Category: economics

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Student Debt

In 1974 it cost me (a Canadian from Ontario) about $3,000 to go to a U.S. college for one year. That included tuition and room and board. I had a job cutting grass and plowing snow too, for spending money. So a poor boy like me could get a college degree and get a good job and do well.

I ended up with about $10,000 in student loans. A house, at that time, would have cost me about $80,000, in Chatham, Ontario.

Now of course there has been some inflation since 1974 and everything costs more and people earn more money, but the rate of increase in college tuition has been nothing short of astronomical. It is now, typically, $35-50,000 for a year in college. In the U.S., a graduating senior typically owes about $50,000.

What happened? Did it suddenly cost ten times as much to hire a professor? To build a lecture hall? That $80,000 house is now $175,000. Why is that $3000 education now ten times as much?

Part of the reason is that State governments cut back on the amount they contributed to the cost of higher education. In Washington State, for example, in 1991, the state’s contribution to the costs of colleges and university education was (inflation adjusted) $96 for each person in the state. Today it is $31. All while politicians of every stripe whine and kvetch about the low achievement of American students on international tests and their unpreparedness for work after they receive their diplomas!

The other reason college costs rose astronomically is quite simple: the money available to pay for it increased; the colleges knew how to get that money flowing by facilitating access to government-sponsored loan programs and young students with poor judgment about the relative advantages and disadvantages of massive debt signed up in droves believing that high-paying, secure jobs awaited them upon graduation.

There was, in short collusion. The government offered student loans thinking they would be applied to 1974 tuitions in a 1974 job market. College Presidents rewarded themselves for increasing student debt by paying themselves $500,000 a year or more, with lavish benefits. Athletic departments received more money for stadiums, dressing rooms, uniforms, and coaches. When tuitions skyrocketed and the job market tanked, you suddenly had a huge population of deeply indebted under-employed young people. It’s almost as if the fast food industry’s wettest and juiciest dream came true: a large population of macjob candidates, desperate for any kind of income.

I think what most people don’t get about the economics in the United States, and elsewhere, is that the system is largely controlled by the banks and large corporations and the purpose of the system to keep the vast majority of people in perpetual debt, continuously streaming vast sums of money into the coffers of the investor class. The government is utterly complicit with this process, allowing banks to offer money to people who clearly cannot afford to pay it back, at unconscionable interest rates which serve to trap them the way the giant insect alien in “Aliens” traps it’s victims, with gooey slabs of useless consumer goods and mortgages and degrees. Unable to move or free themselves or escape the massive interest payments.

And the emblematic moment of this relationship, in 2008, after the banks got too greedy– an almost incomprehensible development– more greedy than before?!– and the mortgage securities markets collapsed and the economy was threatened with disaster, the government bailed out the banks. The consumers were strung out to dry with continuing liabilities for houses that had lost half or more of their value or cars they could no longer drive or educations that no longer produced jobs.

There were no consequences to the investors or managers of these banks. In fact, most of them were lavishly rewarded for their greed, their ruthlessness, their incompetence, their monumental callousness towards the home-owners who held their mortgages, and their ability to bribe politicians effectively.

A few of them must have a sleepless moment or two imagining what it would be like to live in a world in which there are consequences for psychotic behavior on a grand scale– a moment or two. But such anxieties will vanish quickly when they meditate on the poetry, the operatic grandeur, the delightful, soaring arias of the capitalists, the Republicans singing in harmony praises every day to a system, they insist, that is going to benefit the average working guy as much or more than those who are already rich.

I found an article in Forbes online addressing the issue.  If this represents the caliber of debate, we are in big trouble.

A much better article on debt forgiveness.

It doesn’t: a much better, more informative article at the Seattle Times.

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It’s Fun to Say at the NCAA

It’s rather quaint the way University administrators and NCAA officials declare just how wonderful and pure is the devotion of their students to athletics. They play for the love of the sport; they aspire to greatness. They want to improve themselves. They want to be true to their school. They want to learn about leadership and team-building and self-sacrafice and self-denial and goal-setting and how to give everything you’ve got, for a higher purpose.

