Last night on ABC News, David Muir made a truly whopping claim. With a straight face he reported that, according to a Stanford study, “a 5% increase in American test scores would translate into a $41 trillion increase in the American economy in the next 20 years.”

Wow.  Let that idea sink in.  It’s amazing propaganda. As I’ve previously concluded: The idea that the focus of our system of public education should be to maintain and improve the American standard of living is an idea so often expressed, we don’t recognize it as propaganda.

The study Muir referred to — “The High Cost of Low Educational Performance: THE LONG-RUN ECONOMIC IMPACT OF IMPROVING PISA OUTCOMES” — as it turns out, is not nearly so confident about a test score / economic growth causation as ABC News would have its viewers believe.

The study offers “five approaches” to argue test score / economic growth causation.  But, significantly, the report admits:  “none of the approaches addresses all of the important issues. Each approach fails to be conclusive for easily identified reasons. However, the combination of approaches, with similar support for the underlying growth models, provides some assurance that the most obvious problematic issues are not driving the results.”

“Some assurance” in its conclusion, is a far reach from the confidence about the study’s conclusion that ABC News projected last night.  “Some assurance” suggests, maybe, a 20% possibility, not a 100% certainty reported by ABC News.

The study centers around results from the Program for International Student Assessment (PISA) tests of 15 year olds from around the globe. Last night ABC news reported the latest PISA results:  “The U.S. now ranks 25th in math, 17th in science, and 14th in reading out of the 34 Organization for Economic Cooperation and Development (OECD) countries.”

Diane Sawyer said the report was a “wake-up call.”  David Muir said the numbers were “stunning,” and quoted President Obama as saying, “this is our Sputnik moment,” and showed a video clip of John Kennedy during the 1960 presidential campaign speaking with alarm concerning the Soviets’ space breakthrough.

Muir, in the context of this PISA report, gave an amazing interpretation of history — “Money was poured into math and science and 10 years later we put a man on the moon” — implying that a ten year effort to improve high school math and science resulted in our moon shot!  This is breathtaking propaganda — deliberate misinformation.  The actions that actually succeeded in bringing the space program together had zero to do with efforts to improve high school education from 1960 to July 20, 1969.

Then, Muir repeated the impossible notion that that a 5%  increase in American test scores would translate into a $41 trillion increase in the American economy in the next 20 years. “Just a 5% increase,” Muir said to Diane Sawyer, who replied, evidently referring to the notion that improved high school education led to the 1969 moon walk, “We did it before and we can do it again.” (Hear the message: just like in the 1960’s, when we responded to the Sputnik challenge by gearing up our math and science education, we now need to respond to the current economic challenge by gearing up our math and science education.  If how to gain $41 trillion in 20 years is the question, then achieving greater educational rigor is the answer.)

The notion that a 5% increase in student test performance will translate, over 20 years, into $41 trillion increase in the economy is a truly stunning claim.  The statistical analysis needed to justify such a conclusion is very much debatable. The study identifies the key issue: “Work on cross-country growth analysis has been plagued by legitimate questions about whether any truly causal effects have been identified, or alternatively whether the estimated statistical analyses simply pick up a correlation without causal meaning.”

Here is an abbreviated version of the “five approaches” that together, according to the report, give “some assurance” of causation:

• First, this estimated relationship is little affected by including other possible determinants of economic growth. …
• Second, to tackle the most obvious reverse-causality issues, Hanushek and Woessmann (2009) separate the timing of the analysis by estimating the effect of scores on tests conducted until the early 1980s on economic growth in 1980-2000. …
• Third, the analysis traces the impact on growth of just the variations in achievement that arise from institutional characteristics of each country’s school system (exit examinations, autonomy, and private schooling). This estimated impact is essentially the same as previously reported, lending support both to the causal impact of more cognitive skills and to the conclusion that schooling policies can have direct economic returns. …
• Fourth, one major concern is that countries with good economies also have good school systems – implying that those that grow faster because of the basic economic factors also have high achievement. To deal with this, immigrants to the United States who have been educated in their home countries are compared to those who were educated in the United States. … Looking at labour-market returns, the cognitive skills seen in the immigrant’s home country lead to higher incomes – but only if the immigrant was educated at home. Immigrants from the same home country schooled in the United States see no economic return to home- country quality, thus pinpointing the value of better schools.
• Fifth, perhaps the toughest test of causality is reliance on how changes in test scores over time lead to changes in growth rates. This approach eliminates country-specific economic and cultural factors. Figure 8 (see below) simply plots trends in educational performance and trends in growth rates over time for OECD countries.25 This investigation provides more evidence of the causal influence of cognitive skills. The gains in test scores over time are related to the gains in growth rates over time.  As with the other approaches, this analysis must presume that the pattern of achievement changes has been occurring over a long time, because it is not the achievement of school children but the skills of workers that count. Nonetheless, the consistency of the patterns and the similarities of magnitudes of the estimates to the basic growth models is striking (see Hanushek and Woessmann, 2009).

