Speaker 1: This is Wall Street Week. I'm David Weston bringing you
Speaker 1: stories of capitalism. This week, the silver tsunami of seniors
Speaker 1: looking for nice places to live, creating a two hundred
Speaker 1: and seventy five billion dollar hole that needs to be filled.
Speaker 1: Plus President Trump wants to eliminate the Department of Education.
Speaker 1: What would that mean and how much would it save?
Speaker 1: And what the next Trump administration will mean for the
Speaker 1: banking system and what it's already meant for the world
Speaker 1: of bitcoin. But we begin with a story of second acts,
Speaker 1: a story of reinvention, of repurposing, and the future of
Speaker 1: America's shopping malls in the growing age of e commerce.
Speaker 1: It's the busiest time of the year shopping, a time
Speaker 1: that in the past would have seen the Berkshire Mall
Speaker 1: in Why I'm Missing Pennsylvania packed to the gills.
Speaker 2: So the mall was built in the early seventies.
Speaker 3: It was in its heyday, especially at this time of
Speaker 3: the year, the time between Thanksgiving and Christmas.
Speaker 2: It was packed. Our police department.
Speaker 3: Would go out and assist for traffic control.
Speaker 1: As borough manager for Wyomissing, Michelle Bhaer saw the Berkshire
Speaker 1: Mall in its glory days but the story today is
Speaker 1: very different.
Speaker 3: Tenancy, I would say is about sixty percent, so I
Speaker 3: mean just the visual of walking through it compared to
Speaker 3: even a decade ago, when again, at this time of
Speaker 3: the year you would be bodying, checking people trying to
Speaker 3: get from store to store versus as of today, I
Speaker 3: would say sixty to seventy percent of the parking lot
Speaker 3: is fenced off.
Speaker 1: What's happened in Wyomissing is far from unique across the
Speaker 1: country or because love affair with shopping malls has cooled.
Speaker 1: It was an affair driven by the passion of consumers,
Speaker 1: a passion to buy, but also to buy alongside others
Speaker 1: sharing that passion.
Speaker 4: It's the emotional connection. So let's not forget why people shop,
Speaker 4: why women primarily shop right, So eighty five percent of
Speaker 4: consumption generally occurs from the she, the female side of things.
Speaker 1: Adrian Yee is a retail analyst at Barclay's and has
Speaker 1: followed the business for nearly twenty years.
Speaker 4: Back in the day, it was the social outlet and
Speaker 4: that hasn't necessarily gone away. Unfortunately, we have all this
Speaker 4: social media where people don't socialize in a public space.
Speaker 4: The US consumption is the most oversupplied in the world.
Speaker 4: So pre pandemic, or i should say actually pre GFF,
Speaker 4: so we had approximately seven square feet of retail space
Speaker 4: per capita. Now you compare that to in Europe, it's
Speaker 4: about a dollar or one square foot to one and
Speaker 4: a half square feet per capita, and then obviously in
Speaker 4: Asia it's significantly lower than that.
Speaker 1: The US hasn't lost its passion to consume, and it
Speaker 1: still has a lot of retail space, but there's a
Speaker 1: good deal less of that space than there used to be.
Speaker 1: In the nineteen eighties, there were approximately twenty five hundred
Speaker 1: malls in the country. Today fewer than one thousand, raising
Speaker 1: the question of how far it could go, whether malls
Speaker 1: could simply disappear altogether.
Speaker 5: We don't think they're dying, but the better malls have
Speaker 5: a place in the market, and we think what's left.
Speaker 5: We don't think they're all going to die. However, there
Speaker 5: are some that will probably die in the future.
Speaker 1: Egl Namdar's company owns some eighty of the malls that remain,
Speaker 1: and he says they can still be a good investment,
Speaker 1: provided they're the right malls. When you look for an
Speaker 1: investment in a mall, what's the profile you look.
Speaker 5: For, Well, look for a great location, a good market,
Speaker 5: strong market, a growing market. We look at the mix
Speaker 5: of tenants in the mall occupancy, who the anchors are,
Speaker 5: sales of tenants, the trend, and we hope we can
Speaker 5: buy more as.
Speaker 4: We go on.
Speaker 1: We may be seeing a natural correction in the number
Speaker 1: of malls pulling back from their peak, but that correction
Speaker 1: has been turbocharged by the rise of e commerce.
Speaker 4: E Commerce as a percent of sales from twenty ten
Speaker 4: to about twenty fifteen was just hugging ten percent, hugging
Speaker 4: hugging ten ten, and then from seventeen to nineteen went
Speaker 4: from ten to thirty. It was a s curve of
Speaker 4: adoption where all of a sudden it was like, oh why,
Speaker 4: because this generation demanded of Amazon and all these other things.
