Education reform and stimulus spending

One of the heated debates taking place in Washington D.C. is whether the federal government should give states $10 billion to save teacher jobs as part of an additional stimulus package. In fact, last Thursday night the issue proved to be contentious enough to delay the passage of the war-time supplemental spending bill – the bill the teacher spending is attached to. Eleven Democrats (and Senator Lieberman) joined the Republicans in sending the House-passed bill back to the House, refusing to pass the measure unless the additional funding is removed. Debate on the issue is expected to continue this week.

Education reformers were lukewarm to the proposal because it didn’t advance needed reforms to the education system and because it did nothing to address seniority-based lay-offs. As a result, all staff cuts will be made based upon a “last hired, first fired” approach with no effort to keep the good teachers while letting the bad ones go.

But this debate is taking place against a broader backdrop of concerns about a possible double dip recession, disagreement about the needed response, and how new spending should be paid for (if at all).

On one side are the Keynesians – economists like Paul Krugman and the President’s head of the Council of Economic Advisors,Christina Romer, who believe the economy needs an additional round of stimulus spending. They argue that an important lesson from the Great Depression is not ending emergency stimulus programs before a recovery is assured. This was the argument the President made in a letter to G20 summit participants where he said that we must “learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession.” David Leonhardt’s NYT column has a good summary of the pro-stimulus viewpoint. Former senior White House economic advisor Keith Hennessey also outlines the nuances between the various stimulus camps.

On the other side are the “Austerians” who argue that the state of the country’s economy and fiscal conditions require that we quickly pivot to policies that reduce deficit spending. They point to CBO’s budget outlook which estimates debt rising from about 60% of GDP to as much as 185% by 2035. Budget watchers are also spooked by Treasury’s report in April that the federal deficit reached $82.7 billion – far above the expected $30 billion. Greece has become the poster country for the Austerians after its debts and deficits sparked fears of a sovereign debt crisis in the euro zone. Former Federal Reserve Chairman Alan Greenspan went so far as to compare the U.S. debt situation to that of Greece which he said demanded “a tectonic shift in fiscal policy.”

And there are those who fall somewhere in the middle. Top notch economists like Donald Marron are concerned about our deteriorating fiscal conditions but don’t believe now is the time for sudden austerity measures. Ezra Klein likes some stimulus for states followed by long-term deficit reduction. House Majority Leader Hoyer also supports some stimulus spending butpoints out that a Gallup poll found the two greatest fears among Americas are terrorism and debt. Bill Gates even waded into the debate on ABC’s This Week, where he endorsed a $16 billion energy R&D proposal as the type of stimulus package we need; but he didn’t back the proposal to save teacher jobs.