That kind of sentiment is for saps, of course, and the Administrators and Coaches and NCAA officials know it. If they claim otherwise, let’s make it simple for them: prove that you believe in the values you insist your students must believe in– you now work for nothing. You are volunteers. You get no money, no limos, no first-class flights, no suites, no dinners at the top restaurants. You too can express your purity and join in this ethereal expression of academic holiness.

Don’t be too quick to dismiss the idea. I mean, it is not likely at all that it’s going to happen, but not because it makes sense to do it the way we do it now. It will not happen because of simple, unencumbered ruthless human greed. There is no body or institution or person who is in a position to prevent the NCAA would perpetuating their positions of privilege indefinitely. There is a symbiotic relationship between college administrators, sponsors, coaches, and politicians, and they will all circle the wagons and roll out the big guns if anyone threatens the status quo.

The players, as you know, are this pure and devoted and selfless. They play for nothing. In fact, if they do accept money or gifts, they can be fined and suspended and expelled. But their coaches are among the highest paid state employees in the nation. The head of the NCAA famously drives a Porsche and lives in luxury.

What’s my problem with NCAA sports in America? Nothing. Just drop the pretense and make it what it really is: a professional league. And pay your players and provide them with decent insurance and other benefits, and cut out all the bullshit. Strip all of the Universities and Colleges of all the professional sports– let them go back to amateur athletics organized purely, solely, and exclusively by and for amateurs.

And athletic scholarships should be terminated, period. The entire idea is stupid. What is an institution of higher learning doing paying for people to come play football or basketball or to swim for them? Who says they should? Who says it wouldn’t be a better world if Universities went back to the business of education?

Let’s get rid of the vampires and pimps. And let’s have a string of institutions that are actually dedicated to higher learning: to producing smart people. Let’s value them on the basis of how good they are at doing that. And let’s put cost controls on them so that the incredibly obscene rise in tuition costs (fueled by perverse application of federal student loan guarantees) stops.

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The Circuitous Life of Johnson’s Folly

If President Johnson had decided in January 1964 that the U.S. would not win the war in Viet Nam and should withdraw it’s troops and let the chips fall where they may, what would have been different?

About 45,000 American men would be alive today instead of buried in graveyards all over America. Most of them would have married. They would have had children– another 100,000 citizens– who would, by now, be having children of their own.

Johnson would have run again in 1968 and he probably would have won, being the incumbent, and credited with the Civil Rights Act, and his anti-poverty programs and the general prosperity of the expanding consumer society. The war protests, of course, would have ended. The younger generation would have lost their identity. No Chicago riots, no Kent State. One great song “Ohio” by Neil Young, would not have been written or sung. We would have never learned who Abbie Hoffman or Jerry Rubin were, or cared. Nixon would probably never have been elected and U.S. relations with China might today be a lot worse.

Who knows– maybe Reagan would have won in 1972. Maybe Vice-President Hubert Humphrey. Bobby Kennedy would not have been assassinated, because he would not have run in 1968, because Eugene McCarthy would not have run (proving that an antiwar candidate could win), because there would have been no war.

There are threads that can never be traced because everything else would have been different.

The inflation of the 1970’s would have been stopped dead in it’s tracks because, don’t you know, the Viet Nam war ate up a HUGE chunk of American government spending and purchasing. Maybe there would not have been a budget deficit. Or– even better– perhaps that deficit would have been run up by spending on social programs and infrastructure instead, which would actually have improved the economy even more.

U.S. credibility abroad would have been immeasurably higher. Except for the fact that they had engineered coups in other Third World countries like The Congo and Iran and El Salvador. Well, imagine, if you will, that they hadn’t. Imagine the U.S. as an emblem of freedom and democracy and justice, in the 1970’s, instead of a cynical, manipulative, oil-mad behemoth?

Viet Nam would still have gone communist, of course, just as the Republicans feared, and just as they did anyway, but with a less extreme leadership. (The moderates were all driven out by the war.)  Significantly, Cambodia would not have been destabilized by U.S. bombing likely sparing the world one of the great atrocities of the 20th Century committed by the Khmer Rouge, which came to power as a result of the illegal U.S. bombing in the border regions with Viet Nam.

