Publications Archive • The Aspen Institute Economic Strategy Group

IN BRIEF: Pandemic-Era Student Learning Loss and the Policy Response

BRIEFLY

The COVID-19 pandemic created not only a public health emergency but a youth education crisis as well. Decades of progress in math and reading among America’s students were wiped away in two years. The federal government passed three rounds of funding to help school districts mitigate the disruptions of the pandemic, but that aid is set to run out next year even as little progress has been made in returning student achievement to pre-pandemic levels. This In Brief examines the scope of student learning loss, what the federal government and districts have done thus far to help students, and what the federal government can do now to put America’s students on a better path forward.

WHAT TO KNOW

Pandemic-induced learning loss has reversed two decades of progress in student achievement. Figure 1 charts student test score performance over time from the National Assessment of Educational Progress (NAEP), also called “TheNation’s Report Card.” The portion of students at or above “Basic” achievement levels in math and reading has fallen sharply since 2019 and is now below 2003 levels. Compared to 2019 results, the percentage of fourth graders at or above NAEP Basic levels in math and reading fell by 5 and 4 percentage points, respectively. The biggest decline is in eighth-grade math scores, where the share of students scoring at or above Basic levels declined from 69 percent in 2019 to 62 percent in 2022.

Figure 1: Percentage of students scoring at or above NAEP Basic level, by grade and subject, 2003–2022

Source: National Assessment of Educational Progress (NAEP).

The declines in student achievement were not uniform across the country. Figure 2 plots the changes in students performing at or above NAEP Basic levels by state. For instance, in eighth-grade math, 19 states experienced a decline greater than the 7 percentage point national drop (with declines as large as 14 percentage points), and 20 states saw smaller drops (with the smallest declines at 2 percentage points and no states seeing gains). Research finds that states that maintained access to in-person schooling during the pandemic saw smaller declines in math and reading progress, a relationship explored in more detail below.

Figure 2: Change in share of students scoring at or above NAEP Basic level, by grade and subject, 2019–2022

Source: National Assessment of Educational Progress (NAEP).

