Latest Stimulus Idea: Keeping People in School, Out of Workforce

Clearly I need to hit the econ books again.

I would have thought that spending $250 billion on state education systems over the next few years would contribute to a reduction in overall economic growth, as opposed to an increase. It seems that many states are encountering budget trouble, and are being forced to consider cuts that would force students to forego higher education, in favor of — presumably — entering the workforce. Given my naivete, I imagined that enabling these people to go back to school would not only be a payoff to states that can’t balance their budgets, but would also slow down the economy. Shows you what I know.

On a conference call this afternoon, David Paterson and four other governors outlined specifics for how they would like to see a $1 trillion federal stimulus shape up, adding a request for education aid.

In addition to money for infrastructure investments and an increase in federal assistance for Medicaid and other social welfare programs, which Paterson called for in a letter to President-elect Barack Obama earlier this week, the governors called for $250 billion to support schools and colleges over a two-year period.

“We do want this to fit together as a package, and not find that the cuts we’re having to make are not working at cross-purposes with a federal stimulus,” Wisconsin Governor Jim Doyle said.

According to Deval Patrick, governor of Massachusetts, the new appropriations would be spread from preschool to colleges and universities. “Our country risks halting or reversing the progress that we’ve made on education,” Patrick said. Doyle recalled his grandparents going to school in the Great Depression, and how similar people led America through World War II and the boom of the 1950s.

After two years, education funding from individual states would return to 2006 levels.

Lest you think that $1 trillion in federal aid over two years would leave the states sitting pretty, have no fear. The governors want you to know that even if they get this money, they’ll still be forced to make cuts:

But he also cautioned against the belief that a federal windfall will enable states to avoid cuts altogeter, saying even the “greatest assistance” from the Obama administration and Congress coupled with belt-tightening at the state level will not prevent the need for “very serious action” by himself and his fellow executives.

“However, it would be a significant, palpable way in which the federal government can alleviate a great magnitude of the problem and, more than anything else, will help the public to reinvest in the growth of its own economy,” Parerson said.

I would have thought that $1 trillion would be enough to solve the states’ fiscal problems — and then some. Strickland, Paterson, Corzine, and Patrick ought to be fired if they can’t manage their states’ respective finances better than that.