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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Brief Thought on High-Quality Public Services



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David Leonhardt’s May 11th column was an excellent overview of our fiscal predicament. But there was one faulty premise that leapt out at me.

 

As societies become richer, citizens tend to want better schools, better medical care and other government services. This country is following that pattern, but without paying the necessary taxes. That combination has us on a course to Greece-like debt.

As a rough estimate, the government will need to find spending cuts and tax increases equal to 7 to 10 percent of G.D.P. The longer we wait, the bigger the cuts will need to be (because of the accumulating interest costs).

This reminds me last month’s debate over the Milwaukee voucher experiment. Basically, reading and math scores were the same for district schools and for choice schools. But choice schools receive a maximum amount of roughly $7,000 per pupil while the MPS spends over $16,000. I have to assume that these numbers aren’t directly comparable. A crude reading of these numbers would suggest that choice schools are “buying” the same educational outcomes at less than half the cost — an extraordinary result if true. To be charitable, let’s assume that these numbers mask hidden subsidies for choice schools. Parochial schools, for example, have existing infrastructure, and so one assumes that capital expenditures aren’t factored in to per pupil spending in the same way as they are for MPS.

But surely at least some of this gap reflects differences in the cost structure between choice schools and district schools. Given that we spend over 4 percent of GDP on K-12 public education spending, the potential savings could be enormous.

The main barrier to achieving these efficiency gains is a large, entrenched, politically powerful constituency of public sector workers. And though Leonhardt’s column is ostensibly about the lessons of Greece, he barely mentions this as a potential obstacle to reform. He makes a passing reference to efforts to cut pensions for public sector workers, which, unfortunately, is only part of the puzzle. He spends considerably more time on the fact that conservative Republicans would prefer to balance the budget on the spending side.

I agree with Leonhardt that addressing long-term fiscal imbalances will almost certainly have to include revenue increases as well as spending cuts. My sense, however, is that ferocious resistance to efforts to introduce competition into the provision of educational and medical services — and here I’m referring to regulatory efforts designed to limit the disruption of the hospital business model, among other things — is at least as big a problem as the supposed intransigence of anti-tax conservatives, and worth acknowledging as such.



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