Posts from the ‘Policy Analysis’ Category

Planes versus Preschool

With the collapse of any meaningful federal budget process in the 2000s, we have given up all semblance of a rational approach to considering the opportunity cost of significant federal expenditures.

Opportunity cost is one of those quaint economist’s concepts which refers to what is given up or foregone by devoting resources to one activity versus the next best alternative use. In other words, if we spend resources on one thing, whether it be defense, research, Medicare, incarceration, or other purpose, we forego the opportunity to spend it on the next best alternative, be that education, housing, mental health, or other social purpose.

For example, the estimated cost of universal preschool ranges from $2-4 billion a year (a Brookings estimate) to $10 billion a year (the administration’s estimate).^[1] What makes this preschool opportunity so compelling is that there is actual evidence that universal preschool is a bona fide social investment with a long term rate of return. James Heckman argues that preschool is an extraordinarily efficient (in cost benefit terms) social investment, bringing a return on investment of 7 to 10 percent per year.

To put this potential investment in universal preschool in context, it is comparable to the annual spending for acquiring just one very problematic weapon system, the F-35 Joint Strike fighter, estimated at over $10 billion in 2016. According to the GAO, acquisition costs for this aircraft will run roughly $12 billion every year through 2038, when the full complement of 2500 jets will finally be purchased. Other big systems, such as the Navy’s proposed turnover of aircraft carriers (estimated at $12 billion each), are so expensive that they too represent legitimate opportunity costs in other domains of federal policy, including social policy. Read more

Robin Hood School Finance

Judge Thomas Moukawsher of the Connecticut Superior Court issued a sweeping ruling this week calling for the comprehensive reform of public education, from governance to funding.

In the background of the Judge’s decision were troubling allocations of education funding going to School districts during the State’s budget crisis. Despite their extreme challenges, many poor districts suffered reductions in support, while relatively affluent districts enjoyed increases in support.

Financing of public education often follows this pattern of reverse Robin Hood. Because we primarily rely on property taxes and state formulas, wealthy communities ride the escalator up, while low-income communities who experience population or economic declines fall into a downward cycle.  Read more