Estimated government spending 2010 shows public funding (all tax levels) Education costs us $908.3 billion. In 2000, that number was $552.6 billion. In 1990, it was 342.5 billion. From 1990, to 2000 it increased by 61% (6.1% per year). From 2000, to 2010 it went up just over 64%. In 1990 there were about 45 million K-12 students, in 2000 about 55 million, and about 56 million in 2010.

If we look at the ~56 million K-12 students consuming $538.8 billion nationwide (of the $908.3 billion from above) it equates to $9621 per student per year. If we choose a comfortable average number for class size of 20, that means we pay our schools $192,420 per class. This is not reflected in teacher salary (which with benefits may be 1/3 to 1/2 that amount).

According to this article;

"Twenty-five percent of Americans that start high school do not graduate. Entering the workforce without a high school diploma means an unemployment rate three-and-a-half times the rate of those with a college degree. And for those who do find full-time work, they on average earn less than half of what a college graduate makes each year.

Thirty percent of high school graduates do not go on to college right after graduation. In the workforce, a high school graduate earns on average more than someone without a diploma, but still only 60 percent of what a college graduate makes each year.

Forty-three percent of students who start college will not graduate in 6 years. Women graduate at a six-percent-higher rate than men within six years, and outnumber men in higher education by a ratio of 3-to-2. "

Minnesota completion rates.

This is close to what I've found in my research. Almost twice the number of Americans per capita compared to Europe attempt college. In Minnesota, which leads the nation in education, only about 1/3 of them complete in four years, and only 1/2 complete within 6 years. We don't encourage education in trade schools anymore, and they have by and large evolved into 2 and 4yr degree granting institutions. Why? Simple. The amount of financial aid you qualify for is directly related to the length of the program you attempt (not complete). If you tell the government you are going for a trades program, or even a 2 year degree, they give you less money.

Is the funding given to those that drop out (50 to 75 percent) money well spent? Hard to tell, but probably not. Is it the case that too many students who are unprepared for the rigor of college attempt college? Yes, I think this is part of it. This drives up demand, and eventually that is reflected in costs. Since the government foots a large chunk, and defers a large chunk in low interest loans, the student doesn't feel the pain of their financial decision until they quit or graduate from college.

Of course there are a lot of details as to why tuition has increased and why the shifts in spending have occurred, but I think we do know how to spend to make education more accessible and have a better educated population. I benefited from a quality public school education, and now I make a comfortable living. I have considerably lower tax brackets than my parents did. I'm oversimplifying a complex budget process, but I'm paying less and the current generation is graduating with a lot more debt.

I speak as someone involved directly in higher education administration. The private non-profit college I work for is pretty efficient, but we could still trim much redundancy and waste. It is pretty rare for schools to end programs, even with flagging enrollments. Public universities are much less efficient, and have little reason to ever control growth or costs. They just pass on the costs to the State legislature. It is political death to attempt to cut back funding for education.

Tuition rate changes are complicated as you say. The average discount rate is running about 35% now (meaning hardly anyone pays the sticker price). Then you have additional stuff they didn't have 50 years ago, like comfortable dorm rooms. Technology. Security. More co-curricular and extra-curricular activities. And, the fastest rising cost for the past 30 years has been... health care costs for employees. We've managed to hold the line to between 3-6%, which over time has made us more affordable compared to our peers.

The bottom line is that I disagree that we are getting our monies worth from education, and it is likely that blind government intervention and the politics is making affordability worse, not better. In K-12 we need to focus on a few things, first parents need to be more fully engaged in their child's education and preparedness, second, we need more money for excellent teachers and less for the administration, third, we need to be clear on what we are expecting the public monies to produce (is it standardized worker widgets?), and finally, we need to empower schools to make the right decisions for their specific situations. Mandates from State, or Federal levels become a glass slipper that no school fits or is comfortable in. As the article describes, we've moved backwards in education from 60 years ago, we still have the same sized achievement gap from 1966, and about the same number of adult Americans are functionally illiterate (~ 14%).

