Can We Find Healing Power in Income Taxes?

By Mike Koetting January 31, 2023

A couple posts back, I wrote that it was hard to imagine what could bridge the divisions in our country. The issues are only occasionally, and usually incidentally, about policies. Tom Nichols, in The Atlantic, opines that there is no principle dividing the country. He contends that although people will say the issue is “liberty” or “freedom, ” those are merely smokescreens for racial and class resentments, personal grudges and a generalized paranoia that dark forces are manipulating their lives. These, I believe, have come to play such an outsized role in our politics because there has been a profound loss of societal coherence.

I don’t want to idealize a past that never was. Our society has always had warts a plenty. And some of them were generated by the foundational principle of individualist striving. The emphasis on individual freedom and the ability of people to have mastery of their own destiny made America both a unique place in the world and uniquely successful as a country. But, for individualism to work its magic, it needs to be balanced by strong local ties and a generalized sense of social solidarity. Without those guardrails, the logic of individualist striving corrodes any larger scale sense of well-being. And without that, society disintegrates. We turn into a nation of Marlboro cowboys riding the range by ourselves—carrying guns and chasing dreams that can never be realized.

I honestly don’t know if that balance can be re-created. I could offer a broad set of prescriptions as to what might do it, but most them are well beyond what can be managed through politics or policy. But let me propose a modest starting spot: a change in our tax system.

Probably not what you expected. Fair enough. It’s not the first thing that leaps to mind. And there’s a good argument that we could never get to a different tax system without a broader sense of social cohesion.

Perhaps, but what would we want in any policy to help heal the national divides? Here’s my list:

  • It could be readily understood
  • It could be easily seen as a policy for the entire society
  • It would have substantial impact
  • It should be possible to get there

It could well be that a proposal to make major changes to our tax system in the current political climate is political daydreaming. Still, it just might be that the first three are sufficiently powerful that it might not be impossible. Even if the effort failed, it might facilitate more focused discussions on what as a society we want for ourselves.

Basic Context

Before sailing into more controversial matters, I will assert two facts that are non-assailable.

First, relative tax collections in the United States are materially lower than other developed countries.

Source: Hamilton Project at Brookings Institution, 2020 (Data from OCED, Revenue Statistics, 2018)

Second, the United States government is running a substantial and growing deficit. To put this in perspective, the deficit is more than 31 trillion, but the entire amount collected by Federal Income Tax in 2022 was only 2.6 trillion.

Broader Context

Of course, as soon as we start to assess these facts, the going gets somewhat stormier. For instance, there are those who argue that the U.S. is stronger by collecting fewer taxes. And those who say “Deficits aren’t important.” There is some degree of argument among economists about the latter. Although there is a strong consensus that time-to-time deficits, particularly countercyclical, are no problem, but persistent and growing deficits sooner or later cause trouble. Most economists, for instance, agree that it was cause for concern when we had a strong economy in the first part of Trump’s presidency, but the deficit continued to increase under the influence of major Republican tax cuts this century.

Setting aside the minority opinions, these two facts alone suggest we need to address the deficit and, if we are going to continue to provide the services we are providing, we will need to increase taxes. I would go further and suggest that we should increase our taxes enough to provide social welfare benefits closer to other countries. I think America’s historical orientation toward letting individuals solve their own problems is an important part of the centrifugal force that is disintegrating our society.

But expanding government responsibilities would jump right into the heart of the partisan debates. (If we can’t make a child tax credit permanent, it’s hard to imagine something even bigger.) Instead, I’m talking about something much more modest: whittling away at the deficit in a way that adds to social solidarity rather than tears at it. The general sense of the unfairness of our tax system exacerbates a deep resentment about the large and growing income and wealth disparities. About 60% of Americans are concerned that wealthy people and corporations do not pay enough in taxes, although there are substantial differences among Democrats and Republicans. No one likes paying taxes, but there is strong sentiment that the current system has way too many ways for the wealthy to avoid paying their fair share.

A Gallup poll from last year found that support for higher taxes on the wealthy has been growing fairly consistently since the end of the Great Depression. Analysis accompanying this poll listed seven other polls that found substantial support (over 60%) for higher taxes on the wealthy, leading Money magazine to start an article with the headline “Most Americans Want the Rich to Pay Higher Taxes, According to Every Poll Everywhere.” Granted, it is a long way from headlines or poll findings to a tax increase on the rich, who unsurprisingly have disproportionate political power. Still, it is an argument that builds on a significant base of support.

Why Start with Taxes

As radical as my proposal would be portrayed, in truth they are radical mostly in labeling and process rather than truly radical. I will be a little specific about what exactly I have in mind in my next post—I am sure that will keep most of you on the edge of your seats until then. But mostly what I am proposing is substantially increasing income taxes on the top 10% of the income distribution specifically to reduce the deficit. Given the extremity of wealth differences that have developed in recent years, even materially higher taxes on the wealthy will leave plenty of differences between them and the rest of the country. Arguments that it will kill the American entrepreneurial spirit will simply be hogwash.

Remember again that I am proposing this change in taxing explicitly as a means to increase social solidarity. If my changes could be enacted, they would make the distribution of wealth and income somewhat more equitable. But major progress on that important goal will require much more change than can be accomplished with the income tax alone.

However, increasing income taxes on the wealthy and making the tax system clearer to reduce the deficit makes sense for several reasons:

  • As these things go, it starts off with a strong base of support. It has the advantage that a great many of the people who will oppose it most strenuously are arguing from the obviously self-interested position of having won the wealth lottery.
  • Done right, it can be made to be easily understood. And on its face, it can be seen as a meaningful attempt to balance the scales. Most Americans have an innate discomfort with both the extremes of wealth and the size of the deficit. They will be supportive of efforts to address both without raising their taxes.
  • This is a particularly good position for Democrats. It has overwhelming support among Democrats, well into the 70% range, and it is a direct counter to the Republican rhetoric that Democrats represent “the elites”.
  • It would also make it more difficult for Republicans to hide behind the idea that they are the only ones who care about the deficit. (And while, as a factual matter, Democrats have been more fiscally responsible than Republicans for the last 40 years, few people realize this.)
  • Republicans will counter anything along these lines, first, with the claims it is “socialism.” Along side this, they will imply (or simply assert) that Democrats just want more money to give to “minorities and immigrants”. The factual arguments against these positions are strong. Hopefully, they will be enough to allow the focus to be shifted to why rich people oppose them, particularly if the proceeds remain narrowly focused on deficit-reduction.

Almost 100 years ago, Oliver Wendell Homes, Jr, wrote that “Taxes are what we pay for a civilized society…”  I am arguing we can better preserve that civility with a tax system that generally balances the budget, is more transparent, and has the better off paying a fairer share.  This will not be a politically easy lift, but no one ever said democracy was easy.

Wither Inflation?

