Nothing is as permanent as a temporary government program.

Milton Friedman

• Most of the cost of educating students in public universities is paid for by taxes allocated by the state legislature. In recent years higher education has seen a decline in its share of state appropriations while expenditures on social services, health care and prisons have increased.

• Currently, more than 1/3 of all college students receive some financial aid. The national government assists students with grants and loans to pay for the cost of attending a higher education facility. Over 5 million students receive the common Pell grant.

• 80% of college students attend public institutions.

• university governance: Most states run the public higher educational system through a board of trustees or regents, "a governing body with the authority to govern a state's universities.“

• Faculty are considered professionals and have traditionally been actively involved in university policy-making.

• Adjunct faculty are part-time, and today almost half of all courses are taught by adjunct faculty or graduate students, saving colleges and universities significant amounts of money at the expense of the faculty.

• Faculty unions have organized and collective bargaining has largely replaced individual bargaining. These unions previously have concerned themselves with faculty salaries and violations of academic freedom and tenure.

• community colleges: In most states, community colleges are actually part of the local government. They receive funding from local property taxes and grants from the state and federal government.

• State colleges rely mostly on state funding and tuition for funding.

• Tuition increases are high due to a lack of accountability, spending increases by universities, and greater dependency on tuition instead of state funding. Many students are in debt after college.

• SAT scores: Verbal and math scores obtained on the national College Board Scholastic Assessment Test are required for admission to many colleges and universities.

• The increasing number of people wanting to attend college creates a problem maintaining quality education while allowing nearly unrestrained public access to college.

• Students are in college to get an education and skills for future employment. Many college students believe they don't need to be in college but social norms force college on students.

• Students’ lack of prior knowledge and capabilities cause professors to play catch up, assume a lost cause, or ease requirements. More and more universities have lower admission standards. It’s becoming more difficult for hiring companies to tell the difference between good and bad students. Degrees are watered down and more people seek advanced degrees as a consequence.

• main problems with higher education:

• lower student capabilities and effort, and the declining quality of graduates

• faculty priorities – may be different from student priorities

• university priorities – may be different from faculty and student priorities

• costs: tuition, fees, textbooks, etc

• increases in the levels of debt of both students and colleges

• solutions:

• don't push students to college (so don’t require college for new jobs)

• more restrictive admissions process

• re-focus universities on teaching

• decrease class sizes

• cut frivolous spending

State Funding for Community Colleges: A 50-State Survey

College costs are skyrocketing out of the reach of the middle class. College tuition costs have risen 538% since 1985.

The increases exacerbate income inequality and can damage the reputation of US higher education.

• scope of the education inequality problem in the US:

• US lags behind other countries in educational achievement, especially in math and science.

• Education system reinforces social inequality because low-income students attend lower performing schools with higher dropout rates.

• Education system reinforces racial inequality as residential patterns re-segregate school districts and there are large gaps in performance between white and minority groups.

• Educational equity, or Robin Hood laws, move funds from wealthy districts to poorer ones, creating quite a bit of political opposition in the process.

• Educational adequacy focuses less on funding than on educational outcomes, such as test scores. In the adequacy approach, courts look at test scores and other performance measures created by the state to ensure that all students are receiving an adequate education.

• generalized inequities in US education:

• Student performance is highly correlated with family background.

• High performing states have higher income populations, have more residents with college degrees and spend more on education per pupil.

• Lowest performing states have the highest rates of student poverty.

• In poor districts we spend more on core programs and less on college prep, capital projects, teachers incomes, etc.

• Local control of education leads to unequal distribution of resources but most don’t want to use national money to equalize distribution because (1) state and local districts want to retain primary control of education policy, (2) competing demands on federal budget and (3) financial inequality is a significant policy issue.

• Major education policy issues involve the following questions.

• Who should be educated and by whom?

• How much should education cost and who should pay for it?

• What should be taught, and who decides this?

• Where and when should students be educated?

• Who is responsible for the delivery of education?

• What are the standards for measuring success?

• What should and can be done to correct failure?

• The interested parties or stakeholders include students, parents, teachers, school administrators, professors and education schools, elected and non-elected officials, reformers and businesses which rely on an educated work force.

• Education policies often pit these stakeholders against each other and often come down to who should decide what is best for children.

• Professional educators don't like community control because the public has a lack of experience.

• Free market ideology has turned parents into consumers, rather than public citizens participating in a common good.

• Markets do a fine job making stuff and selling it. But they also create extreme inequality, with winners and losers. Education isn’t about winning and losing but about helping every child reach his/her potential.

• Choice alone doesn’t guarantee quality and it hasn’t solved the larger problems facing public education.

• We don’t really have any choice at all if our local public school is not a high quality option.

• Teachers statistically account for around 10–20% of achievement outcomes. About 60% of achievement is explained by nonschool factors, such as family income.

• recommendations to make education better:

• focus on basics of education

• longer school day and year

• merit pay

• competency testing

• master teacher plan

• One of the future trends in funding for education is the growth of the senior citizen population, who may no longer have a vested interest in increasing taxes for education.