These are 2003 numbers, so we are due for an update, but at that time 93 million adults were at basic or below basic literacy. 123 million were intermediate to proficiently literate. The numbers remained flat from 1992 to 2003. If we use national SAT/ACT scores as a guide, they have remained flat over the past two decades. From what I see in the data, we are spending more on education, and getting the same or worse results.

[Jester]

From what I see in the data, we are spending more on education, and getting the same or worse results.

1) You aren't really spending more on education. It's barely tracked GDP, and that includes a hefty slice of pure inflation. And the demand for education in production, shown in the skill premium, is going up and up. Or, put another way, the penalty for having uneducated people is increasing.

2) You have had a large migration from much less literate societies, which will continue to drag down literacy rates. If almost 1/20 people is an undocumented migrant, that's going to tank your literacy figures in the first generation, and put increasing pressure on the 2nd. This wasn't true in the 1960s.

Regardless, I cannot conceive of a possible world where backsliding in literacy figures would lead to calls for *less* education funding. The programs necessary to boost literacy rates and K-12 education are not mysterious or esoteric. They do not suffer from the problems you describe with higher education management. Just build more damn schools, hire qualified teachers, pay them well, and make sure they're supplied with the necessary materials. I have no doubt there are serious administrative challenges, but in the end, it's not rocket science, at least up until high school.

-Jester

[ErickTheRed]

I'm not sure what to make of the spending numbers on the government spending website you linked. I narrowed down to California since I am most familiar with the UC system, and compared 1992 when I attended and 2012. The data shows that education spending with a 1% larger share but it also showed health care with a 2% smaller share in 1992 compared to now. So if we conclude that we are spending the same on education for less effect I guess we also conclude that rising health care costs aren't an issue?

Tuition rate changes are complicated as you say. The average discount rate is running about 35% now (meaning hardly anyone pays the sticker price). Then you have additional stuff they didn't have 50 years ago, like comfortable dorm rooms. Technology. Security. More co-curricular and extra-curricular activities. And, the fastest rising cost for the past 30 years has been... health care costs for employees. We've managed to hold the line to between 3-6%, which over time has made us more affordable compared to our peers.

Comparing my 1992 UCBerkeley tuition to the current value I see a difference of $2,800 to $11,200 (maybe more, I'm not sure what fees were included in the first number that aren't in the 2nd) That doesn't include dorm living or anything else. I doubt the dorm rooms are that much better now. I had the essentials (by which I mean good internet access.)

I get that big government institutions are inefficient, but the UC system has been plugging along since 1868. If the fastest increasing cost is health care costs for employees (which doesn't surprise me as I've also read that elsewhere) then isn't that less of an example of mounting inefficiency than an example of spending more on health care and less on actual education?

I agree that a 4 year college education isn't for everyone, but given the increased earning power it gives it's a good idea for a lot of people. I agree that there are many issues with K-12 education, but in my generation people who did make it through and qualify had an affordable world class college experience waiting for them. It was a great system for me and a lot of people like me and I hate seeing it become less accessible.

[Occhidiangela]

The amount you spend on education is only one metric. What your methodology for education (or as Pete used to suggest, awakening the natural curiosity in a child and making it grow so that it's more about establishing a love of learning and less about spoon feeding/teaching) holds has a profound influence upon its effectiveness.

However, with the bulk of families being dual income earners, and a non trivial portion being single parent, the complementary side of education, which has NOTHING to do with schools, gets short changed.

Education is far more than a product, it is a process that includes lots of factors.

The above considered, without adequate funding, the public portion can only do so much.