By Mike Koetting January 17, 2023

Having neither a degree in economics nor a crystal ball, I lack the proper credentials to post a blog on inflation and the Federal Reserve Board. But the issue is very important to the well-being of the society—probably more than most of us acknowledge–so I will take my chances.

The Issue

The Federal Reserve Board has evolved the responsibility of steering the national economy between two potential disasters, runaway inflation and recession, another hell or high water situation.

Runaway inflation is deeply corrosive of society. If your income—be it paycheck or pension—suddenly stops supporting the life you expect, you get grouchy. Majorly. It seems like the fundamental contract between you and society has broken down. Chaos often ensures.

But cracking down too hard on inflation can create a recession. Unemployment grows, workers no longer feel empowered to ask for raises and sellers are wary of raising prices. Less chaos, unless the recession becomes too steep. But as much—maybe more—human suffering.

As a practical matter the Fed has only one tool for steering, tightening or loosening credit. There are multiple factors that determine inflation in the economy so ratcheting credit up or down is kind of a blunt instrument. As a consequence, it has to be used very judiciously if it is to reduce inflation without creating a recession.

Regarding the country today, it seems that the Fed has been threading this needle pretty well. Inflation is moderating and the labor markets are still strong, as evidenced by the unemployment rate edging down last month to its lowest post- pandemic level. Central to this navigation has been a series of interest rate increases, seven raises since March, 2022 from 0.25% to 4.5%. The question now confronting the Fed is how to extend their success thus far in reining in inflation without inducing a recession– and what course of interest rate adjustments can achieve this end.

I will not be so foolish as to pretend to know what the Fed should do. This is their day job. But there are a number of considerations that might be of interest.

How High Is Inflation?

The measure of inflation that gets the most press is year-over-year inflation. That is, how much higher are prices today than they were a year ago. As useful as this is, like most statistical measures, it has limitations.

In particular, if there is a singular price spike in a short period and the prices established that month stay at the higher level, the annual measure of inflation will be influenced for the entire year. The economy may be stuck with that inflation, but there is no ongoing problem that needs to be blunted.

The below graphs show two hypothetical courses of inflation on a month-by-month basis for a year. Both these imaginary economies reflect a one-year inflation rate of 7.4%. But the patterns are very different. One shows a generally consistent upward inflation rate. The other shows a strong inflationary shock at the beginning of the year, with very little inflation the second half of the year. The more consistent pattern suggests a generalized “overheating” of the economy (disposable income driving up demand beyond the economy’s ability to keep pace). The second suggests a more discrete event or set of events that created price spikes that may well be resolving themselves.

Needless to say, reality may not sort itself into such obvious buckets. Reality is further complicated as various sectors of the economy can be inflating (or deflating) at different rates. But these illustrate the issue in choosing what inflation to consider.

Again, I am not licensed to offer an assessment that you could take to the bank of what the current situation more closely resembles. Indeed, there is a fair amount of debate among those people who are appropriately licensed. But after reading a bunch of these arguments, it sure looks to me more like our inflation spiked last winter/spring. From June, 2022 to December 2022, the month-over-month inflation rate was at the low end of the range of pre-pandemic normal. So when the New York Times reports the annual inflation in December at 6.5%, it is not wrong. But it is also not necessarily complete.

The Fed needs to be very careful if it is to avoid nudging the economy into an unnecessary recession.

Implicit Biases

Federal Reserve Board Chairman Powell is very fond of saying that the Fed is above politics. In the narrower sense of the term, that is absolutely the case. Even with a slightly broader definition, he has been willing to take positions without regard to partisan considerations. But politics doesn’t stop at the border of partisan differences. Making decisions about which risks to prioritize over other risks inherently reflects politics in the broadest sense of the term—how as a society we make contested decisions that impact the entire society.

Neither excessive inflation nor a recession is in anyone’s interest. But slowing down the economy by making credit more expensive will inevitably “soften the labor market,” as Chairman Powell concedes.

We should ask who takes the brunt of the hit when the labor market cools off? Every one suffers but those who lose their jobs or forego increases in income suffer the most. For the last couple months, I have been fascinated that the stock market retreats when continued job growth is reported. The standard line is that is a consequence of Wall Street fearing another rate hike by the Fed. But it occurred to me, there may be a more parsimonious explanation: a tight labor market means workers have more bargaining power, which will put pressure on company profits.

For the last 40 years, wages for most workers have grown more slowly than the overall economy. Right before Covid and as we have been coming out of the Covid period, worker salaries have made some real gains. To be sure, some of those have been undermined by inflation. But given that the bargaining power of unions has been so badly undermined during those 40 years, the vision of collective bargaining inflaming inflation by holding out for anticipatory price increases—a real problem in the 80’s—may be largely outdated.

We may be facing a very different problem. Sources as divergent as the Economic Policy Institute and Bloomberg have pointed a finger at the role of corporate profits as a major factor in contributing to inflation. Oil companies, for instance have posted record profits while Republicans made blaming Biden for high gas prices the centerpiece of their midterm campaign.

U.S. Bureau of Economic Analysis, Statista 2023

To the extent cranking up profits is a culprit in inflation, increasing interest rates will have less effect on the rate of inflation. But a softer labor market will certainly reduce worker leverage.

How Much Inflation Is Too Much

For the last several decades, the Fed has had a target inflation rate of 2%. Economists Robert Pollin and Hanae Bouazza have suggested that this target may be overly aggressive and we may be paying a considerable cost in terms of lost economic activity to bring inflation down that low. Their chart, shown below, suggests that real GDP growth has been highest in years with an inflation more in the 2.5 – 5% range. This is consistent with the same analysis for 37 high income countries.

I am relatively sure there is other economic literature that takes issue with these numbers. Although virtually all economists recognize that there are real trade-offs between growth and controlling inflation, a target rate this high is certainly not in the mainstream of economic thinking. Still, it is worth considering on what basis the 2% target is determined.

What to Do

I can’t think of much that the average person can do. While I am currently worried that the Fed may be too focused on controlling inflation, I am also aware that once inflation really takes hold, it can be hard to stamp out. Stopping an antibiotic prematurely leads to more potent infections. I just don’t know enough to have a strong opinion.

I certainly don’t think the situation would be improved by making interest rate decisions overtly political. Although it is without question that the decisions are profoundly political in their impacts, I would still rather have the relatively impartial Federal Reserve Board—implicit biases and all—making the decisions.  So far, at least, they seem to be doing a reasonable job.

I think the best we can hope for is that academics keep debating the issues. They need to make sure that they listen to arguments outside whatever orthodoxy is reigning at the time. Thoughtful and lucid journalistic coverage helps, but am not sure that the mainstream media has done as good a job as possible making these issues clear. Robust and open debate will improve the odds of avoiding a huge mistake.

