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Our anti-recovery policy

Want to get depressed? Spend some time reading the Center for Budget and Policy Priorities "Update on State Budget Cuts." "Florida’s 11 public universities will raise tuition by 15 percent for the 2010-11 academic year. This tuition hike, combined with a similar increase in 2009-10, results in a total two-year increase of 32 percent. In Minnesota, as a result of higher education funding cuts, approximately 9,400 students will lose their state financial aid grants entirely, and the remaining state financial aid recipients will see their grants cut by 19 percent." And on, and on.

There's some debate over how well certain forms of stimulus "work." That is to say, whether a tax cut increases spending, which increases jobs, which increases total economic output. But there's no debate over what state and local aid does: It allows the continuation of programs that are already ongoing, the preservation of jobs that people already occupy, the protection of tax rates that are currently in place. It doesn't promote economic expansion, which is a somewhat uncertain business. It prevents economic contraction, which is a much more predictable project.

If states have to cut $120 billion from their budgets, that money -- and the things it does -- will just leave the economy. There will be fewer jobs, higher taxes, less financial aid. None of that is speculative. There's no theory in which it doesn't happen. This is a large economic contraction that we've decided to allow, because we would prefer to allow it than to put down the money -- much less money, incidentally, than it will cost to extend the Bush tax cuts for the rich -- necessary to prevent it.

Of everything that's happened since the financial crisis, this is, to me, the most frustrating. It is a decision we, as a polity, are making to prolong our economic pain and slow our economic recovery. It is needless and senseless and largely the result of political, rather than economic, disagreement. And when it happens, we will all look around at one another and lament our slow recovery, and our terrible economy, and our inept political leaders, who have clearly done something wrong, even if we're not sure exactly what.

By Ezra Klein  |  August 11, 2010; 10:51 AM ET
 
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Comments

One effect of all this will be the dismantling of our major universities. I mean, how long will Michigan or UC Berkley be world class institutions if their funding is reduced year-in, year-out?

As Glenn Greenwald said, 'What collapsing empire looks like...'

Posted by: leoklein | August 11, 2010 10:59 AM | Report abuse

"And when it happens, we will all look around at one another and lament our slow recovery, and our terrible economy, and our inept political leaders, who have clearly done something wrong, ***even if we're not sure exactly what***."

This is precisely the problem. No one will ever agree what the "right" solution was. Republicans will say that the recovery was slow because there was too much spending and the deficits were too high. I'm not sure what economic principle that's based on, but they will say it anyways. And therefore there will always be "controversy" surrounding the question of what could have/should have been done.

So lessons will never be learned and we are doomed to repeat our failures. Kind of sad, isn't it?

Posted by: vvf2 | August 11, 2010 11:11 AM | Report abuse

Physicians are often confronted with a similar challenge and, long ago, arrived at what seems to be the best general solution: first, do no harm.

Robert Higgs, senior fellow in political economy for The Independent Institute, wrote earlier this year (http://www.csmonitor.com/Commentary/Opinion/2009/0209/p09s01-coop.html):

"Federal intervention rests on the presumption that officials know how to manage the economy and will use this knowledge effectively. This presumption always had a shaky foundation, and we have recently witnessed even more compelling evidence that the government simply does not know what it's doing. ... The US government has shown repeatedly that as an economic manager it is not to be trusted. What we need most are authorities wise enough to follow the dictum, 'First, do no harm'."

Posted by: rmgregory | August 11, 2010 11:21 AM | Report abuse

Ezra,

I have just one simple question for you.

WHY?


Where are these increases coming from? Were they always there and being subsidized by the taxpayer before? Are they due to increased healthcare costs for the university? Increase professor salaries? Lessening endowments? Increased infrastructure costs?

Why can we ask Wellpoint to open their books to show us their costs (and we should) but we can't ask the University of Florida to do the same?

Posted by: visionbrkr | August 11, 2010 11:24 AM | Report abuse

Tuition is based on what the intended 'market' (incoming students and their parents) will pay, not what their costs are.

Tuition will come down at the well recognized and desired Universities when the 'market' no longer views them as desirable. Which will be never. The implied value (to a parent) of UVA vs Christopher Newport is far beyond the reality, but by the time that's apparent, the tuition check has been cashed.

Posted by: JkR- | August 11, 2010 11:33 AM | Report abuse

visionbrkr what are you talking about?

The U of Fla is a public institution with open records, all costs, salaries, etc are transparent. I work there. Tuition has traditionally been some of the lowest in the US for state universities. We are just now getting it up to a more reasonable (in line with other comparable institutions) amount.

Posted by: rjewett | August 11, 2010 11:33 AM | Report abuse

"It is a decision we, as a polity, are making to prolong our economic pain and slow our economic recovery. It is needless and senseless and largely the result of political, rather than economic, disagreement. And when it happens, we will all look around at one another and lament our slow recovery, and our terrible economy, and our inept political leaders, who have clearly done something wrong, even if we're not sure exactly what."

Is Jimmy Carter back in office?

Posted by: tuber | August 11, 2010 11:36 AM | Report abuse

In the case of state universities, part of this is just a way of shifting costs around -- it's likely a quasi-back-door tax made by politicians who are to reluctant to raise taxes on the population generally.

In Virginia we are likely to have this scheme where the Gov and GA are raiding student fees to finance state operations. I imagine quite a few students are paying for these on the basis of private student loans. So we have a situation where pols are more than happy to finance operations using private debt, but public debt through the federal government financed at much lower rates is apparently off-limits?

