Spend Education Dollars Wisely – Invest Private Equity Funds in Real Economic Capacity

November 27, 2012 at 8:14 AM Leave a comment

This should be a no-brainer. The $500 billion dollar elementary and secondary education market needs to be fiscally responsible. And our economy needs to expand through investment in real productive assets. Yet private investors are seeking to skim profits off of the poorly administered public education money instead of going for new economic capacity. They misinterpret the difference between a stimulus package steeped in short-term spending on employment and infrastructure improvements in education and long-term profit-planning through economic growth.

Private firms eyeing profits from U.S. public schools: “…Now investors are signaling optimism that a golden moment has arrived. They’re pouring private equity and venture capital into scores of companies that aim to profit by taking over broad swaths of public education.”

This excerpt from a Reuters press release yesterday tells us that US “job creators” still don’t get it. They continue to do profit planning based on eating our young. Building a renewed private sector based on extending government spending on PreK-12 education will not make this nation stronger economically. Nor will it make sense to crowd out other investments in productive assets by developing a shadow industry for private investment money in alternative education services.

In the recent past election, the US economy was a key issue. It remains so. However, we continue to see private investment in the very public goods that conservative politicians sought to curb. Cutting healthcare spending and privatizing education were targeted as solutions, but we still need to see evidence that our great economic visionaries can see past their next short sale. The private growth opportunities cannot be healthcare and education. They crowd-out investments for the future.

Healthcare spending already consumes as much of GDP as should ever be reasonable in a stable economy. The $1 trillion investment in college loans to kids is already too high. New private dollars going into public education will continue to dampen the job opportunities for the children once they finish high school and college.

Yes, the brick-and-mortar infrastructure in education is crumbling and needs to be reinforced. And, yes, the children in the classroom should be protected from the feast and famine of economic cycles. However, compensatory money spent in either area must be seen as short-term spending.

In addition, existing private companies that serve this industry need to follow the market from paper to digital media. They must do this to survive – not expand. New players may emerge because they do this better, but the overall industry should not grow faster than the economy in the long run.

$500 billion may be enough to fund public education. We are not sure, but we need to find out what we are buying with our money. However, as long as our financial data system in education lacks transparency, the looters will come.

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Entry filed under: Financial data, Special Rants.

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