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The real deal on the debt

There is a tremendous amount of BS on the national debt and how we acquired it. Here are some actual figures.

On Online Education

There is certainly a place for online education. However, the following post about graduation rates might be useful to keep in mind in considering how great a role it might play.

What would Jefferson have thought about having his University turned into the University of Phoenix. Emails that have come to light show that Dragas and her fellow plotter, Mark Kingston, were upset that the University wasn’t pursing on-line learning. Now there is certainly a place for on-line learning but their example of wonderfulness is the University of Phoenix (they really liked a David Brooks column that noted the University of Phoenix),

So this is what they want to emulate – a for-profit organization (part of the Apollo Group which is expected to announce 4th quarter earnings tomorrow of 97 cents on $1.1 billion in revenue) Too bad they seem more impressed with their revenue than with their graduation rates.

From The Chronicle of Higher Education – March 2012:

Let’s look at some of the numbers from America’s biggest for-profit college, the University of Phoenix. Based on a 2010 Education Trust report, here were the six-year graduation rates at several of their major campuses:

(I only list a sampling – they have a lot of locations)

University of Phoenix-Online Campus — 5%

University of Phoenix-Southern California Campus — 11%

University of Phoenix-Phoenix-Hohokam Campus — 15%

University of Phoenix-Metro Detroit Campus — 9%

University of Phoenix-Bay Area Campus — 14%

University of Phoenix-Houston Westside Campus — 19%

University of Phoenix-New Mexico Campus — 33%

University of Phoenix-Las Vegas Campus — 16%

University of Phoenix-South Florida Campus — 21%

University of Phoenix-Louisiana Campus — 20%

University of Phoenix-Maryland Campus — 6%


With a few exceptions, these are appalling numbers. And what happens to those who drop out? Increasingly, they default on their student loans. The default rate on student loans for those enrolled at or graduated from for-profit colleges is higher than any other sector of higher education: 15 percent. So much for a sound industry.

An Eisenhower Quote, 1952

From the Washington Post comments:

9:54 PM CDT
A quote from when Republican Officials were still Americans who cared about the country over party.

“Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes that you can do these things. Among them are a few Texas oil millionaires, and an occasional politician or businessman from other areas. Their number is negligible and they are stupid.”

President Dwight D. Eisenhower, l952—–

The Austerity Agenda – Paul Krugman

From the New York Times:

“The boom, not the slump, is the right time for austerity.” So declared John Maynard Keynes 75 years ago, and he was right. Even if you have a long-run deficit problem — and who doesn’t? — slashing spending while the economy is deeply depressed is a self-defeating strategy, because it just deepens the depression.

So why is Britain doing exactly what it shouldn’t? Unlike the governments of, say, Spain or California, the British government can borrow freely, at historically low interest rates. So why is that government sharply reducing investment and eliminating hundreds of thousands of public-sector jobs, rather than waiting until the economy is stronger?

Over the past few days, I’ve posed that question to a number of supporters of the government of Prime Minister David Cameron, sometimes in private, sometimes on TV. And all these conversations followed the same arc: They began with a bad metaphor and ended with the revelation of ulterior motives.

The bad metaphor — which you’ve surely heard many times — equates the debt problems of a national economy with the debt problems of an individual family. A family that has run up too much debt, the story goes, must tighten its belt. So if Britain, as a whole, has run up too much debt — which it has, although it’s mostly private rather than public debt — shouldn’t it do the same? What’s wrong with this comparison?

The answer is that an economy is not like an indebted family. Our debt is mostly money we owe to each other; even more important, our income mostly comes from selling things to each other. Your spending is my income, and my spending is your income.

So what happens if everyone simultaneously slashes spending in an attempt to pay down debt? The answer is that everyone’s income falls — my income falls because you’re spending less, and your income falls because I’m spending less. And, as our incomes plunge, our debt problem gets worse, not better.

This isn’t a new insight. The great American economist Irving Fisher explained it all the way back in 1933, summarizing what he called “debt deflation” with the pithy slogan “the more the debtors pay, the more they owe.” Recent events, above all the austerity death spiral in Europe, have dramatically illustrated the truth of Fisher’s insight.