Absolutely crazy.

Posted by: JPRS | August 11, 2010 11:40 AM | Report abuse

rjewett,

sorry as i wasn't aware of the transparency. if i have the time I'll look it up if I can find it to try to find out for myself but the question is still there, WHY?

Why 32% increase over 2 years? This sounds eerily like conversations had 10-15 years ago with colleagues about healthcare costs and that can just got kicked down the road too.

Posted by: visionbrkr | August 11, 2010 11:40 AM | Report abuse

If "first do no harm" is the philosophy that the GOP wants to embrace, how do they justify voting NO on aid to states?

"But there's no debate over what state and local aid does: It allows the continuation of programs that are already ongoing, the preservation of jobs that people already occupy, the protection of tax rates that are currently in place."

Aren't the GOP members of Congress (and Blue Dog Dems) nothing more than a death panel for jobs?

Posted by: cmccauley60 | August 11, 2010 11:47 AM | Report abuse

"Why 32% increase over 2 years?"

Results of 'starve the beast'...less general fund money = higher tuition (at state schools).

Posted by: JkR- | August 11, 2010 11:47 AM | Report abuse

Thanks for focusing on the plight of students. I'm grateful for the work you do day in and day out.

Posted by: AIT8 | August 11, 2010 11:57 AM | Report abuse

I guess that's the answer to my question of why tuition keeps going up at insane rates: the funding received from the State and Federal budgets has been shrinking. I'd still like to see some numbers on that, but it's a compelling enough argument for me to believe.

And I think there is an argument that aid to states is stimulative. There's a fair chance that state workers are saving up money right now in fear that they may be laid off. If, through help from the feds, the state government can announce few or no lay offs, those workers might go back to consuming. It's a hazy kind of argument, like those that Ezra describes above, but there it is.

Posted by: MosBen | August 11, 2010 11:58 AM | Report abuse

UVA gets, I believe, only 13% of their funding from the State, IIRC.

They are in serious discussion to become a private institution, and why not? If the state wants to have a say, they're not paying enough have a prominent voice.

Posted by: JkR- | August 11, 2010 12:06 PM | Report abuse

visionbkr,

WHY? Like I said, because tuition was for years, until 2 yrs ago, way lower in Fla than in other state universities of comparable size and quality.

Posted by: rjewett | August 11, 2010 12:06 PM | Report abuse

"Florida’s 11 public universities will raise tuition by 15 percent for the 2010-11 academic year. This tuition hike, combined with a similar increase in 2009-10, results in a total two-year increase of 32 percent."

Which would be a good thing if it were the taxes thus raised on the student's parents, but is a bad thing when it's the tuition they pay.

Think of it as a consumption tax, and it we'll all feel better about it.

Sounds reasonable to me. When I went to art school from 1987 to 1991, tuition went up 150% between the first year and the last year. Then, about ten years later, I found out that between my last year (1991) and ten years later (2001) the tuition hadn't gone up at all. Maybe 2%?

A lot of times, it has to do with timing. ;)

Posted by: Kevin_Willis | August 11, 2010 12:11 PM | Report abuse

JkR,

thanks for the answer. My question (and it sounds like MosBen's too) is how much general fund money on average goes to universities and how has it changed over the last several years in light of the recession. Also how have costs gone up correspondingly. Sounds like a good question for research desk.

Posted by: visionbrkr | August 11, 2010 12:17 PM | Report abuse

JkR- is entirely correct...there is no mystery about the rising costs of tuition at public universities.

In my state, the tuition statement every student receives shows the overall tuition rate, the state's contribution, and the balance the student must pay. The state's contribution here has been reduced by over 35% in just the past two years, and the outlook for the near term for further reductions is equally bleak. This is coupled with severe cutbacks in state grants for financial aid, and program cuts at the colleges themselves. Students today are paying much more, and receiving considerably less, than was the case even a few years ago.

Ezra's ongoing discussion of how state and local budget cuts offset the modest federal stimulus and erode critical sectors (like higher education) is commendable.

Education is not a "beast," but it is certainly being starved, and our young people and all future generations will pay a heavy price.

Posted by: Patrick_M | August 11, 2010 12:18 PM | Report abuse

Kevin, that's why I'd really like to see numbers. I know that during my four years of college, tuition went up ~20% between the first and last years. And I know that in the couple years after I left it went up a bit more too. Admittedly, this was at a private liberal arts school, but it certainly gave me the impression that tuition costs are completely out of control. Maybe I just went in a bad period. I know my law school tuition wasn't going up *that* much every year, and that was at a state school.

Posted by: MosBen | August 11, 2010 12:21 PM | Report abuse

BS.

Cross posted from an earlier thread:

As to why state bailouts are controversial:

New Jersey budget in 1998: $16.4 billion.

2002: $23.2 billion
2005: $28.6 billion
2008: $34.6 billion

Inflation has been 32% over that decade. The budget more than doubled.

Enough is enough.

Posted by: krazen1211 | August 11, 2010 12:32 PM | Report abuse

@rmgregory:

"Federal intervention rests on the presumption that officials know how to manage the economy..."

No it doesn't. It rests on the assumption that (A) officials know when the economy is underperforming and (B) officials know how to spend money. That's it.

Expecting an economy with centralized control (i.e., Leninist) to perform well requires Higgs' assumption,

but a Keynesian intervention can be successfully implemented by monkeys with bags of cash.