Speaker 4: So now we're in the era where this next two
Speaker 4: decades of consumption is everything that I picked that I
Speaker 4: want that is going to land at my doorstep when
Speaker 4: I blink my own when I sapped my fingers or
Speaker 4: I blink my eyes. Like Genie, if it.
Speaker 1: Went to thirty percent in twenty nineteen, I think you said, right,
Speaker 1: what happened with the pandemic and where is it now.
Speaker 4: In one year? So that that thirty percent, which is
Speaker 4: kind of like specialty, more like specialty like on mall retail,
Speaker 4: less so in furniture and more so in apperil, but
Speaker 4: generally that numbers thirty percent. It flipped in twenty twenty.
Speaker 4: It went to seventy thirty.
Speaker 1: Seventy percent e commerce econmo percent bricks and mortar.
Speaker 4: Because you can go to the stores. And then what
Speaker 4: happened is it sort of like kind of ratcheted down
Speaker 4: sort of in twenty twenty one, in twenty twenty two
Speaker 4: and serves now kind of at a level playing field
Speaker 4: where it's kind of more like forty forty five percent
Speaker 4: e commerce and it's heading to fifty to fifty.
Speaker 1: Can you envision a world in which actually bricks and
Speaker 1: mortar start eating back into e commerce?
Speaker 4: My view is it a fifty to fifty world is
Speaker 4: about right, because a fifty to fifty world will be
Speaker 4: about five hundred stores. So does you know kind of
Speaker 4: in that range.
Speaker 1: Which malls get hit the hardest by the retrenchment depends
Speaker 1: on the type of mall involved. Not all us shopping
Speaker 1: malls are created equal. They come in three basic classes.
Speaker 1: A Class A mall is one that makes at least
Speaker 1: five hundred dollars per square foot a year. Research from
Speaker 1: Capital One says their average vacancy rate is just three
Speaker 1: point six percent and they're largely doing just fine. On
Speaker 1: the other extreme, class C malls average less than three
Speaker 1: hundred dollars per square foot per year and have much
Speaker 1: higher vacancy rates. That leaves Class B malls right in
Speaker 1: the middle, which is where Namdar likes to be given
Speaker 1: their availability and the bigger difference between what they cost
Speaker 1: and the revenue they can generate, which investors call the
Speaker 1: cap rate.
Speaker 5: What we like to invest in is A B or
Speaker 5: B plus malls. Those are malls that they do well,
Speaker 5: but they're one level below the A, and there we
Speaker 5: feel that there's an arbitrage in the cap rates, that
Speaker 5: you could buy them at much more attractive cap rates
Speaker 5: than the A and maybe a little bit less than
Speaker 5: the c's that we feel don't have much life left
Speaker 5: in them.
Speaker 1: If I own a B mall, is it possible for
Speaker 1: me to do something to make that into an AIM all?
Speaker 4: Simply no, because the A mall designation is based on
Speaker 4: the sort of five mile radius of income density demographic. Okay,
Speaker 4: I want an income demographic in that five mile radius.
Speaker 4: That makes seventy five to one hundred thousand dollars. Now
Speaker 4: I can go look for my malls. So the designation
Speaker 4: of the A or the B is actually based on
Speaker 4: the wealth. So if you think that an area will
Speaker 4: in ten years become more more wealthy, then you're going
Speaker 4: to make that bad because these least are also ten
Speaker 4: years long.
Speaker 1: If a mall owner can't change the demographics of its
Speaker 1: immediate surroundings, what can it do to improve its investment?
Speaker 1: What can be done to save a struggling mall.
Speaker 5: Now, our main focus is to do joint venture with
Speaker 5: a developer and bring someone in and say, let's go
Speaker 5: as a partner and we can repurpose it, whether it's
Speaker 5: a for residential for you know, hospital, for you know, industrial, hotel,
Speaker 5: mixed use, other types of retail, big boxes, you know,
Speaker 5: junior anchors. So that's what we're trying to do. But
Speaker 5: in some cases we just would sell it if there
Speaker 5: isn't a demand for that joint venture.
Speaker 1: Which takes us back to the Berkshire mall and why
Speaker 1: I'm missing Pennsylvania, which has become something of a problem
Speaker 1: for borough manager Ware and for its owner, which turns
Speaker 1: out to be none other than Egle Namdar. The average
Speaker 1: income within a mile of the Berkshire Mall is close
Speaker 1: to one hundred and thirty thousand, but that's just seven
Speaker 1: thousand people. Zoom out five miles and the average income
Speaker 1: drops to seventy three thousand dollars a year across almost
Speaker 1: two hundred thousand people.
