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The American Rescue Plan Act: The Wrong Debate

There is a big debate among Democratic economists about the American Rescue Plan Act that will strike most educators as a bit wonkish. But educators should be paying close attention.

Some applaud the idea of legislation that provides financial support for low-income and minority Americans to help them avoid bankruptcy and eviction and get back on their feet, but they worry that the $1.9 trillion bill is so big that inflation will spike, the Fed will be forced to raise interest rates to cope with the inflation, and the economy will go into a tailspin. 

Others think there is little danger of inflation getting out of control anytime soon, interest rates are so low that it will cost next to nothing to borrow the money, the emphasis on lifting up the poor and working class is—to put it mildly—refreshing and long overdue and, finally, all these factors will converge to make it possible for the President to keep his base and win over many who had been in Trump’s corner. So, they are not so concerned about the size of the American Rescue Plan Act.

It is these differences that the economists and the press have focused on. But, if you read the fine print, the differences almost disappear. It turns out that one side thinks that more of the American Rescue Plan Act should have been devoted to investment and somewhat less to temporary income support. The other side is fine with the American Rescue Plan Act being mostly devoted to income support, but believes that there should be follow-up legislation that is mostly devoted to investment.
You might, at this point, be puzzled. We can all agree that both income support for those who need it and investing in our future are important. And, you might say, the administration is already fully committed to investment as well as income support. Look at all the money in this bill for health care, for elementary and secondary education and for a big new program to lift low-income children out of poverty. Look at its commitment to a big infrastructure bill, climate change action and support for higher education, much of it in the form of loan forgiveness at some level for students and the idea of free community college. Each of these commitments involve colossal amounts of money. Don’t all of them taken together signify investments in our future on a scale not seen since the New Deal?

"Yes, there is a great deal of money on the table, but whether it is an investment in our future depends on how the money is spent."Which brings me to my point. No, they don’t—not necessarily. Yes, there is a great deal of money on the table, but whether it is an investment in our future depends on how the money is spent.

There is a lot of money in the American Rescue Plan Act for each of things I just listed. And the Biden administration is talking about following up with other bills for a good deal more. But there is every reason to believe a great deal of that money will be wasted unless a lot of thought is given to how we can make sure that the money we spend will be more than a temporary shot in the arm for the economy, that every dollar spent will produce a return of four or six or ten dollars in the not too distant future, that, in other words, it really will be an investment and not just an expenditure. If that is the case, then the debt we are building up will be easily paid in the future. But, if it is not, then the debt will in fact come back to bite us big time in the future.

The readers of this blog are no doubt tired of hearing that, over the last close to half a century, the cost of educating the typical American high school student has more than doubled after accounting for inflation, but the achievement of our high school students in reading and mathematics has been absolutely flat. We get the same results for more than twice the price. Now think about that in the context of the billions of new dollars for elementary and secondary schools in the American Rescue Plan Act. What, I may ask, makes anyone think that this enormous shot in the fiscal arm is going to change the performance of American high school graduates?

Americans naturally assume that, if we spend more money on our schools, the students will do better. But the data I just shared with you shows otherwise over a period of many decades, during good times and bad, Republican administrations and Democratic administrations, through one big policy initiative after another, after implementing the advice of experts from every point on the political spectrum. So, my question is a serious question: What is the Biden administration going to do to make sure this enormous amount of money is not wasted?

The problem is not just elementary and secondary education. It is at least as serious in postsecondary education. For decades, the cost of higher education in the United States has increased much faster than the increase in inflation. At hundreds of thousands of dollars or more for many four-year institutions, it represents one of the largest single expenditures a family will ever make. Elderly people are now dying with unpaid balances left on their college loans. So, what are these families getting for their money?  

In the case of our schools, we have a common measure that has been in use across the United States for many years, the National Assessment of Educational Progress (NAEP). For higher education, we have the Collegiate Learning Assessment (CLA), initiated in the year 2000, that assesses critical thinking, analytical reasoning, problem solving and writing. It asks respondents to manipulate information and data to solve real-world problems. These are the very qualities employers offering good jobs are most interested in.