As such, there are three actual counterarguments to a current intervention (of which the first two have some validity): (A) Government officials aren't very good at spending money (B) The economy is not, in fact, underperforming and (C) the Keynesian assumptions underlying this argument are significantly flawed.

Higgs' argument supports none of these points, because he is a drooling imbecile.

Posted by: eggnogfool | August 11, 2010 12:34 PM | Report abuse

"Why 32% increase over 2 years?"

My guess...the magic of free market capitalism. Demand is high enough to support that prices and supply is willing to supply it at that price.

In capitalism, the only rationale for any price is, "what price people are willing to pay" and "what price people are willing to receive." There is no need to justify why a price went up. Justifying a "correct" price based soley on factor inputs is something straight out of Das Kapital.

But hey, if you don't like this aspect of capitalism, you wouldn't be alone. Its also the reason we have asset bubbles, etc. Prices are just what people agree they are, nothing more, nothing less.

Posted by: nylund | August 11, 2010 12:36 PM | Report abuse

Also cross posted from another thread.

US education spending per capita in constant 2005 dollars:

Year $ spent on education
1995 1856 a
2002 2352 a
2008 2601 a

Posted by: krazen1211 | August 11, 2010 12:39 PM | Report abuse

Also cross posted from another thread.

US education spending per capita in constant 2005 dollars:

Year $ spent on education
1995 1856 a
2002 2352 a
2008 2601 a

Posted by: krazen1211 | August 11, 2010 12:39 PM | Report abuse

There are two answers on the college tuition question (at least based on the Univ of Calif). Back in the '60s UC was practically free, except for living costs. Then lawmakers decided to start charging tuition, especially at the professional schools, on the theory that the state ought not to be subsidizing to such an extent people who would later be earning high salaries. Then they started to charge more for undergraduate. Then they started to reduce the Stste's share, at least on a proportional basis. UC also started admitting more out-of-state and foreign students, because they paid higher tuition and fees, leaving fewer places for state residents. Of course financial aid made up some of the difference, but a great deal of that was taxpayer funded.

I think there is something to the idea that with the proliferation of financial aid, the costs of college (more private but public as well) did start inflating faster than most other things. And some universities did build fancy new research centers rather than educate more undergrqads (see Harvard), but I don't think that is generally true at state institutions--they just kept building mroe campuses as population increased.

When I was student in the early '60s tuition at Harvard was around $1250 and at UC it was free, but there were fees of $50 or so, maybe $100 a semester. By the late '70s law school at UC cost about $350 a semester, IIRC. Now UC costs about half of what the Ivies charge, and the student share just keeps rising every year under Schwarzenegger as the state share shrinks. So it is a combination of reduced taxpayer support for higher education and some inflation of costs by the institutions to keep the fancy research centers.

Posted by: Mimikatz | August 11, 2010 12:41 PM | Report abuse

@krazen:

The GDP of New Jersey more than doubled over that period as well.

Posted by: eggnogfool | August 11, 2010 12:42 PM | Report abuse

@eggnog

No it didn't.

NJ GDP in 1998: $314 billion
NJ GDP in 2008: $475 billion

That's 51% growth in nominal terms, compared to 110% growth in state spending, in nominal terms.


Of course, that begs the question: Why should state spending grow solely because GDP grows?

Posted by: krazen1211 | August 11, 2010 12:46 PM | Report abuse

@Krazen:

(1) I'd guess that "Education spending" includes college/graduate stuff, which is out of control due to student loan craziness. Fixing the student loan issue is important, and firing kindergarten teachers won't help.

(2) Per capita GDP has increased significantly more than per capita education spending over that period.

Posted by: eggnogfool | August 11, 2010 12:48 PM | Report abuse

@Krazen:

Are you sure your New Jersey numbers are nominal? I have similar numbers, but it appeared they were current dollars.

For "why should state spending rise with GDP", why shouldn't state employees standard of living rise with everyone else's?

It's a question of priorities; if spending falls relatively speaking, capable people will leave and services provided will decrease in quality. Some people may favor that effect, but I'd argue the 'default state' would maintain the quality/quantity of publicly provided services. That requires spending growth fairly close to GDP growth.

Posted by: eggnogfool | August 11, 2010 12:55 PM | Report abuse

@eggnog

I dont think it includes collegiate spending but it might.

But either way, real spending per capita in education went up 40%.

Per this link

http://www.measuringworth.org/datasets/usgdp/result.php

Real gdp per capita went up 28%.

Posted by: krazen1211 | August 11, 2010 12:56 PM | Report abuse

@eggnog

I dont think it includes collegiate spending but it might.

But either way, real spending per capita in education went up 40%.

Per this link

http://www.measuringworth.org/datasets/usgdp/result.php

Real gdp per capita went up 28%.

Posted by: krazen1211 | August 11, 2010 12:56 PM | Report abuse

@eggnog

I'm pretty sure they are nominal, yeah. That's 50% nominal growth which is about in the same ballpark as 66% nominal growth of the US as a whole.

You can't have it both ways.

If state spending is going to go up when GDP goes up, it has to go down when GDP goes down. Of course, then you call it an 'anti-recovery' policy.

The same with u

Posted by: krazen1211 | August 11, 2010 1:01 PM | Report abuse

"Tuition has traditionally been some of the lowest in the US for state universities. We are just now getting it up to a more reasonable (in line with other comparable institutions) amount.

Posted by: rjewett "|


You got there before me, rjewett. Tuition for Florida state universities is incredibly cheap.

Incidentally, I spent 4 years working in a university setting. You wanna talk about the luck of being an educated person in the richest country the world has ever known? Tenured university professors have got a very cushy, very insulated life. Very.

