The Public Option
Page 11
Indeed, funding isn’t just about schools, nor is education just about funding. Problems like homelessness, untreated medical conditions, family trauma, and drug addiction can—and do—exist everywhere. But they are far more prevalent in poorer communities (both rural and urban). Neighborhoods and communities also have different levels of support networks, economic opportunities, and social capital—all of which are important for fostering an environment where young people can succeed. And there are significant differences in the out-of-school enrichment that kids get, from how much parents read to their children, to whether they make trips to museums, to whether they are involved in outside activities like organized sports or supplementary tutoring.
Take Washington, D.C., as an example. The Washington metropolitan area, taken as a whole, is the richest in the nation, ranking ahead of San Francisco and New York, among others.10 But that average prosperity masks a high degree of residential segregation. The affluent and the middle class tend to live in places like Bethesda, Maryland, Fairfax, Virginia, and wealthy enclaves in D.C. itself. The very poor tend to live in the District’s poorer neighborhoods, like Anacostia.
The District is politically separate from Maryland and Virginia, and it is barred by law from taxing the many suburban commuters who occupy its streets and offices every day. Schools are funded locally, and local district lines are drawn so that poorer people have no chance to vote for higher taxes on their richer neighbors.11 D.C. does what it can to make up for this unequal distribution; in fact, it has some of the highest per-student spending in the country. But even with these high rates of spending within the District, disparities in resources and in outcomes persist between poorer and wealthier schools.
We believe that de facto segregation and underfunding of poor districts are huge problems and worthy subjects for public debate, as are other topics like raising salaries for teachers and ensuring small class sizes. But we also believe that broader issues—from economic growth and opportunities, to segregation and historic discrimination, to health, family, and social crises—must also all be part of the debate. The key issue, however, isn’t whether schools are public. It is that education cannot be divorced from the economic and social context of families and neighborhoods.
The big, splashy reforms in the news are charter schools and, under the rubric of school competition, vouchers, so we will look at both. Before diving into the evidence, though, it’s useful to clarify some terminology. You might think that charter schools are a thing, since they’ve been so widely promoted—and vilified. But, in fact, “charter school” is an umbrella term that covers a wide range of programs. In essence, charter schools are a kind of public-private hybrid, but they range from public schools that test a new educational model to private schools that take state money with very little accountability.12
Some of the most successful charter schools have tested educational models that might (in theory) be adapted in public schools. For instance, some Boston charter schools with a “no excuses” philosophy, an approach that sets high behavioral and academic expectations and a strict disciplinary code, have generated some positive results in test scores and four-year college attendance. Still, a shortcoming of the evidence is that the children studied applied for the charter-school lottery and so might not be a representative sample of all students.13
But charter schools can also fail spectacularly, especially when they have a weak educational model and limited public oversight. The State of Ohio provides a well-known cautionary tale. The state is one of the top five in the number of charter schools, and has spent millions of dollars on charter schools, including on for-profit firms. But the charter scene turned into an ugly free-for-all because the state engaged in little oversight. Some schools closed midyear. Others “shopped” for friendly monitors who would overlook a little sleight-of-hand on money and school quality.14
Take the private firm Electronic Classroom of Tomorrow (ECOT), which sounds kind of futuristic and cool. ECOT’s website touts “Education Your Way” and promotes its status as Ohio’s largest online charter school.15 But in practice, the for-profit company bilked the state and offered little to students. Ohio school officials repeatedly gave the chain’s schools a grade of F for quality.16 And in 2015, ECOT billed the state for 9,000 students who didn’t actually attend the school.17
ECOT is one bad apple in what seems to be a very rotten barrel. Even advocates of charter schools view Ohio as a cautionary tale.18 The Akron Beacon-Journal found that Ohio “charter schools misspen[d] public money nearly four times more often than any other type of taxpayer-funded agency.”19 And Ohio isn’t alone: some charter schools nationwide have been caught engaging in very questionable practices.20 It’s no surprise then, that some nationwide studies suggest that charter schools in the aggregate do not raise student achievement.21
Overall, we are dubious to agnostic on charter schools, simply because they encompass so many different models. The best charters might permit innovative nonprofits to aid the cause of reform in the public schools—basically, a way of tapping experimental expertise to improve the public option. But as the Ohio scandal suggests, there is no reason to think that the best approach is to give government funds, willy-nilly, to private firms.
