More economic wisdom from the Library of Economics and Liberty
In a post today at Econlib, David Henderson writes:
Postscript:
There was an unusually high percentage of good comments on my op/ed on the WSJ site. Here’s one I just noticed:
In Michigan, our Governor ordered auto insurance companies to issue rebates – due to folks driving less I guess.
But amazingly, our Governor who is owned by the teachers union, gave no such order to rebate the portion of property taxes that go toward public schools. Even though there is no way teachers, who stopped in school teaching in March, provided the same level of service.
This needs to change.
Indeed!
This is, in fact, an absurd comment, strictly on economic grounds. The cost of producing auto insurance has gone down due to the pandemic – people are driving less and having fewer accidents. In fact, many auto insurance companies are offering rebates to customers as a good will gesture. In contrast, it is not at all obvious that the cost of producing public education has gone down. Of course, the quality of public education has gone down – on line learning is, for many students, a decidedly inferior alternative to in person instruction, and on line instruction does not provide child care to parents. But as Henderson is well aware, price is driven by cost, not quality. The bundle of goods and services I get when I go to the grocery store today is decidedly lower quality than it was 6 months ago, because I risk getting COVID-19 when I shop. Yet the price of food has risen because the cost of grocery store inputs has risen. (To be clear, I am not defending the governor’s order on auto insurance, or her handling of schools and property taxes, just explaining why the two situations Henderson is comparing are not at all comparable, on narrow economic grounds.)
There is no way that costs for public schools did not fall, except with a mighty effort by districts to still spend the money. School and administration supply purchases, janitorial services, heating, water bills, normal wear and tear physical facilities all went way down. Employee travel and living expenses (which are bigger than you might imagine) went to $0 at shutdown. Bus transportation ended, which is a very significant expense. And this was not offset by any significant increases elsewhere. The district here was not paying for student devices or home internet service at all. You either had them or you got them and paying for them was up to your family.
Now it might not be worth the effort to reclaim this for taxpayers, but it is nonsense to think schools did not spend a lot less.
Teachers are overpaid, lazy and uncaring.
D:
I didn’t know this site had emojis.
By that reasoning we should all be getting tax rebates for all the wars our expensive military has been losing and for our government’s failure to keep us safe from COVID-19. Hell, get us a rebate for 9/11.
This is just war on education rhetoric. Teachers are bad because they knocked a few points off one’s essay for bad spelling in 3rd grade. Most of us get past 3rd grade in life but not modern Republicans. They still can’t get over the fact that someone knows there are two Zs in pizza, so they take it out on teachers, schools, colleges, researchers and other smarty-pants.
Wow, I got italics for free.
There is more I can give you if needed or you do not know the methodology.
“Employee travel and living expenses (which are bigger than you might imagine) went to $0 at shutdown”
Do you have any proof at all about this?
Many expenses have increased, or didn’t exist before this spring (I wish I owned stock in whoever makes plexiglass!). School tax covers about half of our district’s budget, with state aid and county sales tax and a few other smaller sources covering the rest. Any surplus from shutting down will disappear quickly when school begins – distancing and disinfection cost extra.
Hi Ken:
I guess I should add something of value here to explain schools, auto insurance, and Michigan. Simply speaking.
– k-12 and colleges in Michigan have been underfunded and purposely so by the state (more of this in the 3rd topic) to meet the needs of the state due to political decisions in the state government. With the rising cost of getting a college education and the cuts to support a public college education, the burden has fallen upon parents and students alike to go into debt more so today or curtain getting an education beyond high school or an associates degree. In Michigan, the rise of Charter schools has impacted the public school system and its fixed costs to the point of where schools have closed due to fewer students and the students are shuttled elsewhere. This is not happening so much in the richest, 97% white Livingston county as much as in city schools and rural schools. Charter schools do draw upon, public school funding in Michigan.
– Auto Insurance? Yes the Governor did mandate that insurance companies return a portion of their premiums since we went into a shutdown and people were not traveling to work, etc. Another change came about due to a Republican ballot initiative sponsored by billionaire Dan Gilbert of Quicken Loans. The issue was to get rid of no-fault due to its rising costs to people. The main driver of the costs were healthcare taking care of people injured in care accidents. The problem being their was no transparency required of the insurance companies to provide why the fees charged for the healthcare part of No Fault was going up. It passed. Now people can have no healthcare on up to keeping the same no fault coverage. They did reduce the cost of No Fault by 10%.
– Michigan; Lets talk about Michigan a bit. First some history since 1990. The Michigan Senate has been controlled by Repubs 100%. The Michigan House has been controlled by the Repubs 80% of the time since 1990. Up till Gretchen Whitmer since 1990, the governorship has been occupied by a term-limited Repub two of three times. The districts selecting their representatives have been gerrymandered to insure the same over and over. Ballotpedia will back my findings.
So when we talk about infrastructure, schools, colleges, roads, bridges, taxes, etc. look not further than Repubs in Government. In Michigan there is also something called the Headlee Amendment which governs how high the state government can increase taxes in relation to total income which is limits taxes to 9.49%. In 2019, state citizens had income of $460.3 billion (U.S. Department of Commerce Bureau of Economic Analysis) which would translate to ~ $43 billion dollars in tax revenue. The state was projected to collect $33.4 billion in taxes and fees in 2019 based upon current taxes which are below the 9.49% limit. This results in a $10.3 billion short fall (nonpartisan House and Senate fiscal agencies) or at 7.3% of total allowable tax under Headlee. https://www.bridgemi.com/special-report/michigan-doles-out-more-tax-breaks-it-spends-schools
Rather than raise taxes, Repubs are balancing tax receipts on decreased funding for infrastructure, schools, colleges, roads, bridges, taxes, etc. 50% of the roads in Livingston are in poor condition requiring major rebuilds. Michigan is #5 in corporate welfare amongst states. These giveaways are like gift certificates with most having no time limit to them. “Michigan also ranked 13th in the national Tax Foundation’s 2019 business climate index, which measures state tax burdens. Michigan ranked 11th lowest for corporate income taxes, 12th for individual income taxes, 11th for sales tax and 22nd for property taxes. https://www.detroitnews.com/story/news/local/michigan/2019/05/17/feel-overtaxed-michigan-10-b-below-tax-fee-limit/3707389002/ and here: https://subsidytracker.goodjobsfirst.org/state/MI
It is pretty simple to critique Michigan if you do not know the issues which at every turn I lay in front of Republicans publicly. You just can not have it both ways in terms of a good infrastructure, jobs, above age income, low taxes and give aways to special interets. It just does not work that way. Additionally and Besides the burden of Repubs controlling the state for so long when compared to its voting Dem in Presidential Elections since 1992 (with the exception of 2016 [which is another story]), we are also burdened with the DeVos family which gave the nation Betsy.
If there are questions ask away. Others may differ with my critique of the Michigan issues.