How did we get here? The cost of a university education has varied directly in proportion to the level of federal subsidies for higher education. Coincidence? I think not.

Posted by: bgmma50 | August 11, 2010 1:04 PM | Report abuse

@krazen1211,

You'd need to break down the budget into component parts. I don't have the disaggregated information, but if you're serious about finding an answer, that's one place to look.

With respect to increases between 1998 and 2002 part of that growth in state spending is obviously connected to the recession which saddled states with additional costs. The unfunded NCLB mandate added to most state budgets, I'd imagine that NJ increased it's spending for first responders following 9/11, plus there was an increase in population from 2000 to 2010 of close to 300K.

Part of the increase was almost certainly due to increased revenue from the real estate bubble (if you have revenue coming in the door, the tendency is to spend it). Still this notion that all state spending is wasteful is only true if you think the Somalia model is what we should aspire towards.

It's also worth noting, that even in the face of the worst financial crisis since the Great Depression, at a time when states are forced to spend more on social services, NJ slashed the budget in 2009 to $29 billion.

As far as aid to the states at this point goes, leaving the state governments bleeding on the floor is probably the stupidest thing you could do at this point. When the private sector is cutting back on spending and the public sector follows suit, you end up creating a vicious downward spiral, which increases the unemployment rate in both the public and private sector, and which causes state revenues to plunge even further.

I appreciate that the GOP wants to sabotage the economic recovery, but I suspect most Americans want to see the economy growing again and the unemployment rate decreasing -- not increasing. At this stage that's going to be hard to achieve without some federal support -- aid to states is a direct way of achieving that end.

Posted by: JPRS | August 11, 2010 1:07 PM | Report abuse

@eggnog

I'm pretty sure they are nominal, yeah. That's 50% nominal growth which is about in the same ballpark as 66% nominal growth of the US as a whole.

You can't have it both ways.

If state spending is going to go up when GDP goes up, it has to go down when GDP goes down. Of course, then you call it an 'anti-recovery' policy.

The same with employment: Union contracts prevent the state from enforcing the same pay and employment cuts that the private sector enacted. If their standard of living is supposed to rise, and I don't even think it should, well, they shouldn't get their 3-4% contracted raises in a deflationary environment.

Of course, there's just a general glut of employees. NJ hired about 10k government workers in the 90s and 70k government workers in the 00s. That's part of the reason why they've maintained spending growth that didn't just run with GDP growth. It doubled it.

And its why we had property tax growth here that didn't just run with GDP growth. It more than doubled it. Property taxes were growing at 7% earlier in this decade. They grew 3.3% in 2009 despite GDP declining.

Posted by: krazen1211 | August 11, 2010 1:07 PM | Report abuse

So that growth rate is maybe 0.5-1% per year too fast. That's significant, and I bet part of that is the student loan disaster.

But I do agree that there is probably a component of public sector wage growth in there that assumed a private sector wage growth that never occurred, and some correction may be due.

Posted by: eggnogfool | August 11, 2010 1:10 PM | Report abuse

Free money plus easy credit plus unreal expectations of value will inevitably create a bubble, whether in real estate, tulips, or higher education.

Posted by: bgmma50 | August 11, 2010 1:11 PM | Report abuse

Due to the multiplier effect, the loss to the economy will actually be greater than the actual cut to the budget. Since taxes are collected on that economic activity, tax revenues will go down as well. Although spending decreases, so do revenues, so the ultimate affect on the budget will be smaller, perhaps much smaller, than the cut cut in spending.

EG (with arbitrary numbers for exposition only). Cut budget by $120, economic activity decreases by $150 via multiplier, taxes go down by $30 from decrease in economic activity. End result, a $120 budget cut actually only gets the budget
$90 closer to being balanced. This is neglecting the fact that if that cut resulted in lost jobs, claims on social service safety net (unemployment insurance, etc.) may go up, so the actual effect on the budget may be even worse.

You end up creating a lot of unemployment without actually making the budget situation nearly as much better as you think.

Posted by: nylund | August 11, 2010 1:12 PM | Report abuse

What part of "70% consumer consumption" in our economy do the Congress, the White House, the Fed, Wall Street, Corporate America and saltwater economists not understand?

Those hit the hardest by this Great Recession are not those making the economic decisions which are prolonging the downturn.

Supposedly, we got into this mess in part by "overconsumption." Well, we certainly aren't going top get out of it by underconsumption.

Posted by: tomcammarata | August 11, 2010 1:25 PM | Report abuse

'Part of the increase was almost certainly due to increased revenue from the real estate bubble (if you have revenue coming in the door, the tendency is to spend it). Still this notion that all state spending is wasteful is only true if you think the Somalia model is what we should aspire towards.

It's also worth noting, that even in the face of the worst financial crisis since the Great Depression, at a time when states are forced to spend more on social services, NJ slashed the budget in 2009 to $29 billion.
'

Of course they did, and this this the entire problem with the 'grow spending with GDP model'. You don't follow it up wiht the obvious correlary. That said, $29 billion is STILL higher than GDP growth over the last decade. You'll have to forgive me if I don't believe this 'bleeding on the floor' rhetoric.

All you are proposing is maintaining a current level of elevated spending. After all, if you have revenue coming in the door, the tendency is to spend it.