And there’s a clear moral to this story: When the private sector is frantically trying to pay down debt, the public sector should do the opposite, spending when the private sector can’t or won’t. By all means, let’s balance our budget once the economy has recovered — but not now. The boom, not the slump, is the right time for austerity.

As I said, this isn’t a new insight. So why have so many politicians insisted on pursuing austerity in slump? And why won’t they change course even as experience confirms the lessons of theory and history?

Well, that’s where it gets interesting. For when you push “austerians” on the badness of their metaphor, they almost always retreat to assertions along the lines of: “But it’s essential that we shrink the size of the state.”

Now, these assertions often go along with claims that the economic crisis itself demonstrates the need to shrink government. But that’s manifestly not true. Look at the countries in Europe that have weathered the storm best, and near the top of the list you’ll find big-government nations like Sweden and Austria.

And if you look, on the other hand, at the nations conservatives admired before the crisis, you’ll find George Osborne, Britain’s chancellor of the Exchequer and the architect of the country’s current economic policy, describing Ireland as “a shining example of the art of the possible.” Meanwhile, the Cato Institute was praising Iceland’s low taxes and hoping that other industrial nations “will learn from Iceland’s success.”

So the austerity drive in Britain isn’t really about debt and deficits at all; it’s about using deficit panic as an excuse to dismantle social programs. And this is, of course, exactly the same thing that has been happening in America.

In fairness to Britain’s conservatives, they aren’t quite as crude as their American counterparts. They don’t rail against the evils of deficits in one breath, then demand huge tax cuts for the wealthy in the next (although the Cameron government has, in fact, significantly cut the top tax rate). And, in general, they seem less determined than America’s right to aid the rich and punish the poor. Still, the direction of policy is the same — and so is the fundamental insincerity of the calls for austerity.

The big question here is whether the evident failure of austerity to produce an economic recovery will lead to a “Plan B.” Maybe. But my guess is that even if such a plan is announced, it won’t amount to much. For economic recovery was never the point; the drive for austerity was about using the crisis, not solving it. And it still is.

JP Morgan’s 2 Billion Loss

One person’s loss is another person’s gain. Hmmm. Sounds right. But is it symmetrical? And more importantly: is it just? It depends … read on.

Paul Krugman writes in the New York Times:

I’ll come back shortly to the troubles at JPMorgan Chase, the bank Mr. Dimon runs. First, however, let me talk about Mr. Romney, whose remarks about those troubles were so off-point that they constitute a teachable moment.

Here’s what the presumptive Republican presidential nominee said about JPMorgan’s $2 billion loss (which may actually have been $3 billion, or $5 billion, or more, but who’s counting?): “This was a loss to shareholders and owners of JPMorgan and that’s the way America works. Some people experienced a loss in this case because of a bad decision. By the way, there was someone who made a gain.”

What’s wrong with this statement? Well, suppose that someone — say, Jimmy Stewart in the movie “It’s a Wonderful Life” — runs a bank that takes in deposits and invests the money in various ways. And suppose that one of those investments is a risky bet on some complex financial instrument, with Mr. Potter, the evil plutocrat, on the other side.

If Jimmy Stewart’s bet pays off, we’re in Romneyworld: he’s made money, Mr. Potter has lost money, and that’s that. But suppose Jimmy Stewart loses his bet. If the bet was big enough, he no longer has enough assets to pay off his depositors. His bank collapses, probably in a chaotic bank run that takes down the whole town’s economy as collateral damage. Mr. Potter makes money on the deal, but so what?

Here we go again: John Boehner, playing in the house with matches

Here we go again. I had hoped to swear off political blogging, but John Boehner is once again playing in the House with matches. Time to document the craziness. And to act for the future of our nation.

Let us ask, as always: what would Eisenhower do? He was a Republican, and he was a conservative. Those were the days in which reality did not make a mockery of the word, when it expressed an honored political philosophy, not a gang color.


5:32 PM EDT
I’ve asked it before, and I’ll ask it again, but where were the Republicans for the last 10 years when the Bush administration was spending us into bankruptcy? Where was the fiscal conservatism of the Republicans when they kept rubber-stamping Bush’s outrageous deficit spending without so much as raising an eyebrow at those record-setting deficits? Where was the outrage on the part of Republicans for the last 30+ years when we saw the national debt ballooning out of control? I get that this is all about politics. I just don’t get why the Republican leadership is so stupid as to think that moderates and independents won’t take them to task for their mendacity.See Less

6:26 PM EDT
Where are they now? They are blaming the “oh yeah, blame Bush game” instead of taking some, any, responsibility.