Speaker 3: I believe the highest assessed value was in the mid
Speaker 3: fifty million dollar range. That coupled with mercantile tax, you
Speaker 3: were looking at probably anywhere between four to seven hundred
Speaker 3: thousand dollars in annual tax revenue. Compare that to the
Speaker 3: most recent reassessment that dropped it down to five million dollars.
Speaker 3: So you can do the math on four hundred to
Speaker 3: seven hundred thousand lower to ten percent. I mean, that's
Speaker 3: if you're talking in terms of our overall budget. Current
Speaker 3: annual operating budget is around thirty million dollars. Four hundred
Speaker 3: thousand is the amount we spend annually on televising and
Speaker 3: repairing our water means or that's a third of our
Speaker 3: annual street improvement. So that amount could have a significant
Speaker 3: impact when you're talking about services the borough can provide
Speaker 3: and tax revenue that's being generated.
Speaker 1: Berkshire's owner recognizes the problem. He says he shares the
Speaker 1: community's goal of getting revenue from the property and tax
Speaker 1: payments up, but that sometimes the issue lies with the
Speaker 1: local government and difficulties in getting timely approval of plans
Speaker 1: to redevelop.
Speaker 5: I think that if you have a good use that's
Speaker 5: going to help the city and help the developer the landlord,
Speaker 5: maybe you can expedite things where we can make that
Speaker 5: happen quicker. I hate to see certain assets sit empty
Speaker 5: for years and years till you get the zoning approved,
Speaker 5: the entitlements. I hope that there's a way that everybody
Speaker 5: can work together and maybe expedite it, because the ultimate
Speaker 5: goal is to have that land repurpose into a new
Speaker 5: class that is ideal for the community, for the city,
Speaker 5: for us, for everybody.
Speaker 2: The intent was to redevelop it.
Speaker 3: The borough quickly found out that current ownership that's not
Speaker 3: how they operate. They instead buy properties and effectively sit
Speaker 3: on them. So the redevelopment plan that I think the
Speaker 3: community and borough council expected to see obviously has not
Speaker 3: happened much to the dismay of most everyone who just
Speaker 3: kind of sits back and watches it continue to further deteriorate.
Speaker 1: However, things ultimately work out for the Berkshire Mall. All
Speaker 1: parties recognize the need to repurpose the property for a
Speaker 1: changed world of retailing, and they all see potential yet
Speaker 1: to be realized.
Speaker 3: I don't think shopping centers as a whole are a
Speaker 3: dying breed, and twenty years from now you're going to
Speaker 3: see every single one of them repurposed. There's clearly development
Speaker 3: going on.
Speaker 5: It just takes a while, but are really our intent
Speaker 5: is to work together with the towns of ease as
Speaker 5: much as we can work together as a team to
Speaker 5: redevelop these assets into something that will hopefully be here
Speaker 5: for the next hundred some of the years.
Speaker 1: Adapting to the wants and needs of the current generation
Speaker 1: and those that come after them will be the key
Speaker 1: to the long term health of the shopping ball and
Speaker 1: the key to a successful second act. Still ahead, how
Speaker 1: America is preparing for the Silver Tsunami. That's next on
Speaker 1: Wall Street Week. This is a story about a tsunami,
Speaker 1: an overwhelming wall not of water, but of people. As
Speaker 1: our population ages and needs places to live that can
Speaker 1: accommodate their particular needs and desires.
Speaker 6: We considered probably for different residents, and that would be
Speaker 6: for COVID, and then we looked at Murano and loved Mirano.
Speaker 1: That's Marilyn Bergstrom, an eighty seven year old widow who
Speaker 1: has recently left her house in Seattle, Washington to take
Speaker 1: up residence in an upscale senior living development.
Speaker 6: My husband he got lung cancer and passed away in
Speaker 6: a year, and then I stayed in the house for
Speaker 6: another year, and then I decided it was time for
Speaker 6: me to move on. Well, I had thought years ago
Speaker 6: I wanted to live in a senior living community before
Speaker 6: I had to.
