Saturday, November 5, 2011

The case for American optimism

Mr. Podhorest makes the case for optimism in the face of a stagnant economy by framing the events of the last years. I can agree on his perspective in general. But I disagree in particular on one paragraph. After describing the increasing turn-over of federal governments in the last decade, from Democrat to Republican and back again, Mr. Podherest offers this explanation:

Voters were not being flighty or silly or stupid. These dramatic shifts were substantive, the result of inarguable policy failures. Bush’s failure to win in Iraq and to handle Hurricane Katrina competently caused the 2006 Congressional thumpin’; the Republican party’s failure to manage the financial meltdown competently led to Obama’s easy victory in 2008; Obama’s failure to generate the recovery he had promised with his stimulus and his swelling of government caused the 2010 shellacking. Voters took a chance that Obama could bring about the change he had promised; the bet didn’t pay off, to put it mildly; and they tore up their tickets. If the 2012 election follows the same form, and at this moment there is no reason to think the dynamic will be different from what it has been since 2006, it will not go well for him.

The Case for Optimism « Commentary Magazine
Sat, 5 Nov 2011 19:20:00 UTC
I believe this argument is fundamentally incorrect. Dissatifaction was not born by policy failure. It was born by the alarm of outlandish government over-reach and spending.

For there is concrete evidence that the American public has been searching for party that will decrease federal spending and power since the days of Jimmy Carter. It drove the Presidency of Reagan, the ouster of Bush I, the acceptance of Clinton despite his moral vacuity, the disgust with an out of control Republican Congress, the failing of Bush II, and the hope for Obama, now dashed as his true colors become apparent despite media cover.

And the populace has ultimately been disappointed for over 40 years.

Inside unending education subsidy

After giving us publicly available facts and their citations, the author offers this picture:
Among the 221 graduates of the 2010 class of Thomas Jefferson, only 73 obtained jobs as lawyers. According to information provided by the school, the highest earners worked in private law firms, with a 75th percentile salary of $77,500 (only 12 of 55 graduates in private firms reported their salary). Based upon the numbers provided, and making a few reasonable assumptions, we can estimate that at least 80% to 90% of the class earned less than $77,500.

Now consider that the average debt of 2010 graduates of Thomas Jefferson was $137,000 (95% of the class had debt). The monthly payment for this debt is $1,600. Graduates must earn over $100,000 to manage this level of debt.

Thus, only about one third of graduates actually ended up as lawyers (nine months after graduation), and most of the graduates that landed lawyer jobs did not earn enough to manage the average debt of the class. It appears that a significant percentage of the class is likely to enroll in IBR, a federal program designed to help graduates in “financial hardship,” paying reduced monthly payments based upon a percentage of their income, with the balance of the loan forgiven after 25 years. That is what “access” to a legal career comes to for many unfortunate law graduates today.

What Federal Loans Do for Law Students and Law Schools - The National Law Journal's Law School Review
Sat, 5 Nov 2011 18:59:57 UTC
Meanwhile, tuition keeps rising. Is that a bubble inspired by regulation? So far, the answer offered is not to transform the system, but to restructure the debt and offer more amenable haircuts. Does that sound like Greece?

A Faculty Productivity and Costs at The University of Texas at Austin report found, among other things:
  1. Looking only at the UT Austin campus, if the 80 percent of the faculty with the lowest teaching loads were to teach just half as much as the 20 percent with the highest loads, and if the savings were dedicated to tuition reduction, tuition could be cut by more than half (or, alternatively, state appropriations could be reduced even more—by as much as 75 percent).
  2. 20 percent of UT Austin faculty are teaching 57 percent of student credit hours. They also generate 18 percent of the campus’s research funding.
  3. The least productive 20 percent of faculty teach only 2 percent of all student credit hours and generate a disproportionately smaller percentage of external research funding.
  4. Research grant funds go almost entirely (99.8 percent) to a small minority (20 percent) of the faculty; only 2 percent of the faculty conduct 57 percent of funded research.
It appears there are many issues with higher education. We have not even begun to talk about the lack of technology use.

Recently professors from top ten schools on a popular education site were debating how to limit laptops in class because key strokes were distracting. They were also dismayed that students asked if the lecture could be emailed to them, which destroyed their incentive to come to class. Is there no better use of lecture time than to listen to a professor regurgitate his notes on Power Point?

Markets are fantastic at driving prices down and ultimately staying on focus. Could they provide an answer? For many decades now, that possibility has been ignored.