It seems so easy to say that states should provide more support for public universities, but should they? Who pays if the states pay more? The answer is: the average taxpayer. Why shouldn't the student attending the university foot their own bill. Why should a taxpayer who is not attending and who may or may not have children attending pay to subsidize college students?
"We all benefit" is the usual refrain. But, is that correct? Does the average taxpayer benefit when Joe Dough gets a sociology degree from Alabama Polytechnic Institute, while sudsing his way through four years of school? Certainly, the local bars in every college town would like to see higher subsidies by taxpayers for higher education. They know where the poor college student likes to spend his/her own money. Visit any major university and check out the attendance records in a typical class these days and you might wonder why taxpayers are subsidizing a lot of empty seats.
The usual principle is that if you want something bad enough you should pay for it yourself. Why doesn't that rule apply to higher education? I can understand the case for public funding for elementary school and secondary schools but the case for public funding for higher education seems to me to be no stronger than the case for public funding for iphones, ipads and tv sets.
Study after study has demonstrated that college degrees are worth it to the student enrolled. I point you to the most recent edition of the Journal of Economic Perspectives (Winter, 2012) for some observations on the "private value" of higher education in an article by academics Christopher Avery and Sarah Turner: "On the other side, the earnings premium for a college degree relative to a high school degree nearly doubled in the last three decades." Earnings premium means how much more in earnings a student will earn with a college degree as opposed to a high school degree. So, why should the taxpayer subsidize and make the premium even larger by transferring wealth from those without to those with?
In an otherwise excellent survey, the article by Avery and Turner does not raise the question: why does higher education cost so much more than it used to cost? Are we doing something different in higher education that escalates the costs without limit? That is really the much more interesting question than posing the endless pursuit of "how to feed the beast" exercises that involve more loans and more taxpayer funding.
So often you hear the refrain that state funding has been reduced or that big donor contributors are down this year. Fine. But, that does not explain why costs are exploding. The fact that revenues are not growing as fast as one might like is irrelevant to the issue of why costs are exploding. Higher education is not simply looking for more funding because existing sources are drying up, which is what college bureaucrats would have you believe. Costs of higher education have been and are exploding. Why? Doesn't anyone care?
Tuitions this year rose once more at most major universities. You have to wonder what expenses are rising so much in the midst of a still faltering global economy and a moribund US economy. What is straining the budget? Simply expanding student loans to an already overburdened student loan market adding to the mountain of debt that overhangs our citizenry and forcing taxpayers to cough up more and more does not address the question of cost. This is one more example, paralleling the health care debacle, that once you decide someone else should foot the bill, the bill explodes to infinity.
Friday, April 27, 2012
Wednesday, April 25, 2012
The Cradle of Civilization?
Civil society is breaking down in Greece. Riots, civil anarchy, violence and a rapidly descending respect for the rule of law is being played out on the streets of Athens daily. What once was the "cradle of civilization" is now a country descending into barbarism. The road to anarchy is often paved with good intentions.
Left wing governments for three generations, originally inspired by the American-trained economist Georges Papandreou, have fought the fairness battle -- the same battle that Obama is engaged in today -- and Papandreou emerged the winner in Greece. They got what they wanted -- a bloated government, a massive government bureaucracy, and promises of fat government retirements and free health care for their citizenry. They got it all. They had the same dream that the Obama folks have in the US.
Now we can see clearly where that dream takes you -- the modern nightmare that is Greece and will soon expand to Portugal, Italy, Spain, France and, yes, even Germany. Slowly but surely civil society is unraveling in Europe and economic collapse is unfolding. This is the inevitable outcome of a society that believes that no one is responsible for providing for their own health care, their own retirement, their own housing and for their own family. As the government, whatever "government" means in this context, gradually assumes responsibility for all of the basic necessities of life, there is no one left to produce the goods and services to provide those necessities. That's where we are in Greece.
One can only guess the ultimate outcome of the Eurozone collapse, but one thing for certain, it won't be freedom and democracy. When the respect for law and personal responsibility have disappeared from society, that society becomes fair game for demagogues and that's most likely where this is headed. If you think twentieth century Europe was a continual warzone, watch the unfolding drama now taking place in Europe. Finger pointing is now the major government policy in every European country. There are no political solutions to what ails Europe.
