Relevant and even prescient commentary on news, politics and the economy.

Posts I Won’t Write

Buce sends us to Der Spiegel’s description of Barack Obama’s potential 2012 opponents (“You Think This is Bad?”)

John Kay in today’s FT (no link) tells us why letting economists pontificate about finance is a Mug’s Game. The mugging being of people who are stupid enough to believe economists. (If Brad DeLong or Mark Thoma links to this one, I’ll add a link to them.)

This (from Kaplan Daily of all places, but Valerie Strauss is one of the only Bright Lights there) is probably the most important general article about standardized testing and education.

This one tells the truth and shames the devil, as it were. Those fooling themselves that vouchers and charter schools will lead to improvement in anything other than excess rents going into the pockets of the people who are hired to run them (such as Christopher Cerf, President and COO and Christopher Christie, lobbyist) either have forgotten or are ignoring history:

Decades of research have shown that not only do the for-profit, corporate models being forced on school districts from coast to coast not work, they present a separate and unequal solution, and offer huge profits for investors.

Anyone stupid enough to believe the “anti-piracy” crowd has the best interest of Creators in mind needs to mark that belief to market. For another data point (via Dr. Black), see here.

On a more positive note—not to mention having grown up watching Bob Braun as a local, afternoon talk-show host—I want to note Mr. Braun being one of the only reasons to read The Star-Ledger, and especially highlight his series dealing with ICE abusing its power (nu?) and almost preventing a girl from saving her sister’s life.

This one has a happy ending.

Learning To Owe

A few thoughts from a friend of mine and an introduction from a movie I (run75441) watch each year.

“I don’t need 24 hours. I don’t have to talk to anybody. I know right now, and the answer’s no. No! Doggone it! You sit around here and you spin your little webs and you think the whole world revolves around you and your money! Well, it doesn’t, Mr. Potter! In the, in the whole vast configuration of things, I’d say you were nothing but a scurvy little spider!” George Bailey

Learning To Owe

by The Bell

The Cost of Education Is Crushing the Opportunity We Mean It to Provide

The Occupy Wall Street movement has no formal goals but several consistent memes have emerged among the crowd demonstrations in various cities across the country. Most of these have to do with the concentration of wealth and the collusion/corruption between big business and government. However, a more selfish trend also has surfaced among the demonstrators – many want their college student loans forgiven.

A small, informal survey among New York protestors last week by equity research analyst David Maris found ninety-three percent of them advocated student-loan clemency. This idea actually is neither original to OWS nor unique among its members.

clip_image001

Sign bewailing large student loan debt
from one Occupy Wall Street protestor

New York University Professor Andrew Ross recently proposed a radical solution to student loan debts the he calls “A Pledge of Refusal.” The idea requires those who owe to sign a pledge to stop making payments on their student loans once the pledge garners a million signatures. Meanwhile, an online petition supporting student loan forgiveness has collected over a half million signatures.

President Obama announced a plan last week to provide student loan relief. First, he is reducing the maximum repayment on student loans from fifteen percent of discretionary annual income to ten percent. Second, he will allow borrowers to combine loans from the Family Education Loan Program with direct government loans, with a lower consolidated interest rate. Obama plans to use his Executive authority to bypass Congress for this program.

Democratic Representative Hansen Clarke of Michigan wants to go even further. He has introduced legislation (H.R. 365) that includes creating incentives for banks to negotiate with distressed lenders, providing tax credits for education expenses and student loan debt, and making more private student loans eligible for discharge in bankruptcy proceedings.
Both Obama’s and Clarke’s solutions fall short of general clemency but protestors are unlikely to obtain this remedy. A Rasmussen poll found only twenty-one percent of American adults in favor of blanket forgiveness as contrasted to sixty-six percent opposed. Many feel clemency would be unfair to lenders as well as those borrowers who repaid their student loans. At worst, they write off OWS protestors and other advocates for loan forgiveness as spoiled, lazy slackers who expect a free ride.

