Quote of the Day
I like long walks, especially when they are taken by people who annoy me.
Fred Allen
Obama: Read My Lips: NO STATE BAILOUTS!
The President intends to ask for a stimulus tax 2-year extension for interest charges due from states which borrowed money from the government to replenish inadequately reserved unemployment funds. Up to maybe half of states may be faced with paying millions and relevant employers may be hit with automatic federal tax increases (i.e., $21 per worker). Then, in 2014, Obama wants to more than double the unemployment tax base from $7K to $15K.
First of all, the federal government should not engaging in moral hazard, giving states that have not lived within their own means an effective bailout. Among other things, this simply defers the day of reckoning, whereby disbursement rates aren't cut to accommodate limited reserves. Second, doubling the employer tax base for unemployment is yet another anti-business growth policy.
Reading between the lines, the GOP is signaling it might agree to the 2-year interest payment extension, but not increasing the tax base. I'm opposed to both; I understand employers might find themselves saddled with more taxes in the short run, but this has more to do with the state fiscal balance.
Matthew Shaffer, Back to the Future with Peter Thiel: Thumbs UP!
Any faithful reader of this blog knows I've been arguing for some time about what I see as the unsustainable higher education cost bubble, and I happened across this National Review post of an interview. Hedge fund CEO Peter Thiel is probably best known as the Paypal founder and CEO--and a venture capitalist whom put up some money for Facebook.
The question of the value of a college education has been made before; for example, the entrepreneurial success of Harvard dropout Bill Gates (one of the 3 richest men on the planet) and UT dropout Michael Dell are legendary. Thiel has recently gotten some notoriety by offering students under the age of 20 $100,000 to drop out and create a business.
It brings up the memory of a tall, pretty girl I met during my freshman year of high school (my dad had transferred to Laredo over the summer). We were in a science class together, and she had befriended me; she saw some of the same qualities in me that she admired in her older brother, a brilliant student whom ably represented the school in the UIL science context, and encouraged me to join the team. Her brother won early admission to MIT and left high school early (and she also left after the end of the school year). I tracked her down via a social networking site a couple of years back; among other things, we discussed what happened to her brother. It turns out he had run into some money problems while attending MIT and never finished his degree. But he worked with an MIT colleague on a startup project, and long story short, he eventually sold his equity stake for over a million dollars and reportedly bought an apartment near Harvard. It was fascinating to hear how he had struggled to make ends meet as a student, at times living out of his car, to a few years later pulling down an annual salary well into six figures (at a time in the 1980's when I literally had less than $100 to my name).
There is some discussion about college being more of an increasingly expensive surrogate measure of self-discipline and general intelligence. I realize that comments I may say here, as a former professor whom was unable to find work during the early 90's recession, may come across as sour grapes. As a professor, I taught at UWM, UTEP, and ISU; these are not residential colleges: many of my students worked at least part-time, and most (I'm assuming here) did not score in the top 10% of their entrance exams. Many (not all) of the students had poor work habits, procrastinated, got by with minimal effort, and were poorly prepared (often lacking sufficient knowledge of course prerequisite material); few showed initiative.
I'll give a simple example to make the point. At ISU, I was teach a microcomputer applications class (at the time, it was the classic DOS application suite, e.g., Lotus 1-2-3, Word Perfect, dBase IV, etc.); I wanted them to be vested in the assignment, so I didn't assign a specific database project. I was proud of one of my students, a farmer whom set up an application to produce immunization reports for his dairy cows. But probably two-thirds of the students begged to be assigned a specific application. They didn't understand what the intent of my assignment was, of course. I realized the rapid changes in applications; less than 10 years earlier, one of my employer's customers, Hines Interests, a real estate development concern, used to evaluate proposals using dozens of MBA's wielding fancy calculators; still, management was faced with the need to evaluate limited-time proposals within hours, not days, and it had to pass on a number of potentially profitable opportunities. I didn't expect my students to memorize Word Perfect keystroke combinations for the benefit of their grandchildren; I did want them to be able to use available tools to do something useful, in the absence of a professor with a gradebook.
Is Obama correct in trying to guarantee college loan availability? Of course not. Thomas Jefferson realized over 200 years ago that the government should not be operating a bank; it's beyond the core competencies of government. But we have the same moral hazard problem we have when local banks wrote loans, knowing it would be sold to a secondary market player, implicitly guaranteed by the federal government. Colleges, knowing the loan money will be there, are able to defer the day of reckoning; it has less incentive to get costs under control, e.g., reduce teaching and other staff; reform compensation; limit capital expenditures; etc. The college gets its money whether the student ever graduates.
Yes, Obama talks a good game--"invest" in education, target innovation and exports. (Briefly, in response to the last two points, globally uncompetitive taxes and regulatory burden under Obama work against said objectives.) We have limited resources; I don't think that a number of students I taught really benefited from the college experience. They treated my class as a card punch on their job ticket. There were ill-prepared students, and I had to adjust my objectives to accommodate these students. I would prefer to see a more manageable number of able, highly-motivated students whom, on a means-tested basis, are extended as-needed financial aid.
The bottom line, like I've mentioned before, is that students who do not belong in college exacerbate cost pressures, just like low-collateral home buyers push up house prices artificially; as long as the federal government keeps the spigot open, the colleges don't need to economize to pass along operational savings to students or their families.
Political Humor
Egyptian President Hosni Mubarak told ABC news that he would like to step down from power immediately, but if he did, it could cause chaos in his country. Well, you would hate to see that happen. - Jay Leno
[KAOS denies that it has any agents in Egypt; it complains that this allegation is but another example of CONTROL propaganda.]
During the Super Bowl halftime show, the Black Eyed Peas changed the lyrics of their song “Where is the Love” to call on President Obama to do better in education and jobs. And Christina Aguilera changed the lyrics of the national anthem — just because. - Jimmy Fallon
[The Congress has also changed its tune: it told the President that he needs to do better in his job and lose some fiscal weight.]
Musical Interlude: My Favorite Groups
The Bee Gees, "My World"