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NOTE: Thanks to Ira Kawaller for reviewing an earlier draft of this blog. His advice was very useful, but he can’t be blamed for my opinions or errors. If you are interested in a blog that offers political economic analysis in a short, lucid and intelligible format, I highly recommend his work. Read him at igkawaller.medium.com.

The Rail Strike That Didn’t Happen

By Mike Koetting December 18,2022

Today’s post goes deep into the reaches of the American Political Way-Back Machine. Yup, more than two weeks ago! Back then there was widespread panic about the consequences of a rail strike. Then, poof, all gone, like a very early snow.

Before it drifts completely out of our consciousness, it is worth reminding ourselves how we got to that pass and the implications therefrom.

The Clear but Inchoate Culprit

I believe this event was a nearly perfect microcosm of what is wrong with the way America organizes, to use the term somewhat loosely, its economy.

The specific issue that would have caused a strike was the failure of the proposed deal to give workers sick days as a benefit. The settlement recommended by the arbitration did give workers a substantial raise (24%) and a $5,000 bonus. Railroad workers are unquestionably well paid. But they were still unhappy enough about the quality of life issues to vote down the contract. (Although only some unions rejected the deal, it was a majority of the workers across all the unions.) Currently, rail employees can take days off for any reason, but those days are generally unpaid and workers might be docked under the railroad’s attendance rules. In fact, actually using any paid days off, even if technically allowed, is very difficult unless workers can plan far ahead and have the seniority to secure them. Thus, there are no functional sick leave days—an issue most Americans thought was settled about 100 years ago.

Most of my work experience has been in management at institutions with unionized workforces. I have a robust sense of the difficulties posed when workers get rights for sick days. They take them. Often at inconvenient times (for management) and sometimes in patterns that raise cynical eyebrows. Still, people have generally accepted that a certain amount of sick leave is something that should be readily available to workers in an advanced economy, not just for their convenience but for the broader health of the population. Accordingly, those institutions where I worked figured out how to manage around the constraints.

The railroads are unwilling to do that. Why? As usual, the answers are multi-faceted, but pretty much come down to the way that the railroads now structure their business. In the view of the railroads, they are in mortal combat with the trucking industry for the transportation dollar. And to an extent that is true. Trucks have a flexibility that cannot be matched by trains. And that may be even more true when “self-driving” trucks are actually operational.

But trucks have downsides, although it is harder to quantify those issues than I had imagined. Many of the numbers that get thrown around are dated—at a time when technology is rapidly changing. And most are issued by one side or the other. Still, for instance, it seems likely that fatalities from big trucks materially exceeds those caused by freight trains. It likewise appears that trucks have a worse environmental impact than trains. Historically, trains had a huge environmental advantage, but more recent technology has reduced that gap substantially. And more electric trucks could reduce their carbon emissions materially, although trucks would still have other adverse environmental consequences. Train technology is also subject to change and work on electric locomotives is picking up steam, so to speak.

All things taken into account, the situation of the railroad industry is not particularly dire. In fact, profit statistics suggest the opposite. Recent operating margins in the large freight railroads were some of the highest of any industry. Despite their relative share of freight declining, revenues have doubled. These results have been achieved by charging higher rates and making drastic reductions in the number of employees, cutting work forces by more than a quarter in the past decade. Which has made Wall Street bullish on railroads.

It has also resulted in ever longer trains and fewer employees per train. Which, in turn, means there is lower margin for events like employee call-offs. So no sick leave in the collective bargaining agreement.

But, then again, it wasn’t exactly a collective bargaining agreement. Using powers from the 1926 Railroad Labor Act, which gives Congress the right to override any actual collective bargaining in railroads and airlines, a settlement was simply imposed by Congress, without addressing the fundamental issue in the strike. Union members, not surprisingly, suspect that the companies were unwilling to give on the sick leave days because they believed Congress would intervene to prevent a strike.

Put all this together, and we have the American economy. Profit comes first, workers come second—an arrangement enforced by fiat if necessary. A lack of centralized planning and lower regard for the subsidiary effects (e.g. environment, road safety) than for maintaining stock prices.

I adamantly concede that even the politics aside, these are hard issues to address. Outlining a moral concern is not in itself enough to determine specific policy. There are no simple answers and any specific policy will have trade-offs. People who pretend the answers are simple are simply dangerous. Nevertheless, starting with moral concerns—treating workers humanely and proactively considering the longer-term consequences of economic decisions—is not a bad place to start.

The railroad strike that never happened is a poster child for what we get wrong.

Politics of the Issue

This issue also illustrates the politics of the times.

President Biden, easily the most pro-union president in 50 years, was put in a bind. There is no question that a rail strike would have damaged the economy at a time of fragility. On the other hand, there is no question that he supported the desire of the workers for more considerate sick leave policies. I suppose it is possible to criticize his willingness to sign the legislation imposing a settlement as an abdication of values. I rather see it as a compromise made in the name of the greater good. It’s not clear that he has received the credit he deserves for his position because most of the country sees political decisions as totally transactional. Generally speaking, we have lost sight of the fact it sometimes takes a matter of principle to compromise on another principle.

The specifics of the actual process for ending the strike are also instructive. In fact, there were two separate bills—one that imposed the settlement and a separate bill that mandated the addition of seven days of paid sick leave to the agreement. The first passed with overwhelming bi-partisan support in both houses. The second narrowly passed the House on a party line vote and got 52 votes in the Senate, 49 Democrats and 3 Republicans, eight short of what would be needed to break a filibuster.

On the one hand, this again illustrates that the notion of Republicans as a working class party has a peculiar idea of what it means to be a working class party. On the other hand, I suspect that also illustrates why Republicans are still seen as “better” on the economy. The average person on the street simply assumes that voting to give railroad workers paid sick leave would increase their prices for goods because the cost of transportation would increase. The further assumption is that Democrats must be the party of the elite since they are willing to increase prices for the common man to favor 125,000 unionized railroad workers. The idea that the cost of sick days would come out of company profits as opposed to being passed back to consumers is not given much consideration. This is unsurprising since there is no mechanism to enforce that outcome.

Which brings me back to the original point: this issue illustrates why American society is so broken. There is no ethic of communal good that goes beyond very narrow notions of community. And the mechanisms of governance do not support being able to achieve society-wide goals as opposed to facilitating the accumulation of vast amounts of wealth by individuals lucky enough to get leverage.

There are no easy solutions—technically, let alone politically. Particularly since we are not starting with a blank slate. We exist in a society structured around a set of operating assumptions that embody the values that have gotten us here. Any individual change, like sick leave days for railroad workers, is very hard because the interconnected nature of our system works against it. But it is difficult to imagine how the society thrives without getting a better handle on these core issues.

“America First”—A Possible Area for Collaboration?

By Mike Koetting December 6, 2022

One of the interesting themes in MAGApublican thought is “America First”. Commentators have identified this as a major belief for those inclined to vote Republican. It is hard, however, to know exactly what this means in the current context. Traditionally, the sentiment has been primarily a foreign policy instinct to keep America away from wars that don’t affect them directly and from treaties that have the risk of getting them involved in such wars.

