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School Vouchers: Promise and Pitfalls

By Sarah Reber·March 25
UCLA, Luskin School of Public Affairs

The Issue:

There is strong support for private school vouchers in the Trump administration. States would likely have ample discretion in how they implemented any new, Federally-funded voucher program. Who benefits educationally and financially — and who may be harmed—would depend critically on how such programs are designed.

The Facts:

  • School vouchers give families money to use for private school tuition including, in some cases, at religious schools. They can create incentives for public and private schools to improve as they compete for students.
  • Evidence on vouchers is mixed. Some studies find educational improvements while others have found that using a voucher to attend private school actually lowered student test scores.
  • Students who remain in public schools could be made worse off if voucher programs lure away the highest-achieving students or if public school funding is reduced. Special measures may be needed to ensure that the requirements of disabled or special needs students are met.

What this Means:

If the goal is to improve education for low-income children, the Administration should consider requiring States to avoid program designs that lack accountability for outcomes or will mostly transfer funding to families already using private schools. Considering the mixed evidence on the effectiveness of voucher programs, they would be wise to proceed with caution.

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Education Funding: Tax Credits Cost the Federal Government Money

By Nora Gordon·March 21
McCourt School of Public Policy, Georgetown University

The Issue:

President Trump pledged to devote $20 billion to expand "school choice" programs. Scholarship tax credit programs are one possible way the federal government could fund greater access to private education without going through Congressional appropriations.

The Facts:

  • Tax credit scholarships allow taxpayers to make a contribution to a scholarship program and subtract the value from taxes due.
  • The Florida Tax Credit Scholarship Program, spotlighted by the administration, allows individuals or corporations to donate to non-profit scholarship funding organizations (SFOs) and deduct the full amount from their state tax obligation. Students from low-income families receive the scholarships.
  • Because these funds go through a nonprofit intermediary they can be directed to religious private schools, avoiding legal issues. Private schools receiving these vouchers would not necessarily be subject to a variety of federal and state requirements, including serving students with disabilities through special education and participating in accountability systems.

What this Means:

Even though it wouldn't increase the federal budget, supporting school choice with a $20 billion federal tax credit scholarship program would require $20 billion in some combination of federal spending cuts and deficit increases. The details of the program —who is eligible, how foundations are formed, and what conditions private schools must meet— would affect student choices, the size of the deficit and the progressivity of the tax code.

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Agricultural Implications of Mr. Trump’s Policies

By Menzie D. Chinn·March 20
Robert M. La Follette School, University of Wisconsin-Madison

The Issue:

Donald Trump was elected with strong support from areas that are highly dependent on agriculture. However, several of the Trump administration's policy proposals threaten to lower prices for agricultural products, reduce demand for U.S. agricultural exports, and raise agricultural production costs.

The Facts:

  • Prices for agricultural products are likely to fall because tax cuts and spending increases –  as well as the Federal Reserve's actions – will likely result in higher interest rates and a stronger dollar. The dollar's appreciation makes agricultural goods more expensive to foreigners, reducing demand and causing prices to decline (see chart).
  • The farm sector is a net debtor, so rising interest rates will depress farm incomes, raise the cost of borrowing for farmers and likely drive down already declining prices of farmland since the costs to mortgage these purchases would rise.
  • More aggressive U.S. trade policies risk retaliation from Mexico and China, two of the largest markets for U.S. agricultural exports.

What this Means:

The fortunes of rural areas, closely linked to the strength of the agricultural sector, are likely to suffer given the budget priorities of the Administration, and the conduct of macroeconomic, trade, and immigration policies.

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Immigration and Economic Growth in the U.S., 2000-2015

By Giovanni Peri·March 16
University of California, Davis

The Issue:

Concerns regarding immigration during the presidential election revolved around undocumented immigrants entering through the U.S.-Mexico border. This focus does not take into account a shift towards more educated immigrants over the last 15 years and their contribution to raising productivity and U.S. economic growth.

The Facts:

  • Groups of immigrants with high levels of education grew much more than those with lower education between 2000 and 2015 (see chart). Immigrant inflows from India and China increased while those from Mexico dropped dramatically.
  • Among the college educated, immigrants are much more likely than U.S.-born workers to have a degree in science, technology, engineering or mathematics (STEM). These fields play a key role in technological advancements and economic growth.
  • Immigrants have mainly increased population and employment in large, densely populated cities where productivity is much higher — contributing to increases in U.S. productivity and income per person.

What this Means:

Focusing immigration policy on the US-Mexico Border misses completely the reality of the last 15 years of immigration. The growth of professionals with college degrees in STEM fields has come largely from foreign-born workers. It is unclear whether having fewer high-skilled immigrants would protect high-skilled American jobs in the short run, but it would certainly hurt growth and jobs for all in the long run.

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Will ‘Deconstructing the Administrative State’ Spur Economic Growth?

By Steve Cicala·March 14
Harris School of Public Policy, University of Chicago

The Issue:

The Trump Administration has rolled back regulations, instituted a hiring freeze on federal workers, appointed industry figures to high government positions, attempted a two-for-one repeal for all new regulations, and is seeking large budget cuts at federal agencies as part of an agenda of “deconstruction of the administrative state.”

The Facts:

  • Government intervention might improve economic outcomes when prices do not reflect the true cost to society -- as in the case of pollution.
  • The mere presence of harm to a third party is insufficient to guarantee that government intervention will improve matters.
  • These calls can be hard. Poorly designed fuel economy standards that make allowances for vehicle weight, for example, can create the perverse incentive to make cars heavier. While the standards are distortionary, it is not clear that they are worse than having no policy in place to reduce fuel usage.

What this Means:

By treating “the administrative state” as a uniformly harmful institution, the Trump administration risks causing profound damage. Regulations are not universally good or bad—they’re tools and their impact can be beneficial or deleterious depending on how they are used. Promoting policies that give the appearance of greater profits or higher employment without accounting for their complete cost is a recipe for harming the economy.

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