I’m saying all this because, in 40 years, we may be asking ourselves what would have happened if the U.S. had just walked away from Iraq in 2014.

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Corporate Welfare Bums

The phrase “Corporate Welfare Bums” was coined by Canadian NDP Leader David Lewis in 1972.

J. P. Morgan just got a gift of $225 million from the local government to locate an office in Jersey City. Corporate welfare. Somewhere in Jersey City a single mom with two kids is thinking, I should ask the government for some money if I agree to locate my ass at the McDonald’s drive-thru window.

J.P. Morgan had profits of $18 billion last year. The government had evidence that J. P. Morgan was complicit with the Bernie Madoff ponzi scheme: while claiming the trust of investors and partners they did nothing to ensure that their money was being handled in a legal and responsible manner. To forestall more serious criminal proceedings they agreed to pay out about $2 billion in fines. They would have you believe that they didn’t really do anything wrong, and the agreement with the government allows them to claim that they didn’t really do anything wrong– they just like to hand over $2 billion dollars to the government occasionally, because it makes them feel good.

If you were a bank robber or a burglar, wouldn’t you wish that you had the option of paying a large fine every time you were threated with imprisonment? J. P. Morgan’s President and CEO and Board Members can phone almost any politician and arrange lunch. You can’t. So pick up your mop and get back to work.

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And Now, My Fee

It should be absolutely, irrevocably, unconditionally illegal for any agent, lawyer, manager, or service provider of any kind to deduct his or her fees directly from any property owned by the person for whom they are performing a service. And that goes triple for lawyers. And agents. And managers.

Lawyers, and bankers, you see, are not like you and me.

If you hire a lawyer to manage your purchase of a home, they do not do the work for you like a plumber, a dentist, a doctor, a mechanic, or a carpenter, and then, once you have agreed that the work has been performed in a satisfactory way, submit his or her bill for you to pay, with approval. (I grant that it would not be unreasonable for them to ask for a fair “up front” fee to begin the work). No. The lawyer decides how much to pay him or herself and then takes it right out of your bank account. If you, later on, realize that the lawyer made up imaginery services and imaginary expertise and charged you large sums of money for them, and you did not ever agree to pay these surprise fees and charges– good luck getting your money back. You will never see a penny. Unless you hire …. a lawyer.

Yes, this happened to me. A lawyer added close to $800 to my bill for certain services. I demanded to know what the charge was for and he could not tell me. He just muttered something about something that was “required” and how impertinent of you to question a lawyer about whether or not you need to pay him lots of money.

Other businesses would love to be in on this arrangement, which is why I am always a bit leery of providing my credit card data to places like my domain registrar, or the New York Times website.

Just imagine your plumber came in to do some work. Instead of giving you a quote and then doing the work and then showing you a bill and then accepting your payment– once you are sure he did the work he promised to do– suppose he just demanded your bank card and your pin number. And when he was done, he just went down to the bank and withdraw as much money as he thought he deserved.”

I fully expect that a lawyer reading this would say that I have no idea how many people would hire a lawyer, make use of his services, and then not pay for the services. It would be intolerable for a professional to have to put up with that kind of rip-off. In other words, it would be intolerable for lawyers to have to live in the same real world as plumbers and mechanics and carpenters.

I believe it should be enshrined in law: any professional who deducts his or her own fees from any transaction is committing theft– even if they say they were owed the fees. If they are really owed the fees and the customer refused to pay them, let them hire lawyers and try to obtain their money through the courts like everyone else.

It is absolutely epidemic in the world of entertainment and sports. Agents and managers receive the money, deduct their own fees and expenses, and the let the rest go into the athlete or performer’s bank account. And we hear, over and over and over again, how some incredibly successful star athlete or musician is now bankrupt because they didn’t pay attention and their managers bled them dry while charging every expense, no matter how minor, to the performers’ accounts.

Not good enough for you? Not easy enough? Not convenient? Suck it up: that’s why everyone else expects to have to do if there is a dispute over fees and services and you are not entitled to magical powers just because you say so.

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Stupid Government

Americans will probably never admit it but their system of government is really kind of stupid. Yes, yes we all know that the fathers of the nation intended to weaken central government forever by providing counterweights to each branch. This design served them well in an era of Kings and Emperors. That era is long, long past.

