While some economists point to signs that the nation’s economy is improving, others say the U.S. faces a much slower climb out of the recession–a scenario that will have a huge effect on public education in the coming years.
Though the Dow recently broke 10,000 to hit its highest level for the first time in a year, the national unemployment rate, at 10 percent, is the highest it has been since 1983.
States are still waiting to hit bottom and are not likely to do so for another year or two–and education will feel the financial impact for some time after that, said Richard Sims, the chief economist for the National Education Association (NEA), at the Software and Information Industry Association’s Ed-Tech Business Forum on Dec. 1.
At best, Sims said, current conditions will create the way for improvement, but it will be a “long stretch” of improvement until the economy has recovered fully.
If the economy’s rate of growth during recovery resembles its rate during previous economic recoveries and remains stable, the nation will not return to its pre-recession level of unemployment until December 2016, Sims predicted.
The nation is in a financial recession as opposed to an average recession, he said, and financial recessions are deeper and only recover at about half the rate of a normal recession.
Sims predicted that unemployment levels have not yet bottomed out and that the economy will see permanent effects from the recession.
“When you have a recession, you lose economic growth for a period of time, but when the recession’s over, you don’t get it back–[you have] lost incomes [and] lost investments,” Sims said.
“With education, we’ll see the same effect,” he added, pointing to per-pupil funding as one area that will continue to feel the recession’s impact.
Ed Muir, deputy director of research for the American Federation of Teachers (AFT), agreed. “There is a chance that we’re not going to get back to [the previous unemployment level of] 4.5 percent,” said Muir. “Unemployment, at this moment, is a key factor in preventing the economic recovery from taking shape.”
And slashing the unemployment rate is a key step in beating the recession.
“We’re at a critical point right now as far as whether or not we can get the recovery off the ground and sustain the momentum,” Muir said.
State deficits continue to rise
A November 2009 report from the Center on Budget and Policy Priorities indicated that states’ fiscal problems are so great that states might have to make additional deep budget cuts and tax increases in 2010.
Most states’ fiscal years begin on July 1, meaning states are already taking steps to plan their FY 2011 budgets. If states aren’t aware of additional federal fiscal relief, the report says, they will begin implementing new budget cuts and tax increases in the near future, and by the summer at the latest.
States will take steps to eliminate deficits for the 2011 fiscal year that, according to the report, “will likely take nearly a full percentage point off the Gross Domestic Product (GDP). That, in turn, could cost the economy 900,000 jobs next year.”
Mark Zandi, chief economist of Moody’s Economy.com, recently warned that this kind of state budgetary action “will be a serious drag on the economy at just the wrong time.”