And this is what happened; keep in mind nominal GDP growth is ~50%.

http://www.state.nj.us/treasury/omb/publications/98budget/pdf/bib.pdf
http://www.state.nj.us/treasury/omb/publications/08bib/pdf/bib.pdf

Lower Education? More than doubled, $5 billion to $11 billion.
Human Services? More than doubled, $3 billion to $7.2 billion.
Higher ed? Almost doubled, $1.1 billion to $2.1 billion
Prisons/police/judiciary? Well, this one went from $1.6 billion to $2.1 billion. They got this one right, I suppose.


This is what happens when you don't have any discipline for 10 years and then cry wolf. It's what happens when you make foolish commitments to the unions in 2001 based on false revenue projections.

Posted by: krazen1211 | August 11, 2010 1:38 PM | Report abuse

krazen1211,

When you talk about the "property tax rate" -- are you referring to the total dollars rec'd? e.g. were the rates staying fixed but bringing in more revenue due to higher prices, or did the rates actually increase in conjunction with an increase in property values?

In the context of an economic downturn I could see how an increase might be used to off-set the impact of declining price (e.g. in dollar terms the tax impact could be effectively a 0% increase compared to earlier years -- it might even represent a decrease relative to a lower rate on a higher valued property).

As far as general rules go -- yeah it's generally a good idea to have a rainy day fund during the boom years, so that when you have a downturn you can maintain services without needing to raise taxes (which might work at counter-purposes with the recovery).

Not all recessions are equal here either. In the case of a mild recession, you might be able to goose the economy back to health with a movement in short-term interest rates. It's important to understand that this is not a normal recession. The impact of state cut backs is not "anti-recovery" -- it is without qualification anti recovery. Public sector firings under the current circumstances will result in the loss of private sector jobs as well.

Posted by: JPRS | August 11, 2010 1:42 PM | Report abuse

""Why 32% increase over 2 years?"

My guess...the magic of free market capitalism. Demand is high enough to support that prices and supply is willing to supply it at that price."

nylund, I don't think you can blame a problem on "free market capitalism" in any sector which gets a significant portion of its funding from government.

The problem is that government (and private foundations & other non-profits) has been funneling money into higher education for years. That money has largely led to an arms race between institutions and a bloated cost structure. The loss of some government support is revealing that insane cost structure.

Take Mimikatz's example of Harvard having $1,250 in tuition in the early 1960s. During Jan1960, the CPI was 29.37, and during Jun2010 the CPI was 216.929. If Harvard's tuition had grown with inflation, it would be at $9,233 today. Tuition is now $34,000 (and just shy of $39,000 including the non-room and board fees). The cost of tution went from around 20% of median family income to 70%.

http://webdocs.registrar.fas.harvard.edu/ugrad_handbook/current/chapter7/tuition_fees.html

The story is similar at pretty much every school. What happened? It seems to me that throwing money at higher eduction increased costs. If a large and growing pot of money is availble to higher eduction, then all else being equal it makes more sense for a school to compete on quality (including ammenities and other non-eductational things) than price. It is the same as with health care - the consumer is insulated from cost, so you don't compete with other hospitals by providing a lower price, you compete by buying more advanced equipment and paying top dollar for the best doctors.

Posted by: justin84 | August 11, 2010 2:00 PM | Report abuse

krazen1211,

With respect to increases in spending for schools, we have the "echo-boomers" or "millennials" passing through the educational system (i.e. there is likely a substantial increase in the overall student population); in 2000 New Jersey also made a commitment to spend $23 billion over a 12 year period renovating antiquated schools. I'm sure union pay is significant part of the equation too, but the notion that the majority of the spending was wasteful strikes me as dubious (of course this is New Jersey we're talking about where the Turnpike looks like it's been under renovation for the past 30 years).

As far as "bleeding on the floor" -- that may be understating things in the real economy (e.g. the worst unemployment number since the great depression in terms of long-term unemployment; likely we're heading for a double-dip here too). Obviously, some people are more insulated from the economic shocks than others, and perhaps some are under the impression that foisting the consequences of the down-turn on the poor, the young, and the elderly can be done without any kind of blow-back onto themselves. I would rather the nation pulling together and doing what needs to be done to get the economy back on track, but clearly that's not a priority for some Americans.

Posted by: JPRS | August 11, 2010 2:06 PM | Report abuse

@GPRS

I suppose it was a combination of all 3 depending on the district, but I am talking about dollars charged to homeowners.

The average property tax bill in 1999 was $4239. The average bill in 2009 was $7281. That is 72% growth over a decade; very few people around have had 72% income growth. They are literally trying to tax people out of their homes.

We had a 'rainy day' fund. Back in 2002-2004, a former governor hiked taxes on the 'rich', found out that he lacked revenues, and spent the entire rainy day fund. He also borrowed a few billion dollars for operating expenses, and enacted tens of billions of pension liabilities for future taxpayers. Of course, that's an entirely separate manner for a separate post.

We built up the rainy day fund from 2005-2007, then prompty spent the entire thing in 2008 and part way thru 2009.

The truth is that nationwide student/teacher ratios have dropped 10% over the last decade. I see no reason how increasing them 10% back to what they were will somehow destroy classroom sizes and the education system when they are the same as they were when I was in school.

If you want to give out money, give it to the private sector.

Posted by: krazen1211 | August 11, 2010 2:13 PM | Report abuse

"If states have to cut $120 billion from their budgets, that money -- and the things it does -- will just leave the economy. There will be fewer jobs, higher taxes, less financial aid. None of that is speculative."

It absolutely is speculative. The money doesn't leave the economy - it simply stays where it was before it was borrowed. What the alternative use of funds would have been cannot be known, although it is known that very few people who buy treasuries are likely to put cash under the mattress.