Such epithets are unfair, counters conservative columnist Nicholas Kristoff this week in the New York Times. “While alarmists seem to think that the movement is a ‘mob’ trying to overthrow capitalism, one can make a case that, on the contrary, it highlights the need to restore basic capitalist principles like accountability.” Kristoff goes on to deplore how “some financiers have chosen to live in a government-backed featherbed. Their platform seems to be socialism for tycoons and capitalism for the rest of us . . . they can privatize profits while socializing risk.”
Representative Clarke concurs that most protestors “are not asking for [a bailout]. They are simply asking for a system that is not rigged against them.” When big bankers and investment firms can make poor decisions without suffering obvious consequences, then the motivation for individuals requesting similar absolution may not be admirable but it is understandable.
While the current crop of students and recent graduates may be whining about the problem more than past generations, they face an objectively bigger problem. This year, the average borrower graduating from a four-year college left school with roughly $24,000 of student debt, with ten percent facing debt of $40,000 or more, according to the College Board. Total student loan debt will exceed $1 trillion this year and it now exceeds outstanding credit card debt, according to the Federal Reserve Bank of New York.

Only seven percent of graduating bachelor’s degree holders come from the bottom quarter of income earners, as compared to twelve percent back in 1970. Intended as relief and opportunity for the distressed poor, student loans have become an unavoidable middle class reality. In addition, a series of laws passed by Congress last decade have increased the difficulty of discharging debt, including student loans, through bankruptcy.
The website College Scholarships reports on several programs that forgive or reduce student loan debt for graduates willing to work in high need/disadvantaged areas. The problem is such programs are limited to highly targeted professions, such as nurses, attorneys, and teachers. What is more, they often require a minimum of five years experience. Traditionally, graduates take such jobs immediately after graduation to acquire experience, when they are most inclined to social activism and less acclimated in their lifestyles to larger salaries.

I attended college for six years, ultimately earning a master’s level degree in 1984. I won several scholarships, based on merit; qualified for several grants, based on need; and I worked. In spite of this, I fell short of the necessary money for tuition and books on a couple of occasions. I took out a couple of federal student loans to make up the difference that I was able to repay within a few years of graduation.

Contrast my experience with that of Robert Applebaum, who graduated from Fordham Law School in 1998 with about $65,000 in debt. After going to work as an Assistant District Attorney in Brooklyn, his salary forced him to put his student loans in “forbearance,” which prevents default but allows continued accrual of interest. Applebaum began repaying his loans upon leaving the DA’s office in 2004 but remains $88,000 in debt today.
Tommaso Boggia is an MPA candidate at Presidio Graduate School and an advocate for student loan clemency. He writes at the website Triple Pundit, “Regardless of work ethic, more and more middle class families are slipping into poverty, in part because of the heavy debt burden of house ownership and of pursuing a higher education degree . . . A whole generation is seeing their plans and ambitions shackled by the extra weight of their student loan payments. These young people are unable to buy a home, start a family, or do the socially important but underpaid jobs in the social services sector.”

In the post-World War II era, a college education was the chief means by which children from working poor families could leapfrog into the middle class or even affluence. Increasingly, however, the cost of this requirement is becoming the very thing holding them back from the opportunities promised by the American Dream.

The most cited reason for exploding debt is the ever-increasing cost of college. Average in-state tuition and fees at four-year public colleges rose an additional eight point three percent in 2001 alone, passing $8,000/year ($17,000/year with room and board). In addition, the American Council on Education notes that budget cuts and other austerity measures have reduced state appropriations to higher education by eighteen percent over the last three years.

Richard Vedder, Director of the Center for College Affordability and Productivity and author of the book Going Broke by Degree – Why College Costs Too Much, maintains that we are looking at the problem exactly backwards. Writing in the National Review, he argues that just as an abundance of easily obtainable, low interest mortgages spurred the housing bubble that caused the 2008 financial crisis, “Arguably, federal student financial assistance is creating a second bubble in higher education.”

Vedder also points out that government doles out loans without discrimination to a student’s prospects of success in college, despite the fact that over forty percent of those pursuing a bachelor’s degree fail to receive one within six years, or chances of success after college, regardless of whether a student’s field of study offers poor versus good job/career availability. During a 2011 PBS NewsHour appearance, Vedder argued American society must “open up opportunities for people to consider a variety of different options after high school, one of which is college, but there are many others.”

