More on Higher Education - Will It Be the Next Bubble to Pop?

This article at Minding the Campus is worth reading. It talks about the cost of higher education and its potential for being the next bubble, a la the housing market. The cost of a college degree has been rising at roughly three times the rate of inflation for some time. People have been willing to pay it, often going deep into debt (see post below), because they see it as the price of entry into the competition for the best paid jobs. Never mind that the degree earned may have little if any relevance to the career they actually end up with. I remember when I went to Large State U that the Chancellor addressed the incoming class and one thing he said has stuck in my mind ever since. He said that only about 5% of all liberal arts majors actually end up working in their field of study. I'm certainly not in that 5%, and that's probably a good thing because chances are it would be a poorly paid job teaching other people the same stuff.

After all, didn't ambitious citizens have to pay their dues to higher ed in order to have a meaningful chance at success? With seemingly no viable alternative or exit strategy, consumers have stretched their pocketbooks to the breaking point and taken out loans to purchase a chance at the American Dream. (Today over 35% of students rely on student loans, and the number is growing.) Not surprisingly, the last twenty years have seen tuition costs rise at over three times the rate of inflation. The overall costs for many private schools add up to $50,000 per year, while public universities cost up to $20,000
for state residents, and over $30,000 for those who hail from out of state. Meanwhile, wages for most Americans have been left in the dust.

Another point made in the article is of particular interest to me because part of my job involves arranging financing for both public and private higher education institutions.

Last September, Timothy Burke, a professor of history at Swarthmore, wrote an influential essay at Inside Higher Ed in which he asserted that "the party's over" for higher ed's tuition and building binge. Burke focused on five main reasons for a contraction in higher education: 1) declines in tuition growth; 2) underperformance by endowments; 3) pullbacks by donors (indeed, on November 26 the Wall Street Journal published a lead story on how the economic crisis has caused a downturn in charity giving nation-wide); 4) lower funding from public and private sources; and 5) the fact that revenues from IPOs, investment property rights, and technology benefit only a few institutions. A respondent to Burke's piece added three other factors: 1) fewer students are attending college as the nation's demographics change; 2) "growing public awareness of the declining economic returns of a college degree" is causing a backlash; and 3) such on-line schools as the University of Phoenix provide education at a fraction of what residential institutions charge. (Will the Internet affect higher ed the same way it has affected newspapers?)

It's all very though provoking. Read the whole thing.

(via Instapundit and Newsalert)

Update: I remembered reading a column by James Taranto in the Wall Street Journal along these same lines a while back and thought I blogged it already. Seems I didn't, so here it is. "College is an expensive way of taking an IQ test."

The Great Student Loan Racket

If you have a kid you are hoping to send to college soon, read this article in Forbes. It's an eye-opener.

"Get caught in this quagmire and you're stuck for good. Consumers who go on a credit card binge stand a good chance of getting debt discharged in bankruptcy. Not so if they take out a loan to educate themselves. Those loans, per the 2005 bankruptcy law, are not dischargeable. One reason: Without this exception, every student would run through a bankruptcy between graduation and starting a career."

(via Dr. Helen)

Atlas Is Getting Twitchy......

Neal Boortz posted this yesterday. Of course, you should read the whole thing but here is the central message:

"Here is what many of you don't understand ... to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now......

......If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child's future. Frankly, it isn't my problem any more.

Then, I will close this company down, move to another country, and retire. You see, I'm done. I'm done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship."

Hilarity Arises from Near Tragedy

The successful ditching of US Airways flight 1549 on Wednesday was a masterful piece of flyng and happily no lives were lost. Within 24 hours, an enterprising Photoshopper was able to come up with this:

Now that is an apt metaphor.



(from the Dealbreaker)

What the Second Amendment is Really For

Stay with it to the end......

Atlas Shrugged - Maybe More Prophecy Than Fiction

Stephen Moore penned an op-ed in the Wall Street Journal yesterday, pointing out some eerie similarities between the events in Ayn Rand's classic Atlas Shrugged and our current economic/political situation. It's a long (1,000+ pages) book, in rather small type and can be heavy going at times, but it's worth reading. If you don't have the patience for that, at least go read the article. A sample:

"For the uninitiated, the moral of the story is simply this: Politicians invariably respond to crises -- that in most cases they themselves created -- by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism."

and

"The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the more handouts the politicians will bestow on you. That's the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies -- while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to "calm the markets," another trillion of national wealth is subsequently lost. Yet, as "Atlas" grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate "windfalls." "

One Very Pissed-Off Dude

Too many good quotes. Just go and read it.