Shifts to virtual learning and a concomitant rise in chronic absenteeism have driven declines in student achievement. The shift from in-person to remote or hybrid instruction during the pandemic had profoundly negative consequences for student achievement. Hallaron et al. (2021) estimates that the decline in test scores from 2019 to 2021 was on average 10 percentage points larger in districts that did not maintain in-person instruction as compared to those that did, after adjusting for differences in district-level test-score trends and demographic differences across school districts. The shift to remote schooling also exacerbated educational inequality. An analysis of test scores from 2.1 million US students in 10,000 schools finds that Black and Hispanic students’ performance dropped significantly more than that of white students with similar baseline scores and school poverty levels—primarily because Black and Hispanic students were more likely to live in districts that shifted to remote schooling.
As districts around the country resumed in-person instruction, many students did not return to school. The number of public school students who are chronically absent—meaning they miss at least 10 percent of days in a school year—has nearly doubled, from about 15 percent in the 2018–2019 school year to around 30 percent in 2021–2022. The White House Council of Economic Advisors estimates that, based on the pre-pandemic association between absenteeism and test scores, the rise in absenteeism can account for a portion—though not all or most—of the post-pandemic decline in test scores: 16–27 percent of the drop in math scores and 36–45 percent of the decline in reading.
If declines in student learning are left unmitigated, millions of students—and the country—will be worse off in the future. While the decline in test scores itself is alarming, this problem will only compound itself over time. Research finds that school test scores are strongly predictive of later-life outcomes, even after controlling for differences in student characteristics and family backgrounds. Students who can’t read at grade level by third grade, for example, are four times less likely to graduate high school. Using the historical relationship between academic achievement, earnings, and economic growth, researchers estimate that pandemic-induced learning loss could reduce lifetime earnings by $49,000 to $61,000 per student. That reduction will cost the US approximately $128 billion to $188 billion each year as this cohort enters the labor force.
In 2020 and 2021, the federal government allocated $189.5 billion in temporary funding to school districts to address pandemic-related disruptions. Most of these funds are allocated to school districts through the Elementary and Secondary School Emergency Relief (ESSER) Fund, which was built up in three phases: initially in the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act; the 2021 Coronavirus Response and Relief Supplemental Appropriations Act; and in the American Rescue Plan (ARP) later in 2021. The law stipulates that districts are generally free to spend these funds as they choose— on teacher salaries or building upgrades, for instance—but they are required to be spent by September 2024, and at least 20 percent of funds allocated in the ARP phase must be allocated to overcoming pandemic-related learning loss. Although the roughly $190 billion effort appears to be a significant increase over the $757 billion spent on public schooling in the 2019–2020 school year, Jonathan Guryan and Jens Ludwig estimate in their recent AESG chapter that, after taking into account that these funds are intended to be spread out over four years, this support accounts for about a 6 percent increase in annual funding—and part of these funds are intended to offset drops in school district revenue during the pandemic.
School districts were slow to start spending this aid but are now on track to spend all funds by next year. The Georgetown University Edunomics Lab’s ESSER Expenditure Dashboard indicates that, despite delays in spending their allocations initially, schools nationally are on track to exhaust their allocations by the September 2024 deadline. In the 2020–2021 school year, states spent funds at a $1.9 billion per month rate, which has accelerated to $5.1 billion per month. A pace of $4.9 billion per month would exhaust funds by September 2024. However, districts vary significantly in the share of funds currently exhausted. Figure 3 displays the share of ESSER allocations spent (as of October 2023) for the 32 states that publish timely spending reports. The shares spent range from a low of 36 percent across Kansas schools to 92 percent across districts in Michigan. An obvious question is whether the spending of these funds has been associated with improvements in student outcomes. We consider this question with a simple correlation; figure 4 plots state-level changes in the share of students at or above NAEP Basic assessment levels from 2019 to 2022 against the share of allocated pandemic relief funds that a state has spent. While there is little relation between spending and student reading levels, states that spent a larger portion of their ESSER funds saw relatively smaller declines in the share of students at or above an NAEP Basic level on fourth- and eighth-grade math tests, a finding consistent with a positive effect of spending on learning-loss mitigation in math. This pattern of results is in line with prior evidence that student achievement in math is more sensitive to school inputs than achievement in reading is, perhaps because students spend more time building reading skills at home.

Figure 3: Percentage of ESSER funds spent, by state: October 2023

Source: Edunomics Lab ESSER Funds Dashboard.

Figure 4: Relationship between state ESSER spending and change in percentage of students scoring at or above NAEP Basic level, 2019–2022

Source: Achievement levels from NAEP; state spending shares from Edunomics ESSER Funds Dashboard.

District spending plans do not indicate an intention to increase the share of remaining ESSER funds spent on student academic needs, despite the size and persistence of learning losses. The latest spending reports to the Department of Education (from FY 2022) indicate that school districts have spent about 48 percent of ESSER funds on “Meeting Students’ Academic, Social, Emotional, and Other Needs” compared to 33 percent on “Operational Continuity,” 18 percent on “Physical Health and Safety,” and just 2 percent on “Students’ Mental Health Supports.” Based on how districts report the portion of remaining funds that they intend to spend on each activity, schools are planning to maintain that same share of spending on academic needs in their remaining set of funds. A 2023 McKinsey and Company survey of school district administrators found that only 30 percent of schools plan to spend significantly on educational supports to remedy learning loss—supports like high-dosage tutoring and intervention curricula–mainly because of the perceived high cost of these interventions at scale and because these interventions require ongoing funding that will not be available after ESSER funds expire in 2024.

Figure 5: Categories of ESSER funds already expended or allocated for use

Source: Department of Education ESSER Transparency Portal.