Was there a surplus during the Clinton administration? Yes!

What happened the surplus?
In 2001, Jan. 25, 2001, the republicans convened a session of the U.S. Senate Committee on the Budget. The topic? The dangers of budget surpluses to the US economy. All of the conservatives experts opined on how dangerous budget surpluses as far as the eye could see would be for the US economy! (That is 5 days after Bush’s inauguration).

“In January 2001, the Congressional Budget Office (CBO) projected under a current law baseline that the federal government would erase its debt in 2006. By 2011, the U.S. government would be $2.3 trillion in the black.” Source

That is, the 8 years under Bush resulted in a $12.7 trillion shift in the national debt.

Here are 2 other independent analyses that show clearly that the current deficit problems are a result of 1) Bush Policies and 2) the economic downturn that President Obama inherited. Most importantly, the final reference highlights that the senate republicans signed a pledge stating that they would hold up ALL legislation if the Bush tax cuts were not extended (so that the extension of the Bush tax cuts cannot be explained away as an Obama administration policy, i.e. none of the Bush administration policies that doubled the national debt were forced upon them).

Tax Returns: A Comprehensive Assessment of the Bush Administration’s Record on Cutting Taxes

Obama vs. Bush: Breaking Down The Deficit

Senate GOP pledges to block all bills until tax dispute resolved
December 01, 2010|By Alan Silverleib, CNN

Senate Republicans want action on the expiring Bush-era tax cuts before tackling any other issues.

Senate Republicans promised Wednesday to block legislative action on every issue being considered by the lame-duck Congress until the dispute over extending the Bush-era tax cuts is resolved and an extension of current government funding is approved.

Thoughts on religion and civil discourse: conciliation versus conflict

Times change, and not always for the better.  Here is an extract from a New York Times blog on the 1965 battle to repeal the Massuchusetts banning birth control.  In it Cardinal Cushing of the Catholic Church played a leading role in the conciliation and diplomacy that led to the law’s repeal. I think we can all learn from his words.  The blog post makes good reading and gives some excellent historical perspective.

Two days before a fellow Massachusetts Catholic won the first primary of the 1960 presidential campaign, Cushing argued that a Christian must engage in “friendly discussion with those whose views of life and its meaning are different than his own.” The times had changed, and so had he.

In 1963, while a guest on WEEI radio, Cushing took a question from an unidentified female caller who asked if he considered the birth control ban to be “bad law.” Yes, Cushing replied. “I have no right to impose my thinking, which is rooted in religious thought, on those who do not think as I do.” (The anonymous caller, I discovered decades later, was Hazel Sagoff, executive director of Planned Parenthood of Massachusetts. A month earlier she had learned from a Cushing confidant that support for the state’s ban was dwindling within the local church hierarchy.) It was the first time that the cardinal publicly announced a willingness to accept revisions to the state’s contraception law.

Poor health prevented Cushing from appearing before the legislative panel considering the Dukakis bill in March 1965, but he dominated the hearing nonetheless. In a written statement he declared that “Catholics do not need the support of civil law to be faithful to their own religious convictions and they do not seek to impose by law their moral views on others of society.” He found it unreasonable to “forbid in civil law a practice that can be considered a matter of private morality.” What’s more, he observed, laws needed a “reasonable correspondence” to community standards to be effective and enforceable. Cushing, however, could not endorse the proposed change to the ban, because he felt that it lacked “proper safeguards” for the young. He requested that Gov. John Volpe appoint a commission to craft a repeal to “satisfy the conscientious opinions of the whole community.”


What is the cause of the current high unemployment in the US? It has been around nine percent for seem time. Some say: “government regulation,” others say “lack of sufficient demand.” Etc. Well what is the cause. Here is some commentary on the issue: Econmix, by Bruce Bartlett, New York Times.

A few quotes:

… During June and July, Small Business Majority asked 1,257 small-business owners to name the two biggest problems they face. Only 13 percent listed government regulation as one of them. Almost half said their biggest problem was uncertainty about the future course of the economy — another way of saying a lack of customers and sales.