While the contemporary use includes the traditional sense, it also seems much broader. For sure, it is a thinly veiled protest against diversity. And it is obviously an objection to the outsourcing of jobs. But it is equally obviously a primal scream of anger at “the elite” who have more of a global outlook–which has coincided with their economic outlook improving exponentially better than that of the working class. Never mind that the actual cause-and-effect model is murky.

If “America First” is used in the narrow, historical sense, one can imagine the policy implications. But in the vaguer, more amorphous use, it is not at all clear what an “American First” agenda would look like.

Somewhat peculiarly, I got focused on that question from reading an article about the water from the Tigris and Euphrates Rivers.

The basic story is simple. These rivers originate in Turkey but Iraq and Syria are dependent on the water flow. The details are of course complicated—a difficult problem in the best of circumstances, but also with enough conflicted intent and incompetence on all sides to preclude any simple assessment of who’s right. However, the details aren’t important for our purposes. It is the essence of the story that is critical: Would a “Turkey First” policy suggest that Turkey use the lion’s share of the water for its legitimate uses?

The immediate caution for Turkey would be that the enmity created by such a policy would eventually bounce back to bite them one way or the other. So it is theoretically unlikely they would keep the water to the max—as, indeed, the real world event is playing out, although not without a fair amount of ill will on both sides. And difficulties for the ruling party in Turkey which appears to be “holding out” on its own citizens. Seems that even a “Turkey First” policy needs some degree of balance and compromise, something unappreciated by most sides.

In America

Back on this side of the ocean, it’s basically the same. “America First” is much more useful as a pollical rallying cry than a guide to policy. But given its reality in our politics, is there a way to defang the political bite? It may well be it is not possible. If this is just a different reframing of the culture war, no policy choice will satisfy.

But there may be steps that would take off some of the edge—and perhaps address some legitimate concerns as well.

I see two main strategies working together—remediation and balancing the scales. But before discussing these, I want to point out that what seem like the most obvious solutions are probably like using all of Iraq’s water—the end consequence will make matters worse.

Simply increasing tariffs and erecting high barriers for international trade are more likely to leave US consumers on balance worse off. Tariffs inevitably get paid by the consumer.

There is, no doubt, a place for specific and targeted trade barriers. It also makes sense to pay some premium for developing critical supply lines to be less dependent on international circumstances, as the recent action by Congress to support increasing domestic production of computing micro-chips. Still, there is a strong consensus among economists that the overall economic well-being of Americans is improved by the globalization of the economy

Help Losers, Charge Winners

But that improvement hasn’t been close to evenly distributed. There have been major league winners and losers. These extremes are what makes “America First” compelling to some people.

Accordingly, there should be significant emphasis on helping the situations of Americans who have been damaged by the internationization of the economy. Yes, this requires expenditures that are hard to get approved in a situation where polarization has made it hard to pass anything, perversely more so for things that would disproportionately benefit the base of the opposing party. But the bigger issue is that this is just damn hard. It is hard to identify those uniquely hurt and it is hard to create satisfactory alternatives. Blue collar workers from the rust belt don’t want to be retrained to code computers; they want their old jobs back. And simply providing welfare is a poor alternative. People are happier—and society demonstrably better off—when they have meaningful jobs that provide decent wages. So it will require some real creativity to come up with successful ways of protecting people who have been hurt by the global economy. One of the intriguing successes of the Inflation Reduction Act (IRA) is the eagerness with which Red states have embraced the jobs created with support from that act—which received not a single Republican vote in either house.

More is needed. The changes in our economy have been fundamental and will continue as technology continues to evolve, maybe even accelerate. Since the dawn of the industrial age, economies have evolved and some people have always gotten mangled in the transitions. Still, a competent government will mitigate the damage from this evolution. It would be helpful if both political parties were working to protect those specifically hurt as best possible and to train the next generation of the workforce for a more flexible future. We are slowed in this endeavor by people who have a vested interest in pandering to the past rather than adapting to the future

Which brings us to the issue of balancing the scales. The yawning gaps in the American economy are not created by the internationalization of the economy. No doubt internationalization is a contributing vehicle. But the gaps in income have been created by the entire neo-liberal edifice built primarily by the Republican establishment. “America First” won’t solve this because those gaps have been created by, and stalwartly supported by, those Americans who benefit most from this arrangement, most of whom, as a matter of fact, happen to be Republicans.

Can’t Afford to Ignore

Regardless of causal reality, there is the political reality that a large chunk of the American population believes that Democrats are somehow selling out Americans in order to preserve their international advantages. If actual policy makes any difference, one part of blunting the partisan divide would be to link resources necessary for participating in global solutions to taxes on the rich. This will be increasingly necessary as the true global nature of our current situation becomes more apparent.

Henry Olsen, in a sobering piece in the Washington Post, suggested that participation in the recent UN-sponsored agreement for richer nations to compensate poorer nations for damage wrought by climate change is likely to create a populist backlash in the countries being asked to contribute. His analysis seems more than plausible; transferring American money to other countries is the antithesis “America First”.

On the one hand, the consequences of not recognizing the intertwined nature of our world will be stark. Walking away from this agreement, which is absolutely fair, would be morally reprehensible. If “America First” sentiment prevents us from participating in global solutions—as it did with the Kyoto Treaty—we will be paving the road to disaster.

On the other hand, we would be foolish to ignore the warning signals. Richard Trumka, late president of the AFL-CIO, has pointed that unless working people see the transition to a low-carbon economy as a just and fair transition, they will join climate deniers to block action on climate change. As it now stands, the working class, particularly the White working class, sees climate change policy is being driven by people who simply don’t understand how their world works and are intent on making modern civilization a luxury that only elites can afford. We can’t afford persistence of this impression.

One thing that might make sense is adoption of a substantial and visible effort specifically, indeed ostentatiously, focused on remediating the damages from the changing nature of the American economy underwritten by taxes targeted at “the elite.” That this was the explicit strategy of the IRA. Unfortunately, the specific taxing measures got watered down in Congress and public understanding largely lost in the wave of partisanship. But this is exactly the kind of approach that has a chance of blunting “America First” without letting ourselves be backed into an isolation-driven corner from which no one benefits over time.

As illustrated by the situation in Turkey, Syria and Iraq, it simply doesn’t make long run sense for a country to believe its resources are theirs alone and assume you can go it alone.

A Nation Divided by Its Divisions

By Mike Koetting November 20, 2022

Democracy had a pretty good election. Not an unbridled victory, but particularly when compared with our worse fears, pretty good.

The connection between real problems and real solutions, however, took its usual pummeling. In fact, I think it was little worse than historically, despite several unalloyed bright spots.

Let’s consider three important issues where governance reality took a beating.

