Our preoccupation with the immediate crisis of financial capital is causing us to overlook the bigger crisis in America’s human capital. While we commit hundreds of billions of taxpayer dollars to Wall Street, we’re slashing our outlays for public education.
Education is largely funded by state and local governments whose revenues are plummeting. As consumers cut back, state sales and income taxes are shrinking; three quarters of the states are already facing budget crises. On average, state revenues account for half of public school budgets, and most of the funding of public colleges and universities. On top of this, home values are dropping, which means local property taxes are also taking a hit. Local property taxes account for 40 percent of local school budgets.
The result: Schools are being closed, teachers laid off, after-school programs cut, so-called “noncritical” subjects like history eliminated, and tuitions hiked at state colleges.
It’s absurd. We’re bailing out every major bank to get financial capital flowing again. But we’re squeezing the main sources of our nation’s human capital. Yet America’s future competitiveness and the standard of living of our people depend largely our peoples’ skills, and our capacities to communicate and solve problems and innovate – not on our ability to borrow money.
What’s more, our human capital is rooted here, while financial capital moves around the globe at the speed of an electronic blip. Right now global capital markets are frozen, but the big money — mostly in Asia and the Middle East — and will come here, bailout or no bailout. At this point it’s coming back as purchases of dollars or in the form of T-bills that are financing the Wall Street bailout. Eventually American assets will become so cheap that the money will come rushing here to buy up the bargains.
It’s our human capital that’s in short supply. And without adequatepublic funding, the supply will shrink further. Don’t get me wrong: I’m not saying funding is everything when it comes to education. Obviously, accountability is important. But without adequate funding we can’t attract talented people into teaching, or keep class sizes small enough to give kids a real chance to learn, or provide them with a well-rounded curriculum, and ensure that every qualified young person can go to college.
So why are we bailing out Wall Street and not our nation’s public schools and colleges? Partly because the crisis in financial capital is immediate while our human capital crisis is unfolding gradually. But maybe it’s also because we don’t have a central banker for America’s human capital – someone who warns us as loudly as Ben Bernanke did a few months ago when he was talking about Wall Street’s meltdown, of the dire consequences that will follow if we don’t come up with the dough.