Speaker 1: Bergstrom is on the leading edge of a coming explosion
Speaker 1: in people who will seek senior living accommodations. The number
Speaker 1: of Americans over age eighty is projected to surge over
Speaker 1: the next twenty five years from thirteen million to day
Speaker 1: to over thirty two million by twenty fifty, and within
Speaker 1: the growing population over seventy five, those with annual incomes
Speaker 1: over one hundred thousand dollars are growing much faster than
Speaker 1: the rest, with the highest percentage of growth coming from
Speaker 1: those with incomes over two hundred thousand dollars.
Speaker 7: Demographics are definitely in our favor. I got into this
Speaker 7: business just over thirty years ago, and we talked about
Speaker 7: then this silver tsunami that was coming. Well, I'm happy
Speaker 7: to say that I'm actually seeing it happen now. You know,
Speaker 7: within the next five to ten years, that aging population
Speaker 7: is actually going to be moving into senior living.
Speaker 1: Tanegaal is one of those addressing the growing demand for
Speaker 1: high quality senior living. She's president of Meryl Gardens, which
Speaker 1: owns and operates retirement communities in seventy locations across the
Speaker 1: United States, including Morano, which Marilyn Bergstrom now calls home.
Speaker 1: And what her company provides goes well beyond just a
Speaker 1: place to live.
Speaker 7: We define senior living as a place for people to
Speaker 7: go enhance their lives once they're past the age of
Speaker 7: sixty two and they're ready to downsize, or they have
Speaker 7: some need that really keeps them from living in their
Speaker 7: own home and makes them want to move into senior living.
Speaker 7: So we provide help with activities of daily living. We
Speaker 7: provide meals, housekeeping, maintenance. Probably the most important and maybe overlooked,
Speaker 7: is social interaction. People who live at home alone are lonely,
Speaker 7: and we know that socialization helps you live longer, and
Speaker 7: certainly not just longer, but happier lives.
Speaker 8: Taichi, yoga, all those amenities don't come cheap, particularly at
Speaker 8: the high end of what Meryl Gardens has to provide,
Speaker 8: But today there is a growing number of seniors like
Speaker 8: Bergstrom who can afford it.
Speaker 6: I'm paying about seventy five hundred a month. That includes
Speaker 6: my car, which I like to have as long as
Speaker 6: I can drive. I feel that it's a fair price
Speaker 6: for what you get. This is far better than any
Speaker 6: place I expected to live. When I moved in. I
Speaker 6: just felt like I was in the fancy hotel every
Speaker 6: morning that I woke up.
Speaker 1: And Tanna Gall says that as pleasant as it is
Speaker 1: for residents like Bergstrom, it should also be good business
Speaker 1: for Meryll Gardens.
Speaker 7: I would not say it's a high margin business. It
Speaker 7: is a middle margin business. Our margins have been a
Speaker 7: little more compressed of recent since the pandemic. The pandemic
Speaker 7: goes really rough on our sector, for sure. If your
Speaker 7: question had been to me, Tanna, what keeps you up
Speaker 7: at night? I would have said getting enough great team
Speaker 7: members there's a couple things that we're looking at. Number one,
Speaker 7: we are trying to attract more people into our business
Speaker 7: that don't even know we exist. So, for example, we
Speaker 7: hire a lot of people from the hospitality business. It's very,
Speaker 7: very similar to running a hotel. We have also really
Speaker 7: broadened our scope in reaching out to colleges and universities.
Speaker 1: Were bused to steal robust demand that's about to explode clientele,
Speaker 1: with the ability to a high prices, a business with
Speaker 1: solid margins, all of it should make the world of
Speaker 1: senior living a truly good real estate investment. But, as
Speaker 1: Nickmaps Vision CEO Eric Morton says, there's one thing holding
Speaker 1: it back. Supply. His firm tracks senior housing inventory and demand.
Speaker 9: Senior housing is really facing a watershed moment as the
Speaker 9: baby boomers begin to turn eighty. Senior housing construction has
Speaker 9: been outpaced by eighty plus growth since twenty twenty two,
Speaker 9: and that gap is only set to continue as the
Speaker 9: boomers grow by about forty percent by the end of
Speaker 9: the decade. It's really on the supply side that the
Speaker 9: issue has manifested. So the pandemic brought inflation to construction
Speaker 9: costs as well as a historic increase in interest rates,
Speaker 9: and the effect of that has been to make the
Speaker 9: cost of development basically out of reach for most markets.
Speaker 9: And so what's happened is the senior housing inventory growth
Speaker 9: has hit all time lows right as demand is set
Speaker 9: to explode.