The Economy

Republicans said they wanted to make this election about “the economy.” Fair enough. A great many people in America feel their economic position is precarious and really want government to do something about it. So what did the Republicans propose about the economy? Nothing. They said they wanted the election to be about the economy and then had not a single proposal, not a single policy that would address economic issues in a head-on way. Instead, they simply wanted attention for a protracted whine that inflation was a problem.

Inflation is a problem. And there is some possibility that some of the pandemic relief efforts made it slightly worse than it would otherwise have been. Setting aside the fact that Republicans had also voted for some of them as well, there is abundant evidence that the pandemic relief efforts were appropriate. The evidence is even stronger that the bulk of the current inflation is caused by factors beyond the control of Democrats, or, indeed, any political party, at least in the meaningful short-term. Accordingly, it was strategically reasonable of Republicans to avoid putting forth policies to curb inflation—because there is as little they could do as the current administration. So they did what they could: howl at the moon.

Here and there, a few Republicans did trot out some of their long-term proposals for the economy—mostly cutting social programs. These policies are as unpopular as they have ever been so we didn’t see any wide-spread attempt by Republicans to push these to center stage because it would shine the spotlight on how out of synch they are with the needs of their base.

Moreover, any protracted discussion of economic issues would inevitably have led back to the fact that so many of the issues causing economic pain are the result of Republican policies, particularly cutting taxes on the wealthy and reducing regulation of corporations. While there has been some Democratic complicity in some of these, these policies are overwhelmingly the result of Republican actions.

In short, no real discussion of the economy, theoretically one of the most important venues for political policy.

Immigration

Republicans are demonstrably more concerned about immigration issues than Democrats, but it’s something clearly on the minds of the entire electorate. At least here the Republicans seemed to be saying something: a new commitment to securing our borders. But on second look, it offers only the vaguest of policy options, a move that one Republican strategist said was deliberate because it united Republicans without being beholden to specific policy solutions.

In some respects, about par for the course of political campaigns. But it does raise the question of what are appropriate policies around immigration. One might think that an issue that is one of the most central concerns in the minds of the party’s members would have at least a couple specific actionable proposals. But it doesn’t. And there is a reason for that. Whether it’s been a Republican or a Democrat in the White House, they have had no luck stopping immigration into the U.S. The problem is that in many places the alternative to not leaving is so bad that people will take ever escalating risks to try to get in the U.S. Our immigration activities won’t change that. And frankly, we are all better off if we keep America a place that people see as a desirable destination.

Donald Trump talked loudly about reducing immigration and that made his base feel better. But what he actually accomplished was to dramatically reduce the amount of legal immigration—while having virtually no impact on illegal immigration. Unfortunately, most of the rhetoric is about illegal immigrants. And reducing the amount of legal immigration is a dubious achievement, since legal immigration has long been a source of foreign talent.

While there are deeply divergent opinions on immigration, there are also roads to compromise. But they will require a series of nuanced policies that take into account the multiple realities of what’s driving immigration to the U.S., the number of illegal immigrants who are truly settled in this country, the nation’s manpower needs in light of low fertility and an aging population, recruitment for high skill jobs, and several others.

By simply fanning the flames of anti-immigrant sentiment, the Republican party made it still more difficult to actually address this issue. Starting with George Bush, there have been several bi-partisan attempts to put together realistic immigration policies and procedures over the last two decades, But they have all fallen apart on the unwillingness of far-right Republicans to even discuss the issue. Apparently, they believe their political fortunes are better served by keeping the issue roiling rather than actually recognizing reality and making sensible compromises. And that’s what they did for this election.

Environment

The big problem for environmental issues in this election is how relatively little they were involved. It is somewhat remarkable that an issue that poses such huge threats—that is already remaking the landscape of many American communities—was mentioned only in passing.

On the one hand, the fact that Republicans have stopped openly attacking environmental issues as a leftist, woke plot is progress of a sort. They are still not comfortable with these issues—consider that there was not a single Republican vote in either house for the Inflation Reduction Act (IRA), the largest environmental bill passed in decades. They may have realized that the return from attacking environmental issues per se is dwindling. For instance, among young Republicans almost half think we are not doing enough on environmental issues.

On the other hand, it wasn’t much of a Democratic talking point either. Although the IRA was a major environmental initiative, Democrats have been relatively shy about underlining what it really involved, starting with the stupid name for the bill.

At this point, every election should be about climate change. Its relative absence was a serious mugging of reality—as the world ticks toward the breaking point on emissions and other environmental problems disrupt the country, from barges stuck on the Mississippi River, to California suffering massive drought, to longer and longer hurricane and wildfire seasons. The midterm attitude seemed to be if we can whistle loud enough, maybe we can pass the graveyard without actually having to do anything.

On Balance

While I am pleased the election went as well as it did, the overall reality score was pretty dismal. The election shows that if, on a specific issue, a party goes too far (Republicans on abortion and election denial) they will be punished. That’s good. On the other hand, it also shows there are some underlying grievances that seem to carry big weight no matter how much actual policy positions belie them. The country is locked at 50-50.

Pundits are making money saying how much better the Democrats did than expected. But that assumes there is something given about Biden’s approval rating or historic midterm trends. The truth is, Democrats have the support of only half the country. But what, realistically, can they do to change that? The election proves that they are closer to the majority on abortion than the Republicans. And that more people are worried about the machinery of democracy than Republicans thought. Maybe it is possible to work through some of the divisive issues one election at a time. But will that break the deadlock? And what happens in the meantime?

It seems to me as if the county is divided by a social media algorithm that takes a few attributes and slots voters into one camp or the other and all the other issues make a difference only at the margin. What set of policies or specific issues could convince the White working class that while Republicans and MAGA have rhetoric that makes them feel better, it doesn’t make their lives better. Conversely, how could Democrats swing far enough on cultural issues to appease current Republicans without alienating their own base, most of whose concerns are valid. Moreover, even things that Democrats don’t support—“Defund the police” for instance—will be used to make sure there is no reproachment between the parties.

Maybe the best the Democrats can do is keeping on the course they are on, trying to reach out wherever they can, being careful not to amplify the most extreme thoughts of their base, hope Trumpism alienates more voters and wait for today’s younger voters to be a bigger share of the electorate.

Not particularly satisfying. But reality is messy.

The Most Essential Missing Ingredient in Addressing Climate Issues

By Mike Koetting October 25, 2022

Much of the discourse on environmental issues is at the level of kindergarteners arguing over toys. In reality, these are the most complex problems ever faced by human beings because, as we have painfully learned, everything is connected to everything. And the issues need be addressed at a scale never before contemplated in human history. They are not simply a series of tricky technical problems. The problems are political, psychological, even religious. And every technical problem must be addressed with some consideration of how the alternative solution interacts with all the technical problems around it—literally to the ends of the earth.

Continue readingThe Most Essential Missing Ingredient in Addressing Climate Issues

Republicans as Working Class Party?