• unresolved issues with teachers and curriculum: national teacher certification, no work force preparation, no moral education, intelligent design vs. evolution, charter schools, privatization, home schooling, single gender schools

• In the past, public schools were beyond partisan dispute.

• Today, our two major parties have begun to disagree over a broad range of educational issues.

• conservative positions:

• Education is the individual’s responsibility.

• Believe that people have different levels of ability.

• Emphasize family control and give private institutions a role in determining education policy.

• Favor local control of education: Education should be under community and local control rather than national control.

• Against national spending on education because it gives the national government control over education policy.

• Believe that money is not the answer to education problems.

• Favor private schooling as another choice for families.

• liberal positions:

• Issues of race and religion prevented many liberals from supporting legislation until segregation was abolished.

• Society can overcome inequality through education.

• Government has obligation to compensate for social inequalities.

• Favor increased national aid in education to improve education quality. Centralized/national funding leads to equal funding and equal opportunity.

• Believe that external barriers limit development of potential.

• Believe that money does have something to do with education.

• Oppose private schooling (as do professional educators).

• But both parties remain strongly committed to public education.

• The number one concern of local school boards is budget/funding.

• Despite political rhetoric to the contrary, the level of financial support for public education clearly makes a difference in the quality of education.

• Public school funding is largely based on local property taxes.

• block grants: Federal dollars provided to the states, with limited federal restrictions, for educational aid and program funding. The shift from categorical grants to block grants in the 1980s resulted in funding decisions shifting from the federal level to the state level.

• Among the largest growing populations of students are English-language learners, students in poverty and students with disabilities. These often require additional funding per student in order to provide services.

Building a 21st Century US Education System

• Public education (K-12) is not only a fundamental right but a vital public service, akin to the public provision of police, parks and public libraries.

• We appear to do less well than other countries in terms of educational outcomes relative to expenditures. We are below other industrialized nations in quality of education and teacher salaries have declined since 1970.

• Governments in the US spend about 4% of the US GDP on primary and secondary education.

• Japan and Germany spend less; Canada, Sweden and France spend more

• Countries with high-performing school systems (Korea, Singapore, Finland, Japan) have succeeded not by privatizing their schools or closing those with low scores, but by strengthening the education profession. They also have less poverty than we do.

• School financing in the future will be influenced by accountability, choice programs, the national economy, deteriorating school buildings and the continuing battle over inequitable funding.

• The US has never been able to agree on what it believes regarding the appropriate role of government in regulating business and finance, and the effect of such regulation on our national economy.

• American policy has swung back and forth between laissez-faire approaches and demands for accountability and control.

• When it comes to regulation, the national government has created several agencies responsible for providing for everything from worker safety (Occupational Safety and Health Administration), to food safety (FDA), to consumer protection (Bureau of Consumer Protection). The EPA is charged with ensuring that businesses do not excessively pollute the nation’s air or waterways. A complex array of additional regulatory agencies governs specific industries such as banking and finance.

• The American business community has generally been an opponent of any government law, regulation, compliance obligation or tax levy that it perceives to undermine profitability or impede business operations. Yet business in general has posted immense profits as the nation emerges from the financial crisis.

• Hundreds of assistance programs from the government in the form of money, information and service are available to businesses and entrepreneurs.

• The US Patent and Trademark Office offers protection of inventions and certain products from illegal infringement by competitors, thus encouraging innovation and creativity in the business community.

• The Commerce Department provides many services for businesses, including a nationwide program to help small and medium-size businesses increase overseas sales of their products.

• Two of the largest recipients of government aid to business are agriculture and energy. Both are multi-billion dollar industries concentrated in rural and/or electorally influential states.

• Government policy regarding business will be examined in the presentation on economic policy. Here we will deal briefly with regulation.

Government Regulation of Business, from the New Deal to the Stimulus: A Primer

• regulatory domestic policy

• Regulatory policy is government restriction and control over business practices. Government regulation is intended to discourage producers from taking harmful actions but it requires a balance between protecting safety and protecting constitutional rights.

• competitive regulatory policy: Designed to limit the provision of goods and services to one or a few designated deliverers who are chosen from a larger number of competing potential deliverers. The licensing of various professions, and of radio and TV stations, are examples of such policies.

• protective regulatory policy: A policy that seeks to protect the public and consumers from market problems such as deceptive advertising faulty products, or negative externalities. Example: pollution

• Regulations are enforced usually by a regulatory agency formed or mandated to carry out the purpose or provisions of a legislation.

• An excess of regulation leads to over-regulation, which can hurt business and create inefficiencies. Governments usually over-regulate out of a desire to increase equity or promote social justice.

• Deregulation involves the removal of government rules that once controlled an industry, addressing concerns that stem from the negative impact of regulation.

• Why have the regulatory responsibilities of government expanded so dramatically over the past 50 years? There are several broad types of circumstances in which government regulation is most easily justified.

