Education spending and capital gains
Mishel, Lawrence & Edith, M.
eorge Bush wants to be the "education president" without spending money on education. Last year he achieved a "presence" on this issue by stealing the Democrats' idea of an "Education Summit."...
...The administration's analysis of comparative education spending is at best misleading and, at worst—well, a lot worse...
...Calculations of funding adequacy must also be related to the size of the school-age population in each country...
...United States K-12 spending is less than that of eleven of the sixteen countries considered...
...Roger Porter, the White House domestic policy adviser, said, "We spend $353 billion on education...
...spending to come up to this average, in 1985 we would have had to raise K-12 spending by more than $20 billion...
...Our education system has not lacked for resources during this decade...
...For U.S...
...Lapitai gains taxes are only a small portion of the "cost of capital," and lowering the "cost of capital" will have, at best, a modest effect on investment...
...So Bush is trying to focus on the jobs and investment generated by a capital gains tax break...
...And between 1980 and 1985 the U.S...
...The significance of the capital gains debate is not the specific provision but what is said about tax policy...
...He even has acknowledged that "most of our [council] members don't care about capital gains...
...For example, over 19 percent of the U.S...
...The Bush administration apparently believes it can bluster its way through the capital gains debate as well...
...In fact, there is nowhere to go, because neither the Council of Economic Advisors nor the Treasury Department has provided estimates of the amount of investment and jobs likely to be generated by a capital gains tax cut...
...It is a lot in comparison with other countries...
...Until recently this approach to education worked because it was also coupled with deceit...
...A comparison of funding for all levels of education thus obscures the main concern about American education...
...Our recent Economic Policy Institute report ("Shortchanging Education") shows that the United States spends a far lower share of gross domestic product (a measure of national income similar to the more familiar gross national product) on kindergarten to twelfth grade (K-12) education than other industrialized countries...
...Therefore, "Our focus must no longer be on resources...
...ranking in education spending fell from twelfth to fourteenth...
...This will give the peace dividend to Corporate America...
...There's no denying that most of the capital gains tax cut goes to the very well-off — some 80 percent going to those with incomes of $100,000 or more...
...Other ways of spending our public resources, such as education and training programs and infrastructure improvement, will yield far more jobs, investment and income...
...The point is to reestablish the need to subsidize business investment bring back the investment tax credit and accelerated depreciation, and eliminate taxes on dividends...
...But the current crisis of American schools is not in higher education...
...Bush's "Let them eat rhetoric" approach is thus far a successful political recipe...
...Even the effect on future investment will be small...
...Among the countries studied, the United States enrolls a relatively large percentage of the population in preprimary, primary, and secondary school...
...Bush declared at the "Education Summit" that the United States "lavishes unsurpassed resources on schooling...
...The chief lobby for a capital gains tax reduction, the American Council for Capital Formation, even acknowledges the modest investment and job consequences...
...Well, where would potential "demagogues" go to check the evidence for Bush's assertions about the benefits of capital gains tax reductions...
...This is part of a "let them eat rhetoric" policy that covers domestic issues...
...When we take into account the relative size of each country's K-12 enrollment among the sixteen countries studied, the United States spends less on K-12 education than all but Australia and Ireland...
...it is in the primary and secondary schools...
...Cross-country comparisons of spending do not, of course, tell us how much we should spend on particular education programs or on education as a whole...
...144 • DISSENT...
...population was enrolled in colleges and universities, at least double the rates in Japan, France, Germany, Italy, and the United Kingdom...
...In 1985 roughly 5 percent of the U.S...
...State and local governments increased their education spending from 1980 to 1985 while the federal government has cut back...
...Our study shows that in 1985 (the latest data available) the United States spent 4.1 percent of its national income on K-12 education, far lower than the average of 4.6 percent spent abroad...
...Much of the tax break will go toward existing investments and thus only provide a windfall only to "old capital" while generating no new jobs or investment...
...At the same SPRING • 1990 • 143 Spending on Grades K-12 as Percent of Gross Domestic Product time, many of the items on school-reform agendas, such as raising teachers' salaries and extending the Head Start programs, will cost money...
...It is true that the United States spends more than other countries on education, but only because we spend substantially more on higher education...
...For instance, Mark Bloomfield, its spokesman, concedes that taxes are substantially less important than interest rates in determining the costs of capital...
...Anyone questioning whether this tax break is beneficial is, according to Bush, a "demagogue...
...The consequence has been that for every three steps forward by state and local governments, the federal cutbacks have caused one step backward...
...This is especially dramatic given that the federal government provides only about 7 percent of K-12 education expenditures...
...It is clear that more money by itself will not fix our educational problems of high dropout rates, nearly illiterate high school graduates, low scores on achievement tests, unprepared workers, and citizens ill-equipped to participate in democracy...
...An important ingredient of this recipe is the timidity of the political opposition (along with a corrupting political financial apparatus) and a somnolent press...
...population is enrolled in K-12, but less than 15 percent of the West German population and only 14 percent of the population in Switzerland...
...Oh, now we get it...
...This should not be surprising since the benefits, if any, are likely to be minuscule (apart from growth in the tax shelter industry...
...It's more per capita, more per student, it is more as a share of our gross national product...
...The Bush analysis also obscures the effect of reduced federal spending on total K-12 education spending...
...It must be on results...
...In fact, there is no evidence that the recent loss of a capital gains tax break has adversely affected investment at all...
...We spend one-and-a-half percent[age points] more than the Japanese do on education...
...A constructive debate on education reform should not be artificially restricted by the Bush "no new resources" position that is based on misleading indicators of comparative education spending...
Vol. 37 • April 1990 • No. 2
