The Agenda

James Feyrer and Bruce Sacerdote Estimate the Economic Impact of ARRA

Garett Jones of GMU, a favorite of The Agenda, recently pointed to a new working paper by Dartmouth economists James Feyrer and Bruce Sacerdote that gauges state and county level variation to estimate the economic impact of the 2009 fiscal stimulus law:

Transfers to local governments and school districts to support teachers and police appear to have no positive effect on employment. Programs funding support for low income households generate the largest employment response.  Building projects generate a smaller, but still substantial response. Excluding the transfers to local schools and governments, the  cost of a job in the stimulus was less than $100,000 per year. Including the transfers to local school districts, this cost increases by at least a factor of two. The implied Keynesian multipliers are between 0.5 and 1.0 in the aggregate and rise to 2.0 if one excludes education spending. 

Early on, Feyrer and Sacerdote make an important yet often neglected observation:

Most claims of success or failure have been based on the same models that were used to argue for or against the stimulus in the first place.

The authors cite the widely-cited work of Alan Blinder and Mark Zandi as an example of this phenomenon, as well as the more critical analysis of the conservative-leaning Cogan, Cwik, Taylor, and Wieland. 

Feyrer and Sacerdote’s result is a kind of advertisement for Special Interest, Terry Moe’s new book on the extraordinary power of U.S. teachers unions. That in turn leads me to Moe’s new op-ed on how the spread of online learning will diminish that power. 

 

As the cyber revolution comes to American education, it will bring about a massive and cost-saving substitution of technology for labor. That means far fewer teachers (and union members) per student. It also means teachers will be far less concentrated in geographic districts, as those who work online can be anywhere. It’ll thus be far more difficult for unions to organize. There will also be much more diversity in educational offerings, and money and jobs will flow out of the (unionized) regular schools into new (nonunion) providers of online options.

The confluence of these forces—plus the shifting political tides among Democrats—will inexorably weaken the unions, sapping them of members, money and power. It will render them less and less able to block reform. The political doors will increasingly swing open to reforms that simply make good sense for children and for society.

This might have other salutary consequences, e.g., governments at all levels might direct more resources to the poor and near-poor and fewer to sustaining above-market compensation levels for employees of traditional K-12 schools. 

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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