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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

Postscript: Clinton Poverty Proposal

No sooner than I post my critique of our presidential candidates’ failure to talk about poverty, Hillary Clinton publishes an Op-Ed in The New York Times that addresses poverty explicitly and outlines the broad strokes of her plan. My Plan for Helping America’s Poor

Secretary Clinton’s essay emphasizes elements of her core economic plan: economic growth, jobs (especially infrastructure and manufacturing), and increases in the minimum wage. Her programmatic proposals include Low Income Housing Tax Credits for affordable housing, increased investment in low-income communities, expanded access to affordable child care, more funding for Headstart, and access to universal preschool.

Secretary Clinton’s essay cites Mark Rank’s research on the lifetime risks of experiencing poverty: “Nearly 40 percent of Americans between the ages of 25 and 60 will experience a year in poverty at some point.” Professor Rank’s poverty risk calculator can be found at American Misfortune.

Saying the Poverty Word, and Doing Something About It.

Fifteen years ago I was told by a program officer at a major national foundation that I should never say the word “poverty” in meetings at her foundation. She lectured me that her board and the leadership were tired of hearing about poverty, that there was nothing that really could be done, and talking about poverty was so yesterday. She was anxious to hear about social entrepreneurship, innovation, and anything else that would be new and fresh and exciting, but not poverty.

In these fifteen years, with poverty largely out of the public vocabulary and public policy discussion, we have not made long term progress, including reducing child poverty. Despite the relatively good news this week in the 2015 Current Population Survey data, 1 in 5 children still live in poverty. Roughly 1 in every 2 children live in households with incomes less than two times the poverty level. The number of children who live in deep poverty – with household incomes below half the poverty level – is over 6 million. 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

Public Policy Malpractice?

The New York Times editorial this week, Missouri: The Shoot Me State, laments that the new Missouri gun legislation “has drawn no great national attention, but it certainly provides further evidence that gun safety cannot be left to state lawmakers beholden to the gun lobby.”

Should legislators and policymakers be held accountable for adverse consequences of their policy decisions when there is good evidence that harmful outcomes will result? What if legislators make wanton decisions that ignore policy evidence and have the effect of causing loss of life?

In other walks of professional life we hold leadership accountable for such decisions. Automobile executives face civil and criminal penalties if they show disregard for evidence of safety problems amongst consumers. Airline executives face enormous accountability for the safety of their companies. Read more