Speaker 7: I have been fortunate enough to watch our industry go
Speaker 7: through two very big cycles. As I mentioned back in
Speaker 7: the mid nineties, when assisted living hit Wall Street. Nobody
Speaker 7: was public before, but a bunch of companies went public
Speaker 7: in the mid to late nineties and they built a
Speaker 7: lot of assisted living. And then we had the dot
Speaker 7: com bust and things slowed down again. And what was
Speaker 7: good from that is it took all those buildings that
Speaker 7: we built and filled them up, and so then the
Speaker 7: supply demand was in a nice balance for quite a
Speaker 7: few years. And then when the recession hit in eight
Speaker 7: to ten, the same thing happened. We had a lot
Speaker 7: of product on the market and people weren't moving in.
Speaker 7: So now as we come into a new economic climate,
Speaker 7: it is probably the lowest I've seen on construction starts,
Speaker 7: maybe in my thirty years. So in some ways that's
Speaker 7: a little bit distressing to me. But what I'm seeing
Speaker 7: happen is everybody's filling up our occupancies, I'd say, is
Speaker 7: an industry are back up to about where they were
Speaker 7: before the pandemic.
Speaker 1: Occupancy rates are back up, But now there's a risk
Speaker 1: things will go too far that there will be a
Speaker 1: substantial shortage in available senior housing.
Speaker 9: At the current pace, we're on track for about a
Speaker 9: two hundred and seventy five billion dollar shortfall in senior
Speaker 9: housing development. I still think a lot of the challenge is, frankly,
Speaker 9: just projects don't pencil. So if you think about what's
Speaker 9: happened there, you're looking at construction costs that have gone
Speaker 9: up by twenty five or thirty percent, Debt that used
Speaker 9: to be three or four is now seven or eight,
Speaker 9: and so when you put those two together, your cost
Speaker 9: of development has gone up pretty substantially. At the same time,
Speaker 9: you're looking at what's happened to margins over that time.
Speaker 9: Will occupancy has been down and the cost of labor
Speaker 9: has gone up. But if you dig deep and go
Speaker 9: down market by market, street corner by street corner, there
Speaker 9: are areas where occupancies high rates are high, and the
Speaker 9: construction costs the equation pencils, and so we're really seeing
Speaker 9: people kind of sharpen their pencils and really go hunting
Speaker 9: for those areas that can work today. And the number
Speaker 9: of those areas that work are going to increase as
Speaker 9: demand explodes.
Speaker 1: But if investors are going to be in a position
Speaker 1: to move in to serve that exploding demand, there have
Speaker 1: to be enough projects in development now just waiting for
Speaker 1: the capital and the go ahead. Tena gall at Meryl
Speaker 1: Gardens says she's ready to move as soon as it
Speaker 1: makes sense.
Speaker 7: It really kind of halted our development, and so, for example,
Speaker 7: I've got two pieces of land today that are entitled
Speaker 7: and ready to go, but I can't financially make them
Speaker 7: work yet. And from an investor standpoint, there's a lot
Speaker 7: of people who want to get involved in the sector
Speaker 7: because they're seeing what's happening down the road, But right now,
Speaker 7: the cost of capital is just too much for us.
Speaker 7: At this point, we're starting to see it come down,
Speaker 7: but it's not quite where we can a project work yet,
Speaker 7: so we're always looking for pieces of land that makes
Speaker 7: sense to me.
Speaker 9: That's the kind of the scary scenario is that there's
Speaker 9: markets and segments of the market across the country that
Speaker 9: have you know, frankly no excess capacity, and so the
Speaker 9: impact that could have on seniors and our entire society
Speaker 9: is pretty significant. So I think that, at the end
Speaker 9: of the day, is the thing that I worry the
Speaker 9: most about.
Speaker 1: All of which means those in the industry see an
Speaker 1: opportunity for investors to get into the senior living game
Speaker 1: now in anticipation of that silver tsunami.
Speaker 9: At a time when the industry needs more capital, more
Speaker 9: debt financing to be able to go out and meet
Speaker 9: this need. You know, we're seeing market participants that have
Speaker 9: become exhausted or maybe been beaten during this cycle, and so,
Speaker 9: you know, really I think there's a call to action
Speaker 9: for the nation's banks, for the nation's asset allocators, LPs,
Speaker 9: pension funds, whoever they might be, to look at this
Speaker 9: not only as an opportunity to generate an incredible return,
Speaker 9: but also an opportunity to really help the industry meet
Speaker 9: the needs of society. And so I really am hopeful
Speaker 9: that that will happen. But to the extent that we
Speaker 9: have challenges there, that's something that you know, I'm quite
Speaker 9: worried about.
Speaker 1: For all the challenges the senior housing industry faces, it
Speaker 1: also offers substantial rewards financial and otherwise.