Districts need more time, more resources, and more accountability to alleviate pandemic-induced learning loss. Jens Ludwig and Jonathan Guryan make the case in their AESG chapter on pandemic learning loss that the federal government can do three things to effectively help students make up ground lost in academic progress since 2020. First, schools need more time to spend their funds. Districts were slow to start spending their allocations, and placing an arbitrary deadline of September 2024 to spend ESSER funds incentivizes districts to spend funds in ways that meet this deadline rather than in ways that most effectively help students over the long term. Second, schools need more resources. As noted above, ESSER funds represent a small share of K–12 schools’ annual funding, and even the latest ARP funds were appropriated before the magnitude of pandemic learning loss was fully appreciated. The federal government should offer support on a scale that matches the size of the problem students face. Finally, many steps districts need to take to effectively address learning loss may not be easy—such as changing HR models or the structure of school days—and the federal government should provide districts with accountability and other nudges to help schools make these choices that are difficult in the short run but beneficial to students over the long term.

THE BOTTOM LINE

The destruction to educational progress among America’s youngest students will be one of the most profound, long-lasting effects of COVID-19. If it is left unaddressed, as these students today reach adulthood, American families will be less economically secure, and the American economy will be less productive and less globally competitive. Yet, policies today are dictated by deadlines set years ago and funding allocated before the scope of the problem was fully known. Providing schools with more time, more resources, and more accountability to help students get back on track is one of the most important ways policymakers can help create a generation equipped to meet the challenges it will face.

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Aspen Economic Strategy Group Releases 2023 Annual Policy Volume: Building a More Resilient US Economy

Washington, DC, November 8, 2023 – The Aspen Economic Strategy Group (AESG) today released its sixth annual policy volume, Building a More Resilient US Economy. The book’s publication comes as the US faces historically high levels of debt that threaten the resiliency of the nation’s economy, including the ability to invest in key priorities and adapt to changing global economic conditions. Last month, the Congressional Budget Office (CBO) estimated a $1.7 trillion gap between government spending and revenues in 2023, nearly double the annual budget deficit from last year. The volume’s eight papers offer policy solutions to the federal budget situation (namely, the debt and deficits, tax policy, Social Security and prescription drug prices), investing in children and mitigating pandemic-induced learning loss, and navigating global economic shifts (supply chain resilience and China’s economic outlook).

“Though the US economy has proven to be remarkably resilient in recent years, the nation’s fiscal trajectory is bleak, leaving little space to address our long-term challenges,” said AESG director Melissa S. Kearney. “This year’s AESG policy volume presents evidence-based, bipartisan policy solutions to improve our fiscal situation, develop our workforce, and build a stronger, more resilient US economy.”

“How the United States navigates ongoing economic challenges in the coming years will have significant consequences for decades to come,” write AESG co-chairs and former Secretaries of the Treasury Henry M. Paulson Jr. and Timothy F. Geithner in the book’s foreword. “Policymakers will need to make difficult spending and tax policy decisions to bring the US fiscal situation into better balance and to maintain our ability to invest in key priorities like national security, health care, and addressing climate change.”

The book outlines various evidence-based solutions to some of America’s biggest economic questions: Given demographic and fiscal trends, to what extent will Medicare, Social Security, and other key safety net programs need to be reformed? How should the government raise more revenue to address the federal government’s fiscal imbalance? What are priority investments that we should make to ensure the future workforce to grow the US economy? How can we navigate shifts in the global economy?

The policy volume can be read in full here: Building a More Resilient US Economy

The papers fall under three major themes:

ADDRESSING US FISCAL CHALLENGES

Karen Dynan’s paper, High and Rising US Debt: Causes and Implications, explains why the outlook for federal debt represents a major economic challenge for the US, particularly because, even under optimistic economic scenarios, debt will soon reach levels well above historical experience.

The Social Security trust fund is set to run out by 2033, which would likely force sudden and dramatic across-the-board cuts to benefits. Mark Duggan offers a proposal to reform Social Security and put the program on a more stable financial footing in his paper, Reforming Social Security for the Long Haul.

US policymakers have proposed several solutions to curb rising drug prices, and included provision to allow Medicare to negotiate certain drug prices in the Inflation Reduction Act. Craig Garthwaite and Amanda Starc’s paper, Why Drug Pricing is Complicated, describes the opaque and complex process of pharmaceutical price setting in the US and proposes reforms to make these markets more competitive and efficient.

