Council President Cited in Bloomberg News article on State of American Education

Former Federal Reserve Chairman Alan Greenspan said the U.S. has a “pretty awful” educational system that is leading to a shortage of skilled workers.

U.S. education problems also are “concentrating income at the top” of the scale, Greenspan said today at a convention of the Commercial Finance Association in Washington. “It’s pulling society apart.”

Greenspan, 80, was one of the most influential voices in U.S. public policy prior to his retirement from the Fed in January. During his 18-year tenure, he warned Congress on occasion about the economic repercussions of U.S. educational failures.

His remarks today follow a year in which both business and political leaders proposed funding Bush administration education initiatives to boost U.S. economic competitiveness, yet failed to win passage in Congress.

Greenspan did not list what he saw as problems, though recent studies indicate areas of concern in performance, affordability and participation.

About 29 percent of U.S. grade schools failed this year to meet minimum federal testing standards under the “No Child Left Behind” law, according to figures compiled by Education Week.

Other tests suggest those figures may be optimistic, since the federally funded National Assessment of Educational Progress shows lower levels of proficiency in math and science, while international comparisons such as the Trends in International Mathematics and Science Study show U.S. students performing below students in several Asian and European nations.

Costs Cut Attendance

Also, about one-third of U.S. high school students quit their studies before receiving their diplomas. And a federal advisory panel estimates that 1.4 million to 2.4 million qualified U.S. students won’t attend college in the coming decade because of costs.

At the college level, both schools and the government are facing pressure to make higher education more affordable. College tuition and fees continue to rise, and the proportion of those costs covered by grants to students is dropping, adding to the burden on middle- and lower-income families, the College Board said Tuesday.

“Mr. Greenspan’s completely right” to warn about the costs to the economy of U.S. education failures, said Deborah L. Wince-Smith, president of the Council on Competitiveness, a Washington-based group of industrial, university and labor leaders. Its 130 members include Wal-Mart Stores Inc., Microsoft Corp., Pfizer Inc. and Harvard University.

Education Brings Benefits

The Federal Reserve’s own data shows education-related benefits for families, Wince-Smith said. Families led by a college graduate saw their net worth increase 61 percent to $851,000 between 1989 and 2004, while those led by a high school dropout saw only a 12 percent increase, to $136,000, she said.

Greenspan told the Commercial Finance Association that problems facing the U.S. economy include a “pretty awful” education system along with Medicare costs and protectionist trade policies.

Greenspan is “absolutely correct” to list U.S. education, said Susan Traiman, director of education and workforce policy at the Business Roundtable, a Washington-based association of chief executive officers of U.S. companies including General Motors Corp., Exxon Mobil Corp. and Citigroup Inc.

“CEOs agree with him,” Traiman said. “We increasingly see that education is what separates the haves from the have-nots.”

Greenspan, however, isn’t likely to change the realities now that he’s retired from the Fed, and business advocates “need other spokespeople” in high positions to raise the alarm, she said.

Business leaders including Greenspan could help by directing more resources toward U.S. schools, said Janet Bass, spokeswoman for the 1.3 million-member American Federation of Teachers.

“Unwieldy class size, inadequate resources and facilities and off-base education ‘reforms’ all hamper educational returns,” Bass said.