The roadmap to Greece is plainly in front of the US. If Americans want to travel down this road, it is pretty easy to see where it leads.
Left wing governments for three generations, originally inspired by the American-trained economist Georges Papandreou, have fought the fairness battle -- the same battle that Obama is engaged in today -- and Papandreou emerged the winner in Greece. They got what they wanted -- a bloated government, a massive government bureaucracy, and promises of fat government retirements and free health care for their citizenry. They got it all. They had the same dream that the Obama folks have in the US.
Now we can see clearly where that dream takes you -- the modern nightmare that is Greece and will soon expand to Portugal, Italy, Spain, France and, yes, even Germany. Slowly but surely civil society is unraveling in Europe and economic collapse is unfolding. This is the inevitable outcome of a society that believes that no one is responsible for providing for their own health care, their own retirement, their own housing and for their own family. As the government, whatever "government" means in this context, gradually assumes responsibility for all of the basic necessities of life, there is no one left to produce the goods and services to provide those necessities. That's where we are in Greece.
One can only guess the ultimate outcome of the Eurozone collapse, but one thing for certain, it won't be freedom and democracy. When the respect for law and personal responsibility have disappeared from society, that society becomes fair game for demagogues and that's most likely where this is headed. If you think twentieth century Europe was a continual warzone, watch the unfolding drama now taking place in Europe. Finger pointing is now the major government policy in every European country. There are no political solutions to what ails Europe.
The roadmap to Greece is plainly in front of the US. If Americans want to travel down this road, it is pretty easy to see where it leads.
Tuesday, April 24, 2012
So, What's the Deal With Corzine?
Just because Corzine is an Obama supporter, is he going to get a free pass? Madoff should have thought of this: "hey, it was just an accident!" Or, perhaps: "I never intended to mislead anyone." Would that have gotten Bernie Madoff a free pass? I don't get why Madoff is in jail and Corzine is free as a breeze.
It looks like Corzine is getting a free pass on the $ 1.2 billion of customer money that disappeared on his watch at MFGlobal. If there is a difference between what Corzine did (presiding over the looting of customer accounts, protected by law as segregated from firm accounts) and what Madoff did (running a ponzi scheme with customer money), I fail to see the distinction. Why is one guy behind bars and the other guy still the President's best buddy and on the loose?
It looks like Corzine is getting a free pass on the $ 1.2 billion of customer money that disappeared on his watch at MFGlobal. If there is a difference between what Corzine did (presiding over the looting of customer accounts, protected by law as segregated from firm accounts) and what Madoff did (running a ponzi scheme with customer money), I fail to see the distinction. Why is one guy behind bars and the other guy still the President's best buddy and on the loose?
Why Not Just Make It Against the Law to Hire Anyone?
The Obama Administration seems bound and determined to eliminate job opportunities in the American economy. The latest salvo in the war on jobs by the Obama folks is the new set of rules and regulations coming out of the EEOC (the mis-named "Equal Employment Opportunity Commission"). The new rules would force more and more mandates on companies who have the temerity to hire a handicapped worker. The new rules force dramatically higher "reasonable accomodation" standards on firms that hire handicapped workers.
The Wall Street Journal highlights the new rules in their opinion piece today entitled (appropriately): "Disabling Common Sense."
So, what is the predicable effect of the new EEOC rules? For certain, employers will be less willing to hire the handicapped. For another, since the definition of the handicapped is ever-shifting and will in time encompass virtually every American, employers will be less willing to hire anyone.
The Obama plan for jobs seems to be to make it as difficult and costly as possible for employers to hire employees. Employers aren't stupid. They read the memos. This is a jobless recovery by design.
The Wall Street Journal highlights the new rules in their opinion piece today entitled (appropriately): "Disabling Common Sense."
So, what is the predicable effect of the new EEOC rules? For certain, employers will be less willing to hire the handicapped. For another, since the definition of the handicapped is ever-shifting and will in time encompass virtually every American, employers will be less willing to hire anyone.
The Obama plan for jobs seems to be to make it as difficult and costly as possible for employers to hire employees. Employers aren't stupid. They read the memos. This is a jobless recovery by design.