Speaker 7: When I jumped into senior living, I didn't think I
Speaker 7: would be in it for very long. To be honest,
Speaker 7: I thought, oh, I'll give this a try. I see
Speaker 7: what it's about. Everybody told me, you know, the people
Speaker 7: are really nice in the industry, and I thought it
Speaker 7: would be like a six month gig. And I literally
Speaker 7: woke up in August and I've been doing it for
Speaker 7: thirty years. And here's why I love it. It matters.
Speaker 7: I get to make a difference in people's lives every
Speaker 7: day and it's pretty significant. So for me, it's like
Speaker 7: working with the team members. If I treat my team
Speaker 7: members great, I know they treat my REDID it's great.
Speaker 7: And simultaneously it's a business. We make money doing it,
Speaker 7: so that's why all of it. That's why I think
Speaker 7: as an industry is going to be around a long
Speaker 7: long time.
Speaker 1: And that, of course is a good thing for Marilyn
Speaker 1: Bergstrom at Morano, I like.
Speaker 6: Everything just this day as is. I mean everything right
Speaker 6: now is just absolutely perfect. Kids, grandkids coming for dinner
Speaker 6: and spending time here. It's a place that people like
Speaker 6: to come to. In fact, even without being invited. They
Speaker 6: just will call up and say, oh, can I come over?
Speaker 6: And that's a really good feeling. It's like being in
Speaker 6: your own home.
Speaker 1: Coming up. Taking a hard look at funding for the
Speaker 1: US Department of Education that's ahead on Wall Street Week.
Speaker 1: This is a story about doing without recognizing our limits
Speaker 1: and facing the consequences of testing them, particularly when it
Speaker 1: comes to things we care deeply about, things like education.
Speaker 4: Now, I'm going to.
Speaker 10: Close the Department of Education and move education back to
Speaker 10: the States, and.
Speaker 1: We're going to do it fast. In campaigning for president
Speaker 1: this year, Donald Trump made eliminating the Department of Education
Speaker 1: a priority for his new administration, which could help with
Speaker 1: his plan to reduce government spending overall. But what would
Speaker 1: that entail and what would it mean for the nearly
Speaker 1: fifty million US public school students. The Department of Education
Speaker 1: was created under President Jimmy Carter in nineteen eighty and
Speaker 1: started with three thousand employees and a budget of just
Speaker 1: over fourteen billion dollars. Today, it employs forty four hundred
Speaker 1: employees and its budget has grown to over eighty two
Speaker 1: billion dollars. That it's just its operating budget, it's also
Speaker 1: responsible for dispersing over two hundred and forty billion dollars
Speaker 1: for schools and student resources from kindergarten through grad school,
Speaker 1: with the lion's share of it coming in the form
Speaker 1: of student loans and grants for higher education.
Speaker 11: The federal government needn't be doing many of these things,
Speaker 11: and you know, we're going to have to get into
Speaker 11: a mode where the federal government limits itself to must
Speaker 11: do items.
Speaker 12: This is like standard Republican orthodoxy. Abolish the Department of Education,
Speaker 12: blah blah blah, and it's you know, okay next. Obviously,
Speaker 12: this seems a little more serious this time, but you know,
Speaker 12: time will tail. The Congress obviously is going to have
Speaker 12: its by to the apple.
Speaker 1: Before we can even consider eliminating the Department of Education,
Speaker 1: we need to understand exactly what it does.
Speaker 12: The Department of Education is responsible for a lot of
Speaker 12: funding for higher education and K twelve education. Actually, about
Speaker 12: seventy five percent of the department is focused on higher
Speaker 12: education through the form of a nanchel Aid pell grants
Speaker 12: support for college and university students. The rest of the
Speaker 12: House is focused on elementary and secondary education through Title
Speaker 12: one funding and the Office of Special Education. There are
Speaker 12: other things like Career and Technical Education, and the Office
Speaker 12: of Civil Rights that supervises and oversees things like Title nine.
Speaker 1: Margaret Spellings served as the eighth Secretary of Education under
Speaker 1: President George W. Bush. She now heads the Bipartisan Policy Center,
Speaker 1: a think tank based in Washington, d c. American public
Speaker 1: schools receive only eleven percent of their funding from the
Speaker 1: federal government, but the lion's share of money coming from
Speaker 1: the Department of Education has nothing to do with K
Speaker 1: through twelve public schools. It goes instead for college educations.