Anyone who would prefer a paralyzed government to a powerful government– like Canada’s– prefers no government at all. We Canadians enjoy the spectacle of parties running for election, winning, and then having absolutely no excuse for not carrying out their platform. It’s easy: you campaign on your policies, you write the legislation, you propose it in the House of Commons, you analyze it in committee for a while, then you bring it back and pass it. Americans will tell you that this process is terrible and leads to oppression and dictatorship. They much prefer their process of running on a platform, proposing legislation, having it dismembered and appended to death in various committees of the House and then the Senate, having it stall for years in a second or third round of committees and negotiations, and then, finally, having a spectral mostly useless shadow of itself pass just before summer recess.

I think most Canadians would tell you in a flash that they would rather have the government do something and occasionally fail, than have the government do nothing and always fail.

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Obama’s Failures

It is not easy to sort out the points at which Obama has failed and the points at which a ridiculously venal and disingenuous opposition has succeeded in thwarting all government, all policy and all strategy. The clearest point was the earliest: Obama had a majority in both houses for the first two years of his first term and failed to conclude a number of legislative initiatives, including budget and tax measures, that could have been the foundation for the rest of both terms.

In fairness, not even everyone in his own party would have supported it. The fact that he was only able to squeeze through Obamacare with a bare majority, in spite of the fact that it is essentially the Republican Plan from ten years ago, gives you an indication of just how dysfunctional U.S. national politics is.

Nobody will ever be able to prove, convincingly, that the Republicans had a better strategy for dealing with the 2008 financial crisis than Obama– and, any way, the strategy they did have was same: bail out the banks (and the big contributors to your election campaigns) and string the mortgage holders out to dry, and then cut taxes for the rich. It is easy for Republicans to claim that the economy would have performed better under a McCain or Romney Administration because it is impossible to show that it wouldn’t have. There is no laboratory of economics that can isolate budget policies from all the other factors that go into making up the economic performance of any given country. What evidence we do have suggests that cutting taxes and reducing over-all spending (Republican policies) has a negative effect and that, in fact, we would be worse off today if the Republicans had had their way. Check Wisconsin for comparison.

Obama pressed a little for more help for those hurt the most by the ruthless greed and amoral practices of the big banks, but he didn’t push very hard. Obama’s Justice Department did very, very little in the way of punishing the people responsible for inflicting more peacetime misery on more people all around the world than anyone else before or since. Almost no one was held to account.

Eric Holder was not up to the task. Timothy Geithner was always one of them, as was Ben Bernake.

The Obama administration came to the conclusion that it would be too difficult to prosecute them. That’s a typical “liberal” response to complexity. It was a moment I would have liked a hard-bitten tough-as-nails conservative like Teddy Roosevelt (there’s nobody in the current Republican Party who is anything like that) to come along and just do it. Just let people know that you are going to do it whether they like it or not. Liberals are always trying to get everyone on board and compromise. And usually, that’s a wise strategy. But not when dealing with these Republicans who always ever only had one goal, to prevent Obama from any legislative success whatsoever, no matter what the cost.

So Obama gets elected on the promise of change but the first thing everyone noticed was how many familiar faces there were in his administration, all holdovers from Bush and Clinton and Reagan, all establishment figures, and almost no real outsiders. He tried to get Elizabeth Warren appointed to the Consumer Protection Bureau but caved quickly to hysterical Republican attacks, which is about the highest compliment anyone has recently paid to anyone on either side.

What is it about Elizabeth Warren that they are so frightened of?

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Push the Button First, Gothamites!

You buy a product from a store. The store charges you extra. Then they give you “air miles” which they pay for with the extra money they charged you. This induces a hypnotic state of bliss in the customer.

In “The Dark Knight”, the Joker sets up a situation in which there are two ferries, one filled with upstanding citizens of Gotham, and the other with criminals. They each have a detonator linked to explosives on the other ferry. Whoever pushes the button first will be spared but the other boat will blow up killing all of its occupants.