Economist Joseph Stiglitz in an article in The Guardian, says, “It’s possible to cut the US deficit in a growth-friendly way that reduces inequality. But certain powerful groups won’t like it.”

He says that new austerity strategies now being championed, “will almost surely lead to weaker national and global economies and a marked slowdown in the pace of recovery.” He says, “Those hoping for large deficit reductions will be sorely disappointed, as the economic slowdown will push down tax revenues and increase demands for unemployment insurance and other social benefits.”

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Stiglitz says that the deficit-reduction agenda in the U.S., “is an attempt to weaken social protections, reduce the progressivity of the tax system, and shrink the role and size of government – all while leaving established interests, such as the military-industrial complex, as little affected as possible.”

The plan Stiglitz proposes would curb corporate welfare and would increase tax rates on the wealthy. About his deficit-reduction package, Stiglitz says: “lt would more than meet even the most ardent deficit hawk’s demands. It would increase efficiency, promote growth, improve the environment and benefit workers and the middle class.”

But he is not optimistic that such a sensible plan would ever be enacted because, “It wouldn’t benefit those at the top, or the corporate and other special interests that have come to dominate America’s policymaking.” Here is Stiglitz’s plan:

First, spending on high-return public investments should be increased. Even if there are emergency loans options available, this widens the deficit in the short run, it will reduce the national debt in the long run. What business wouldn’t jump at investment opportunities yielding returns in excess of 10% if it could borrow capital – as the US government can – for less than 3% interest?

Second, military expenditures must be cut – not just funding for the fruitless wars, but also for the weapons that don’t work against enemies that don’t exist. The US has continued as if the cold war never came to an end, spending nearly as much on defence as the rest of the world combined.

Third, corporate welfare must be ended. Even as America has stripped away its safety net for people, it has strengthened the safety net for firms.

• Corporate welfare accounts for nearly 50% of total income in some parts of US agro-business, with billions of dollars in cotton subsidies, for example, going to a few rich farmers, while lowering prices and increasing poverty among competitors in the developing world.
• An especially egregious form of corporate special treatment is that afforded to the drug companies. Even though the US government is the largest buyer of their products, it is not allowed to negotiate prices, thereby fuelling an estimated increase in corporate revenues – and costs to the government – approaching $1tn dollars over a decade.
• Another example is the smorgasbord of special benefits provided to the energy sector, especially oil and gas, thereby simultaneously robbing the treasury, distorting resource allocation and destroying the environment.
• Then there are the seemingly endless giveaways of national resources – from the free spectrum provided to broadcasters to the low royalties levied on mining companies to the subsidies to lumber companies.

Fourth, create a fairer and more efficient tax system.

• Eliminate the special treatment of capital gains and dividends. Why should those who work for a living be subject to higher tax rates than those who reap their livelihood from speculation (often at the expense of others)?
• Increase tax on the wealthy. With more than 20% of all income going to the top 1%, a slight increase, say 5%, in taxes actually paid would bring in more than $1 trillon over the course of a decade.

Interesting article by Andy Kroll in Mother Jones, “How the Oligarchs Took America” reports on how America became a country “of the rich, by the rich, and for the rich.” The article uses information from a new book by political scientists Jacob Hacker and Paul Pierson — “Winner Take All Politics.”

It says the march to oligarchy started with President Jimmy Carter, who slashed the capital gains tax from 48% to 28%. The article says, “Ronald Reagan, you could say, simply took the baton passed to him by Carter. His 1981 Economic Recovery and Tax Act (ERTA) bundled a medley of goodies any oligarch would love, including tax cuts for corporations, ample reductions in the capital gains and estate taxes, and a 10% income tax exclusion for married couples in two-earner families.”

The article quotes Hacker and Pierson: “ERTA was Ronald Reagan’s greatest legislative triumph, a fundamental rewriting of the nation’s tax laws in favor of winner-take-all outcomes.”

The article condemns the Supreme Court’s Citizen’s United decision that it says empowered the political power of the oligarchy by opening the floodgates for big money from anonymous donors. It says, “Even for dedicated reporters, tracking down these groups is like chasing shadows: official addresses lead to P.O. boxes; phone calls go unreturned; doors are shut in your face.”

