American public school teachers don't get fired. They just don't. In New York City, hundreds of teachers spend all day in "rubber rooms" because they're deemed too dangerous or stupid to supervise children but can't be booted because they have union-protected tenure. In crisis-ridden California, the mildest of threats from Gov. Arnold Schwarzenegger to cut back on teaching staffs led to an immediate rebuke from the White House.

So when 266 teachers were unceremoniously canned in Washington, D.C., in the fall of 2009, the educators of America collectively slid their glasses down their noses and glared at the District of Columbia. Although 266 firings might not seem like a lot in a country that has lost 8.4 million jobs since December 2007, they could turn out to be more important to the nation's long-term health than the $150 billion "jobs bill" legislators were debating on Capitol Hill.

D.C. is a divided town. In the heart of the capital, the federal government hums along, churning out paperwork and disillusioned interns at a steady clip. But the rest of the city is in pretty miserable shape. The District of Columbia Public Schools rank below all 50 states in national math and reading tests, squatting at the bottom of the list for years at a time. More than 40 percent of D.C. students drop out altogether. Only 9 percent of the District's high schoolers will finish college within five years of graduation. And all this failure doesn't come cheap: The city spends $14,699 per pupil, more than all but two states and about $5,000 more than the national average. Yet as unlikely as it seems, D.C. may prove to be the last best hope for school reform in the United States.

The District's school system is sitting at the center of a remarkable convergence. A driven, reform-minded chancellor, endowed with extraordinary powers by the city council and mayor, arrived on the scene in 2007 just as the teachers union's contract was about to be renegotiated. Charter schools are blossoming, with nearly a third of the city's public school students now enrolled in nontraditional institutions. And a new presidential administration, which has been retrograde in other policy areas ripe for reform, has flirted with some of the more advanced ideas on the education front. Add an education secretary who has respectable reform credentials and a president who has two school-age children, and it's hard to imagine a sweeter set-up.

One further advantage, paradoxically, is the city's utter hopelessness. "D.C. schools have long been the poster child for paralyzing education dysfunction," says Neal McCluskey, an education policy analyst at the Cato Institute. "It seems like they have a complete inability to educate anyone. Educationally, if you could save this patient, you could save anyone."

But there's a flip side to all these advantages: If D.C. can't fix its schools in this context, probably no one can. And the first indications from the Obama administration have been ominous: As part of an omnibus spending bill in March 2009, union-backed Democratic legislators gratuitously killed a promising pilot program for school vouchers in the District. Meanwhile, the fate of reform hangs in the balance of a long, increasingly tense standoff between superintendent Michelle Rhee and the all-powerful teachers unions over the fundamental question of hiring and firing instructors. Depending on which side blinks first, education reform in America could be a long-lost dream come true or simply a lost cause.

'You Don't Want Me for This Job'

Michelle Rhee was an unlikely candidate to take over the D.C. school system, let alone wind up on the covers of both Time and Newsweek. "I was like the least obvious choice," says Rhee, whose verbal mannerisms are those of a recent college grad. The person who suggested Rhee to D.C. Mayor Adrian Fenty did so with a few caveats: "She's 37 years old, she's Korean, and she's never run a school district."

In fact, Rhee's only in-school experience was two years in Baltimore as a recruit for Teach for America, a nonprofit that places new college grads in troubled inner-city and rural schools for two-year teaching stints. In 1997 she founded The New Teacher Project, another nonprofit, which brings highly qualified teachers—people who are credentialed in the subjects they teach—to public schools. She was busy running that project when Fenty called.

Rhee immediately told the D.C. mayor, "You don't want me for this job." With a bluntness for which she would later become famous, she explained, "If I were to take over the school district, the kinds of things that I would have to do to transform the district"—closing schools, firing teachers—"would just cause you headaches, political headaches. And that's not what politicians want. Politicians don't want the dirt to get kicked up. They want everyone to be happy." Fenty swore indifference to the political ruckus, and, much to Rhee's surprise, he has so far remained true to his word. Rhee enjoys near dictatorial powers within the system, thanks to the absence of a school board, and she has used them to the fullest possible extent. "The man has not blinked once," she says.

