Sara. Okay. Let me get started as everybody is coming in to sit down and make sure first we need to really thank david and carrie have put together a Wonderful Program and theyve been good at nudging people to do what they should on time. I want to just start out with some general comments and then turn to specifics. So first off, education is an excellent investment, both for individuals and for society. I think we can i want to make this case in terms of an efficiency argument. Failure to close the gaps, which are really big and growing in Educational Attainment is likely to both hinder Economic Growth and also increase the burden on tax payers over the long term. I think there are just two big takeaways from this first. Money matters enormously in education, but thats a necessary, not a sufficient condition. Secondly funding really needs to be matched to a commitment to accountability and in the education space innovation. The federal government has a big role here. Okay. That said, the title of this event includes i believe from bridges to education and its worth noting why education is different and arguably a good bit more complicated than the challenge of building a bridge. The economics of building a bridge is tough enough in terms of the problem in terms of who pays it, how do we do it at the lowest cost, but there are blueprints, theres an Engineering Solution to building a bridge or building an airport. Education is more difficult in that were still trying to uncover the underlying technological process that is what we should do with different populations of students. Were learning a lot, but these are really hard problems and again its worth making that distinction. Second, another sort of opening point is just about every big volume on education starts with some bit of a narrative about falling behind. It is certainly true that the u. S. Lags other countries in terms of test score growth and changes in College Completion, but its also worth putting a more optimistic note on the table. That is, over the last couple of decades weve actually seen some growth in test scores and in the early grades. That said, theyve been stagnant in the middle grades. Weve seen some reductions in High School Dropout rates. In the most recent decade weve seen increases in College Enrollment rates and College Completion rates. Those gains are not spread evenly across the population and we should be increasingly concerned about the degree of inequality. Whats more is i think were going to talk as we go along in this, we know a great deal more about what works and actually what doesnt then we did two decades ago. Some of this owes a big debt to the founding of the institute of sciences in 2002, but theres a hopeful note here. Weve made some progress. Theres a lot more to do. Two messages, we want to use evidence to shape policy and we need to innovate in this space. My assignment, what are high return investments and priorities for federal education policy. I decided to make that a little bit narrower. Prek, talk to diane. Shell answer question questions about prek. Also i think the forgotten piece of graduate education and funding the sciences, but weve got to set some boundaries here. Indeed im going to set even a better boundary here, im going to do something that economists are pretty good at. Dick and i have co lewded on this enterprise. We are going to exercise some division of labor here. Im going to concentrate on the postsecondary margin which is my comparative advantage and hes going to concentrate on k12. We have a lot to discuss and i think within k12 you can think about three buckets. School accountability, school choose mechanisms, teacher preparation. Were going to hit on those i think through the course of this 40 minutes. Im going to talk in terms of the post secondary sphere, in terms of Student Financial aide, College Choice and then the supply side of Higher Education. I want to say just a quick moment about the federal role in education policy here because it deserves some comment. We spent about 1. 2 trilli 1. 2 t federal education each year. In that quarter thats about 100 million are ek kwqually did between elementary and secondary and k12 and then theres another 100 million in terms of Student Loans. You might ask what are the big missions of the federal government. The first issue is credit constraints. Thats one of those market failures that economists love to teach about in introductory classes and they really matter in education. Theres a good reason to think that individuals cannot fully finance worthwhile investments in education. Theres a compelling Government Role in that area. Second is what im going to call a limited, but certainly not zero role of the federal government in regulation or auditing the use of its funds. Preventing the worst outcomes. Third, and this is where i think hopefully well have more discussion. The federal government really has an advantage in funding research, innovation and development. These are innovations that when we discover something that works in one area, we can spread them around to other communities. Many of these things need to be done at scale and it is only and the federal government is actually well positioned not necessarily to execute these experiments, but to at least seed the the next is the challenge were facing in Educational Attainment. These things start early. The gaps start actually very early before kids enroll in school, but they continue on so here are what im going to call the entrenched elementary secondary achievement gaps. The blue bars are comparisons of the quinntiles by education, the red bars reflect the black white difference. You should think about these in terms of grade levels of achievement a achievement. They are very meaningful in terms of grade levels