Most of us may not agree with those advocating total clemency for student loan debt. While this solution may be overly simplistic and impractical, it seems clear that some reforms are necessary – whether the efficiencies proposed by Obama, the incentives proposed by Clarke, or Vedder’s more draconian measures toward higher education in general. It also means we need to give OWS protestors and other loan forgiveness advocates more credit for identifying a real, substantive, and systemic problem beyond their selfish interests.

If we value an education for our children as much as we claim, our society has to find a way to re-engineer it back from the crushing burden it has become to more of the opportunity we aspire it to be. Right now, the main thing we are teaching our kids is learning to owe. This is neither opportunity nor American exceptionalism.

When I Steal A Blog Post, I Leave A Link

I wanted to look at the WSJ job database, suspecting what I might find, but currently lack the bandwidth in a major way.

Fortunately, Noah took some (more) time from his thesis (“distraction from productive activity”) and did the dirty work. Apparently, being a STEM undergraduate isn’t the path to Nirvana:*

I went through the Wall Street Journal database that Phil cites, and found the following unemployment rates:

  • Genetics: 7.4% unemployed
  • Biochemical Sciences: 7.1% unemployed
  • Neuroscience: 7.2% unemployed
  • Materials Engineering and Materials Science: 7.5% unemployed
  • Computer Engineering: 7.0% unemployed
  • Biomedical Engineering: 5.9% unemployed
  • General Engineering: 5.9% unemployed
  • Engineering Mechanics Physics and Science: 6.5% unemployed
  • Chemistry: 5.1% unemployed
  • Electrical Engineering: 5.0% unemployed
  • Molecular Biology: 5.3% unemployed
  • Mechanical Engineering and Related Technologies: 6.6% unemployed

    Compare these with a 5.0% unemployment rate for all bachelor’s degree holders in 2010.

  • And why do those Astronomy and Astrophysics people** have jobs?

    Earth to [Phil Plait of] Bad Astronomy: your short-list of fully-employed science majors is totally cherry-picked….And all those astronomers who have plenty of jobs? Guess what: they’re employed because they work for the government. Yep, that’s right, the same government whose ability to provide employment Phil laughs at.

    *Raise your hand if you’re surprised by this. Mine is not up.

    **Full disclosure: I speak as someone whose wife’s cousin, with a Ph.D. in Astronomy & Astrophysics, currently has a Fellowship in the Astronomy department at DeLongville.

    Dave Dayen Is Wrong

    And not in a good way, when he says:

    I understand that Republicans are just playing the culture war game here, trying to link Warren and the loony left. I don’t know how that will play in, er, Massachusetts. And the world has moved on from the Hard Hat riots and the 1972 campaign. The hard hats have been brutalized just as much as the rest of us in this economy.

    No, no, no.

    The “hard hats” have been brutalized much more than “the rest of us” in this economy. And the economy before that. And, basically, every one since 1986,* Bruce Bartlett’s protestations notwithstanding.

    Note especially that having all those English Literature and Anthropology majors with degrees hasn’t hurt.

    *The data only breaks down from 1992 onward, so you’ll have to wait for my tribute to the 1986 “tax reform” act.

    cross-posted from Skippy, the Bush Kangaroo

    Admitting You’re a Tool Doesn’t Make You Less of One

    Matt (Dalton, Harvard) Yglesias, via Aaron Carroll’s note that he should move into another line of work), accidentally gives the Education game away:

    the Dread Evil Neoliberal School Reformer Barack Obama And His Lackeys At The Center For American Progress

    Yep, Matt has been doing great things for education.

    As, of course, has CAP, in spades.

    As for Barack “Also Never Attended a Public School, But I Know All About Them” Obama, all that needs to be said was said by Dean Baker on Saturday:

    Emanuel’s predecessor as mayor, Richard Daley, also placed an emphasis on reforming Chicago’s schools. From 2001 to 2009 he installed Arne Duncan, currently President Obama’s Secretary of Education, as head of the Chicago school system. If Friedman and Emanuel’s complaints about the current state of Chicago’s schools are accurate, this would imply that Duncan must not have been very successful in his tenure even though he was widely acclaimed as a reformer at the time.

    Notes toward A Blog Post on Chrystia Freeland’s Interview of GE CEO Jeff Immelt

    UPDATE NOTE: The following isn’t complete. Many of my notes from the latter part of today’s interview can be found on Twitter, hashtagged #Immelt. At the moment, I both (1) don’t have easy access to them and (2) have other things that need to be done. Feel free to look there, and/or mention anything you want discussed here.)