By Mike Koetting October 11, 2022

I generally consider what David Brooks has to say interesting. We share enough basic values that I can imagine a discussion with him, but we disagree enough around the edges that I frequently find his perspective usefully different. But one of the dangers of being interesting is that you occasionally uncork something that is completely off base, even if it has a good size grain of truth to it.

Such was the case when, on the PBS Newshour a couple weeks ago, he started talking about the Republican Party being in transition to a working class party. Seriously?

Continue readingRepublicans as Working Class Party?

Worker Shortage or Common Sense Shortage? Or Both?

By Mike Koetting September 28, 2022

Everyone seems to accept that the US is facing a labor shortage. But labor shortage is one of those concepts that seems straightforward until you start to look into it. Turns out the whole thing is—and I’ll bet you’re not surprised—really complicated.

For example, take the issue of trucker drivers.  According to the American Trucking Association, America has a shortage of 80,000 drivers with the number that could reach 160,000k by 2030. That is probably a reasonable estimate of the number of truckers who could be hired if suddenly there were people to hire.

Complications arise immediately. It’s not like you can simply answer an ad in the newspaper and become a trucker. It requires a Commercial Drivers License (CDL) which both requires training (which can cost up to $10K) and then an apprenticeship. But the training is not the bottleneck. There are plenty of people with CDLs. The issue is that turnover in parts of the trucking industry is astronomical, often in the vicinity of 90%, and most of them out of the industry. The current configuration of the job is miserable.

The root of this problem seems to stem from the de-regulation of trucking under Carter. As more carriers got into trucking post-deregulation, union representation fell, and wages followed. Total employee compensation fell 44% in over-the-road trucking between 1977 and 1987. Turnover has been much lower in those places with higher wages and better working conditions, including those that retained union representation. There is no doubt deregulation led to lower costs of transporting goods, benefits that accrued to all consumers. Conversely, better wages will drive up costs for everyone. But the current model isn’t really working, and lack of truck drivers is making a material contribution to supply chain woes.

Virtually every other specific job I looked at that shortages are being written about had a similarly complex story. What appears to be a society-wide “labor shortage” turns out to be a story of lots of smaller things that have impacted one job or another. Anyone offering a one-size-explains-all approach is going to miss a lot.

That said, there are also some structural factors that are affecting the overall labor market and will have even bigger impacts in the future. As I noted in my post on school closings, society is very poorly served by trying to ignore underlying structural changes instead of facing up to them and making proactive, if hard, choices.

Structural Factors

Population Aging. The Boomer generation is retiring. (Sorry, folks.) There is no way around it. Try as we might, we’re just not going to live forever, let alone work that long. This has several consequences. The most obvious is that large numbers of well-trained workers are leaving the work force. Many of them are professionals–physicians, nurses, lawyers, engineers, pilots, teachers and so forth. This will get worse for the next few years as the biggest bulge in the boom actually steps away from work. It also appears that enough “young” Boomers are retiring earlier than anticipated that they are having an impact on the overall work force.

Declining Birth Rate. This hasn’t yet had a big impact on the overall size of the labor force, but it will. Just as lower fertility inevitably leads to lower school enrollment, it will inevitably lead to a smaller work force. It is projected that there will be 16 million fewer babies between 2008, the last year fertility was sufficient for population replacement, and 2030 if fertility had continued at replacement rate.

Immigration. Roughly one-quarter of the “missing” workers are the result of lower immigration, legal and illegal, during the Trump era. This flow is starting to return to pre-Trump, pre-Covid levels, so some of the shortages will be addressed. But we have also shown conclusively that there aren’t Americans willing or able to take many of the jobs the immigrants would fill. In all events, immigration remains a major factor in determining the size of our overall workforce, and more so in certain fields. For example, a larger percentage of personal care workers are immigrants. This is an area with exploding demand as the Boomers get older still.

Work Force Participation Rate. Another suggested factor in the shortage of workers is the apparently low participation in the work force—that is, more people who would be expected to be working are neither employed nor looking for work. Some of this argument has a kind of moral tone—as in, kids today aren’t working. However, it seems fairly clear that most of this decline is the statistical implication of an aging work force. For instance, between 2010 and 2019, overall labor force participation decreased, but within every age category it increased. It is simply that older populations have less work force participation, so as their relative size increases, they exert greater drag on the aggregate. Still, when looking at specific age/gender groups, it seems there is some decrease beyond what can be explained by age distribution alone, even before Covid. It wouldn’t surprise me if there has been some overall decrease in labor force participation, or, as I suspect, participation in the formal labor force. People must be getting resources from somewhere. A 2014 study by the Boston Federal Reserve estimated that 26% of the people “not in the labor force,” as defined by the government, were in fact in engaging in the informal economy. I’ll bet the percentage is higher post-Covid. Another factor is that female work force participation had stagnated in the 20 years before Covid, and probably much more during Covid. Part of the culprit here is the lack of family friendly policies, particularly around parental leave and day care, that would make female participation easier (even if family responsivities remain unequal by gender). Our lack of family friendly policies is unique among developed economies.

Implications

There is one blindingly obvious conclusion and a lot I don’t understand.

The obvious conclusion is that we need a sensible immigration policy. In a country with a fertility rate well below replacement and an aging population rapidly retiring, making sense out of the immigration policy would seem a self-evident move. This is not to say that we could solve all our work force problems this way, let alone that it would be easy. As long as the distribution of welfare around the world is so lopsided, there will be impossibly difficult issues. But the fact that our culture wars have made it impossible to even address this issue suggests that the country may be in the grip of terminal stupidity.

Beyond that, I am confronted by a lot I don’t fully understand about the link between workforce size, economic growth and general welfare. In my reading for this post, it seems economists take it for granted that a larger work force leads to more economic growth. But, even if this is true, is total economic growth the right measure for a society’s economy—as opposed to, for instance, economic resources per capita. It seems to me that in terms of economic wellbeing, the distribution of the economy is relevant; a society with fairly evenly distributed resources might be better off than one with greater aggregate resources that were distributed much less equitably.

All of which, in my mind, leads to questions about how we think about machines replacing people. I know many people who say you shouldn’t use self-service check-out because it takes away jobs. But does this make sense? If as a society we have more jobs available than people willing to take them, shouldn’t we be investing in labor-saving machinery? The case may be more obvious with replacing people at the fry-station in fast food places or replacing truck drivers since these jobs are difficult to fill. But the fundamental question is ultimately the same.

On the other hand, what happens when people who want to keep working are replaced? Presumably the overall economy is just as robust, but putting people out of work will create significant disruptions. How are those people who are displaced reabsorbed into the economy?

And how is immigration factored in? In the short term, it is clear we need immigration to meet the needs of our economy. In the longer term, we might have a situation where we have “too much labor”—that is, more people than we can productively employ given the current economic model. At that point, we might be able to cut off immigration from a strictly economic stand-point, although practical and moral problems would remain. More immediately. we don’t know how far away that is or, indeed, if we will ever reach that point.

