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The Republican Budget War on Children

Politicians who seek steep government spending cuts while opposing a higher U.S. debt ceiling sound a common theme. Slash spending for the sake of the next generation, they say, because the nation's debt is crippling our children's aspirations. "The question comes down to this: What will you say to that next generation about what you did to make sure that wouldn't be their fate?" said Rep. Michelle Bachmann (R-Minn.) at a Republican rally in New Hampshire on Apr. 30.

The problem is that the proposed spending cuts would disproportionately affect the current generation of children. It's emblematic of skewed priorities that the same Congress that on Apr. 15 approved Rep. Paul Ryan's (R-Wisc.) budget proposal to exempt anyone 55 and older from changes in Medicare had less than two months earlier supported cuts of at least $7 billion in discretionary spending for children's education. Slashed were such programs as the Even Start Financial Literacy Program, the High School Graduation Initiative, and Head Start. (The eventual compromise budget reached late on Apr. 8 focused cuts in other areas, such as high-speed rail.)

Pressure on education is even more draconian at the state level. The District of Columbia and 34 states have reduced expenditures on K-12 education and 43 states have cut into higher education, according to the Center on Budget & Policy Priorities. Human capital is the key to creating wealth in a modern economy. "I don't think most people are thinking about the long-term time bomb we're creating," says Robert Pianta, dean of the Curry School of Education at the University of Virginia. "There's no question you'll save some money upfront, but the long-term cost is enormous."

Early Childhood Education Pays Off

In recent years, scientific and economic research has coalesced around the insight that the biggest bang for the public buck comes from investing in early childhood development programs, especially for young kids growing up in poverty. Investment in early childhood education not only improves academic and social skills; it reduces future crime and teenage pregnancy rates for disadvantaged children.

Still, early childhood education has taken a hit on the state level. According to the National Institute for Early Education Research, "state cuts to preschool funding transformed the recession into a depression for many young children." On Apr. 26 the group released its "State of Preschool 2010" report, which found that while enrollment increased slightly, total state funding for pre-K fell by nearly $30 million. It would have dropped by a further $49.3 million if not for funding from the 2009 federal stimulus bill. That financial support is ending.

The education pipeline is worsening, too. The U.S. was once the world's leader in mass education, with succeeding generations of children better educated then their parents. The trend toward ever-greater educational achievement has slowed since the 1970s, according to Harvard University economists Claudia Goldin and Lawrence Katz. They note that the U.S. has slipped from the top of the Organization for Economic Cooperation and Development's ranking for high school graduates to near the bottom. The U.S. college graduation rate has remained steady over the last decade, but the country has the highest college dropout rate among OECD nations.

Help Wanted: Well-Educated Workers

Yet demand for well-educated workers is rising. According to the U.S. Bureau of Labor Statistics, about half of the 30 fastest-growing occupations in the U.S.—jobs such as biomedical engineers and financial examiners—require at least a bachelor's degree. Entry into an additional seven growth occupations, including dental hygienists and occupational therapy assistants, requires either an associate's degree or a postsecondary vocational certificate.

Here's the thing: The quality of retirement for the Baby Boom generation—from Social Security to private pensions—will depend on cash flow created by the current generation of young people. From the Morrill Land Grant College Act of 1862 to the G.I. Bill of 1948 and on to the National Defense Education Act of 1958, the lesson of history is clear: Education pays.

For example, the NDEA funded the education of a generation of young people that became the driving force behind the infotech and biotech revolutions. For the nation's financial planning, it's not a question of "can we afford it?" Of course we can. Maybe those in the 50-to-70 age range will have to relinquish something now so that economic growth will support them in old age. In a world of trade-offs, the U.S. needs to invest more, not less, in children.

Farrell is contributing economics editor for Bloomberg Businessweek. You can also hear him on American Public Media's nationally syndicated finance program, Marketplace Money, as well as on public radio's business program Marketplace.

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