Only 200 of our colleges have agreed to administer the CLA to their students. According to the Wall Street Journal, “At more than half the schools, at least a third of the seniors were unable to make a cohesive argument, assess the quality of evidence in a document or interpret data in a table….At some of the prestigious flagship universities, test results indicate the average graduate shows little or no improvement in critical thinking over four years.” There are actually some institutions at which students do worse on the CLA when they are assessed at the end of their senior year than they did when they arrived as freshmen 

It is no problem at all to learn everything you want to know about the performance of a $25 toaster you are considering buying, but it is a bear to find out anything nearly as definitive about a $200,000 education you are about to purchase. The bottom line is that we know very little about how much colleges actually contribute to the education of students in dimensions that many people care very much about, and what we do know is very discouraging.

Much the same thing can be said about vocational education. Years ago, big cities had selective technical and trade high schools that supplied well-trained high school graduates for the trades. These selective high schools were abolished in the 1970s and 80s. As the movement to raise academic standards gained steam in the same period, high school vocational education became the education of last resort for students who were thought to be incapable of academic achievement. The nation’s leading vocational educator was actually our armed services, which provided the nation with a steady stream of young people who were trained to world-class standards in a bewildering array of occupations when their required period of service ended. But when the draft was abolished, the young people who volunteered stayed in the service and that giant stream dried up. Today, most of our vocational education is done by the unions, mainly those in the building trades, and by our community colleges. Some do a very good job, but most run career and technical education programs that compare very poorly with their counterparts in countries with state-of-the-art vocational programs. This is in part because the students who come to them from our high schools are, on average, two-and-a-half years behind students of the same age graduating from the high schools in the top-performing nations. Our community colleges and our four-year colleges adjusted to that reality by running programs the first two years—or more—of which would be high school programs in the countries with the best-performing schools.

Pouring tens of billions of dollars into our schools, colleges and vocational education programs will provide more access to a system that has long produced results for our students who fall further and further behind the achievement of students at similar ages in a growing number of other countries: The record shows that pouring more money into our outmoded, dysfunctional system will not improve those results. As automation takes bigger and bigger bites out of the jobs of American workers, the suffering will increase. As federal money pours into the hands of the students, the institutions will raise their prices. Far more education and training will be provided, but the net benefit will be minimal and, when the money runs out, fleeting. We will have missed a once-in-a-lifetime opportunity to rebuild our education and job training system to deliver the performance we now need.

It would be one thing if we had no idea about how to do it. But we do know how to do it. There is a growing list of countries, north of us in Canada, in Europe and in Asia, that have figured out how to run much more effective education and job training systems than we have here in the United States. They are eating our lunch. Most of them got there by looking carefully at the countries that were outperforming them and adapting their strategies for use in their own country. The only thing that stands in the way of the United States leapfrogging them in the same way is our hubris, our belief that we are unique and can learn from no one.

"It will be an investment only if this moment is used to change and modernize our education and job training systems, root and branch."

It may be another hundred years or more before we once again are at a moment when it costs nearly nothing at all to borrow enormous sums of money and there is very little near term danger of inflation getting out of control. We are faced with hostile powers who are making enormous investments in their future in the belief that they are on the way up and we are on the way down. If ever there was a time to invest in our people, this is it. But, make no mistake, throwing money at the problem is not investment. It will be an investment only if this moment is used to change and modernize our education and job training systems, root and branch.

Yes, put the money on the table for people who desperately need it to get through the pandemic. But, from here on out, put the emphasis on investing in our future. Make it clear that the money will go to states that will use it to redesign and modernize their education systems for much higher performance than they are getting now. Tell them they have to get their citizens together to study carefully what the world’s top performers are doing, compare it to what they have been doing and use their analysis of the gaps to create a state plan for rebuilding their systems that uses what they have learned from the top performers to build a system that is right for them. Don’t give them the money all at once. Make sure that they are taking the charge seriously, doing the research they need to do, involving the people they need to involve, building the support they need to build and creating the policies that they will use to deliver a much, much more productive system for preparing their people for the future.

Fail to do this and we will waste billions and miss our chance to rebuild institutions that are vital to our future. We need to distinguish between income support and investment. But we have to get the investment part right. Investing in outmoded, unproductive institutions is a very bad bet. Investing in modernizing those institutions for world-class performance is the best investment we can make.