Monday, April 23, 2012
So Long Sarcozy
Nicolas Sarcozy, President of France, is in deep political trouble. He should be. Along with Angela Merkel of Germany, Sarcozy has orchestrated the absurd policies that have been pursued in the Eurozone over the past 36 months. The answer to too much debt, if you believe Merkel and Sarcozy, is more and more debt. Together with half-hearted pleas for budgeting austerity, the Merkel-Sarcozy is a "more of the same" plan that simply makes a bad situation potentially catastrophic.
Tim Geithner and Barrack Obama have openly advocated even more ridiculous policies for the Eurozone, patterned after their own US policies, that make the Merkel-Sarcozy absurdities look mild by comparison.
It is amazing how often the Merkel-Sarcozy formula is used in countries throughout the western, developed world. All of these countries, without exception, have made promises to their citizenry that cannot be kept. So, now, all of these countries have a combination of out of control sovereign debt, declining GDP (or soon to be declining GDP), and a dawning awareness that their old folks of the future are doomed to live in penury. Thanks for nothing.
Because debt financing is becoming hopeless in the Eurozone in country after country, there is a movement to cut government expenses. This is not a plan, it is a necessity. They have no funds to pay the bills anymore. The result: political chaos. That is the ultimate destination of the Merkel-Sarcozy path and we are moving rapidly along.
America should take note. We will soon be on that path as well. Other than Scott Walker and Chris Christie, no American elected politicians have successfully challenged the fiscal problems that are in front of them. Indeed, the Obama Administration follows the "Ostrich" policy. See no problem, hear no problem, speak no problem. But the problem is there and it is simply a matter of time.
Sadly, Francois Hollande, who will replace Sarcozy as President of France advocates even more absurd policies than Sarcozy, if that can be imagined. The end game of the Eurozone political posturing is economic and political chaos.
There is a much, much easier solution. Owning up to their true fiscal situation, admitting that there is no way to finance the health care and entitlement plans in place, and sitting down with borrowers and restructuring loans is the right set of policies that could lead to European prosperity. But, it looks like no European politicians have what it takes to get there. So, look for increasing chaos ahead for the Eurozone.
One wonders if US policy makers will see the light before the US follows Europe down this tragic path. The problems in the US are exactly the same as the problems in the Eurozone and, if anything, of a larger magnitude.
Tim Geithner and Barrack Obama have openly advocated even more ridiculous policies for the Eurozone, patterned after their own US policies, that make the Merkel-Sarcozy absurdities look mild by comparison.
It is amazing how often the Merkel-Sarcozy formula is used in countries throughout the western, developed world. All of these countries, without exception, have made promises to their citizenry that cannot be kept. So, now, all of these countries have a combination of out of control sovereign debt, declining GDP (or soon to be declining GDP), and a dawning awareness that their old folks of the future are doomed to live in penury. Thanks for nothing.
Because debt financing is becoming hopeless in the Eurozone in country after country, there is a movement to cut government expenses. This is not a plan, it is a necessity. They have no funds to pay the bills anymore. The result: political chaos. That is the ultimate destination of the Merkel-Sarcozy path and we are moving rapidly along.
America should take note. We will soon be on that path as well. Other than Scott Walker and Chris Christie, no American elected politicians have successfully challenged the fiscal problems that are in front of them. Indeed, the Obama Administration follows the "Ostrich" policy. See no problem, hear no problem, speak no problem. But the problem is there and it is simply a matter of time.
Sadly, Francois Hollande, who will replace Sarcozy as President of France advocates even more absurd policies than Sarcozy, if that can be imagined. The end game of the Eurozone political posturing is economic and political chaos.
There is a much, much easier solution. Owning up to their true fiscal situation, admitting that there is no way to finance the health care and entitlement plans in place, and sitting down with borrowers and restructuring loans is the right set of policies that could lead to European prosperity. But, it looks like no European politicians have what it takes to get there. So, look for increasing chaos ahead for the Eurozone.
One wonders if US policy makers will see the light before the US follows Europe down this tragic path. The problems in the US are exactly the same as the problems in the Eurozone and, if anything, of a larger magnitude.
Sunday, April 22, 2012
Suing Bank of America
Bank of America has recently settled a lawsuit with two public pension funds for $ 160 million. The case involved BofA's purchase of Merrill Lynch. Who pays for this?