The Republicans Can't Just Play the Game, They Need to Change the Game - Part II

A couple of weeks ago I wrote a semi-incoherent rant post about some of the things I fell the Republican Party needs to do to to make it a genuinely viable alternative to the Democrat Party. As usual, someone has come along and made a much more concise case for what needs to be done. While I ended up on a digression about the FairTax (and I still think we need it), Perry DeHavilland at Samizdata kept the focus where I should have:

"I am not calling for the 'libertarianisation' of the Republican party along the lines I would actually like, just for the party's rationalisation. I am in essence calling for a nominally conservative party to become... conservative. The simple fact is that people can be fellow travellers on a path that leads to liberty without all marching in ideological lock-step. It just boils down to asking the question "do you want the state to have less control over people's lives or more control?" [my emphasis] If a person can honestly answer that they think the state is too powerful and needs to be reduced, that is a fellow traveller.

This is the time to apply that test to Republican politicians, every last one of them... and drive any who fail that simple test out of the party by whatever means necessary...."

Reducing the role of government in the people's daily lives and minimising the opportunities for political interference in free markets is the goal we should be striving for.

Why the Credit Crisis Is the Government's Fault

Over at Reason TV American Enterprise Institute Fellow Peter Wallison lays out the genesis of our current financial crisis. It's about 25 minutes long but a very methodical presentation of the facts.

Some like to blame Wall Street greed for the meltdown. I'm not saying that there isn't blame to be assessed there too, but I can't help but observe that Wall Street's reaction is somewhat like the HAL 9000 computer in 2001: A Space Odyssey. It became irrational because it was instructed to do something fundamentally at odds with its programming. Banks were made to lend to borrowers whom their normal underwritng standards said they should not or be fined for doing so. They were placed in a no-win situation and the ways they tried to reconcile the two competing goals of prudent lending and complying with the Community Redeveloment Act (CRA) caused them to do increasingly irrational things. It's just one more example of how political interference in free markets, well intentioned or not, produces undesireable results.

Update: History of the HAL 9000. HAL was constructed for "the accurate processing of information without distortion or concealment". However, he was asked to conceal information from the Discovery crew and the only way he could reconcile the contradictory instruction was to kill the crew, therefore leaving no one to conceal anything from.

Mark Steyn Takes on Bailouts.....

... in his unerringly to the point but humorous style.

"General Motors now has a market valuation about a third of Bed, Bath & Beyond, and no one says your Swash 700 Elongated Biscuit Toilet Seat Bidet is too big to fail. GM has a market capitalization of about $2.4 billion. For purposes of comparison, Toyota's
market cap is $100 billion and change (the change being bigger than the whole of GM). General Motors, like the other two geezers of the Old Three, is a vast retirement home with a small money-losing auto subsidiary. The UAW is AARP in an Edsel: It has three times as many retirees and widows as "workers" (I use the term loosely). GM has 96,000 employees but provides health benefits to a million people."

President Bush seems to think that it would be a mistake to let the Big 3 file for Chapter 11. His decision to go ahead and bail them out anyway, despite it failing in the Congress, will probably prove to be a bigger one and will not actually bail them out at all. Go read it all of course.

Hey, Big 3, If You Let Government Get Into Bed With You, You'll Never Get It Out Again.

I'm holding back a little in the title of this post. I'm addressing it to the Big 3 automakers, now seeking alms from the taxpayer. What I mean to say is that if you let the government in your bed, you will get screwed (still a little more polite than the word I'm actually thinking of). Todd Zywycki has an op-ed in today's Wall Street Journal in which he get it exactly right about why the automakers should prefer Chapter 11 not government "help".

Those Washington politicians who repeat the mantra that "bankruptcy is not an option" probably do so because they want to use free taxpayer money to bribe Detroit into manufacturing the green cars favored by Nancy Pelosi and Harry Reid, rather than those cars American consumers want to buy. A Chapter 11 filing would remove these politicians' leverage, [my emphasis] thus explaining their desperation to avoid a bankruptcy.

I agree with this, except that I don't think it's going to be a bribe. It's going to be naked coercion. Once you get Harry and Nancy dictating the kinds of cars they'll build, Maxine Waters dictating which dealers they may or may not close, etc., it's only a matter of time before the Big 3 really do collapse entirely. The Big 3, at least GM and Chrysler, should file now, before they completely lose control of their destinies. Chapter 11 gives the companies the opportunity to come up with a reorganization plan first and if management is smart (not demonstrated thus far) they'll take this opportunity before it's too late.