Rhee has become the Great Korean Hope for school reform advocates around the nation and a lightning rod for criticism locally. D.C. publications follow her every move. Blogs are devoted exclusively to hating everything from her policy proposals to her hairstyle. Almost every move she makes draws headlines. And no wonder: Rhee's approach goes right to the heart of a decades-long political debate about what schools really need, more money or fewer lousy teachers. On that question her position is clear: No real change is possible unless good teachers are hired and bad teachers fired.

Within months of taking office, Rhee foreshadowed the bloodbath that lay ahead by firing 30 percent of the school's central bureaucracy. She commissioned an outside audit of school records. (Her staff is still finding rooms filled with unmarked file boxes and cabinets with no keys.) As her first year ticked away, Rhee staffed the human resources department with her own people, installed modern payroll systems, and generally tidied up the back office. Before her first school year started, she found 68 people on the books with no discernible duties, 55 teachers, three aides, and 10 assistant principals, costing a total of $5.4 million a year. She closed 25 underperforming schools (in a district that has 129) and replaced half of the system's principals with candidates hand-selected by her personal staff and interviewed by Rhee herself.

In July 2008, Rhee revealed her opening gambit with the teachers union: She offered the teachers a whole lot of money. Under her proposal, educators would have two choices. With the first option, teachers would get a $10,000 bonus—a bribe, really—and a 20 percent raise. Nothing else would change. Benefits, rights, and privileges would remain as they were. Under the second option, teachers would receive a $10,000 bonus, a 45 percent increase in base salary, and the possibility of total earnings up to $131,000 a year through bonuses tied to student performance. In exchange, they would have to forfeit their tenure protections. To make good on her financial promises, Rhee lined up money from private donors; she has been close-mouthed about their identities, but The Washington Post has reported that likely contributors include Bill and Melinda Gates and Michael and Susan Dell.

Says Rhee: "I thought, this is brilliant. Everybody talks about how teachers don't get paid enough; I'm going to pay teachers six-figure salaries! I'm going to pay the best teachers twice as much as they are currently making. Who could not be in favor of that? But people went ballistic." Getting incentive pay required giving up near-absolute job security. "That," she says, "is when the crap hit the fan."

If Rhee has a model, it is Chicago, one of the only places in America where bad teachers can (eventually) get the heave-ho. In the Second City, failing schools can be dissolved and reconstituted. Teachers who worked at those institutions must reapply for their jobs, without seniority rights. Those who fail to get their old posts back are free to apply elsewhere in the city. If they haven't found a placement in a year, they're off the books. Just plain old laid off. There's even a small merit pay program. The man who instituted this plan is Arne Duncan, who is now Obama's secretary of education.

Teachers simply don't believe that it should be possible for them to be fired—not by a principal, not by a superintendent, not by anyone. Unions and other opponents of the reformers prefer to stick with warmed-over solutions that have been failing for decades: smaller class sizes, more teacher pay, and more job security. The sight of Rhee descending on them, an avenging angel with a pad of pink slips in one hand and a wad of cash in the other, was a shock to the system.

'Rhee Hates Veteran Teachers'

During the spring and summer of 2008, Rhee started hiring new teachers as if it were, well, her job. Many were young college graduates, vetted by programs such as Teach for America. All told, there were 934 new hires. Rhee was just hitting her stride when a city budget crunch hit, forcing the local government as a whole to make do with several hundred million dollars less than originally planned. (Of D.C.'s $9 billion budget, roughly half is appropriated by Congress.) Faced with the new fiscal realities, Rhee announced a "reduction in force" and summarily fired those 266 teachers.

At this point the union sprang into action. They sensed, correctly, that what Rhee longed to do was fire more of the teachers she had inherited, perhaps most of them. Now she had tasted blood, and they were worried.

No one is better positioned to throw together an afternoon protest rally than a bunch of teachers. They have poster board and markers on hand at all times, and they get off work at 3 p.m. On a gray September day shortly after the firing plan was announced, signs declaring that "Cutting Our Teachers Is Hurting Our Kids" festooned the plaza outside the government building that houses the chancellor's office. Other placards featured photos of Rhee with her teeth blacked out, alongside portraits of Martin Luther King Jr. The motto "Rhee Hates Veteran Teachers" was particularly popular. A small child jiggled a sign saying "Rhee and Fenty are playing politics with children." The kid seemed just young enough to be unfamiliar with the concept of irony.

