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Tag Archives: budget

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By Mira Korber, guest blogger.

The story is familiar. With a tight economy and insufficient funds, public schools have to cut back. Music, physical education, and language classes are the first to go. And along with the classes go the teachers; since 2008, over 294,000 teaching positions have evaporated.

While some believe retaining core classes — English, History, Math — is more important than a substantial music program, studies show that kids who study the arts actually have greater success in academic fields including reading and writing.

In fact, global music programs, such as the famous “El Sistema” in Venezuela, have shown their music students have a drop-out rate of 7% versus the national 25%.

This doesn’t solve the global music education vs. budget problem. But it does show that the opportunity cost of cutting music classes could be high.

The Economic Lesson

When you make a decision, you always give something up, which is otherwise known as your opportunity cost. With budget cuts already in place and more on the way, school boards have to choose what stays in school and what doesn’t. When a school board makes a decision, there’s always some kind of trade-off. For example:

Eliminate music teachers and keep the same number of math teachers to avoid larger classes. Use older editions of textbooks to keep teachers of any subject employed.

Yet in terms of long-run consequences, cutting music classes may have negative effects on students’ academic success.

An Economic Question: Do you think it is possible to balance the arts with an economically viable school budget?

 

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A debt reduction suggestion.

Let’s use what the President’s budget commission suggests. Proposing legislation that will mandate restraint and discourage political opportunism, they are bipartisan. And, they get people on the right and the left agitated which means that everyone is sacrificing something.

Called “The Moment of Truth,” The National Committee on Fiscal Responsibility and Reform has a 65 page blueprint for our fiscal future. They deal with reducing annual spending. They have suggestions for preserving Social Security, Medicare and Medicaid. They would stabilize debt by 2014. And, citing important incentives and legislative restraints, they understand how to make the Congress and each of us work toward fiscal responsibility. (They even suggest a 3-year pay freeze for members of Congress!)

Specifically, they deal with 6 categories:

  1. Discretionary spending cuts
  2. Comprehensive tax reform
  3. Health care cost containment
  4. Mandatory savings (like cutting agricultural subsidies)
  5. Social Security
  6. Process changes (like measuring inflation more accurately)

The plan is excellent.

The Economic Lesson

Discussing the budget, people always seem to refer to the GDP. Here is why. Because the GDP is the total dollar value of the goods and services we produce during one year, it reflects our affluence. So, just like you look at your income from what you produce when you decide what you can spend, the government can look at the value of what it produces.

The President’s budget commission believes we can afford to spend 21% of our GDP. It also says that the deficit, the amount by which annual spending exceeds annual revenue, should be close to 2.3% of GDP. (p. 16)

An Economic Question: Using this NY Times interactive graphic, specifically, how would you cut discretionary spending?

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