of achievement and what is striking here is how large the economic gap is relative to the race gap. If you look back 50 years ago the race gap would have been larger than the economic gap. But things get worse as we go on to College Enrollment. The lefthand panel is enrollment by Family Income at the lowest quartile on bottom. The Left Hand Panel is completion. The dark dashed line is essentially the behavior of those students who are working College Going choices in the 80s. The lighter blue line is students making College Choices at the beginning of the 21st century. The takeaway is first off theres a positive gradient and the second is the gaps have w e widened and theyve widened markedly over time. Theres not much more youre going to push up that enrollment rate and only about a ten percentage point increase at the bottom which is meaningful again the increase at the top of this distribution between the top and the bottom. Now, one might rightly note these are not adjusted for differences in achievement on entry. Again, if you do this additional calculation, youd still very large gaps and theyve increased over time. So on the order of about 16 Percentage Points in College Completion. So thats the preliminary. Thats the problem we need to address. As i say, im ceding some territory well come back to, but i want to talk about Higher Education and this may get some front billing in the d. C. Environment given that the act was reauthorized and whats on the table is reauthorization of the Higher Education act which somehow congress hasnt gotten to yet. Within this rubric are the big programs of title iv facial aids which you probably know as stafford or direct Student Loans or pell grants, and i want to touch on the supply side problem. Federal aide and grant aide. I think we have really compelling evidence at this juncture from sue and work that ive done on the g. I. Bill, the transparent grant aid can have a positive effect on collegiate attainment. We have grant aid on the table right now or effectively grant aid in the form of the pell grant, which we spend about 30. 6 billion a year on and the tuition tax credits which amount to another 18. 2 billion. If you look back at 2010 at the peak enrollment those numbers total 60 billion. The bad news is that even though these programs have two features that one might really like in a student aid program, that is theyre portable so theyre in effect like vouchers, secondly theyre means tested, the problem is theyre not very transparent. And because theyre not very transparent, particularly the tuition tax credits, theyre not having necessarily the impact that we would like to see on student enrollment and more importantly helping students to finance really worthwhile collegiate investments. I think ill draw your attention to two issues here. First the tuition tax credits. Separate from the problem of really a total lack of salience. They dont matter to you if your parents dont get paid another 18 months from when he yyou appo college. You wont see that in terms of a tax benefit. At that point you may have lost interest or its not going to effect your decision and indeed that comes through very clearly in the research literature. Many students dont even know about them. The pell grant is actually a bit of a challenge here because it serves such a broad umbrella of students that its not very well targeted. I want to draw your attention. The pell grant generosity has actually increased a bit in the last decade. I want you to draw your attention to the column on the right here which is the portion of students that are independent, likely over the age of 24, they have Young Children of their own. Now, one of the challenges is designing an aid system that meets the needs of this population who are likely responding to near Term Economic shocks as well as the needs of students who are recent high school graduates. And the system of Needs Analysis that we have doesnt accomplish either objective very well. And so given that im running out on time, well come back to this, but there are excellent recommendations by a panel called rethinking pell grants that would serve to essentially divide the resources with separate Needs Analysis systems between pell grant Adult Program and a pell grant young program. Loans. Everybodys favorite question. Im going to simply note that theres nobody anyone who has read a newspaper in the last ten years knows that there has been much attention with headlines like a generation hobbled by the soaring costs of college. Contrary to what some newspapers would have you believe, the number of undergraduate students who are drowning in six figures of debt is more like one in 30, rather than the median or the mode. Theres a point of just getting the numbers right that are important. Also, theres a really important study that i believe was presented last year by adam luny that looks at what is a real increase in default rates, which has occurred over about the last eight years to increasing to about 5 and they ask why. There are two big factors that are at play here. The first has to do with the changing student populations, a shift that is the students who are most likely to struggle are these older if you will nontraditional borrowers and second a shift in the type of institutions that those students are attending. When you take out the compositional changes, the loan issue is different than it has often been characterized. So this brings us to the question, there are real questions as to whether some of the students struggling are really being buried because they may be enrolled in a college that had weak returns in expectation at the worst example of this would be those institutions that have turned out to be downright fraudulent and theres a question of can we help those students