The crowd was composed largely of middle-aged black women, and the speaker list was heavy on older black men, reflecting the District's 83 percent black student population. Many at the rally were explicit about the race angle. "You know who Rhee is firing?" one speaker demanded. "Teachers who have hair like mine, and skin like mine." (Gray and brown, respectively). "Maybe Rhee and Fenty don't like the way this city looks," said another. When a slim Asian-American woman with a short swingy haircut and a pencil skirt—a look favored by Rhee—exited the building, excited whispers ran through the crowd that the Iron Chancellor was coming to face the protesters down. But it turned out to be a junior employee of the department who just happens to be Korean.

It's true that the teachers Rhee hired are younger and paler than the current teacher population. A few of the newbies even showed up at the rally to demonstrate solidarity with their brethren. They stood around holding signs and looking slightly uncomfortable as they listened to speech after speech bad-mouthing inexperienced white teachers from outside the city. One popular applause line: "Young teachers are good for one thing. Learning from older teachers!"

In 2008, after Rhee's office released a statement about tying teacher licensing to student outcomes, the Washington Teachers Union (the dominant local union) sent an email message to its members stating, "This proposed regulation would not benefit DCPS teachers, as a teacher's true effectiveness should not be linked to a teacher's right to renew his or her license." The message went on to explain that it was "dangerous and discriminatory" to "require a candidate to demonstrate effectiveness to continue teaching in a District of Columbia Public School." To review: The official position of the teachers union is that being good at their jobs has nothing to do with whether teachers should keep them.

In D.C. today, 50 percent of a teacher's evaluation is based on student outcomes. In any other industry, this standard would be absurdly low, like basing only 50 percent of a salesman's performance review on how many units he sells. Bringing the education labor market anywhere close to the way things work in virtually all other industries—at-will employment, promotion based on competence, and salary based on performance—is an almost unimaginably difficult task.

Rhee says that when she took the job, she made a deal: "I made a commitment at the outset of these negotiations that I was not going to sign my name to a piece of a paper that was just better than what the old contract was. That I wasn't going to sign my name to a piece of paper that had provisions in it that were not good for kids and not good for schools. Period." Her right-hand man, Richard Nyankori, who came with Rhee from The New Teacher Project, told the pro-reform magazine Education Next: "Six weeks into the job, Rhee called her staff together with the message that 'We are not here to do the bureaucracy better. That's what all of our friends are doing in reform all around the country: They're trying to make the trains stay on the track and go faster. We are here to derail those trains.'?" Three years later, the trains are well and truly derailed; there is still no contract.

But Rhee quickly changed what she could control: rampant grade inflation in the District's teacher evaluation system. For years, more than 90 percent of D.C.'s teachers received ratings of "exceeds expectations" on their job evaluations, even though students were dropping out, graduating without basic math and reading skills, and going on to menial jobs at best. As Rhee told Time in 2007, "What I'm finding is that our principals are ridiculously—like ridiculously—conflict-averse." (That story's cover photo of Rhee pushing a broom and looking grim is still producing witch jokes years later.) These days, the chancellor is a bit more politic: "It's tough, a tough cultural change for people [who] have been told for years, 'You're doing an excellent job.' All of a sudden [they're] being told, 'Actually, here are the things you need to work on.' It's not an easy thing to go through."

Changing the evaluation process had another practical benefit. There is nothing more difficult than firing a teacher with decades of glowing reports in her file. In a city council hearing about the 266 firings, teacher after teacher testified that their personnel files were filled with sugar and spice and everything nice. As Rhee told Time, "People come to me all the time and say, 'Why did you fire this person? She's a good person. She's a nice person.' I'm like, 'OK, go tell her to work at the post office.' Just because you're a nice person and you mean well does not mean you have a right to a job in this district."