As in many things, no one seems to ever ask the question: who pays? Instead, folks bask in the view that the bad guys got their due. But, did the bad guys get their due in the BofA case?
BofA is a public company. The biggest single owner of BofA are American workers of slightly above average income. How do they own it? In their pension funds.
The next largest owner is another set of average Americans -- folks who own mutual funds either in their IRA accounts or in the brokerage accounts. These folks have saved this money, invested it, and have ended up as a major owner of BofA.
So, when you ask who pays, look in the mirror. The two public pension funds who won $ 160 million in the case will be paid essentially by the owners of BofA, the single biggest group being other public pension funds. So, to make it clearer: in effect, the public pension plans of Louisiana have successfully sued the public pension plans of Arizona, New York, California, etc. One public pension plan is dipping its hands into the pockets of another pension plan. Does that sound like "getting the bad guys" to you?
If all that is going on is one group of average Americans are suing another group of average Americans (who are, by and large, unaware that they are being sued), who really wins?
That's easy. The lawyers. They are the ones who loudly trumpet these lawsuits and lobby hard to see to it that damage awards and other financial penalties are not limited by state and federal law. It's great to see those average Americans who own BofA get what they are due. "Sock it to the little guy." That's the message of the BofA lawsuit.
Meanwhile, the perpretators of whatever went wrong are completely unaffected by the outcome of this lawsuit. They are highly paid executives of BofA, that bear no penalty whatsoever from the outcome of this lawsuit. Even if they own stock, the company typically simply grants them more stock if the value of the their holdings have fallen.
So, as in other things, rich folks roll merrily along unscathed, while middle class Americans are crushed once more.
Anytime you read about a public corporation being sued for some malfeasance -- think Enron, Exxon, World Com, whoever -- and you wonder who pays if the lawsuit is successful, look in the mirror. It's the little guy that pays for all of this litigation. The Enrons of the world aren't owned by some rich bad guy. The Enrons of the world are owned by average Americans, mostly trying to save for their old age. These lawsuits make it tougher for these folks to retire. But, the media seems to think that bludgeoning the retirement hopes and dreams of the average American with these kinds of lawsuits is "getting the bad guys." I guess that tells us who the media really thinks the bad guys are.
Meanwhile the Wall Street Journal reported yesterday that Bank of America was planning more layoffs. Maybe BofA needed to produce some cost cutting to pay off the recent victory by the plaintif lawyers. That should get the bad guys! Sock it to them!
As in many things, no one seems to ever ask the question: who pays? Instead, folks bask in the view that the bad guys got their due. But, did the bad guys get their due in the BofA case?
BofA is a public company. The biggest single owner of BofA are American workers of slightly above average income. How do they own it? In their pension funds.
The next largest owner is another set of average Americans -- folks who own mutual funds either in their IRA accounts or in the brokerage accounts. These folks have saved this money, invested it, and have ended up as a major owner of BofA.
So, when you ask who pays, look in the mirror. The two public pension funds who won $ 160 million in the case will be paid essentially by the owners of BofA, the single biggest group being other public pension funds. So, to make it clearer: in effect, the public pension plans of Louisiana have successfully sued the public pension plans of Arizona, New York, California, etc. One public pension plan is dipping its hands into the pockets of another pension plan. Does that sound like "getting the bad guys" to you?
If all that is going on is one group of average Americans are suing another group of average Americans (who are, by and large, unaware that they are being sued), who really wins?
That's easy. The lawyers. They are the ones who loudly trumpet these lawsuits and lobby hard to see to it that damage awards and other financial penalties are not limited by state and federal law. It's great to see those average Americans who own BofA get what they are due. "Sock it to the little guy." That's the message of the BofA lawsuit.
Meanwhile, the perpretators of whatever went wrong are completely unaffected by the outcome of this lawsuit. They are highly paid executives of BofA, that bear no penalty whatsoever from the outcome of this lawsuit. Even if they own stock, the company typically simply grants them more stock if the value of the their holdings have fallen.
So, as in other things, rich folks roll merrily along unscathed, while middle class Americans are crushed once more.
