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Wednesday, December 03, 2008

"On Financial and Human Capital"

Robert Reich:

Of Financial Capital and Human Capital: Why We're Bailing Out Wall Street While Allowing Our Schools to Get Clobbered, by Robert Reich: Our preoccupation with the immediate crisis of financial capital is causing us to overlook the bigger crisis in America's human capital. While we commit hundreds of billions of taxpayer dollars to Wall Street, we're slashing our outlays for public education.

Education is largely funded by state and local governments whose revenues are plummeting. As consumers cut back, state sales and income taxes are shrinking... On average, state revenues account for half of public school budgets, and most of the funding of public colleges and universities. On top of this, home values are dropping, which means local property taxes are also taking a hit. Local property taxes account for 40 percent of local school budgets.

The result: Schools are being closed, teachers laid off, after-school programs cut, so-called “noncritical” subjects like history eliminated, and tuitions hiked at state colleges.

It's absurd. We’re bailing out every major bank to get financial capital flowing again. But we’re squeezing the main sources of our nation's human capital. Yet America's future competitiveness and the standard of living of our people depend largely our peoples’ skills, and our capacities to communicate and solve problems and innovate – not on our ability to borrow money.

What’s more, our human capital is rooted here, while financial capital moves around the globe at the speed of an electronic blip. ...

Don't get me wrong: I’m not saying funding is everything when it comes to education. ... But without adequate funding we can’t attract talented people into teaching, or keep class sizes small enough to give kids a real chance to learn, or provide them with a well-rounded curriculum, and ensure that every qualified young person can go to college.

So why are we bailing out Wall Street and not our nation’s public schools and colleges? Partly because the crisis in financial capital is immediate while our human capital crisis is unfolding gradually. But maybe it's also because we don’t have a central banker for America’s human capital – someone who warns us as loudly as Ben Bernanke did a few months ago when he was talking about Wall Street's meltdown, of the dire consequences that will follow if we don’t come up with the dough.

I'll just add this:

College Costs, by Paul Glastris, Washington Monthly: Some scary numbers out today about the growing unaffordability of college.

Over all, the report found, published college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent.

The current economic downturn will probably make matters worse. ... And, like everything in life, the poor are hit hardest:

Among the poorest families -- those with incomes in the lowest 20 percent -- the net cost of a year at a public university was 55 percent of median income, up from 39 percent in 1999-2000. At community colleges, long seen as a safety net, that cost was 49 percent of the poorest families' median income last year, up from 40 percent in 1999-2000.

This is a huge problem. ...

Update: See also Restoring America’s Academic Competitive Edge.

    Posted by on Wednesday, December 3, 2008 at 11:52 AM in Economics, Universities | Permalink  TrackBack (0)  Comments (53)

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