Monday, February 13, 2006

Romancing The Federal Education Budget: A Critic's View

Newsweek's Allan Sloan doesn't buy the administration's much-ballyhooed American Competitiveness Initiative, which emphasizes math and science education. Nor does he think too much of the decision to impose cutbacks on the student loan program:
In the world of Washington, there are applause lines—and then there are budget lines. Applause lines get all the attention, but budget lines are where you find the bucks. Take Bush's American Competitiveness Initiative, which was a major part of his State of the Union speech and drew plenty of applause. By contrast, privatizing Social Security was absent from this year's speech despite having been the major focus of last year's. But when you read the budget that Bush proposed to Congress last week, you see something fascinating. He wants to put major, major money into setting up private Social Security accounts, while the money dedicated to the competitiveness initiative is barely a rounding error in a $2.77 trillion budget.

Now, please, don't get me wrong. We need, desperately, to enhance America's competitive standing in the world. Bush's proposals to increase teachers' math and science savvy and to double spending on cutting-edge federal research over 10 years are worthy things. But in budget terms, at least, there's less to the competitiveness initiative than meets the eye. In fact, the vast majority of the money Bush is seeking for it in fiscal 2007—$4.6 billion of the $5.9 billion—is to reinstate the research-and-development corporate-tax credit that expired last year. The credit, which Bush wants to make permanent, would amount to $50 billion of the program's 10-year cost of $136 billion.

But can we really call reviving an old tax credit a competitiveness initiative? Sure, says Claude Allen, Bush's domestic-policy adviser. "Stimulating the private sector is a key [to increasing competitiveness]," he told me, adding that making it permanent rather than temporary, as it used to be, will enhance its value. "Before, business didn't have predictability," he said, "but now it will."

The other part of the competitiveness package involves only $1.3 billion of research and teacher-training spending next year. I certainly wouldn't turn down $1.3 billion if someone offered it to me—but in terms of federal spending priorities, that's nothing. In fact, it's less than the $2.5 billion-a-year reduction in higher-education student-loan subsidies imposed in the budget-reconciliation bill Bush signed last week.

There are endless arguments about how much of that money—$12.7 billion over five years—comes from lenders' pockets and how much is actually borne by students. But clearly, students are on the hook for some of it. Supporting ambitious strivers who are hocking themselves to get an education strikes me as one of the best things we can do to increase our competitiveness. Making a big fuss over $1.3 billion of extra spending while cutting student-loan subsidies doesn't seem like the way to go. No matter how much money the Bushies say they've added to loan programs.

Even though training and research spending would overtake the tax credit in size after 2007, it's hard for me to think of it as enough money to make a fuss over. Margaret Spellings, secretary of Education, sees it differently. "We will see a 51 percent increase in math and science investments," she told me. She said the tax credit is part of a three-legged stool along with education and RD spending, rather than a stand-alone item. The pieces, she said, reinforce each other.
I'm saddened that the federal government is raising the interest rates on these student loans. With college tuition and related expenses rising faster than the rate of inflation, college is going to get even costlier for America's middle-class families.

Related: USA Today thinks that the Initiative is a "Search for jobs in some of the wrong places."
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