Anytime you read about a public corporation being sued for some malfeasance -- think Enron, Exxon, World Com, whoever -- and you wonder who pays if the lawsuit is successful, look in the mirror. It's the little guy that pays for all of this litigation. The Enrons of the world aren't owned by some rich bad guy. The Enrons of the world are owned by average Americans, mostly trying to save for their old age. These lawsuits make it tougher for these folks to retire. But, the media seems to think that bludgeoning the retirement hopes and dreams of the average American with these kinds of lawsuits is "getting the bad guys." I guess that tells us who the media really thinks the bad guys are.
Meanwhile the Wall Street Journal reported yesterday that Bank of America was planning more layoffs. Maybe BofA needed to produce some cost cutting to pay off the recent victory by the plaintif lawyers. That should get the bad guys! Sock it to them!
Saturday, April 21, 2012
The Public Pension Saga
State and local governments in the United States have a major fiscal disaster on their hands. The obligations of these governments embodied in their pension plans for government employees are not funded and there are no serious plans to fund them. The result: a combination of looming state bankruptcies and drastically reduced pension benefits for covered employees. The biggest single group of pensioners threatened by this looming disaster are public school teachers.
Yesterday, Democratic Governor Pat Quinn of Illinois made a last ditch desperate effort to avoid disaster in Illinois by urging state employees to "voluntarily" accept a shift in the retirement age to 67 and to contribute an additional three percent of salary to their pension funds. This is not a reform, this is an emergency and Quinn is a Democrat elected with strong union support in a traditionally Democratic state. Even if Quinn's suggestion is taken up by public employees, which it won't be, it is only a drop in the bucket compared to the real problem that Illinois' pension fund faces. That tells you how bad things have become.
Illinois is in the vanguard of this coming catastrophe. New York, California, New Jersey are waiting in the wings. South Dakota may be the only state of the 50 states in the US that has a real shot at delivering on their public employee retirement promises. No one else is coming anywhere near close to properly funding their systems. Some states, Virginia is an example, have recently enacted "reforms" that will have minimal impact on the massive funding deficits of their public pension plans. These reforms are notable in their inadequacy.
Inevitably, the younger members of the work force will find little or nothing waiting for them when the time for retirement comes. This parallels the outcome of social security for this same work force demographic. There is simply nothing out there to fund the promises that politicians continue to make and continue to pretend will be there when the time comes.
On this score, the coming retirement disaster is a bi-partisan affair. Republicans as well as Democrats are both complicit in confusing the public as to where this situation is headed. Ultimately, Democrats like Governor Quinn of Illinois and Republicans yet to be named will be forced to tell the truth to their employees, well past the date that these employees could increase their personal savings to offset the abandoned promises of the politicians. Government and politics at its worst.
Yesterday, Democratic Governor Pat Quinn of Illinois made a last ditch desperate effort to avoid disaster in Illinois by urging state employees to "voluntarily" accept a shift in the retirement age to 67 and to contribute an additional three percent of salary to their pension funds. This is not a reform, this is an emergency and Quinn is a Democrat elected with strong union support in a traditionally Democratic state. Even if Quinn's suggestion is taken up by public employees, which it won't be, it is only a drop in the bucket compared to the real problem that Illinois' pension fund faces. That tells you how bad things have become.
Illinois is in the vanguard of this coming catastrophe. New York, California, New Jersey are waiting in the wings. South Dakota may be the only state of the 50 states in the US that has a real shot at delivering on their public employee retirement promises. No one else is coming anywhere near close to properly funding their systems. Some states, Virginia is an example, have recently enacted "reforms" that will have minimal impact on the massive funding deficits of their public pension plans. These reforms are notable in their inadequacy.
Inevitably, the younger members of the work force will find little or nothing waiting for them when the time for retirement comes. This parallels the outcome of social security for this same work force demographic. There is simply nothing out there to fund the promises that politicians continue to make and continue to pretend will be there when the time comes.
On this score, the coming retirement disaster is a bi-partisan affair. Republicans as well as Democrats are both complicit in confusing the public as to where this situation is headed. Ultimately, Democrats like Governor Quinn of Illinois and Republicans yet to be named will be forced to tell the truth to their employees, well past the date that these employees could increase their personal savings to offset the abandoned promises of the politicians. Government and politics at its worst.
Subscribe to:
Posts (Atom)