The Wall Street Journal’s July survey of business economists found, “The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists.”

And here is a comment on Bartlett’s article:

Anecdotally, I worked for a major corporation during the Nixon wage price control period. These we probably the harshest business regulations imposed on the entire country. Plenty of red tape both Federally and corporate wide to control it. It didn’t do a thing to hamper the business. We all just got around it and went on with business. Unnecessary regulations should be eliminated and all regulations periodically reviewed. Still I’m glad someone is pointing out the silliness of regulation as a significant cause of our employment problem. Sure regulation is a pain, but so is polluted water and diseased hamburger meat. The proponents of this remedy have their own private agenda. — ROSS

General principle: Suppose A and B are causes of X. To change X, change A or B. Not C, D, E, etc. And if A is the principal cause of X, work on it, not B. Or work harder on A than B. Seems logical, no?

Is Democracy Broken?

In today’s New York Times, Nicolas Kulish writes about young people’s disillusionment with democracy. He cites protests from Spain to Israel to India. Here is a quote:

They [young people] are taking to the streets, in part, because they have little faith in the ballot box.

“Our parents are grateful because they’re voting,” said Marta Solanas, 27, referring to older Spaniards’ decades spent under the Franco dictatorship. “We’re the first generation to say that voting is worthless.”

Economics have been one driving force, with growing income inequality, high unemployment and recession-driven cuts in social spending breeding widespread malaise. Alienation runs especially deep in Europe, with boycotts and strikes that, in London and Athens, erupted into violence.

But even in India and Israel, where growth remains robust, protesters say they so distrust their country’s political class and its pandering to established interest groups that they feel only an assault on the system itself can bring about real change.

To me, the key phrases are distrust of the country’s political class and pandering to established interest groups. While most of the article is devoted politics abroad, I think the analysis applies to the US as well. The two established political parties are deadlocked. Compromise, needed to address the important issues the country faces, is impossible. Interests, however small, with powerful lobbies, are served well. But what of the common good?

This reminds me of a passage in That Used To Be Us, by Friedman and Mandelbaum:

In 1982, the economist Mancur Olson published a book entitled The Rise and Decline of Nations, in which he noted the universal tendency of interest groups to form and to lobby on their own behalf, especially in democracies, where they are free to do so. Olson called these groups “distributional coalitions” because they are “overwhelmingly oriented to struggle over the distribution of income and wealth rather than to the production of additional output.” They concentrate, that is, on gaining larger shares of the economic pie for themselves, not on making the pie bigger.

Over time such groups, in Olsons’ words, “slow down a society’s capacity to adopt new technologies and to reallocate resources in response to changing conditions.” That is why special interests pose such a threat to America’s future. Adopting new technologies and reallocating resources in response to changing conditions is precisely what America needs to do.

Well said. But we will see continued mis-allocation of resource and continued avoidance of the real problems facing us until a crisis greater than that of the Crash of 2009 is upon us. Hard as the Great Recession is on so many people, it has not produced sufficient pressure to crack apart established interest and lead to real change. But let’s have change within the context of democracy, please! Peacefully!!

Train travel: why is the US in last place?

The distance between Boston and New York is 190 miles, or 306 kilometers. On the Acela Express, Amtrak’s fast train, the trip takes three hours and thirty-eight minutes, for an average speed of 52 miles per hour. By comparison, the French TGV makes the trip from Paris to Lyon (244 miles, 393 km) in two hours, 10 minutes, for an average speed of 113 mph. This is 117% faster than the Acela. The Shinkansen “bullet train”makes the trip from Tokyo to Shin-Aomori (409 mi, 675 km) in three hour an ten minutes, for an average speed of 129 mph. The record-holder is the train from Beijing to Shanghai (819 miles, 1,318 km), which makes the trip in four hours and forty-eight minutes, for an average speed of one hundred-ninety mph.

To look at the data in a different way, here is a table of travel times from Boston to New York on different train systems, one real, the other three imaginary but possible:

Boston to New York by US train: 3:38 hrs
Boston to New York by French train: 1:40 hrs
Boston to New York by Japanese train: 1:28 hrs
Boston to New York by Chinese train: 1:00 hrs

How come the US is in last place? Is last place a good place to be? What are the economic consequences? What would Eisenhower do?

And finally: can’t we do better?