In the years before Rhee arrived, about 15 teachers a year were put on the "90-day plan," essentially a final warning to shape up or get shipped out. Not all of those teachers ultimately got fired. In addition to the 266 tossed out on their duffs, Rhee has placed more than 100 teachers on 90-day notice. (There are now around 3,000 teachers in the District overall.) And she has stood by her controversial comment in a January Fast Company interview that the laid-off instructors included people who "had hit children, who had had sex with children, [and] who had missed 78 days of school."

Those comments didn't do much to sweeten administration-teacher relations. "It is really shameful of Rhee to tar all of the staff that she illegitimately fired with such a nasty brush," wrote retired D.C. teacher Guy Brandenburg on his blog. "But it's so typical of her; like Ronald Reagan, she is utterly convinced of the rightfulness of her cause, and she seldom lets facts get in the way of her just-so stories." Another blogger (and laid-off teacher) named Candi Peterson told The Washington Post, "I'm ready to recommend that Chancellor Rhee submit for a fitness for duty examination because these are the rants of either a mad or very confused woman."

'You're Going to Have People Who Feel Angsty'

Despite dissension within the ranks, when the doors opened on the 2008–09 school year, it looked like the local union president might be ready to take Rhee's deal seriously. But in December 2008, Randi Weingarten, the head of the powerful American Federation of Teachers (AFT), stepped in. (D.C.'s union, like those in several other big-city districts, is part of the AFT, not the larger National Education Association.)

After a half-hearted counterproposal from Weingarten's team in January 2009, negotiations once again ground to a halt. For her part, Rhee sent out a cheery, exclamation mark–filled letter to D.C. teachers in February lauding Weingarten's intervention in the process, claiming to "welcome her involvement and have high hopes that we'll reach an agreement." But if the two women were sending each other enthusiastically over-punctuated emails in March, by November the relationship had progressed strictly to frowny emoticons, with Weingarten telling The Wall Street Journal that Rhee "has so poisoned the environment that I am not sure that we can ever get back to a good situation here."

Weingarten is no dummy. Rhee's endgame, which she has made fairly explicit, is to seize control of hiring and firing from the unions. And with the national union involved, the D.C. contract is imbued with more precedent-setting value. Among other things, the power Rhee seeks means stopping the practice of shoveling teachers no one wants into meaningless jobs no one wants them in. In other districts, this is known as the Dance of the Lemons. In D.C., jobless educators with first dibs on openings are called "excessed" teachers, and they are the dead weight in a slowly sinking system. If the unions accept Rhee's bribes, their stranglehold on the nation's schools will be endangered.

In pre-Rhee D.C. the single glimmer of hope for many families was the D.C. Opportunity Scholarships Program. Funded by a separate congressional appropriation of $14 million, it offered vouchers to kids in failing schools, allowing them to attend private school instead of their assigned public school. The program took no money from the city budget and was hugely popular with parents and kids; since 2004 more than 7,200 students had applied for a limited number of slots. Last year 1,700 kids were accepted. Next year there will be none. On the campaign trail, Barack Obama had promised to let scientific results determine his education policy. In office, however, he let political influence kill the program even as initial studies were showing positive gains by students and high parental satisfaction. The National Education Association, which is consistently one of the biggest single donors to U.S. political campaigns, pressured the Democratic Congress to eliminate funding for vouchers in 2009. Obama promptly signed the death sentence into law.

The fight over vouchers and charter schools—both of which serve as workarounds to the ossified hiring/firing rules of public schools—is playing out all around the country, with teachers unions usually coming out on the winning side. Consider the philanthropist Robert Thompson, who tried his hardest to give $200 million to the city of Detroit. Thompson's plan was to establish 15 charter schools with a focus on improving graduation rates in a city where two-thirds of kids quit before receiving a diploma. After spending most of 2003 trying desperately to get legislative approval for the plan, Thompson withdrew the offer. The teachers union deep-sixed the proposal in order to save its members from competition, even at the expense of drastically increasing the city's net spending on education.