Now for school vouchers, which command the allegiance and affection of neoliberals. It’s not clear that vouchers have reliably boosted school achievement in the areas where they’ve been tried. Consider the conclusions of a 2017 study by a Stanford University researcher:
Studies of voucher programs in several U.S. cities, the states of Florida, Indiana, Louisiana, and in Chile and India, find limited improvements at best in student achievement and school district performance from even large-scale programs. In the few cases in which test scores increased, other factors, namely increased public accountability, not private school competition, seem to be more likely drivers. And high rates of attrition from private schools among voucher users in several studies raises concerns. The second largest and longest-standing U.S. voucher program, in Milwaukee, offers no solid evidence of student gains in either private or public schools.22
This is just one study (though a wide-ranging one), and there are conflicting views about school vouchers, including about the data. As a result, it is helpful to think about school vouchers from a broader and more basic perspective. The neoliberal theory of vouchers is that schools will improve as they compete for parents’ voucher dollars. On some level, we marvel at the ability of neoliberals to imagine everything as a market. But the reality is that their uncritical faith in markets is very much like the old canard about communism—it sounds great in theory but it doesn’t make sense in practice. There are a lot of sociological factors that undermine the simple market analogy. Parents may not understand how vouchers work or may not have time to research schools. It may be inconvenient to send kids to a school that isn’t close to their home or to a parent’s workplace. And markets might not serve all students well—for example, students with disabilities.
Going beyond parents, the market framework assumes that the problem of performance in schools is that schools and teachers aren’t hard-working or innovative enough, and that competition might provide the incentive for them to improve. But it isn’t at all clear that this is the problem. The problems with American public schools are far more varied and are often tied up with problems in the community. In addition to funding issues (both for schools and for teacher salaries), less successful schools often have student populations that are poorer, historically have suffered from discrimination and segregation, have fragmented or difficult family situations, don’t receive as much out-of-school education and enrichment, and don’t get as much social and community support. Even if schools are extremely innovative, it is very hard for schools alone to address such social problems, especially when they are severe.
Adding to all this is the problem of corruption in private markets. A voucher system might lead schools to compete on substance—the quality of instructi
on. But a private school voucher system, like any private market, can also reward pure marketing and even lies. Schools with an impressive new building may look good but hide an inferior educational “product.” And schools may fudge, manipulate, and even falsify their enrollment and performance numbers if they can profit by doing so.
The takeaway, then, is that school reform is important but tricky, and that vouchers are not a magic solution. Background conditions matter, a lot. And public debate over quality is critical. But there is no reason to think (and no sustained experience to show) that turning the schools over to private firms would solve the system’s problems.
Public Housing and Housing Vouchers
Public housing is one of the most vilified public options, with critics complaining that housing projects warehouse poor and minority families in substandard conditions in segregated neighborhoods. We’ll take a closer look shortly, but before we acknowledge the partial truth in some of these criticisms, it’s worth remembering that public housing has helped ease America’s housing problems and has promoted equal opportunity for many.
Public housing is just one of several public options that offer universal access to housing at an affordable price. In the Great Depression, the New Deal initiated the federal public housing program, which sought not only to provide decent housing but also, in doing so, to create jobs.23 Facing a housing shortage and an influx of returning GIs after World War II, the federal government responded with the mortgage subsidies of the GI Bill. In the 1960s, President Johnson’s War on Poverty offered subsidies to private developers to build low-income housing. And in the 1970s, Richard Nixon endorsed housing vouchers that subsidized market housing for low-income families.24
Housing policy is complex and difficult, not least because programs interact with one another. For instance, mortgage subsidies (through the GI Bill and tax deductions) helped many middle-class families buy suburban homes, so by the 1960s and 1970s public housing had become largely the province of the urban poor.25 Congressional restrictions on income levels have further transformed the public housing program: in 2015, the average income of public housing families was about $14,000 per year.26
So the current debate over public housing is essentially a debate over housing for the very poor. Overall, public housing has provided access to decent and affordable housing to low-income families that otherwise would live in substandard conditions or face unaffordable rents.27 Today, 1.2 million American households occupy public housing units.28 The connection to freedom and equality is clear: at its best, decent housing makes it possible for poor parents to provide a safe environment for children and for themselves. At the same time, of course, public housing competes with market housing: no one is required to live there.
Today, the need for affordable housing is particularly great because the cost of housing in many cities has far outstripped wages. More than 21 million households (in 2016) paid rents of more than 30 percent of income (a standard measure of housing affordability), with 11 million of those paying more than 50 percent of their income on rent.29
Media images of public housing have highlighted high-poverty, high-crime projects like Cabrini-Green in Chicago (which was demolished in 2011).30 But in other large cities, including notably New York City, public housing has proved a lasting success. Today, more than 400,000 New Yorkers live in public housing, which—with some missteps—mostly provides decent and affordable housing. Nicholas Dagen Bloom’s careful study shows that public administration is key to the success of New York’s public housing.31
Taking a national view, public housing has had notable successes. In their overview of housing policy research, Robert Collinson and his colleagues found that studies from the 1960s and 1970s showed that public housing appeared to “greatly increase housing affordability.”32 In a 1999 study, economists Janet Currie and Aaron Yelowitz examined data on public housing and concluded that the program has been unfairly vilified. They reported that households in public housing are less crowded and less likely to live in buildings with fifty or more units.33
Still, it isn’t clear that traditional public housing can cope with the problem of affordability. For one thing, there is a shortage of public housing units relative to need. The U.S. Department of Housing and Urban Development reports that only 60 percent of low-income families with extreme need have access to public housing assistance.34 In many cities, the waiting list is long: in New York City in 2012, for example, the waiting list stretched to more than 200,000 applicants. With under 6,000 slots opening up each year, most of those families will wait years.35 Hundreds of thousands of New Yorkers apparently believe that public housing is a good option for them—hence the long waiting list.
