James Pethokoukis

The more you know about Rising China, the more you want to know. Minxin Pei gives some valuable perspective on the nation’s suddenly emerging debt problem:

Based on the figure released by the National Audit Office (NAO) at the end of June, local governments have accumulated debts totalling 10.7 trillion renminbi (RMB) or $1.65 trillion – about 27 percent of China’s GDP in 2010. Because the NAO’s figure was based on a sampling of 6,500 local government-backed financial vehicles (out of more than 10,000 such vehicles nationwide), the actual magnitude of local government indebtedness is much greater. The People’s Bank of China, the central bank, recently estimated that local government debt totalled 14 trillion RMB (most of which was owed to banks), almost 30 percent higher than the NAO figure.

… On paper, China’s debt to GDP ratio is under 20 percent, making Beijing a paragon of fiscal virtue compared with profligate Western governments. However, if we factor in various government obligations that are typically counted as public debt, the picture doesn’t look pretty for China. Once local government debts, costs of re-capitalizing state-owned banks, bonds issued by state-owned banks, and railway bonds are included, China’s total debt amounts to 70 to 80 percent of GDP, roughly the level of public debt in the United States and the United Kingdom. Since most of China’s debt has been borrowed in the last decade, China is on an unsustainable trajectory at the current rate of debt accumulation, particularly when economic growth slows down, as it’s expected to do in the coming decade.

The longer term effects of massive non-performing loans owed to state banks by local governments are likely to manifest not in the form of a banking crisis, but in other more insidious – yet equally – harmful ways. Because the Chinese state owns trillions of RMB in assets (land, natural resources, state-owned monopolies, and $3 trillion in foreign exchange), Beijing should have enough resources to bail out local governments when these loans have to be repaid. But there’s no free lunch. Bailing out local governments with valuable financial resources in the coming decade – a decade in which China will experience the end of the demographic dividend, rising costs of healthcare and pensions, and slower economic growth – will mean China will have less capital to invest. For an investment-led economy, this implies even more sluggish growth.

I dunno.  Covering local debt, dealing with an aging population — is there really enough dough left over for a military that can project power globally?

A charter school boss runs the numbers (via the WaPo):

At Harlem Success Academy Charter School, where we’ve gotten some of the best results in New York City, some classes are comparatively large because we believe our money is better spent elsewhere. In fifth grade, for example, every student gets a laptop and a Kindle with immediate access to an essentially unlimited supply of e-books. Every classroom has a Smart Board, a modern blackboard that is a touch-screen computer with high-speed Internet access. Every teacher has a laptop, video camera, access to a catalogue of lesson plans and videotaped lessons.

Outfitting a classroom this way costs about $40,000, or $13,500 amortized over three years. That’s how much New York charter schools receive per pupil annually, so we can afford this by just increasing class size by a single student. .. In other words, a 19th-century school can be transformed into a well-managed 21st-century school by adding just two students per classroom. Reducing class size is expensive because most costs vary with class size. Decrease a class from 25 to 24 students and you need to hire 4 percent more teachers as well as build and maintain 4 percent more buildings.

Obsession with class size is causing many public schools to look like relics. We spend so much to employ lots of teachers that there isn’t enough left to help these teachers be effective. According to the city’s education department, New York public schools spend on average less than 3 percent of their budgets on instructional supplies and equipment (1 percent), textbooks (0.6 percent), library books and librarians (0.5 percent), and computer support (0.5 percent). Basic supplies are rationed in absurd ways: A school will pay $5 million in salaries to teachers who end up wasting time writing on blackboards because the school has run out of paper that costs a penny a page. (Don’t believe me? Ask a teacher.)

Also, class sizes would not need to be as small if teachers were better trained in classroom management skills. Here is a bit from a must-read NYTimes magazine piece on the topic:

By figuring out what makes the great teachers great, and passing that on to the mass of teachers in the middle, he said, “we could ensure that the average classroom tomorrow was seeing the types of gains that the top quarter of our classrooms see today.” He has made a guess about the effect that change would have. “We could close the gap between the United States and Japan on these international tests within two years.”

Why the combative governor of New Jersey must succeed in dismantling the NJ teachers unions:

There are many teachers who inspire students. And then there’s Curtis Robinson, the sort of teacher who inspires tenure reformers. During his 18 years teaching disabled students in Paterson, Robinson hurled classroom chairs, punched a boy in the chest for failing to do his homework and shoved another kid against a blackboard until he cried, staff and students said.

Robinson still insists he had a gift with children. But he admits that using cocaine after school early in his career sometimes made him “preoccupied.” “Immediately after work, I’d have a line or two,” he told The Record in August. “I been teaching so long, you can function with your eyes closed.”

That’s probably true, thanks to the extensive job protections for teachers in New Jersey. Because Robinson was tenured, it took more than four years of legal proceedings to fire him, costing the state more than $100,000 in legal costs.

Please, read the whole thing.