It is entirely possible that total spending in the economy increases. It is also possible that spending doesn't much change, and for that matter it could even fall. It all depends on what the lenders would have done with it had Uncle Sam not asked for a loan.

If you cut compensation rather than service, you'd be able to get the same government services AND whatever the alternative use of funds is.

Posted by: justin84 | August 11, 2010 2:24 PM | Report abuse

"Take Mimikatz's example of Harvard having $1,250 in tuition in the early 1960s. During Jan1960, the CPI was 29.37, and during Jun2010 the CPI was 216.929. If Harvard's tuition had grown with inflation, it would be at $9,233 today."

Obviously, there are many factors that influence the costs of maintaining a university. But evidently (at least when looking at the above statement) one needs to point out the obvious as a starting point, which is that we now live in a much more technologically advanced world that we lived in 50 years ago, and so the technology, equipment, and levels of teaching and learning found in university settings is necessarily far more elaborate and advanced than was the case in the early 1960's.

The movement in the cost of educating each succeding generation reflects the exploding complexity and advancements of the world outside the university. The cost will therefore not inflate at the same rate over time as the cost of producing a loaf of bread or a dozen eggs.

Posted by: Patrick_M | August 11, 2010 2:59 PM | Report abuse

@JPRS

With respect to increases in spending for schools, we have the "echo-boomers" or "millennials" passing through the educational system (i.e. there is likely a substantial increase in the overall student population); in 2000 New Jersey also made a commitment to spend $23 billion over a 12 year period renovating antiquated schools. I'm sure union pay is significant part of the equation too, but the notion that the majority of the spending was wasteful strikes me as dubious (of course this is New Jersey we're talking about where the Turnpike looks like it's been under renovation for the past 30 years).


I don't know if the demographics work that way or not (I was born in 1986 which i think is the peak of those 'milennials') and left in 2004, but as far as construction is concerned, that was ordered by our extremely liberal and (in my view) extremely activist and imcompetent supreme court.

Most of that $23 billion went to poorly performing school districts in urban areas that perform poorly regardless of how much cash is pumped in.

http://reason.com/archives/2010/01/22/exiting-new-jerseys-fiscal-nig

In spite of this massive transfer of resources to poor districts, however, outcomes remain abysmal. Since 1998, Camden has received $2.8 billion for its schools and has spent close to $24,000 per pupil. Yet last year, just 18 percent of Camden’s 8th graders scored proficient in math. By contrast, Woodbridge Township has received $169 million in school aid over the period, spending a little more than $10,000 per pupil. Nearly 75 percent of Woodbridge’s middle school students met or exceeded proficiency in math.


Of course, New Jersey didn't even have the cash back then to start the project. So, they issued bonds. That didn't work, so they issued more bonds.

http://newjersey.mercatus.org/fiscal-evasion/

In 2000, the Whitman administration issued $8.6 billion in School Facilities Construction Bonds to meet the court’s 1997 mandate to upgrade school buildings in Abbott districts.

Two-thirds of the planned new school buildings were not built. In spite of accusations of corruption surrounding the initial bond proceeds, the governor and legislature voted to issue the additional bonds in order to meet the court’s requirements under the Abbott decisions


So, to recap, based on a ruling from a bunch of unelected judges, they spent money to build schools in poorly performing school districts only to end up with no schools due to problems in the agency.


Decide for yourself if that is waste or not.

Posted by: krazen1211 | August 11, 2010 3:52 PM | Report abuse

"Obviously, there are many factors that influence the costs of maintaining a university. But evidently (at least when looking at the above statement) one needs to point out the obvious as a starting point, which is that we now live in a much more technologically advanced world that we lived in 50 years ago, and so the technology, equipment, and levels of teaching and learning found in university settings is necessarily far more elaborate and advanced than was the case in the early 1960's. The movement in the cost of educating each succeding generation reflects the exploding complexity and advancements of the world outside the university. The cost will therefore not inflate at the same rate over time as the cost of producing a loaf of bread or a dozen eggs."

Patrick, were the 1960s really that simple?

What has really changed? At the end of the day, in the 1960s you needed to pay college professors to teach/research, pay administrators and other employees to help keep the operation running, build and maintain buildings, run a sports program and keep the lights/heat on.

In 2009 you needed to pay college professors to teach/research, pay administrators and other employees to help keep the operation running, build and maintain buildings, run a sports program and keep the lights/heat on. In addition, today you need to have maintain your campus network and a few computer labs.

If rising complexity is the cause of excess cost growth, then what happened during the first half of the twentieth century?

I stumbled across a blog which uses data from The Crimson for historical tuition values. The blog's author then adjusts these into 2000 and 2007 dollars. Inflation-adjusted tuition from 1900-1947 was volatile (often depending on whether or not there was an inflation or deflation), but this site has it rising from $3,000 in 1900 to $3,719 in 1947. This person didn't have price level data for 1900, so I went to EH.net to calculate it, and low and behold $150 in 1900 was worth $3,800 in 2007. So college tuition at Harvard managed to fall 0.05% per year - basically remaining flat - for 47 years. It's arguable the world changed more from 1900 to 1947 than 1960 to 2010 but in either case both timelines were characterized by rapid technological progress.