Owen Zidar and Eric Zwick draw on lessons from the Tax Cuts and Jobs Act (TCJA) to suggest potential reforms to the US business tax regime, with a particular focus on reforming the business tax code, in their paper, The Next Business Tax Regime: What Comes After the TCJA?

INVESTING IN AMERICA’S YOUTH

National test scores revealed major learning loss among elementary school students due to the COVID-19 pandemic. Jens Ludwig and Jonathan Guryan’s paper, Overcoming Pandemic-Induced Learning Loss, discusses the pressing need to address this learning loss using American Rescue Plan funds that expire next year, and proposes high-impact tutoring as a concrete solution to address learning loss and equalize educational opportunities in the long term.

Melissa S. Kearney and Luke Pardue’s paper, The Economic Case for Smart Investments in America’s Youth, observes that the US spends relatively little on children and argues that investing in youth is one of the US’ greatest opportunities to build a more resilient economic future.

NAVIGATING SHIFTS IN THE GLOBAL ECONOMY

Mary Lovely’s paper, Manufacturing Resilience: The US Drive to Reorder Global Supply Chains, evaluates the US’ efforts to strengthen its supply chains through “reshoring,” “friendshoring,” and “derisking” and offers policy solutions to improve efforts to reduce supply risks.

Hanming Fang examines China’s future economic prospects and evaluates the main factors driving uncertainty around China’s economic future in his paper, Where is China’s Economy Headed?

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The Aspen Economic Strategy Group (AESG), a program of the Aspen Institute, is composed of a diverse, bipartisan group of distinguished leaders and thinkers with the goal of promoting evidence-based solutions to significant U.S. economic challenges. Co-chaired by Henry M. Paulson, Jr. and Timothy Geithner, the AESG fosters the exchange of economic policy ideas and seeks to clarify the lines of debate on emerging economic issues while promoting bipartisan relationship-building among current and future generations of policy leaders in Washington. More information can be found at https://economicstrategygroup.org/.

The Aspen Institute is a global nonprofit organization whose purpose is to ignite human potential to build understanding and create new possibilities for a better world. Founded in 1949, the Institute drives change through dialogue, leadership, and action to help solve society’s greatest challenges. It is headquartered in Washington, DC and has a campus in Aspen, Colorado, as well as an international network of partners. For more information, visit www.aspeninstitute.org.

Where Is China’s Economy Headed?

The arc of the Chinese economy over the next 10 to 15 years will depend on three sets of forces, each of which interacts with the others: (1) Domestically, the internal political economy will determine the relationship between the state and the market. (2) Externally, the relationship between China as a nation and the US-led West will determine China’s access to foreign technology, finances, and markets. (3) Traditional economic forces such as total factor productivity (TFP), population and human capital, and capital and investment will determine China’s growth potential. Even though most studies focus on this third set of traditional economic forces—the ones determining growth potential—the first two sets of forces will ultimately determine how close the Chinese economy can come to realizing that potential. This paper examines the range of outcomes for China’s economy through this lens: growth rates could reach 6 percent if China focuses on market-oriented reforms, or they could stagnate if, in response to external or internal pressures, leaders instead continue to turn to more centralized decision-making and to top-down planned resource allocation.

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Executive Summary

Manufacturing Resilience: The US Drive to Reorder Global Supply Chains

Global supply chains—the network through which products and services move from initial producers to final consumers—have become increasingly complex over the past several decades. Recent disruptions caused by the COVID-19 pandemic, along with the threat of further interruptions from rising geopolitical risks, have exposed the fragility of today’s supply chains. To build more resilient networks, US policymakers have taken three main approaches: increasing domestic manufacturing capacity (“reshoring”), building new supply chains among foreign partners aligned with US interests (“friendshoring”), and reducing dependence on trade partners considered untrustworthy (“derisking”). This paper evaluates these strategies, weighing the likelihood that each will reduce the potential of future disruptions against the costs to taxpayers and consumers. Reshoring builds domestic capacity but is costly and only tenable in a few critical sectors. Friendshoring balances the efficiencies of trade while preventing reliance on rival states but can ultimately result in longer and less transparent networks. Finally, derisking our relationship with China will allow the US to diversify critical supply chains but is complicated by the country’s dominant role in world trade and by ongoing political tensions.