[Alram]

A kid rang my doorbell last night. He was all dressed up in a suit and tie.
"Trick or treat!" He announced.
"You're a little late. That was back in October." I replied.
"There is an automatic extension until the end of the year."
I asked him, "Exactly what are you dressed up as? What's this costume?"
"I'm an IRS agent. And this house is valued at over $250,000."
He then took 40% of my candy. He also took 40% of all my canned goods and beverages -- which he said were no longer exempt from Halloween tax. He left without saying thank you.

I went over the fiscal cliff.

[kandrathe]

1) You aren't really spending more on education. It's barely tracked GDP, and that includes a hefty slice of pure inflation.

Why should education spending increase with GDP? Why should it not be measured as per capita spending adjusted for inflation? Better would be per pupil spending at various levels. Like other labor intensive endeavors, it suffers here greatly from the rapidly inflating costs of employee benefits -- and is then exacerbated with unsustainable government sponsored pension plans. If the GDP per capita increases, it would be better for everyone if the costs per capita remained more constant. We can assume that there may be some slight need for more highly educated people, but really the bulk of the $800 billion in costs ($7743 per) are going to the 60 million K-12 and college students. (source) If production is more efficient, does education cost more?

And the demand for education in production, shown in the skill premium, is going up and up. Or, put another way, the penalty for having uneducated people is increasing.

This is true, but it could also be better served by aligning peoples vocational training with their interests and skills. In the US, far too many people feel that a bachelors, and then graduate degree is a requirement. We have skewed our federal funding that way as well, resulting in way too many people failing -- while also wasting their time, and our money whereas if they had other vocational training options, many would be happier and better off.

2) You have had a large migration from much less literate societies, which will continue to drag down literacy rates. If almost 1/20 people is an undocumented migrant, that's going to tank your literacy figures in the first generation, and put increasing pressure on the 2nd. This wasn't true in the 1960s.

True. We need immigration, so it's an expense we should better plan for. It helps defray costs to cluster like language peoples in the same areas.

Regardless, I cannot conceive of a possible world where backsliding in literacy figures would lead to calls for *less* education funding. The programs necessary to boost literacy rates and K-12 education are not mysterious or esoteric. They do not suffer from the problems you describe with higher education management. Just build more damn schools, hire qualified teachers, pay them well, and make sure they're supplied with the necessary materials. I have no doubt there are serious administrative challenges, but in the end, it's not rocket science, at least up until high school.

I'm not calling for less education, just lower costs. We've increased costs per pupil, but not the results as measured by SAT/ACT or other standardized tests. Just like military spending, more doesn't necessarily mean its spent wisely in the nation's interest. More often, it pads the pockets of a special interest.

[kandrathe]

I went over the fiscal cliff.

So much for "The Bush Tax Cuts for the Wealthy" -- I noticed that language is entirely absent from the dialog now.

I'm middle-middle class and returning to the Clinton era tax policy will reduce my net income by about $350 per month. It's about a 17% increase in my tax rate, whereas those in the wealthy category would only see their Income tax go up about 11%. Although, returning the double tax on dividends will be more harmful for those who invest (and for pensions). It would put the effective tax rate (assuming the top bracket) on dividend income at about 55%-65%.

It's about 48 hours away now.

[Jester]

Why should education spending increase with GDP? Why should it not be measured as per capita spending adjusted for inflation?

Good question. If what you wanted to do was provide a 1950s education, you could just fix per-pupil spending at 1950s level, indexed to inflation. I think that's educational suicide, and that the requirements of keeping up technologically, of hiring teachers who increasingly have better employment options (current crisis notwithstanding) requires spending to at least track GDP. But you're right, there's no inherent reason the two numbers have to be linked.

The other reason would be international competition. If the US wants to keep up with other countries, you probably need to have comparable levels of spending. The US is doing okay right now, but it's not way out of line with similar countries.

Better would be per pupil spending at various levels. Like other labor intensive endeavors, it suffers here greatly from the rapidly inflating costs of employee benefits -- and is then exacerbated with unsustainable government sponsored pension plans.

