All The Government-Created Bubbles
How government-generated spending is killing our economy. Jim Powell writes at Cato:
For example, every year the federal government funds tens of billions of dollars worth of student loans for college. Altogether, the federal government has provided money for some 60 million students. In 2010, for the first time, student-loan debt surpassed credit card debt. There are about a trillion dollars of student loans outstanding.By enabling more and more people to bid for a college education, the government has promoted inflation of college costs -- some 440% during the past quarter-century, quadruple the overall rate of inflation. Vance H. Fried, author of Better/Cheaper College, reported that nonprofit colleges make huge profits on undergraduate education, and they're spent on "some combination of research, graduate education, low-demand majors, low faculty teaching loads, excess compensation, and featherbedding." Meanwhile, an increasing number of families have difficulty paying for college without financial aid.
Federal farm subsidies range between $10 billion and $30 billion annually. Subsidies are paid on the basis of output or acreage, which means big farmers get more money than small farmers. Subsidies are limited to the "program" crops like corn, cotton, rice, soybeans and wheat, that account for about a third of farm production. Aside from enriching big farmers, the main impact of the subsidies is to encourage over-production and inflate the value of land suitable for program crops. One study, by economists at North Carolina State University, analyzed the different types of subsidies and concluded that each $1 of farm subsidies per acre inflates the value of an acre of farmland between $6.38 and $27.37, depending on applicable subsidies.
Since the mid-1960s, federal, state and local governments have spent hundreds of billions of dollars subsidizing government-run urban transit systems. Economist Randal O'Toole explained, "The number of transit trips per operating employee have fallen more than 50%, and the inflation-adjusted cost per trip has nearly tripled during the past four decades. Today urban transit is the most expensive way of moving people in the United States, and it's no better than cars in terms of energy consumption or pollution." Despite the endless subsidies, urban transit systems tend to be inadequately maintained, and they're loaded with debt. New York City's transit system alone has $30 billion of debt plus $15 billion of unfunded pension liabilities for its unionized employees.
...Ever higher taxes are required to pay for all this and other government spending, which means draining more resources out of the private sector -- making it harder to create growth and jobs. As these examples suggest, government spending often makes things more expensive, causes chronic inefficiencies, leads to more debt and disruptive financial bubbles. Far from being an economic stimulus and a cure for unemployment, government spending increasingly turns out to be bad for our economy.
Regarding education bubbles, you might find what Mark Cuban has to say about it interesting. I think you two would agree.
But I suspect you would disagree on other elements of his advice....
blogmaverick.com /2011/10/14/my-soapbox-advice-to-the-ows-movement-and-then-some/
I've mangled the link somewhat, I keep getting spaminatored.
jerry at October 17, 2011 12:16 AM
I'll support economic freedom when the outsourcing of jobs is either made illegal or taxed so severely that no sane corporate Board would even consider it. And when the hiring of illegals is made illegal. Not before.
Patrick at October 17, 2011 3:53 AM
Oops. Wrong thread. Perhaps Amy will remove this and my previous response.
Patrick at October 17, 2011 3:55 AM
Too bad the article ignored one of the largest drivers of expense in academia, namely the explosion in administrative jobs that contribute nothing at all to education.
MarkD at October 17, 2011 5:16 AM
One tiny data point: college students, by and large, no longer study with classroom teachers who earn middle class livelihoods from their work as teachers. Instead, lightly-paid "adjuncts" now teach a majority of all credit-bearing courses. Only a small percentage is taught by six-figure research professors with tiny teaching loads.
The phrase "bartender wages" more accurately describes the earnings of those teaching America's college students. It's great that people are asking where *does* the money go.
Andre Friedmann at October 17, 2011 10:36 AM
Based on my recent adventures in college in seems like there are basically two types of instructors. Note my experience is primarily with engineering & physics type classes).
1. The ones working for peanuts, these were at Community Colleges and those teaching non-main line courses like "Creativity in Photoshop."
2. Research professors who make six figures and could easily earn a lot more in industry.
I think many colleges are in a tough spot. Part of it is that as college costs more, Profs have to be payed more to make good on their education costs so now college has to cost more and so on. Making sure they are following all the rules and requirements. It gets expensive.
As an undergraduate, there was what would now be called the CIO, 2 techs, and 2 of us on workstudy keeping the schools network up an running. A couple of years ago when I talked to a friend that works there, there was 50 people (enroll stil about the same). Every dorm now has to have a network drop, they have to check that no one is hosting anything illegal, etc.
The Former Banker at October 17, 2011 6:54 PM
The way normal insurance works is that it will pay to make you whole. For example, if you have a car accident that was not your fault, the insurance will pay to repair or replace your car. You can get some extra by proving to buy the replacement vehicle in your area for the same vehicle within a year on each side is $XX dollar more than book. (I'm not going to get into personal injury -- that is not germane to the point.) The point of insurance is to make the injured party whole (e.g. starts back at about the same point as before the incident).
The portion of the USDA that 98% of the population has never heard of is the USDA's Federal Crop Insurance Program (http://www.rma.usda.gov/fcic/). Basically the farmers look at the long term weather forecast, the crops that will grow at the end of the range for their area (squash, eggplant, cantaloupe, etc.) that have a high return on investment. They then plant it.
Of course the crop fails because the season was too dry, wet, hot or cold. They then claim the insurance on the crop and plow it under. The insurance reimbursement is based on the market rate for going to market, not the actual cost to plant the crop.
The farmer is not just made whole (the cost of planting the seed, the hours in the field, the fertilizer, etc.) but are paid at what a bushel of eggplant would have cost had it arrived at market. So it may be $25 to plant 100 seeds, they are paid as if 100 seeds would have produced 300 hundred eggplants at $0.98 a piece. The farmer then tills the eggplants under and it becomes free fertilizer and gets a check for $294.
Jim P. at October 17, 2011 8:32 PM
Price supports are not paid over a certain income
level, I think $250k. If you would like to see what it is really like to be a farmer see the Frank James blog, corn beans and spent brass.
Mr. James several times makes an interesting point about crop forecasts. He stated that since large
corporate farms get no federal price supports they
no longer have to fill out any Fed Dept of Ag surveys. This means that the Dept of Ag has no information on a significant part of American agriculture.
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