In D.C., despite the voucher setback, the fight for charter schools seems to have been won before anyone really noticed. As chancellors cycled through the system—six of them in the last 10 years—charters grew quietly but rapidly, without much in the way of overall strategic planning by the city. It's relatively easy to open a charter in the District, and a kid in a charter school costs the city less than a kid in a public school, so education entrepreneurs have taken full advantage.

Rhee is very pro-charter, but her rhetoric on the issue is sly. At an appearance at downtown Washington's E Street Cinema last November, Rhee conflated charter and traditional schools over and over in her remarks. She simply refuses to accept the oft-repeated assertion that letting kids go to charter schools undermines traditional schools. Both types of schools operate under the supervision of her department, she notes. "We have to be aggressive about closing down schools—charter and traditional public schools—that don't provide an excellent education," she told a theater of parents, before running off to another meeting in someone's living room. "Change is difficult. And anytime you try change, you're going to have people who feel angsty about that."

'We Believe Great Teachers Matter Tremendously'

That night at the E Street Cinema, Rhee had just announced her engagement to Kevin Johnson, the mayor of Sacramento and a charter school founder himself. Johnson is better known, however, as a former point guard for the Phoenix Suns. He also has a couple of sex scandals under his belt, a fact that Rhee's antagonists gleefully pounce on. Johnson paid a 16-year-old girl's family $230,000 in 1995 after allegations of sexual harassment, and a similar allegation was made in 2007 by a student at Johnson's Sacramento charter school, St. Hope, although the accuser later recanted. In April 2009, St. Hope agreed to pay a settlement over inappropriate use of federal AmeriCorps education grants. In this, as in all things, Rhee has been proactive, doing damage control on the personal scandals and flying to Sacramento to deal with the fallout from the AmeriCorps settlement. (This will be her second marriage to an education reformer: Kevin Huffman, whom she divorced in 2007, is an executive vice president at Teach for America.)

Vouchers and charter schools can never be perfect tests of new educational modes. When teachers unions accuse charters and vouchers of skimming the cream off the top of the public school population, they're not entirely wrong. These programs don't snag the smartest kids or the richest. But someone, somewhere has to care enough about a kid to get him into a charter school or voucher program. Without real reform at the underlying schools, the students left behind will remain just as hopeless as they are today, while peers with more motivated parents find other solutions.

Reforming those traditional schools has proven damnably difficult to do. In Chicago, Arne Duncan—then the CEO of the city's schools, now the national secretary of education—was able to make some progress on getting rid of bad teachers. But even in Duncan's district, hiring and firing remain difficult and time-consuming, and teacher ratings continue to be inflated. Duncan shares Rhee's focus on personnel, pioneering some merit-pay pilot programs in Chicago and telling Education Week: "We believe great teachers matter tremendously. When you're reluctant or scared to make that link, you do a grave disservice to the teaching profession and to our nation's children."

But where Rhee makes enemies, Duncan has been able to make friends. In addition to winning the endorsement of AFT's Weingarten, Duncan got an approving nod from President George W. Bush's departing education chief, Margaret Spellings, when he was nominated by Obama in 2008. In July 2009, Duncan told PBS's Newshour: "Money is never going to be the entire answer in education. I will tell you, quite frankly, far too often adult dysfunction has stood in the way of student achievement and has hindered students' ability to learn." His rejection of the tired "more money" formula in favor of a focus on teacher quality may be the most heartening development in the Obama administration.

Film critic Roger Ebert (of all people) recently noted that in many ways, the possibilities for reform look better in Kenya than they do in D.C. or Detroit. He was blogging about two new documentaries: Waiting for Superman, which discusses the problems of U.S. school systems and features Rhee, and A Small Act, which is about a woman who helps pay for a boy's education in Kenya. Ebert arrived at this difficult-to-swallow conclusion: "The fact is that the next African or Indian taxi driver you meet has quite possibly benefited from a better education than the average American high school graduate."

With Rhee's root-and-branch reforms stuck in interminable union negotiations, we're still waiting for Superman. But what has the Iron Chancellor accomplished so far? Ironically, her best work has been in what she set out not to do: There may not be a revolutionary union contract in place yet, or a bold new educational vision, but the bureaucracy sure runs better than it used to.