Something changed a no excess inflation trend to a 3.6% excess inflation trend. That change seems to have occurred in the mid 1940s. It could be a coincidence but to me the biggest change was that government subsidies to higher education really took off at about the same time. Chart these data points using a scatterplot, the sudden trend change is striking.

http://kwharbaugh.blogspot.com/2005/02/educational-costs.html

http://www.measuringworth.com/uscompare/result.php?use%5B%5D=DOLLAR&year_source=1900&amount=150&year_result=2007

Posted by: justin84 | August 11, 2010 4:06 PM | Report abuse

"Patrick, were the 1960s really that simple?

What has really changed? At the end of the day, in the 1960s you needed to pay college professors to teach/research, pay administrators and other employees to help keep the operation running, build and maintain buildings, run a sports program and keep the lights/heat on."

Yes, compared to 2010, 1960 was a far simpler time. Just to take a couple of examples...

If you majored in economics in 1960, you likely listened to a professor lecture, and read standard texts that contained some statistics and graphs. Today (as this wonky blog) shows us, students can access (and are expected to be able to interpret and present) a mountain of statistical information or sophisticated computer modeling that was not even dreamt of 50 years ago.

A student obtaining a degree in marine biology today confronts an entirely different body of knowledge than existed 50 years ago. The number of species, their taxonomy and evolution, the nature of their ecosystem -- the sheer volume of information to be known and understood about all of these elements of the field is much greater and more complex.

In the fields of applied and basic sciences, the laboratories will necessarily contain far more expensive equipment and technology than 50 years ago, reflecting the world that a trained chemist, medical profession, engineer, or computer professional will enter after completing his or her studies.

Visit a university and take a tour. It is not simply a place where professors with leather patches on the elbows of their sport coats stand inside brick buildings and scribble on chalk boards, with a football field out the window, as your quote implies. Today universities have facilities to work with radioactive material, electron microscopes, sophisticated telecsopes, massive computer servers, just to scratch the surface.

"It's arguable the world changed more from 1900 to 1947 than 1960 to 2010 but in either case both timelines were characterized by rapid technological progress."

The changing requirements of nature of higher education, and the acceleration of new information and technology needed within university settings, was far greater between 1960 and today than it was between 1900 and the end of WWII. We all want to believe that the scools our children attend and the studies they will undertake will just echo our own experience. That is not the case.

Posted by: Patrick_M | August 11, 2010 4:38 PM | Report abuse

"If you majored in economics in 1960, you likely listened to a professor lecture, and read standard texts that contained some statistics and graphs. Today (as this wonky blog) shows us, students can access (and are expected to be able to interpret and present) a mountain of statistical information or sophisticated computer modeling that was not even dreamt of 50 years ago."

But this doesn't really cost more.

As a recent econ graduate, I can tell you that the EViews stats program was used for one class. The program was extremely cheap and I used it on my personal computer. In fairness the department did have a computer lab but it couldn't have been that expensive on a per student basis.

All of the other econ classes involved reading standard texts and listening to professors lecture. 95% of other classes were the same.

"A student obtaining a degree in marine biology today confronts an entirely different body of knowledge than existed 50 years ago. The number of species, their taxonomy and evolution, the nature of their ecosystem -- the sheer volume of information to be known and understood about all of these elements of the field is much greater and more complex."

How is this a cost driver? Information is cheap and getting cheaper all the time.

"In the fields of applied and basic sciences, the laboratories will necessarily contain far more expensive equipment and technology than 50 years ago, reflecting the world that a trained chemist, medical profession, engineer, or computer professional will enter after completing his or her studies."

Do you have any examples of this technology? I only took one lab course and there was nothing special about the equipment, although maybe upper level bio courses do have some fancy stuff.

"Visit a university and take a tour. It is not simply a place where professors with leather patches on the elbows of their sport coats stand inside brick buildings and scribble on chalk boards, with a football field out the window, as your quote implies. Today universities have facilities to work with radioactive material, electron microscopes, sophisticated telecsopes, massive computer servers, just to scratch the surface."

I was there recently. It was largely professors standing in brick buildings using PowerPoint. Also, didn't they have all of this technology in the 1960s? The equipment might not have been as good back then, but it was probably still very pricey.

"The changing requirements of nature of higher education, and the acceleration of new information and technology needed within university settings, was far greater between 1960 and today than it was between 1900 and the end of WWII."

I just can't agree here. There was an incredible amount of technological progress from 1900 to 1947. By the way, what change nearly tripled Harvard's real tuition between 1947-1961 after a half century of stable tuition?

Posted by: justin84 | August 11, 2010 6:29 PM | Report abuse

justin84,

I am trying my best not to get into 2 person exchanges that drag on needlessly. So I will go at this just one last time.

My point about both economics and marine biology is that both fields have expanded greatly during the past 50 years. You say that "Information is cheap and getting cheaper all the time." In a sense that is true. But if your task is develop and teach all of that information, there is ever more to do.

To use my marine biology example, since so much of what we understand in that field has been developed in the past 50 years, a university with a first rate marine biology department will be offering many more courses than they would have done 50 years ago, and successful completion of those courses will require more inter-disciplinary background from a student in subjects like biochemistry and ecological systems than was the case 50 years ago. Faculty will need to attend more conferences and spend more time absorbing the research and discoveries of their colleagues around the world in order to present accurate and complete information to their students. Like a museum with a rapidly growing collection, a university in a world with a rapidly advancing body of knowledge has a constantly enlarging set of tasks to successfully fulfill its mission.

"In fairness the department did have a computer lab but it couldn't have been that expensive on a per student basis."

50 years ago there would have been zero computers at the students' dispoal. Acquiring and supporting computer technology that is accessible and up-to-date is a huge cost for universities that was unknown 50 years ago.