avoid those choices, which is a College Choice problem, and what do we do with students struggling in repayment. Given that i think im nearly at negative time here, im going to hit one point here on my list, which is one of the most popular policies from both sides of this aisle has been discussion of income based repayment and there has unfortunately been little attention to how this Program Actually effects the liabilities of the federal government. Recent gao report notes that the liability has now increased to about 74 billion, which is about triple what it was estimated to be. Essentially what youre doing is youre trading an insurance mechanism for more moral hazard and adverse selection. The primary beneficiaries are not going to be those who have borrowed a little bit and really are struggling with small amounts of debt, but turn out to be those who are getting forgiveness for graduate borrowing. I think ill come back to this. Could i have two minutes and then ill two. Okay. Well come back to this. College choice. Theres much to do here. But this is a case where we need r d sponsored by the federal government. Its a real again, there are two groups of students who are not very well guided at this point, particularly the older nontraditional students who dont have access to either peers who are going to college or traditional guidance mechanisms. I think there are interesting experiments we can do there. Supply side. Resources matter enormously. If you see whats going on at Public Institution resources per student have declined markedly. These are constant dollars. The issue here is how can we encourage greater state funding . We see increased strat fiction. This is an issue to address. But really the challenge resources are what they are, are there ways for the federal government to support productivity and enhancing innovati innovations. Are there consolidations that can be supported. Again, literally the billion dollar question is can Technology Change education productivity in the higher ed space. Okay. Main takeaway, again, weve got accountability and addressing market failures. I want to end on this final note, which is were doing better. Were learning a lot about how markets work in education. But theres room for more investment here and just as a relative point, this spending on research on education is about 279 million a year, which is about 102 times spending on nih is about 102 times greater than spending on nasa. Theres room for more investment here and theres many high return projects to think about. Let me turn this over to the professor who is going to take on the k12 side, i believe. Sara has written a thoughtful, valuable paper. I agree with the she used for federal education policy. We agreed i would focus on recent research how recent research informs the design of federal activities in three areas, accountability, teacher policy and school choice. Just a few words on context. Inequality in educational outcomes in each of the 50 states each of which has its own educational system is very high. Lowquality schools are associated with low rates of intergenerational mobility. This is worrisome because the promise of upward mobility provides a lot of the glue that has held up democracy together. So improving education, especially in states with lowquality state systems, and especially if your children from lowincome families should be a goal of federal education policies. What are the policy tools . As sara writes in her paper, funding and regulation are the primary sets of tools. The federal government has attached strings to aid and this has effected actions of states and School Districts. Theres Good Research on that. Some reactions in some tights tying post great recession, Education Funding to the adoption of the common core has shown regulations are not very popular. The ever Student Success account that moves the design of accountability systems firmly to the states, theres still a regulatory role and its still very much up for grabs what these federal regulations will look like. Ill come back to that. Turning to the first of saras buckets, accountability. Very important and its very difficult to get accountability right. A litmus test of that that would be whether an accountability system encourages skilled teachers to work in highpoverty schools. Thats a test that most accountability tests will fail. One is the auditing function. Strong support for National Assessment of educational progress is absolutely critical. Another opportunity would be cost sharing for states to participate in International Testing programs. Three american states that participated in the 2012 assessment for 15 year olds. All those states report p proficiency show theyre doing the same, but one state has average scores above the the oecd average. So again, thats the importance of this auditing function. And helping states to benchmark how theyre actually doing. So thats the second. Second, signal openness to innovation and accountability systems so its a spark of Innovation School design. Currently all state accountability systems are based primarily on student math and reading scores. Now, the skills are clearly important. And this ematter. But there are at least four welldone Research Studies showing longterm effects, interventionists designed to improve the lives of lowincome children, that did not affect test scores. One of these is the opportunity. Part of the effects of placement before 18 no effect on test scores. That suggests the importance of the accountability in a broader sense. The great availability of data on college, on crime, on labor Market Participation wages suggests the possibility of designing much more creative accountability systems. And i think encouragement of that would be valuable. Particularly encouragement of