In light of falling public monies available for higher education and the accompanying rise in tuition, someone asked me a question that I've heard several times over the past year or two, even predating the current national economic downturn: "Whatever happened to all the lottery money that they told us would go toward education? If we got all of this money from the lottery, shouldn't tuition be going down?"
The South Carolina Education Lottery started in 2002 with the promise of being a veritable panacea for the state's struggling education system. Despite debate about how lottery revenue should be allocated between primary/secondary education and higher education, lottery money has in fact been devoted to financing education, as illustrated in the above link; credit the legislature on making good on that. However, the question here is about unintended consequences.
Here's the thing. Most lottery revenues have gone to pay scholarships for qualifying students. The goal was to make a college education more accessible to state residents. This is a laudable goal, in and of itself; when someone is able to have access to opportunity based upon their own merits, society is better off. However, the problem is that this (obviously) increased the number of students seeking to enroll in state colleges and universities. In econ-speak, demand for college education increased. When demand increases, price of course goes up. That's because price is basically just a rationing system: more people trying to get a limited number of spots in the state's colleges and universities drives up the price that everybody pays.
To a point, this price increase was offset by state subsidies (a large portion of tuition costs are subsidized by the government at state schools), but as state tax revenues fell with declining manufacturing income in South Carolina over the past couple of years, the subsidy well began to dry up. Schools had to begin raising the tuition that they charge students to make up the difference in cost. Since lottery-funded scholarships only cover a portion of tuition costs, that means that even financially-disadvantaged people will see price increases over and above what they receive in state assistance, as well as people not receiving state assistance. As a result, the goal of expanding access to education has most certainly not been realized to the degree expected.
In addition to all of this, the sharp national economic downturn has exacerbated this problem, as the state saw its tax revenues decrease at an even greater rate. State money to public institutions has decreased markedly, forcing tuition to go even higher, and furthermore, as institutions find ways to cut costs, supply will likely decrease as well. In other words, we will potentially have a lot of applicants seeking to fill a shrinking number of slots. This means the tuition increases will probably continue for the near future. Lottery money may help some with the increased cost, but to the extent that this props up demand, and therefore price, it probably will not help very much.
Saturday, December 27, 2008
Wednesday, December 24, 2008
No Separation Clause
A recent letter to the editor in my local newspaper demonstrates an oft-recited and widely-held interpretation of the Establishment Clause ("Congress shall make no law respecting an establishment of religion"). The term "separation of church and state" is so commonly stated in association with the First Amendment, that many assume the phrase is part of the text. This phrase actually originates with an 1802 letter written by then-President Thomas Jefferson to the Danbury Baptist Association in Connecticut; in its original context, it was intended to reassure the association that the federal government (the First Amendment was not interpreted as applying to state governments at the time) would not impede their religious freedoms.
A common method in interpreting the intent of laws is to examine statements made during Congressional debates and committee hearings by the legislators who authored the law and by supporters of the law. In the case of the Constitution, the writings and statements made by the Framers are often cited, which is why the Supreme Court quoted the "separation of church and state" clause from Jefferson's letter in Everson v. Board of Education (1947).
However, Jefferson's use of the phrase does not justify the way that it is typically used in current political debate, where manger scenes are banned from Christmas displays on municipal property, student-led prayers at high school sporting events are disallowed, and lawyers file lawsuits to stop the opening prayer at county council meetings. Again, we look at the the original writers for context.
The First Amendment was authored by the 1st Congress in 1789. Therefore, in response to, for example, objections to opening council meetings with prayer, we can look to see how the 1st Congress stood on the issue -- this gives us the context for interpreting the original intent of the writers. Interestingly, the 1st Congress, in the same session in which it crafted the First Amendment, established the office of Senate Chaplain, and began the practice of opening every session of Congress with a prayer. Therefore, to argue that the intent of the First Amendment was to eradicate religious expression from the public square is not correct.
In terms of Jefferson's "separation" statement, did this mean that he objected to the use of government facilities for religious-associated activity? An online Library of Congress exhibit points out that church services were commonly held in the US Capitol in 1801, soon after its construction and during Jefferson's presidency. Jefferson himself was commonly attending these services at the time that he wrote the Danbury letter. Therefore, to argue that Jefferson's take on the First Amendment justifies the removal of manger scenes and so forth from public property is, again, not correct.
Even a cursory glance at American history tells us that the Framers clearly did not want any form of theocracy (despite frequent hysterics from the ACLU, we are hardly moving in that direction), but equally clear is that they did not wish a public sector sterilized of all vestiges of God or religion. One need only read President Washington's farewell address to see this. There is a balance that must be struck: a government that allows the free expression of religion, even by its agents, without impeding on those same rights belonging to others. The fear of theocracy expressed by people like the writer of the letter to the editor cited earlier should not be allowed to push us dangerously too far in the opposite direction. Both extremes lead to the destruction of religious liberty.
Merry Christmas!
A common method in interpreting the intent of laws is to examine statements made during Congressional debates and committee hearings by the legislators who authored the law and by supporters of the law. In the case of the Constitution, the writings and statements made by the Framers are often cited, which is why the Supreme Court quoted the "separation of church and state" clause from Jefferson's letter in Everson v. Board of Education (1947).