"Do you have any examples of this technology? I only took one lab course and there was nothing special about the equipment, although maybe upper level bio courses do have some fancy stuff."

Biology or Chemistry 101 won't require much beyond a high school lab kit, but yes the upper division and graduate courses require the students to work with state-of-the-art technology, a few examples of which I mentioned in the previous post.

"I was there recently. It was largely professors standing in brick buildings using PowerPoint. Also, didn't they have all of this technology in the 1960s?"

No, there was no PowerPoint software or the computers on which to run it in the 1960's. A PowerPoint presentaion was unknown before the middle 90's, before then teachers would make do with drawing with grease pens on transparencies for overhead projection, or using 35mm film slides on clumsy projectors.

"I just can't agree here. There was an incredible amount of technological progress from 1900 to 1947."

There is no comparison between the knowledge and technological explosion that occurred between 1920 and 1940 with the knowledge explosion between 1990 and today.

Have a good evening.

Posted by: Patrick_M | August 11, 2010 7:29 PM | Report abuse

Patrick, that sounds good. These will be my last comments on the matter. Have a good evening as well.

"50 years ago there would have been zero computers at the students' dispoal. Acquiring and supporting computer technology that is accessible and up-to-date is a huge cost for universities that was unknown 50 years ago."

It's hard to find online data, but a few years ago Creighton University was spending $8 million per year for IT for 7,000 students. That's $1,142 per student, and we're trying to explain cost increases for the typical school from perhaps $2,000 to $25,000. This gets us about 5% of the way there, and some of that $1,142 per student replaced earlier expenses on mainframes, typewriters, and whatever other legacy tech that isn't currently used but was in the 1960s.

http://www.universitybusiness.com/viewarticle.aspx?articleid=117&p=2#0

http://www.creighton.edu/about/index.php

"No, there was no PowerPoint software or the computers on which to run it in the 1960's. A PowerPoint presentaion was unknown before the middle 90's, before then teachers would make do with drawing with grease pens on transparencies for overhead projection, or using 35mm film slides on clumsy projectors."

I was referring to your list of 'radioactive material, electronic microscopes and telescopes.' I am aware that Microsoft wasn't selling PowerPoint when Bill Gates was a little kid.

In any case, schools don't have to buy 35mm film slides or new overhead projectors today, so switching to PowerPoint isn't all cost. And PowerPoint is likely covered under the IT spending mentioned earlier.

But didn't they have telescopes, electron microscopes and mainframe computers 50 years ago? They weren't as good as today's models but surely they were very expensive.

Anyway, I'll leave you with this:

"But the trend toward increased spending on nonacademic areas prevailed across the higher education spectrum, with public and private, elite and community colleges increasing expenditures more for student services than for instruction, the report said.

The student services category can include spending on career counseling and financial aid offices, but also on intramural athletics and student centers.

'This is the country-clubization of the American university,' said Richard K. Vedder, a professor at Ohio University who studies the economics of higher education. “A lot of it is for great athletic centers and spectacular student union buildings. In the zeal to get students, they are going after them on the basis of recreational amenities.”

http://www.nytimes.com/2010/07/10/education/10education.html?_r=1&src=twt&twt=nytimes

Posted by: justin84 | August 11, 2010 10:57 PM | Report abuse

@krazen1211,

The increase in the cost of property taxes is likely almost entirely due to an increase in the value of the homes -- not the rate at which the home values are taxed.

e.g. doing a quick, unscientific look on Zillow.com it was common to see an almost two-fold increase in the value of homes from 2000 to 2010 in various New Jersey zip codes.

It might be a fair policy question to ask whether rates should adjust downward when prices escalate quickly -- maybe tying the rate to wage gains so that there's an anchor -- but it looks like the increase is due largely to home value appreciation, not an increase in the rate of taxation on the homes. I'm sure there are exceptions.

The education issues are much more complicated. You are definitely a "millennial" based on your date of birth. Part of the increase in cost is likely attributable to increases in the school age population. The Constitutional issues and the Court rulings are another story too. I did some quick reading on the topic -- it sounds like the courts have been dealing with this issue for over 20 years. Their actions in the beginning were not prescriptive -- it sounds like they were simply holding legislators to the educational funding requirements of the state Constitution. The issue kept getting litigated because the legislature kept failing to find a remedy to disparities in funding for "efficient and effective" education across the state. If voters object to parity in funding, they should probably just amend the state Constitution and be done with the issue (unlikely to happen, because it looks like suburban districts rely on state funding too).

As a side note, I'm not a big fan of elected judges. Some insulation from the political process is part of the Constitutional design at the federal level. In contrast, in Texas for example, it's easy for industries to simply buy their judges. This is the case in other states where elected judges have an incentive to pander to popular passions of the moment rather than to apply the law in an unbiased, consistent, and neutral manner. Whether a decision is going to be popular or not is something that shouldn't enter a judge's consideration. Whether a controversy is settled in a manner that is consistent with the law is something they should worry about. I think the Framers got this one right when they created an indirect selection of judges. The issue of term limits is another story (e.g. the Framers couldn't have envisioned judges serving for 30+ years as the norm). A bit off topic . . .

Posted by: JPRS | August 12, 2010 2:03 AM | Report abuse

Wow-what an interesting reaction to a small part of the blog.

Don't forget Ezra's childish point that if we just tax the rich the economic problems are fixable.

Posted by: Towson_Tiger | August 14, 2010 11:44 AM | Report abuse

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