Speaker 12: The first thing that has to happen is a clear
Speaker 12: ryde diagnosis of where the biggest bang for the buck
Speaker 12: can be found, and I would commend the higher ed
Speaker 12: side of the house probably is the riper work.
Speaker 1: Daniels ran the USOMB the state of Indiana as governor
Speaker 1: and Purdue University as president. As a vocal critic of
Speaker 1: the Department of Education. He doesn't seem much downside to
Speaker 1: eliminating it all together.
Speaker 11: When you look at it through a competency lens, it
Speaker 11: has failed utterly at its mission. Look at the National
Speaker 11: Assessment of Educational Progress SCURSE today versus back at the
Speaker 11: time of its inception. I think it'd be a great
Speaker 11: object lesson to the country if we actually stop doing
Speaker 11: anything federally that's important. You would see, as I've sometimes
Speaker 11: glibly said, you'd be amazed how much government you'd never miss.
Speaker 1: You would not miss.
Speaker 11: You'd hear the screams of the clients and recipients of
Speaker 11: the money, but the average person would not see any
Speaker 11: difference in their lives, and that might embolden the country
Speaker 11: to support other trimming and reductions and modernizations of the
Speaker 11: kind we really need. The Department of Education is doing
Speaker 11: something it ought not be doing. Other things it's doing
Speaker 11: that might be legitimate, and I'll say helping somehow finance
Speaker 11: student education is doing so poorly that someone else should
Speaker 11: do it. There's a lot of suggestion move that whole
Speaker 11: loan mess over to the treasury. Another idea would be
Speaker 11: to sell it to the private sector. But in any event,
Speaker 11: they have failed utterly and clearly should be out of
Speaker 11: that business. What does it leave, perhaps to support state
Speaker 11: and local educators in doing what has always been really
Speaker 11: in their province. You could support them financially without all
Speaker 11: the incumbrances that come with a federal department, and without
Speaker 11: its cost.
Speaker 1: The DOE contribution to K through twelve. Public school budgets
Speaker 1: may be modest, but talk to someone who runs those schools,
Speaker 1: someone like Sherry Cammys, superintendent of the Baldwin, New York,
Speaker 1: Union Free School District, and you get a somewhat different sentence.
Speaker 1: How big is the budget of your school district? How
Speaker 1: much of it comes from their department education?
Speaker 10: So our budget coming from federal funding is just under
Speaker 10: two million dollars a year, which represents one point one
Speaker 10: four percent of our total budget.
Speaker 1: What does that mean if that money went away? How
Speaker 1: would it aff affect Baldwin School students?
Speaker 10: So it sounds like it's a small amount of money,
Speaker 10: and it sounds like a small percentage, but in fact,
Speaker 10: it is a lot of money for us. Our federal
Speaker 10: money helps support the programs that we run for our
Speaker 10: students with disabilities, It helps us run programs for our
Speaker 10: Title I students, which are students that are below the
Speaker 10: poverty line, and it helps us with these students who
Speaker 10: are most in need in our school community. At that
Speaker 10: one point one four percent, that is a timping point.
Speaker 10: If we lose that money, we lose programs and we
Speaker 10: lose the ability to support those students.
Speaker 1: If that money went away at the federal level, is
Speaker 1: it possible that you could get it replaced at the
Speaker 1: state level or even the local level.
Speaker 10: A good percentage of our state funding coming from the
Speaker 10: federal government as well. So when you think about the
Speaker 10: flow of funds, if the state gets less money, then
Speaker 10: the school district is going to get less money in
Speaker 10: terms of our aid from the state. If the federal
Speaker 10: government gives less money, then we're going to see less
Speaker 10: money coming directly from the federal government.
Speaker 1: Quite apart from the role of the Department of Education
Speaker 1: and doling out funds to public schools, educators like Camis say,
Speaker 1: it's also important that we have a federal agency that
Speaker 1: focuses specifically on education and acts as an advocate for
Speaker 1: education in Washington.
Speaker 10: So obviously the funding is important, but the way that
Speaker 10: the Department of Education understands education, the way that it
Speaker 10: advocates for public school systems, is imperative. The majority of
Speaker 10: kids in our country go to school in public schools,
Speaker 10: and public schools, in fact, are the bedrock of democracy
Speaker 10: for this country, and so when you think about eliminating
Speaker 10: the Department, you're really also talking about eliminating the greatest
Speaker 10: advocate for public schools and for our nation's children. I
Speaker 10: guess my question would be, is that really what we
Speaker 10: want to do? Do we want to put the role
Speaker 10: of education in the hands of somebody who maybe that's
Speaker 10: not their primary goal or it's not of primary importance.