Pay your teachers more, get better teachers. Pay your teachers less, get worse teachers. That includes benefits. Unless you're okay with a less and less capable slice of the population going into teaching each year, then the job has to stay competitive.

If the GDP per capita increases, it would be better for everyone if the costs per capita remained more constant. We can assume that there may be some slight need for more highly educated people, but really the bulk of the $800 billion in costs ($7743 per) are going to the 60 million K-12 and college students.

Were else? The point of education is to educate students, no? And the demand for highly skilled people already well exceeds the supply. I expect this to increase, but I suppose that's crystal ball territory.

I'm not calling for less education, just lower costs. We've increased costs per pupil, but not the results as measured by SAT/ACT or other standardized tests. Just like military spending, more doesn't necessarily mean its spent wisely in the nation's interest. More often, it pads the pockets of a special interest.

If you can get more benefit for less spending, then all power to you. But education spending mostly goes to exactly where you'd think: paying teachers, keeping schools in repair, administering standards, buying textbooks, etc... It's not at all obvious where there are savings, and it's much easier to cut the bones of the programs, which are obvious, than the waste, which is not.

-Jester

[kandrathe]

Why should education spending increase with GDP? Why should it not be measured as per capita spending adjusted for inflation?

Good question. If what you wanted to do was provide a 1950s education, you could just fix per-pupil spending at 1950s level, indexed to inflation. I think that's educational suicide, and that the requirements of keeping up technologically, of hiring teachers who increasingly have better employment options (current crisis notwithstanding) requires spending to at least track GDP. But you're right, there's no inherent reason the two numbers have to be linked.

The other reason would be international competition. If the US wants to keep up with other countries, you probably need to have comparable levels of spending. The US is doing okay right now, but it's not way out of line with similar countries.

I would then agree that the line would be flat with a small offset for acquiring new skills. But, if GDP doubles over 20 years, there is no reason the cost of education per pupil doubles.

Better would be per pupil spending at various levels. Like other labor intensive endeavors, it suffers here greatly from the rapidly inflating costs of employee benefits -- and is then exacerbated with unsustainable government sponsored pension plans.

Pay your teachers more, get better teachers. Pay your teachers less, get worse teachers. That includes benefits. Unless you're okay with a less and less capable slice of the population going into teaching each year, then the job has to stay competitive.

I think there is a fallacy in here. Underpay will get you worse, but there is no advantage to overpaying. Beyond that, there is resistance to linking the pay scale to student performance. Why? Teaching is only half the equation, the other half is learning. My experiences with my children are that a teacher has a hard job trying to adapt to the various learning styles of 20-30 children, and so creates one curriculum that suits their teaching style. Some kids thrive, while others starve. The emphasis historically has been on curriculum and teaching, and only more recently on creating environments for student learning. We also try to cram way to much into the curriculum to suit all ideas on what students should learn. The result is they get a smattering of everything, but lack depth in fundamentals - and are allowed to skip science and math altogether if they wish.

Where else? The point of education is to educate students, no? And the demand for highly skilled people already well exceeds the supply. I expect this to increase, but I suppose that's crystal ball territory.

Well, the source I linked shows that compared to OECD, we over pay and under perform. The money doesn't make it to the providers of the service, it gets siphoned off into administration and non-essentials.

Much like our health care system.

I'm not calling for less education, just lower costs. We've increased costs per pupil, but not the results as measured by SAT/ACT or other standardized tests. Just like military spending, more doesn't necessarily mean its spent wisely in the nation's interest. More often, it pads the pockets of a special interest.

If you can get more benefit for less spending, then all power to you. But education spending mostly goes to exactly where you'd think: paying teachers, keeping schools in repair, administering standards, buying textbooks, etc... It's not at all obvious where there are savings, and it's much easier to cut the bones of the programs, which are obvious, than the waste, which is not.

Here, we are seeing much success with vouchers