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Executive Summary

Overcoming Pandemic-Induced Learning Loss

The global COVID-19 pandemic created not only a once-a-century public health crisis but also a once-a-century public education crisis. Unfortunately, the United States federal government’s financial assistance to schools to overcome pandemic-induced learning loss is about to expire – despite the fact that the country has made almost no progress remediating this learning loss. In thinking about where to go next, we first look backward to examine why so little progress was made over the past few years. Changing student learning outcomes requires changing what schools do; that has been hard partly because of the chaos in the wake of the pandemic, but also because change is difficult for all organizations. We illustrate some of the challenges within the context of one specific type of instructional content for which US Secretary of Education Miguel Cardona encouraged schools to prioritize relief funding: high-dosage tutoring, a promising technology that’s been known for centuries to help students of all ages. To avoid lifelong negative consequences for a generation of 50 million school-age children, policymakers need to (1) extend the timeline over which federal assistance is available, (2) provide additional resources beyond that, and (3) nudge schools to take difficult steps that will ultimately help students through increased accountability or other means.

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Executive Summary

The Next Business Tax Regime: What Comes After the TCJA

This essay presents the case for a better US business tax regime. First, we provide an overview of the business tax base in the United States and describe how business activity is taxed, with special focus on the 2017 Tax Cuts and Jobs Act (TCJA). We then review early evidence of the TCJA’s effects on economic activity and compare these effects to policymakers’ predictions. We conclude by considering policy implications and make several recommendations for improving the US business tax regime. We propose a future regime that can raise substantial revenue from business without inventing new policy instruments. Our proposal would preserve productive business activity, promote efficiency by harmonizing tax rates across income tax bases, and improve tax progressivity.

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Executive Summary

Why Drug Pricing Reform Is Complicated: A Primer and Policy Guide to Pharmaceutical Prices in the US

Pharmaceutical pricing in the United States is a complicated and opaque process. Confusion over price setting and the method by which new drugs are brought to market can lead to ineffective and even harmful policies that decrease society’s access to innovative new treatments without providing sufficient decreases in spending to justify the cost. At its core, drug pricing in the United States involves a tradeoff: allowing high prices today provides firms with the incentive to make the large, fixed, and sunk investments necessary to bring future new products to market. In that way, high prices are a central part of the process by which we get new drugs. That being said, firms may—in some areas of the market—take advantage of the complexity of the system to extract profits at a rate that far exceeds any beneficial incentive effects. A wide variety of firms and individuals in the market exhibit such behavior. In this paper we both explain the underlying complexities of how prices are set and suggest areas where policy reforms could improve the market.

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Executive Summary

Reforming Social Security for the Long Haul

Social Security is arguably America’s most important government program, as it is the main source of income for most elderly Americans and represents the primary tax paid by most workers as well. Forty years after Congress made its last significant changes to the program, Social Security again faces severe funding challenges, primarily due to a declining number of workers per Social Security recipient and slower-than-predicted growth in taxable earnings. Absent any change in policy, the program’s trust fund will be depleted in about ten years and payments to Social Security recipients will immediately decline by an estimated 23 percent. In this document, I propose a package of six reforms, aimed at raising revenue and slowing benefits growth, that would tackle this challenge head-on and put the program on a sustainable fiscal path. These proposals insulate America’s most economically vulnerable and instead call for sacrifice primarily from those with high incomes, who have seen large increases in lifetime benefits recently due to their rising life expectancy. If implemented, this reform package will ensure that Social Security benefits for elderly and disabled Americans and for their dependents will not be at risk in the future and that the program will not consume an ever-increasing share of federal spending.

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Executive Summary