'We Only Reward Success'

Nationally, education reformers are desperately hoping that President Obama will take on the cause of school reform, in a kind of domestic equivalent of Nixon going to China. As is often the case with Obama, his words have been encouraging, even a breath of fresh air: In his January State of the Union address, he said, "The idea here is simple: Instead of rewarding failure, we only reward success. Instead of funding the status quo, we only invest in reform." In March 2009, he said "too many supporters of my party have resisted the idea of rewarding excellence in teaching with extra pay, even though we know it can make a difference in the classroom." During the presidential campaign, Obama singled out Rhee for praise during a debate with John McCain, calling her "a wonderful new superintendent…who's working very hard with the young mayor." (Rhee has been more stinting in her praise for Obama. She told reporters that she planned to vote for McCain—"I'm somewhat terrified of what the Democrats are going to do on education," she said—but a close friend convinced her at the last minute to switch to Obama.)

Teachers unions contribute more than $60 million a year to political campaigns, topping contributor lists at the state and federal levels, and nearly all of the money goes to Democrats. That investment buys the continuation of the status quo plus some platitudes about class size and teacher pay from every prominent Democrat. Reformers have virtually no presence on Capitol Hill. But if anyone can take on the teachers unions and win in the court of public opinion, it's a liberal black Democratic president.

Still, other than a few passing remarks, President Obama hasn't made any noticeable moves in the direction of reform. So reformers are pinning their national hopes on the education secretary from Chicago. Duncan, who was confirmed without much fuss, is one of the most reform-friendly education bureaucrats Washington has seen in a long time. While he gave mealy-mouthed excuses for killing off D.C.'s voucher program and has offered little public support for Rhee—generally his comments take the form of statements like "I don't get involved in local labor disputes"—Duncan has expanded programs such as Race to the Top, which gives states cash-money incentives to open themselves up to experimental education methods such as charter and magnet schools. It wouldn't have been surprising to see such a move from the Bush administration, but Obama has made the unorthodox choice to continue funding Race to the Top, requesting $1.35 billion for the program in 2011. (See "Obama's Education Spending Frenzy," page 50.)

How about Rhee's results? Scores released by the U.S. Department of Education in December 2009 show slight improvement in the District during her two years at the helm, with fourth-graders making larger gains in math than their counterparts in any other big-city school system and eighth-graders showing similarly impressive improvements. But Rhee says she still considers the District to be failing its students, and she's right. When she arrived, 14 percent of fourth-graders were proficient in math and 14 percent in reading. Since then, the numbers have moved—a little. There is now one large urban school district that performed worse than D.C. in 2009, the dying city of Detroit. It's not much, but it's progress.

Yet tellingly, the Washington school population con-tinues to shrink. Warren Buffett once told Rhee that the only way to really get public schools fixed was to make private schools illegal and assign the children of senators and businessmen to public schools by random lottery. But Buffet is unlikely to get his way, so the opposite trend prevails. In 2007–08 there were 71,369 students enrolled in D.C. schools, 49,422 of them in traditional public schools. In the 2008–09 those numbers fell to 70,919 and 45,190, respectively. This at a time when D.C.'s population is growing.

While Washington's case is extreme, public schools everywhere in the nation are a widely acknowledged disaster. Everyone knows the litany of woe. Americans are falling behind other nations in science and math. Freshmen routinely arrive at colleges in need of remedial training. Students continue to secede from public school systems in droves.

"We don't have any model of an urban school system that has been reformed," says Michael Petrilli, vice president of the Thomas B. Fordham Institute, an education reform think tank. "Everybody understands that it's an impossible job. The stars have aligned here in ways that are unusual, which makes prospects for reform here better. But Michelle has put a lot—maybe too much—on the long shot that you can get the union to agree to wide-ranging reforms."

If something gives and D.C. teachers take Rhee's deal, Washington could become a model for the nation, pushing policy makers to seize the crucial hiring and firing privilege from the iron grasp of the teachers unions. If the unions turn Rhee down, or if she or her successor settles for a lesser compromise, the possibility for real, revolutionary change may be lost.

Katherine Mangu-Ward (kmw@reason.com) is a senior editor at reason.