However, Jefferson's use of the phrase does not justify the way that it is typically used in current political debate, where manger scenes are banned from Christmas displays on municipal property, student-led prayers at high school sporting events are disallowed, and lawyers file lawsuits to stop the opening prayer at county council meetings. Again, we look at the the original writers for context.
The First Amendment was authored by the 1st Congress in 1789. Therefore, in response to, for example, objections to opening council meetings with prayer, we can look to see how the 1st Congress stood on the issue -- this gives us the context for interpreting the original intent of the writers. Interestingly, the 1st Congress, in the same session in which it crafted the First Amendment, established the office of Senate Chaplain, and began the practice of opening every session of Congress with a prayer. Therefore, to argue that the intent of the First Amendment was to eradicate religious expression from the public square is not correct.
In terms of Jefferson's "separation" statement, did this mean that he objected to the use of government facilities for religious-associated activity? An online Library of Congress exhibit points out that church services were commonly held in the US Capitol in 1801, soon after its construction and during Jefferson's presidency. Jefferson himself was commonly attending these services at the time that he wrote the Danbury letter. Therefore, to argue that Jefferson's take on the First Amendment justifies the removal of manger scenes and so forth from public property is, again, not correct.
Even a cursory glance at American history tells us that the Framers clearly did not want any form of theocracy (despite frequent hysterics from the ACLU, we are hardly moving in that direction), but equally clear is that they did not wish a public sector sterilized of all vestiges of God or religion. One need only read President Washington's farewell address to see this. There is a balance that must be struck: a government that allows the free expression of religion, even by its agents, without impeding on those same rights belonging to others. The fear of theocracy expressed by people like the writer of the letter to the editor cited earlier should not be allowed to push us dangerously too far in the opposite direction. Both extremes lead to the destruction of religious liberty.
Merry Christmas!
Friday, December 12, 2008
Lose Use It or Lose It
President-elect Obama announced parts of his economic plan in his radio address Saturday. One part of this plan is to introduce a "use it or lose it" requirement to federal highway funds given to the states. In other words, if states do not use the monies allocated to them in a given fiscal year, that money will be withdrawn the following year. The idea is that this will stimulate state spending on road construction, which will inject money into the state's economy and create more jobs. This is a bad plan, however.
When a government entity is faced with a "use it or lose it" proposition, they will always use it; that isn't even really an issue. They'll use it. The problem is, the kind of incentive structure that this sets up for state governments. This sort of policy encourages state departments of transportation in the exact opposite direction of fiscal accountability. Imagine for the sake of illustration some state's DOT coming up to the end of the fiscal year and finding that their highway needs have required them to spend $250 million for the year - or perhaps good management has kept costs below projections. Either way, suppose they received federal grants for that year totaling $300 million. Unless they want to be docked $50 million the next year, they need to find some way to spend the remainder of the budget, and they need to do it quickly. Since their needs have already been met, whatever they spend the remainder of their money on (repaving roads that don't need repaving, for example) is going to be wasteful spending. The more efficient means of handling this would be to allow the state to return the remainder without penalty, or carry it over to the following year; this would reward efficient management of resources, rather than penalizing it as the "use it or lose it" policy will do. Given the president-elect's position during the campaign on bringing down ballooning deficits, I would expect that he would eschew this kind of irresponsible policy.
When a government entity is faced with a "use it or lose it" proposition, they will always use it; that isn't even really an issue. They'll use it. The problem is, the kind of incentive structure that this sets up for state governments. This sort of policy encourages state departments of transportation in the exact opposite direction of fiscal accountability. Imagine for the sake of illustration some state's DOT coming up to the end of the fiscal year and finding that their highway needs have required them to spend $250 million for the year - or perhaps good management has kept costs below projections. Either way, suppose they received federal grants for that year totaling $300 million. Unless they want to be docked $50 million the next year, they need to find some way to spend the remainder of the budget, and they need to do it quickly. Since their needs have already been met, whatever they spend the remainder of their money on (repaving roads that don't need repaving, for example) is going to be wasteful spending. The more efficient means of handling this would be to allow the state to return the remainder without penalty, or carry it over to the following year; this would reward efficient management of resources, rather than penalizing it as the "use it or lose it" policy will do. Given the president-elect's position during the campaign on bringing down ballooning deficits, I would expect that he would eschew this kind of irresponsible policy.
Tuesday, December 9, 2008
The Untouchables (apologies to Elliot Ness)
News of the arrest of Illinois Governor Rod Blagojevich and his chief of staff on corruption charges for trying to "sell" his appointment to fill Pres-elect Obama's vacated Senate seat should serve as a warning to politicians everywhere who see political office as a means of self-aggrandizement and self-enrichment. If the governor of a state can be hauled off in cuffs (literally), then what makes any politician think that he can disregard the law indefinitely? Allegations are that Blagojevich also used his office to attempt to get a Chicago Tribune columnist who was critical of him fired. It seems that once some people achieve high (or even not-so-high, in the case of some county council members I can think of) office, they think that they are above the law (apologies to Steven Segall). Power - sometimes it's only perceived power - seems to go to their heads. It's the Boss Hogg model: "I'm in charge around here, this is my {town/county/state/country}, and I'll do with it as I please!" This is still a democracy, however (a republic is a form of democracy, all you poli sci undergrads), so, when the people are sufficiently annoyed, they will act. This turn of events reassures me that we are also still - to some extent - a nation governed by the rule of law (see the relevant chapter in "Road to Serfdom" by Friedrich Hayek).