The Republicans Can't Just Play the Game, They Need to Change the Game

I just received a phone call from the Republican National Committee, asking me for a donation of $300 so "we don't just hand the Whitehouse keys over to the Democrats." It seems to me the Republican Party has already done just that. It has proven itself to be just as corruptible and every bit as spend-thrift as the Democrats and I'm not giving them a dime until I am convinced that they've done the soul-searching necessary to re-learn what it is Republicans are supposed to be about and what the Republican rank and file want from them and then they've got to start acting like Republicans again.

We want you to get Government out of our lives wherever possible. The economic mess we are in now, whether it is the housing crisis, the credit crisis, the auto industry crisis, the health insurance crisis or the energy crisis, every single one of these has its roots in government (political) interference in free markets. Every regulation, every little tweak to the tax code designed to bring about some perceived social good, distorts the markets and causes people and businesses alike to make decisions that make no sense otherwise.

The problem I see with the way the Republicans operate is that they are trying to play a game with rules that someone else has set but are not obeying themselves. The Republicans are fighting according to Marquis of Queensbury rules while the Democrats are fighting with brass knuckles and knives. This has to stop. The Republicans need to stop letting the other side frame the debate and start standing up for what it knows to be right, unapologetically and ignoring the howls of feigned outrage from the other side. Stop backing down every time someone calls you names. Recognize that you're being played and don't engage with that tactic.

The Republicans can't win under the current rules of the game because the other side is controlling the rules. Therefore, it is necessary to change the game. For example, stop quibbling about the tax code and what is just the right marginal income tax rate and talking about who is "paying their fair share". To do that is to buy into the corrosive class warfare/wealth envy rhetoric the other side likes to use to keep the voters divided against one another. The income tax is basically immoral and should be scrapped altoghether. It is also large part of why we have such a hard time competing globally. Our corporate tax burden is the highest or second highest in the world. Quibbling about the details loses sight of the basic fact that the income tax is wrong and Republicans shouldn't be afraid to say so. Yes, I'm talking about enacting the FairTax. Taxing consumption rather than income is the only truly fair way to raise tax revenues and the boost it would give to our economy is definitely something we need right now and it furthers the aim of getting government out of our lives.

A Wake-Up Call on Job Losses

The American Thinker has an article up, penned by a small business owner who is about to permanently shutter his business and "go John Galt", and he's not shy about telling us why.

"Like many business owners, we are no longer willing to take all of the financial and legal risks and put up with all of the aggravation of owning and running a business. Not with the prospects of even higher taxes, more regulation, more litigation and more emboldened bureaucrats on the horizon. Like others we know, we are getting out while the getting is, well, tolerable. Many who aren't getting out are scaling back.......

Most of the kind of people who start and run businesses are by definition trying to opt out of depending on anyone else -- be it a large corporation or government -- for their welfare. We take on tremendous risks and responsibilities. We do so expecting a better than average return. Since we require nothing from government, most of us deeply resent and resist being pestered by government.

For nearly 30 years, I have been one of these business people. It was an amazing journey and literally involved blood, sweat and tears. But now I am done. This election screams that we are going to see a deterioration of the risk-reward equation and the ability to be left alone. Apparently, any appreciation of our crucial place in the economy is lost on over 50% of the voters as well as those they elected."

Read the whole thing.
(via Instapundit)

Vodkapundit Big 3 Bailout Ad

This ad poster says all that needs to be said. The best bailout package the big 3 automakers could have is a trip through Chapter 11. Tell your Senators and Congressional rep NO!

Market Meltdowns and the Wisdom of the Crowd

Instapundit ran across an interesting set of graphs from Intrade.com, the political futures market, the other day. They track the market's fall as Obama's politcal fortunes rose. It's an interesting analysis, wich concludes as follows:

"Call it a crisis of confidence. Call it a Fannie-inspired meltdown. Call it what you will, but the markets appear to have reacted to Obama's promises of economic "fairness", "spreading the wealth" and raising taxes on the job creators of society.

This thinly disguised form of class warfare, the policies of which many have termed socialism (fairly or unfairly), has had a definite impact on the markets.

The markets represent the ultimate collective intelligence engine on the planet.

The markets have spoken on the stated policies of Barack Obama.

Sorry, folks, there are no do-overs."