    The fake “news” of the day will be Immelt’s disparaging of America and Americans.

    The semi-real news of the day will be that Immelt threw President Obama under the bus four or five times before finally saying that he “respects the President and respects the Presidency.” While this is progress from Jack Welch thinking that Buying George W. Bush the office meant that his firm would be exempted from cleaning up the PCBs GE dropped into the Hudson River (it did result in a nine-year delay and the likelihood that taxpayers, not GE, will foot the large majority of the bill), it’s not exactly a ringing endorsement of the man who gave us the Unforced Error of Simpson-Bowles.

    Jeff Immelt, unlike Henry Aaron, believes that Simpson-Bowles is what we need for “growth.”

    Jeff Immelt admits that, while the Board of Directors has some input, CEO pay is all about “getting what you believe you deserve.”

    Jeff Immelt declares that if unemployment gets back down to 6%, no one will care about his being paid $21.5 million last year (about 40% of which appears to be an increase in his pension benefits; other GE pension contributors haven’t been so fortunate) to continue running GE into the ground to a standstill.

    Jeff Immelt says that the US is 25th in math and 26th in science. (He’s wrong on the latter; we’re 17th.) He then spewed some horseshit about the “crisis” of Germans believing that it’s easier to find skilled workers in Mexico than it is in the United States.

    Why do I call this horseshit? Well, let’s look at the two countries compared by Immeltian standards (link is PDF):

    There are two three possibly-reasonable explanations. Either (1) there are a lot of Stupid Germans or (2) the places where Germans trying to hire are Significant Laggard or “Business Friendly, School Crappy” States.

    Oops, or (3) the Germans pwnd Jeff Immelt, who then didn’t check the data.

    And that’s without noting that, if you adjust for demographic issues such as poverty or consider racial inequalities, the U.S. is right at the top, no matter what Jeff Immelt says.

    Otherwise, mostly, Jeff Immelt lies through his teeth, and Chrystia Freeland—who was tougher on George Soros last year—lets him get away with saying it.

    It is left as an exercise whether this is because her boss openly declaring this was going to be a powder-puff interview (“I’m a big fan” of a man who has lost 60% of shareholder value for his investors over the past ten years) or because she decided to let Immelt hang himself. (I know which way I’m betting.)

    Bachmann-Perry Overdrive, the Snag, and Other Notes

    The real story of Michelle Bachmann’s “win” in the Iowa straw poll (not to be confused with the Iowa primary) isn’t that she got just over 4,800 votes—it’s that she paid for 6,000, proving at least 1,200 Iowa straw pollers are smarter than most of the reporters covering her “win.”

    Late to the party mention: The Kauffman Institute’s Blogger Survey results are here (I hope).

    The people who rant about 51% of Americans “paying no income taxes” are strangely silent about the fact that more than two-thirds of corporations don’t pay any—and they aren’t subject to Social Security or Medicare/Medicaid taxes either.

    More Dr. Seuss is good, though “newly enhanced Seuss illustrations” sounds suspiciously like a step beyond even the later collaborations, such as The Butter Battle Book.

    Robert (at least on his FB feed) is trying desperately to be nice to Matt Yglesias. I’m not, since Matt “I’ve never attended a public school so I know what’s wrong with them” Y. continues to fool himself about “the need for education reform” and refuses to pay attention to the research that shows most of those “reforms” his hedge-fund buddies are championing have been tried and failed. Jersey Jazzman does the heavy lifting here and (especially) here, while Bruce Baker notes the core of the Charterist argument.

    Want a clear explanation for why people become writers or, if they don’t write well enough, bloggers? Jason Albert in, of course, Slate explains his own ego.

    (The idea that maybe we need a third category of uncreative typist—Slate columnists—rises up when they try to make an economic argument without understanding sunk costs. But giving them any more pageviews would be a violation of the Douthat Rule.)

    Beauty-Scoring Evolution

    Despite winning the big prize, evolution scores low on the scale at the Miss USA pageant:

    Only Miss Massachusetts and [newly crowned Miss USA, Alyssa] Campanella stood up for Darwin.