In the meantime, the United States clearly has jobs it would like to fill. Since there don’t seem to be people willing to take them—and the trends point in the wrong way—we need a longer-term plan. Unfortunately, our political system is manifestly unable to address this issue. We are surely digging a huge hole for ourselves.

My Journey With Steve Chapman Along the Arc of American Journalism

By Mike Koetting September 13, 2022

I moved to Illinois in the mid-70s. I lived in Springfield and worked for, first, the Legislative Budget Office, and then the Executive Budget Office. I always read the Springfield paper—virtually a company newsletter at the time–but also kept loose track of both the Chicago dailies, the Chicago Tribune and the Chicago Sun Times, which both had substantive Statehouse Bureaus, as did UPI and others. Later, I moved to Chicago, then to Boston for a couple of years. When I returned to Chicago in 1985, I became a religious reader of the Tribune. Every morning with my breakfast.

While I was a gone, the Tribune introduced a new columnist, Steve Chapman. I didn’t like him much. Too conservative Republican for my tastes. Still, I periodically read him.

The years marched on. Steve Chapman continued to write. I still didn’t agree with much, but I started reading him a little more regularly. Like George Wills, David Brooks and, later, Jonah Goldberg, they all wrote and thought well and I figured it was important to see what they were talking about and, from time to time, reflect on it.

The Tribune continued to change. The paper started in 1847 and was originally a liberal, abolitionist newspaper. But in 1911 Robert McCormick became editor and turned the paper sharply to the right, becoming an early voice of strident Republicanism, although by the time I started reading it, it was fairly centrist. Its business sense, however, had always been forward looking. It was one of the earliest cross-media companies, acquiring a radio station and later a television station. In the 1990s, it was one of the first newspapers to establish a website and develop an internet presence.

Foresight, however, did not protect against technology. The internet began to eat newspapers. Initially, more their advertisers than their readers.

Early after the turn of the century, the Tribune had its first major staff layoff and, in 2006, the Tribune Corporation was for sale. What followed was a dizzying period of buyouts, mergers, a bankruptcy and numerous additional staff reductions. To be honest, most of this didn’t seem to make any difference to the paper I read each morning.

Around the rest of the country, the implications were more drastic. Between 2005 and 2021, 2,200 newspapers shut down operation, slightly more than a quarter of all the country’s newspapers. Most of these were less than weeklies. Still, over the same period the number of daily papers dropped by about 13% to around 1275 dailies.

The question of readership is more complicated. The overall drop in readership has been much less drastic than the drop in revenue, but the nature of subscriptions has changed considerably. When print and digital subscriptions are combined, it is estimated that total readership has declined, but in total, at least since 2015, has not been particularly steep. However the total is buoyed by large growth in digital subscriptions, particularly from three papers—the New York Times, the Washington Post, and the Wall Street Journal. It appears these three papers currently account for about one-third of all newspaper subscriptions (print and digital) in the country, with the Times alone accounting for about 20%, although the Times now has so many subsidiary publications and offerings, I can’t get a real apples-to-apples count. It is also the case that the Washington Post is currently experiencing financial troubles as subscribership isn’t growing as fast as costs. (The Post is owned by gazillionaire Jeff Bezos, who bought in 2011 after its last round of financial difficulties. He was one of several billionaires who bought papers.)

My own experience followed national trends. I continued to read the Tribune each morning, but about seven years ago I got hooked on a then free Washington Post daily newsletter and, a couple years later, started subscribing to the digital newspaper. But I looked on-line only after I had read the Tribune over breakfast. By this time, I had started to find Steve Chapman much more interesting. I don’t think he changed fundamental values. Rather the Republican Party had changed its fundamental values. We probably still differ on a lot. (I suspect he was instrumental in the Tribune endorsing Gary Johnson for president in 2016.) But concern about common enemies over-shadowed the latent disagreements and, in the identification of common enemies, it was easier to see where our values aligned.

In 2021, the Tribune sold itself to Alden Global Capital, a venture capital fund with a penchant for buying newspapers and gutting the newsrooms. Within two days, a massive round of buy-outs and layoffs ensued. Over the course of the next several weeks, all of the columnists and reporters whom I regularly followed left. Only Steve Chapman remained on a regular basis—as he had stopped being a Tribune employee in an earlier round of buy-outs and was a syndicated columnist appearing in many papers. Across the country, the number of people working at newspapers has dropped like a rock, from 71,640 in 2004 to 30,820 in 2020.

The experience of the Tribune is not unique. It is estimated that more than half of the daily newspapers are owned by financial corporations. The era of the locally owned newspaper with community ties and responsibilities is definitively over. It is hardly a surprise that people don’t have the same commitment to their local paper as was once the case. So, as noted earlier, more and more people are turning to digital sources that are big enough to provide a high-quality product. This works well for national news but it leaves local coverage adrift, which contributes significantly to the nationalization of our politics. It also contributes to the general lack of trust in government.

Since Alden bought the Tribune, it has gotten thinner and thinner. And an inordinate number of the remaining column inches are taken up with stories from suburban stringers on relatively narrow topics. And, to add insult to injury, If the White Sox game runs late (i.e. after 9 Chicago time) it won’t have game coverage. Unless there are some interesting wire-stories or a lot of obituaries, it doesn’t even last till the end of my breakfast. My serious newspaper time is on-line with the Washington Post.

About two weeks ago, my wife and I decided we’d had it. We subscribed to the digital Sun-Times, the other Chicago daily. (We each had to get our own subscription, but it was still considerably cheaper than the Tribune.) It has much better sports coverage and retains more active coverage of the city itself. It also has an unusual business model. It had gone through the same financial amusement park rides as the Tribune—successive financial crises and revolving door ownership. But earlier this year, it merged with the local National Public Radio affiliate. The deal required a substantial amount of philanthropic support, which as it now stands, will support the new entity for at least the next five years. We will see if that’s a viable financial model for the longer term.

I started looking to purchase a tablet so that I could switch my breakfast reading from the hard copy to all digital—the smart-phone is just too small for me to read while trying to eat. When I get that, our subscription to the Tribune will go to purely digital. (My wife has already made the switch. She also reads Politico and the Times headlines and we both read a digital newsletter on Illinois state politics.)

As it happened, the week I started my Sun-Times subscription, Steve Chapman announced his retirement after 41 years of writing a column. I don’t think it was accidental that his last column was on the threat to our democracy.

It was once assumed that the story of America was one of steady progress in steadily improving our grand experiment in rule by the people. But nothing in this world is guaranteed to last forever, not even the world’s oldest democracy. If it is going to survive, Americans will have to save it — or else be remembered for our failure.

I couldn’t agree more. Happy landings, Steve Chapman.