The FBI special agent-in-charge stated in the article that he hoped the governor's arrest "would send a clear single to elected officials in Illinois that business-as-usual will no longer be tolerated, that selling your office for personal gain is a... practice of the past." I hope that as well, for all levels of government and in every state. But given that Blagojevich is far from the first Illinois governor (let alone the first governor in the nation) to find himself in legal hot water while in office, his immediate predecessor being among them, I'm not holding my breath.
The FBI special agent-in-charge stated in the article that he hoped the governor's arrest "would send a clear single to elected officials in Illinois that business-as-usual will no longer be tolerated, that selling your office for personal gain is a... practice of the past." I hope that as well, for all levels of government and in every state. But given that Blagojevich is far from the first Illinois governor (let alone the first governor in the nation) to find himself in legal hot water while in office, his immediate predecessor being among them, I'm not holding my breath.
Saturday, December 6, 2008
Tuesday, December 2, 2008
NBER Redefines "Recession"
The National Bureau of Economic Research (NBER) - which is a private organization, not a governmental entity - has just declared that the US has "officially" been in a recession since December 2007. I don't want to minimize in any way that many families have been struggling for some time, but this pronouncement by NBER makes no sense from a technical standpoint. In addition to making me question NBER's motive for this pronouncement, I think it points out a larger problem.
What NBER has done here is nothing short of redefining the term "recession". Again, this technicality will seem moot to someone who has experienced a layoff (I will point out that some states have been experiencing recessions for some time, but NBER is declaring a year-old national recession here), but there are reasons that we define things. A recession is officially defined as two consecutive quarters (six months) of falling Gross Domestic Product (GDP), after compensating for inflation. GDP is the dollar value of all new, final (consumer-ready) goods and services produced in the US - when this number falls, it means that the economy is producing less, which means declining employment, which in turn means families' incomes go down.
However, according to official federal government statistics, Real GDP grew appreciably during the first two quarters of 2008, and only began declining in the third quarter of the year. Fourth quarter numbers of course will not be known for certain until the beginning of the year, but they are likely to show further decline, at which point the economy can officially (for real) be declared in a recession. NBER, by their own admission, have sidestepped this definition - note that their claim is not that we were going into a recession or in danger of doing so, but that we have been in one for the past year. Again, I wonder why they would find it necessary to do this.
The larger problem I see here is that, given the importance of certainty and confidence to the behavior of consumers and investors, the most important players in the national economy, it is possible to deepen and even prolong our current downturn by "talking down" the economy. I'm certainly not suggesting that we practice denial when the indicators tell us that trouble is looming, but the hyperbole framing the current economic downturn in terms of the Great Depression (as some politicians have been doing, by the way, since well before December 2007, and almost everyone in media and government is doing now), is counterproductive to any attempts to stabilize the economy. It seems to me that NBER's pronouncement is tantamount to this by making the recession that we are probably now experiencing appear deeper and more protracted than it actually so far is.
What NBER has done here is nothing short of redefining the term "recession". Again, this technicality will seem moot to someone who has experienced a layoff (I will point out that some states have been experiencing recessions for some time, but NBER is declaring a year-old national recession here), but there are reasons that we define things. A recession is officially defined as two consecutive quarters (six months) of falling Gross Domestic Product (GDP), after compensating for inflation. GDP is the dollar value of all new, final (consumer-ready) goods and services produced in the US - when this number falls, it means that the economy is producing less, which means declining employment, which in turn means families' incomes go down.
However, according to official federal government statistics, Real GDP grew appreciably during the first two quarters of 2008, and only began declining in the third quarter of the year. Fourth quarter numbers of course will not be known for certain until the beginning of the year, but they are likely to show further decline, at which point the economy can officially (for real) be declared in a recession. NBER, by their own admission, have sidestepped this definition - note that their claim is not that we were going into a recession or in danger of doing so, but that we have been in one for the past year. Again, I wonder why they would find it necessary to do this.
The larger problem I see here is that, given the importance of certainty and confidence to the behavior of consumers and investors, the most important players in the national economy, it is possible to deepen and even prolong our current downturn by "talking down" the economy. I'm certainly not suggesting that we practice denial when the indicators tell us that trouble is looming, but the hyperbole framing the current economic downturn in terms of the Great Depression (as some politicians have been doing, by the way, since well before December 2007, and almost everyone in media and government is doing now), is counterproductive to any attempts to stabilize the economy. It seems to me that NBER's pronouncement is tantamount to this by making the recession that we are probably now experiencing appear deeper and more protracted than it actually so far is.
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