Excerpts from the article:

• The right wing won the opening battle. In the 2010 midterm elections, shadowy outside organizations (who didn’t have to disclose their donors until well after Election Day, if at all) backing Republican candidates doled out $190 million, outspending their adversaries by a more than two-to-one margin, according to the Center for Responsive Politics.
• Their investments in conservative candidates across the country paid off: the 62 House seats and six Senate seats claimed by Republicans were the most in the postwar era—literally, a historic victory.
• After World War II, a swelling middle class was the most powerful voting bloc, while, in those same decades, the working and middle classes enjoyed comparatively greater economic prosperity than their wealthy counterparts. Kiss all that goodbye. We’re now a country run by rich people.
• American policy has been so skewed toward the rich that we’re now living through the worst period of income inequality in modern history. Consider the statistics: 50 years ago, the wealthiest 1% of Americans accounted for one of every 10 dollars of the nation’s income; today, it’s nearly one in every four. Between 1979 and 2006, the average post-tax household income (including benefits) of the wealthiest 1% increased by 256%; the poorest households saw an increase of 11%; middle class homes, 21%, much of which was due to the arrival of two-job families.
• The number of Americans earning a steady income declined by 4.5 million between 2008 and 2009, and the average wage in the US dipped by 1.2%, to $39,055. On the other hand, the average wage among Americans earning more than $50 million per year was $91 million in 2008 and $84 million in 2009.
• The origins of oligarchy lay in the late 1970s and in the unlikely figure of Jimmy Carter, a Democratic president presiding over a Congress controlled by Democrats. It was Carter’s successes and failures, they argue, that kicked off what economist Paul Krugman has labeled “the Great Divergence.”
• Ronald Reagan, you could say, simply took the baton passed to him by Carter. …

Paul Pierson in this clip talks about facts in his book, “Winner Take All Politics”

• The momentum of the tax-cut fervor carried through the presidencies of George H.W. Bush and Bill Clinton, and in 2000 became the campaign trail rallying cry of George W. Bush.
  Where rewriting the tax code proved too politically difficult, demolishing regulations worked almost as well. This has been especially true in the world of finance. There, a legacy of deregulation transformed banking from a relatively staid industry into a casino culture, ushering in an era of eye-popping profits, lavish bonuses, and the “financialization” of the American economy.
• Republican Senator Phil Gramm of Texas, who as an aide to presidential candidate John McCain infamously called America a “nation of whiners,” [20] was, in fact, the driving force behind two of the most influential pieces of deregulation in recent history.
• In 1999, President Clinton signed the Gramm-Leach-Bliley Act, a bevy of deregulatory measures that obliterated Glass-Steagall. In December of the following year, Gramm quietly snuck the 262-page Commodity Futures Modernization Act into a massive $384-billion spending bill. Gramm’s bill blocked regulators like the Securities and Exchange Commission (SEC) from cracking down on the shadowy “over-the-counter derivatives” market, home to billions of dollars of opaque financial instruments that would, years later, nearly demolish the American economy.
• As presidents, both Bill Clinton and George W. Bush wrapped their arms around financial deregulation. As a result, in a binge of financial gluttony, Wall Street grew fat in ways never previously seen. Between 1929, the year the Great Depression began, and 1988, Wall Street’s profits averaged 1.2% of the nation’s gross domestic product; in 2005, that figure peaked at 3.3% as industry bonuses soared ever-higher. In 2009, bad times for most Americans, bonuses hit $20 billion.
• No understanding of the rise of our New Oligarchs could be complete without exploring the effects of the Supreme Court’s January Citizens United decision, which set their power in cement more effectively than any tax cut ever could. Before Citizens United, the rich used their wealth to subtly shape policy, woo politicians, and influence elections. Now, with so much money flowing into their hands and the contribution faucets wide open, they can simply buy American politics so long as the price is right.
• What the present Supreme Court, itself the fruit of successive tax-cutting and deregulating administrations, has ensured is this: that in an American “democracy,” only the public will remain in the dark. Even for dedicated reporters, tracking down these groups is like chasing shadows: official addresses lead to P.O. boxes; phone calls go unreturned; doors are shut in your face.
• Then there’s the roster of corporations who have used their largesse to influence American politics. Health insurance companies, including UnitedHealth Group and Cigna, gave a whopping $86.2 million to the US Chamber to kill the public option, funneling the money through the industry trade group America’s Health Insurance Plans. And corporate titans like Goldman Sachs, Prudential Financial, and Dow Chemical have given millions more to the Chamber to lobby against new financial and chemical regulations.
• As a result, the central story of the 2010 midterm elections isn’t Republican victory or Democratic defeat or Tea Party anger; it’s this blitzkrieg of outside spending, most of which came from right-leaning groups like Rove’s American Crossroads and the US Chamber of Commerce.
• Spending in the 2012 elections will smash all records. Think of it this way: in 2008, total election spending reached $5.3 billion, while the $1.8 billion spent on the presidential race alone more than doubled 2004’s total. How high could we go in 2012? $7 billion? $10 billion? It looks like the sky’s the limit.
• Few solutions exist to staunch the cash flow: the DISCLOSE Act, intended to counter the effects of Citizens United, twice failed in the Senate this year; and the best option, public financing of elections, can’t even get a hearing in Washington.
• Until lawmakers cap the amount of money in politics, while forcing donors to reveal their identities and not hide in the shadows, the New Oligarchy will only grow in stature and influence. Never before has the United States looked so much like a country of the rich, by the rich, and for the rich.