An illuminating mistake by Tyler Cowen

As the common quip goes, remember when teachers, police, and firefighters set up a system of fraudulent real-estate financing and ran our economy into the ground in 2007-08? Me, neither, but guess who’s paying now for it?

Back in mid-June, economist Tyler Cowen argued that the reason why teachers were being attacked politically and paying the price of the financial crisis of 2008 and the Lesser Depression was a consequence of lost trust in government: “voters have lost faith in the social returns of these jobs and our ability to afford them. The voters have responded by looking to cut expenses, and they’ve chosen state and local government employment as a target” (emphasis added). Cowen was projecting onto the general public his own skepticism of the effectiveness of government intervention, and Ezra Klein was quick to argue that “Cowen has the causality backwards: He says policy is following the declining trust Americans have in their political institutions. I’d say the trust Americans have in their political institutions is declining in part because policy is doing so little to follow their preferences.” Klein pointed out that the financial crunch in the vast majority of states in 2007-2010 was the result of inevitable connections between the economy, national policy, and state finances, not great evidence of conscious choices by voters at the state level (unlike the “they’ve chosen” language of Cowen). Cowen responded by referring to a recent paper on cyclical declines in public trust in major national institutions.

The problem with Cowen’s argument is the slop between public distrust of national institutions and views of schooling, which don’t have the same profile over the past 40 years as the institutions Cowen is thinking of (national government institutions and the media). Part of that disjunction is the cyclical nature of responses to questions about national institutions, but there is an important lesson here: schools and teachers now pay for the sins of others. In the U.S., this has been the case since the 1970s, as the erosion of trust in government with the Vietnam War and Watergate led to a general erosion in trust of public institutions. Yet even that does not explain why legislators and governors who rarely mentioned schools in the Tea Party rhetoric of 2010 attacked the working conditions of teachers in 2011 and 2012.

In addition, part of the disjunction between Cowen’s claims and the reality of public perceptions of schooling is a split-personality public perception of schools. Well-known among education politics observers is the difference in survey answers when pollsters ask “what do you think of your local school?” and “what do you think of schools nationally?” The common result is that people like schools near them (especially parents vis-a-vis their children’s schools), but think the nation’s schools are in trouble.

From that split-personality response, I see the importance of how the issue of investment in education is framed–if it is framed as funding of your child’s school, you will get one response. If it is funding of other people’s schools, you get something very different. If it is funding our future, you get one response. If it is paying too much money for pensions, that’s a different framing entirely.1 There is an important interaction here with default policies–the end of revenue sharing in the 1980s changed the relationship between states and the federal government during successive recessions, including the Lesser Depression, and the annual or biennial budget balancing required by most state constitutions is different from balancing budgets over economic cycles.

In the end, I think legislators felt three different kinds of license to attack teachers in the past few years: a plebiscitary license from having won an election that gave majorities a few years to take action on a broad range of issues, regardless of the issues dominating the election; an ideological license from their existing views about the role government and taxes (again regardless of the issues dominating an election); and institutional license from the structures of government that have mandated single- and two-year balancing of budgets in a way that favored spending cuts.2 To interpret such license as public will for lower funding of schools is a misreading of the complex public perceptions of schools.

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  1. Note: the general smearing of public-employee pensions has ignored significant real variations in levels of funding for employees. New Jersey’s legislature underfunded public pension funds for years, as have a number of California municipalities. But California school districts have been prohibited from engaging in such shenanigans, and Florida’s state-level retirement system is well-funded. []
  2. The fact that Maryland’s state government has been willing to raise taxes to fund schools better has not eliminated the fiscal consequence of balanced budgeting. []

One response to “An illuminating mistake by Tyler Cowen”

  1. Glen S. McGhee FHEAP

    There are problems with Cowen’s attempted utilization of a common sense notion of trust, the kind of trust necessary for political economies of all kinds. We believe in it, and we can point out instances when it is lacking, but cannot yet consistently quantify it. Better not to use the term as the foundation of your argument, I think.

    The looming pension catastrophe revealed by GASB changes, but still largely hidden from view — GASB only requires growth rate assumptions to be justified, no matter how ridiculous they may be — certainly contributes to the overall sense of malaise. But the sense of betrayal felt by the public should not be described as a “loss of trust” — they are not the same thing.

    Remove talk about “trust,” and the article boils down to a “slow cure … is to allow asset prices … to return to or exceed the previous levels” — something that won’t happen in my lifetime, perhaps never.