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What makes you think "little government" has done any better? The problem, ISTM, is that both the feds, the states, and the local districts have all been trying to manage the details over each others' heads. For every crazy action of the Feds (NCLB, for example), there are equal insanities at the state (e.g., Texas text book management), and the local districts (e.g, see Wake County, NC's recent willy-nilly dismantlement of a school assignment plan that has been held up as a national example of how to insure that poor children have the same opportunities as the wealthier kids, driving out the well-respected superintendent of schools and replacing him with a retired army brigadier).
Let me throw a grenade and then get out of the way. How about we get the government out of the education business? They don't have a great track record in much else that they do. And if you say that private education organizations would just abandon the inner city, then you have to explain how other businesses survive in the inner city, but private schools wouldn't.