• natural monopoly: a type of monopoly that exists as a result of the high fixed costs or startup costs of operating a business in a specific industry, or industries that require unique raw materials, technology or other similar factors to operate ... example: tap water, it makes sense to have one company providing a network of water pipes and sewers

• negative externalities: costs that are suffered by third parties, not the producer or consumer ... example: farmer located downstream from factory that dumps its waste into the river

• consumer protection: a form of government regulation that aims to protect the rights of consumers ... example: require business to disclose detailed information about a product such as food

• economic theory of regulation: participants will use the regulatory and coercive powers of government to shape laws and regulations in a way that is beneficial to them

• Progressive Era (1890-1920)

• Progressives believed that the problems society faced (poverty, violence, greed, racism, class warfare) could best be addressed by providing good education, a safe environment and an efficient workplace.

• Teddy Roosevelt believed that strong corporations were good for America, but he also believed that corporate behavior must be watched to ensure that corporate greed did not get out of hand (trust-busting and federal regulation of business).

• Muckrakers exposed abuses of industrialization, focusing on the abuses of large corporations.

• Sherman Act (1890) and Meat Inspection Act (1906)

• New Deal Era (1930s)

• New wave of regulation to prevent practices that were thought to have caused the Great Depression.

• The New Deal consisted of many policies that fundamentally transformed the economy and society during the 1930s, the foundation of national workplace law.

• 1933 Banking Act, Securities Act of 1933, the Wagner Act to protect labor organizing, the US Housing Authority and Farm Security Administration (both in 1937), and the Fair Labor Standards Act of 1938, which set maximum hours and minimum wages

• Social Regulation Era (1960s and 1970s)

• Social regulations are aimed at restricting behaviors that directly threaten public health, safety, welfare or well-being.

• They focus on consumer safety, occupational safety and environmental protection.

• Agencies such as the Consumer Product Safety Commission, Occupational Safety and Health Administration, Environmental Protection Agency and National Transportation Safety Administration were created to protect consumers and citizens from a variety of threats.

• Why the surge of social regulations?

• The late 1960s and early 1970s were a time of social activism and the consumer and environmental movements were at the peak of their influence.

• The public had become much more aware of the dangers to health, safety and the environment associated with various modern products.

• Members of Congress saw the advocacy of social regulation as a way to gain visibility and national prominence.

• The presidents in office during most of this period each gave support to the social regulation movement.

• Deregulation Era (1970-2000)

• Overly complicated regulatory law, increasing inflation, concern over regulatory capture and outdated transportation regulations made deregulation an appealing idea in the late 1970s. In theory, deregulation would increase market competition and lead to lower prices for consumers.

Reaganomics sought to stimulate the economy through income and corporate tax cuts coupled with deregulation and reduced government spending.

Though favored by industry, Reagan-era deregulation is regarded by economists as having contributed to the Savings and Loan Crisis of the late 1980s and 1990s.

Airline Deregulation Act (1978), Staggers Rail Act (1980) and the Motor Carrier Act of 1980

• regulatory agency history web pages

• FTC: http://www.ftc.gov/ftc/history/ftchistory.shtm

• FDA: http://www.fda.gov/AboutFDA/WhatWeDo/History/default.htm

• OSHA: http://www.dol.gov/oasam/programs/history

• EPA: http://www.epa.gov/history/

• Fed (Kansas City): http://www.kansascityfed.org/aboutus/history/

• FTC: http://www.ftc.gov/ftc/history/ftchistory.shtm

• NRC: http://www.nrc.gov/about-nrc/history.html

• SEC: http://www.sec.gov/about/whatwedo.shtml

• NLRB: https://www.nlrb.gov/75th/index.htm

• When and how regulations are imposed are political decisions, shaped by election pressures

• Congress creates regulatory agencies

• to escape criticism when things go wrong

• to avoid being blamed by not directly imposing the regulations but handing the job off to a regulatory agency

• blame avoidance: strategies that are employed by regulators and politicians alike in pursuit of avoiding blame

• Valued by regulators more highly than credit-claiming due to voters‘ negativity bias, the tendency to be more sensitive to real or potential losses than they are to gains.

• Strategies used (agenda limitation, scape-goating, passing the buck and defection) are different than those they would follow if they were primarily interested in pursuing good policy or maximizing credit-claiming opportunities.

• agency discretion

• Because Congress often passes ambiguous legislation, agencies may have considerable freedom in deciding how to execute their mandates.

• This discretion is not limitless. Zone of acceptance is the range within which Congress allows agencies to interpret and apply statutes.

• capture theory of regulation

• Producers' political power and strong stake in the regulatory outcome lead them, in effect, to "capture" the regulating agency and prevail on it to serve producer interests.

• Courts interpret the meaning of congressional statutes and decide whether their application in specific cases conforms to congressional intent.

• They have considerable discretion because they often must interpret vague and contradictory laws passed by Congress.

• Despite the recent deregulation trend, the regulatory state is here to stay.

• Most regulatory policies are supported by the public.

• New problems will probably stimulate public demands for government intervention.

• Businesses will continue to turn to government for regulation when it suits their interests.