    Score one for Charles Darwin. Campanella, 21, of Los Angeles, who calls herself “a huge science geek,” says evolution should be taught in public schools.

    The good news is that only three contestants were “flat out opposed”:

    Miss Kentucky, home state of the Creation Museum; Miss Alaska who assures us “each of us was individually created by God for a purpose;” and Miss Alabama who doesn’t believe in evolution.

    Which leaves 45 or so to be confused.

    Go read the whole thing. Then make the decision: either (a) emigrate to a country that educates its beauty contestants or (b) ignore them entirely for the sake of your sanity.

    (h/t Andrew Verdon—far left of the bottom picture—or available in video here)

    Economics Cannot Find Racism; Just Move Along

    One of my favorite paper presentations ever was by Daniel Parent, who is a good enough reason in himself for pending Labor Economists to apply to HEC. He was trying to present data on income inequalities in the Financial Services industry and was forced to note—all right, I asked—that they didn’t have the data to determine if there was a racial difference in earnings because there wasn’t enough data on high-earning Blacks in the sample to be “statistically significant.” Since the sample used IRS data, among other sources, the answer was clear.

    Now (via Tyler Cowen), I see that “not statistically significant” is not just for Financial Services Executives; the WSJ’s markets blog notes:

    On average, Republican professors gave black students grades that were .2 of a grade point lower than their Democratic colleagues, or about two-thirds of the distance between a B and a B-minus.

    (Among eleven black professors in the sample, there were no Republicans, and the Democrats appeared to grade white and black students as their white-Democratic peers did. But there were too few black professors to make that finding statistically significant.)

    Again, the finding may not be statistically significant, but the sample, er, complection is.

    Their data set is available here.

    UPDATE: Thoreau riffs on the subject and finds a link to the paper.

    It Takes a Village: Scarcity, the NCAAs, and the Decline of U.S. Manufacturing

    I don’t remember seeing any of this type of story last year. But this year, Socialism stories abound from the Midwest.

    My ex-roommate* sends this link to a story about Butler Bulldogs’s Senior Matt Howard’s family being able to attend the NCAA Finals tonight in Houston (video link here).

    Luke Winn of Sports Illustrated covered the macro territory. The 12.7% unemployment rate, up from a few years ago and still 2nd-highest in the state of the 92 counties. The population of “about 13,000,” which puts the decline since I graduated high school at worse-than-Detroit levels—but that makes sense since most of the factory work over the previous forty years was Ford-related as the town once referred to as “Little Detroit” lost competitors to larger areas and consolidation.

    Winn’s article, not to mention several other recent pieces about Howard’s childhood make it clear that it really does take a village. From the NYT piece:

    His mother, Linda, who credited her faith for helping her raise 10 children, said strangers would stop and ask, “Are you the lady with all the kids?” before dropping off bags of clothes. “Maybe everything didn’t fit,” she said. “But we didn’t complain.”

    Bryan Caplan’s noted in his presentation at Kauffman that he knows no one who is liquidity-constrained in their ability to raise children; rather, it’s time allocation that stops them. I suspect he needs to get out more.

    And now the city with 12.7% unemployment and a dim future has once again reached into its collective pockets to make certain that Matt Howard’s family gets to see their son’s/brother’s final college game, which also happens to be for the NCAA Championship.

    From each according to his ability, to each according to his needs.

    As I said, I didn’t see stories like this last year. Last year, there was still another year for Howard and the Bulldogs. Now, there is no possible future NCAA Championship; this is the last time this can ever happen. An economist would tell you that people recognized the Scarcity Value and dug into their pockets accordingly.

    So not only did it take a Village to help as best they could to raise the ten Howard children, it took a Village to enable the family to go to Houston to see now-senior Matt Howard and the rest of the Butler Bulldogs play—win or lose; I hope win—for the NCAA Championship.

    Ex ante, it’s a great decision. Ex post, it will still have been one.

    Musical accompaniment: Tom T. Hall, of course.

    *For whom Mike Mandel took a picture of Tyler and Natasha Cowen at last week’s Kauffman Economic Bloggers Forum, since he and Tyler were once ranked (by Tyler) as the #1 and #2 chess players in the area. Sadly, neither went into the sport as a full-time professional.