Speaker 10: For me personally, I think our kids are the most
Speaker 10: important thing that we treasure and value in our nation,
Speaker 10: and so for me, I want to make sure that
Speaker 10: our children are taken care of.
Speaker 1: The money provided by the Department of Education for local
Speaker 1: public schools may make a difference. It's advocacy on behalf
Speaker 1: of public school students may be important, but that doesn't
Speaker 1: begin to address the bulk of the over one hundred
Speaker 1: and seventy billion dollars going to college student aid in
Speaker 1: the form of loans and grants every year. What about
Speaker 1: that student loan program? Does it make money for the
Speaker 1: US government or lose mone No, it's.
Speaker 11: Losing hundreds of billions of dollars. When the federal government
Speaker 11: under President Obama took it over nationalized, essentially, we were
Speaker 11: told it was going to make money, but that's proven
Speaker 11: to be the reverse of the truth. It's quite possibly
Speaker 11: the this is a this is a stiff competition. It's
Speaker 11: at least a contender for the most catastrophically failed federal
Speaker 11: domestic program that we've seen.
Speaker 1: The story is a bit different when it comes to
Speaker 1: those grants for less fortunate students, though Daniel sees room
Speaker 1: for reform there as well and isn't sure the Department
Speaker 1: of Education is needed to administer them.
Speaker 11: I think the pel grant program, properly aimed, is very,
Speaker 11: very worthy, and you know, could honestly be expanded if
Speaker 11: you didn't have all the rest of the department to
Speaker 11: pay for. Once again, though the money could be and
Speaker 11: the program could be decentralized, doesn't need to be command
Speaker 11: and run command and controls from Washington.
Speaker 1: And then there's the basic question of whether we should
Speaker 1: be urging so many of our high school graduates to
Speaker 1: go to four year colleges. To begin with, there's been
Speaker 1: a lot of emphasis on everybody going to college, to
Speaker 1: go four year college. Is it time to revisit that anyway?
Speaker 12: I think it absolutely is, and it's being revisited all
Speaker 12: over the country. And one of the things that the
Speaker 12: new nominee for the Secretary has been a strong support
Speaker 12: of apprenticeship programs. We have workforce programs scattered throughout the
Speaker 12: federal government. The ones that are focused in high schools
Speaker 12: and community colleges live at the Department of Education. Many
Speaker 12: of them live at the Department of Labor.
Speaker 11: There are twice as many Americans who started college and
Speaker 11: didn't finish, many of them because of the that went
Speaker 11: down the student loan path we talked about. There are
Speaker 11: twice as many such people as all the eighteen to
Speaker 11: twenty two year olds on college campuses. And if we
Speaker 11: could help find more of those people than we do today,
Speaker 11: help them get to a new skill, a new credential
Speaker 11: that would allow them to advance themselves in life, I
Speaker 11: think that could be money well spent, better than much
Speaker 11: of what we do presently.
Speaker 1: With all the disparate views about the value of the
Speaker 1: Department of Education and whether it should be preserved, there
Speaker 1: is one thing everyone appears to agree on, the purpose,
Speaker 1: which should be to prepare students to join the modern workforce.
Speaker 12: As I talk to business leaders around the country, here
Speaker 12: is a part of the Bipartisan Policy Center that you know,
Speaker 12: you hear it from every CEO. Every single entity is
Speaker 12: worried about the quality of their workforce. That is what
Speaker 12: is going to drive their growth, and that's what it's
Speaker 12: going to drive our country's growth too, And so yeah,
Speaker 12: I think it is a national imperative. Can we have
Speaker 12: a lighter hand, Can we be more about a research agenda?
Speaker 12: Can we be more about you know, data and accountability
Speaker 12: as opposed to telling them what to do, telling them
Speaker 12: what we desire instead? Yeah, I think there's you know,
Speaker 12: we're constantly recalibrating the federal role.
Speaker 1: So if I'm a CEO of a big company or
Speaker 1: I'm a big investor, what does this all mean for me?
Speaker 1: Why do I care about what you do every day?
Speaker 10: So the relationship between public schools and industry and CEOs
Speaker 10: and industry is underrated. There is a direct link to
Speaker 10: what we do and what industry does. If I'm a
Speaker 10: CEO of a company, I want the most prepared, the smartest,
Speaker 10: the most independently thinking, critical thinkers that I could possibly employ.
Speaker 1: That does it for us? On Wall Street Week, I'm
Speaker 1: David Weston. We'll see you again next week for more
Speaker 1: stories of capitalism.