Declining Public School Enrollment

By Mike Koetting August 30, 2022

Schools are now underway for the year, so this is a timely spot for a post on education. While there are many possible topics, I have been specifically thinking about something a little wonkish: declining public school enrollment.

The Decline

A recent New York Times article proclaimed “Plunging Enrollment a ‘Seismic Hit’ to Public Schools”. It went on to state that “America’s public schools have lost at least 1.2 million students since 2020.” This did not surprise me. The country’s fertility rate has declined by almost 18% since 1990. In the last 10 years, this decline included Latin and Black populations. Combined with declining immigration rates, dropping enrollments would be expected. But the drop has been uneven. Nationwide, a large portion of the recent sharp decline in public school enrollment is in pre-kindergarten and, to a lesser extent, kindergarten. Some of this is due to declining fertility, but it has been clearly aggravated by specific responses to the Covid pandemic. Aside from this, it seems that the aggregate slide in enrollment is minimal.

On the other hand, there is nothing gradual about the enrollment declines in many of America’s large cities. It seems this is the basis for the Times’ headline. Los Angeles, New York, Denver, Philadelphia, Oakland, Chicago and others have all lost a substantial number of students since peaks in the 2000s.

The example of Chicago is instructive.  By 2021, Chicago had lost almost 20% of its public school enrollment in the previous decade. Enrollment was lower again last year and the guess is that enrollment will be even lower this year when the numbers become available.

The teachers’ union says the problem is underfunded and unsafe schools and the charter school advocates say it is a result of people flocking to charter schools. Both of these may be contributing factors, but the bigger culprit is demography. From 2009 to 2019, births in Chicago fell from approximately 44,000 children per year to 33,000 children per year. With the number of children being born decreasing, it doesn’t take a team of academics to figure out why the school enrollment is decreasing.

What Follows from This?

There are many important questions to be answered about the quality and results of our urban school systems. But those are for another day. This post focuses on the less arguable fact that there are dramatically fewer children in many big urban school systems. Changes in the schools by themselves will not change this trend. It is probable that problems in the city school system contribute to fewer children being born in the city. But surely public safety, transportation, economic opportunity, gender roles and, very particularly, housing are much larger factors.

For most of the last 60 years, urban areas, were growing but their growth was primarily in their suburban portions. Traditional urban residential areas didn’t change that much in the early part of that period but later in that period they started to empty out as White flight drained population and poverty led to more deterioration in the housing stock while, paradoxically, increases in the relative expense of the remaining housing drove others out.

In recent years, there has been an uptick in urban density. But the two factors driving that—growth of high density housing in central cities, primarily younger and wealthier, and growth in suburban cities on the border of central cities—do not lead to more children in the urban school districts. Barring dramatic changes in housing policy and/or immigration policy, the students are not coming back to the big urban school districts. 

Like it or not, cities must respond to an ongoing change of this magnitude.

For openers, this will affect the basic finances of impacted school systems. Although school funding schemes differ from state to state, in almost all cases a portion of school funding is tied to attendance. If enrollment declines, funding will in degree follow. Virtually all of these formulae were put in place while attendance was growing, so there hasn’t been much attention to the reality that costs are typically, as economists say, more “sticky” on the downward side than in periods of increase. Thus, pro-rata reductions will be problematic.

But laws can be changed, however difficult. Conceptually more thorny is deciding what should be the policy response. Perhaps there is some argument that simply maintaining the current level of school funding is a reasonable, even if expensive, response to these enrollment decreases since additional per pupil expenditures could be used to improve educational results. But even if that is the case, it’s not easy to imagine how to do so in an efficient manner.

Planning for Lower Enrollments

For one thing, the enrollment declines are uneven. An aggregate 20% pupil reduction over some period will rarely lead to all schools operating at 80% of their capacity. Some will still be overcrowded and some will have attention-catching low occupancy. At some point low occupancy becomes an irresponsible use of public funds. Measuring where, however, is tricky. Simple “percent of capacity” figures can be unhelpful because they may be driven simply by having excess physical capacity in a particular site. While excess physical capacity adds costs, the capacity itself represents sunk costs and is not an overwhelming expense driver. The much more important question is at what point does the size/cost profile of a particular school tilt its costs per pupil beyond what is reasonable.

Moreover, one has to wonder if there is a point at which low-attendance schools are materially impacted in their educational function by the relative lack of student density. Is smaller class size an unlimited good? How is the point at which smaller class size becomes unsupportable influenced by  teacher shortages? Do teachers in low attendance schools need a different skill set than in other schools? What happens to the amount of support personal (social workers, librarians, etc.) as attendance dwindles? Does curriculum shrink as total enrollment declines, presumably a bigger problem in the upper grades.

Not surprisingly, low utilization often appears in neighborhoods with the most problems. People who live in “bad” neighborhoods have higher motivation to leave than those who live in “good” neighborhoods. This makes schools in troubled, primarily Black and Brown neighborhoods, the most underutilized and the most obvious candidates for closure. Which in turn leads to charges that school closing are being targeted at poor people and people of color, which often makes the issue politically charged.

Still, the issue of declining enrollment could be better addressed than putting off any school consolidations for as long as possible and then doing whatever necessary to get through the political firestorm. There should be a more proactive approach, imagining how adjusting for declining enrollments could fit in with larger urban planning goals.

I suspect that the specifics of what might work would vary from community to community, and, in any event, are better left to a discussion between the people who actually know about such things and the communities themselves. But I have a couple of random thoughts.

  • Schools, particularly in urban school districts, have already been morphing into a broader set of uses—such as providing after-school care necessary to accommodate working families or serving as the largest source of breakfast for the children of a neighborhood. Maybe this trend could be extended further and more deliberately. Maybe smaller enrollment schools might work well in buildings thought of more as community centers than schools per se.
  • Developing flexible, high quality transportation systems may open additional possibilities. However done, nothing would be as convenient as the neighborhood school. But if some degree of busing becomes unavoidable, it might be possible to better match students to specialized opportunities. (Several student-transportation companies have been started on the West Coast claiming their mix of technology and multiple vehicle options could offer better student transportation. It’s too early to tell if these are just sales pitches or if they really offer expanded capabilities, but they are worth keeping an eye on.)
  • While the “on-line” educational offerings of the pandemic did no favors to students, particularly minority students, it is probably too early to completely give up on instruction via computer. It might be possible, for instance, to materially lower the per-pupil cost of low enrollment schools by mixing on site instruction with supervised technology.
  • It seems that absent any concerted policy investments, it’s likely that for the foreseeable future, many urban areas will have “bare spots.” The need for developing sensible plans for those areas goes far beyond educational planning, but how schools are reconfigured could reinforce some approaches.

How all this plays out will probably depend on the extent to which all the players (parents, union, administrators and politicians) accept the idea that the old model isn’t going to work and that we need to experiment our way to a good response. I hope a sufficient number of school superintendents feel lucky enough to try.