This is the same principle behind air miles. The profitability of the system depends upon the fact that people like me refuse to collect them. Those who do collect air miles are pushing the button: they get the benefit of this surcharge, while I do not. But the truth is, both of us are paying more for products and services because of this idiotic scheme that vendors have induced people to buy into.

The same applies to discount coupons and affinity cards. Do people seriously believe that the store has reduced prices just because they love having you as a customer? The only reason any vendor has to provide a discount to any particular custom with a coupon or an affinity card is because they can charge more to people who are willing to shop there because of the cheap, meaningless thrill of getting a “discount”.

 

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The Red Line

Is it too much to ask that the U.S. point to a single success story before embarking on a new adventure in disruptive interventions in the Middle East? What is Obama’s model for this enterprise? Has anybody in this administration asked about five years from now, ten years from now, twenty years from now? Does Obama live in an echo chamber wherein his advisors seek advice from their adviser’s advisers? Does he ever hear from anyone with a genuinely dissenting view?

There is raging hypocrisy in all the blather right now coming from Obama and Hagel and Kerry on Syria: after doing nothing while 100,000 people have been killed and thousands more tortured and millions made refugees, now— now! — we cannot stand by anymore, because Assad has used chemical weapons. Now, our integrity is at stake. Now, the world wonders if we have any principles. Now, our hearts are wrung with compassion for the victims of violent, repressive governments.

I would love to ask Obama if he feels the allies fire-bombing of Dresden and Tokyo, Osaka, Yokohama, and other Japanese cities, using M47 oil gel bombs, during World War II crossed any kind of red line?

Now we support democracy in Egypt. Now we don’t.

Now would be a good time, in fact, for the United Nations to vigorously assert that no government has the right to slaughter or repress or abuse their own peoples, whether it be Zimbabwe, North Korea, China, or Iran. But that would be a dramatic change from the prevailing doctrine, which is, what happens in your country stays in your country. Ever since the world community decided, when it formed the United Nations (from the ashes of the failed “League of Nations”), that it was more important that all states be represented and have some investment in the world order than it was to insist that all of them be democracies, we have lived with this devil’s bargain: we will not interfere when you commit atrocities within your own borders. We will only interfere if you cross the border to commit atrocities.

In fairness, one could make a cogent argument for the idea that the UN has actually been effective in reducing the number of wars on the planet.  That’s no joke.  We are all appalled at Egypt and North Korea and Syria, but at least they are not at war with Israel or each other.  That is nothing to sneeze at.  In the 1960’s, there were numerous wars at any given time, with an appalling cost in human lives and material destruction.

What is needed at the moment in Syria is not more U.S. intervention, but a cease-fire.

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The Awful MLK Memorial

I really doubt that Martin Luther King Jr. would have enjoyed seeing $110 million spent on his memorial, especially when the design makes him look like Mao Zedong bursting out of the Great Wall of China ready to stomp out dissent and squash the nationalists.

How can a memorial that ugly cost so much? And, for $110 million, could they not have double-checked the text engraved into it: it will cost about $1 million to remove it, now that everyone seems to think it is an inappropriate misquote. Something about being a drum major.

I am opposed, as a matter of principal, to most monuments, but especially those that exaggerate the physical or historical size of the subject. The bigger the monument, the less likely the builders of the monument intend to live up to the ideals for which the subject stood. The monument is compensation. It’s a loud, bombastic assertion that the builders really care, really do stand for something, really do honor the ideals presented by the subject. It’s like hearing the Republicans talk about how great the Voting Rights Act was because it is no longer necessary, or how the courts carefully oversea the surveillance programs carried out by the NSA. We know they’re lying.

You can hear the Republicans saying to blacks: look, see how we love you? Look at how big the statue is. It’s gigantic. How can you doubt that we are on your side?

If this monument was appropriate, we would never have needed civil rights legislation or the Voting Rights Act: Dr. King would have simply stomped the racists into the ground or ripped the Washington Monument from its base and swept away the segregationists, the KKK, and the fat southern sheriffs in one stroke.

While the City of Detroit declares bankruptcy, the State of Michigan is providing $500 million to build a new arena for the millionaire players and owners of the Detroit Red Wings.

Taxpayer subsidies of major league sports stadiums remains one of the biggest scandals in American politics.