For another thing, traditional public housing units are disproportionately located in segregated, poor neighborhoods. Nearly one-third of public housing is located in census tracts with a 40 percent or higher poverty rate, and well over one-third of public housing stands in census tracts with minority populations of 80 percent or more.36 Indeed, the location and design of public housing locations in the past “helped reinforce patterns of concentrated poverty and racial segregation.”37 These features can make renovating existing public housing an unattractive option.
Over time, the mix of public dollars devoted to housing has also shifted. Over the last two decades, of the number of public housing units has shrunk by 300,000. At the same time, an additional 2.2 million households have gained assistance through housing vouchers and government-subsidized private housing. The result is that today, “privately-owned and operated properties house nearly three-quarters of assisted households.”38
So public housing as a public option has been on the decline. Given the political roadblocks to increasing funding, even progressive housing advocates have turned to market subsidies instead, in particular to housing vouchers—called Housing Choice Vouchers or Section 8 vouchers. Even the venerable Center for Budget and Policy Priorities, a left-leaning think tank, recognizes housing vouchers for their progressive effects on homelessness, poverty, and opportunity.39
Housing vouchers offer families the opportunity to rent private housing and to pay no more than 30 percent of their income each month in rent. Landlords receive a check from the federal government for the balance. So if market rent is, say, $1,000 but the family’s contribution is capped at $600, the government pays the landlord the remaining $400.40 Housing vouchers have proved popular among low-income households, and (relative to no housing subsidy at all) they improve housing affordability and (possibly) housing quality.41 But vouchers, like public housing, are in short supply, and waiting lists are long.42
Housing vouchers also have not markedly changed the location of subsidized housing. “Even though voucher holders have the ability to reside in middle-class neighborhoods that are not racially segregated, most end up in predominantly minority neighborhoods, most of which also struggle with high rates of poverty.”43 And housing vouchers share many of the shortcomings of other market subsidies. Studies have found that landlords charge more to Section 8 tenants than to market tenants, meaning that they reap an extra profit at the government’s expense, as we would expect from a voucher-based system.44
Government subsidies to private developers have pros and cons as well. The Low-Income Housing Tax Credit, the largest subsidy program, offers tax credits—really, just cash payments—to private developers who built rental units open to low-income families. The program has added millions of affordable housing units to the nation’s housing stock. Still, developments tend to be in low-income areas. One recent study found that the program’s costs have risen sharply, even as the number of additional units has declined.45
When we move the discussion from public housing to private homeownership, most people would be surprised to find out that the market for purchasing a home has also been shaped by a public option. It’s sneakier and far more technical, but as the scholars Adam Levitin and Susan Wachter have argued, America once had a public option for
housing finance.46
After the Great Depression, the government created a variety of “public options” that were integral to the housing finance market. The key features were the Federal Housing Administration (FHA) and the Federal National Mortgage Association (Fannie Mae). The Federal Housing Administration (and also the Veterans Administration) offered insurance on mortgages—but not all mortgages. FHA set standards for mortgages in terms of maximum interest rates, loan to value ratios, and length of mortgages.47 Fannie Mae created a secondary market for these mortgages, buying up FHA and VA mortgages and expanding liquidity in the mortgage markets. This deep bureaucratic history is the origin of the thirty-year fixed-rate mortgage, which could be offered because long-term loans were insured. In other words, the public option for mortgage insurance actually created a wholly new product in the market itself—and in the process helped make America’s middle class into a class of homeowners.
Over time, however, Fannie Mae and Freddie Mac were privatized, and adjustable rate mortgages, teaser rate mortgages, and other more complex products expanded. This new world put more and more risk on homeowners, compared to the old world of the public option, which tried to reduce risk for homeowners through a very simple set of products. The result of abandoning the public option in housing finance, Levitin and Wachter conclude, was the great crash of 2008.
The important thing for our purposes, however, is to notice that for housing, the public option wasn’t just one thing—government provision of housing. There were really two different approaches to a public option for housing. The housing finance public option was the default for most Americans, for the great middle class who could afford to buy their own homes if the rates were stable and secure. For those who weren’t as well off, public housing existed as a baseline safety net.