June 5, 2011, 12:05 p.m.
And the Democrats Aren't That Much Better
A week ago, I was writing about the rising share of costs born by college students, "Paying for College; Allocating Costs, Setting the Price," May 30, 2011, and commenting on Robert Reich's column, Robert Reich, "How Our Prosperity Became Stagnation," Des Moines Register, May 29, 2011, p. OP1.
That blog entry concluded, "Had we been hell-bent on deliberately evolving into a third world country's population, with a statistically insignificant percentage of super-wealthy at one extreme, and 90 percent or more struggling just to get by, we would have adopted almost precisely the policies we have. That's not to say that it was deliberate. Others can explore the conspiracy theories. But that is the result."
This morning [Sunday, June 5], the New York Times's Nicholas Kristof elaborated on that theme in such a powerful and well written way that I'm going to reproduce more excerpts from his column than I would usually reproduce. Nicholas Kristof, "Our Fantasy Nation?" New York Times June 5, 2011, p. WK9. (If he, or anyone at the Times, objects to this Fair Use of the material, simply email me and I'll remove it from this blog. If they do not object, I will recommend my readers subscribe to the Times, as I do, by going to this site.)
With Tea Party conservatives and many Republicans balking at raising the debt ceiling, let me offer them an example of a nation that lives up to their ideals.
It has among the lowest tax burdens of any major country: fewer than 2 percent of the people pay any taxes. Government is limited, so that burdensome regulations never kill jobs.
This society embraces traditional religious values and a conservative sensibility. Nobody minds school prayer, same-sex marriage isn’t imaginable, and criminals are never coddled.
The budget priority is a strong military, the nation’s most respected institution. When generals decide on a policy for, say, Afghanistan, politicians defer to them. Citizens are deeply patriotic, and nobody burns flags.
So what is this Republican Eden, this Utopia? Why, it’s Pakistan. . . .
[A]s America has become more unequal, as we cut off government lifelines to the neediest Americans, as half of states plan to cut spending on higher education this year, let’s be clear about our direction — and about the turnaround that a Republican budget victory would represent. . . .
[D]eveloping countries, from Congo to Colombia [are] characterized by minimal taxes, high levels of inequality, free-wheeling businesses and high military expenditures. Any of that ring a bell?
In Latin American, African or Asian countries, I sometimes see shiny tanks and fighter aircraft — but schools that have trouble paying teachers. Sound familiar? And the upshot is societies that are quasi-feudal, stratified by social class, held back by a limited sense of common purpose. . . .
The wealthiest 1 percent of Americans already have a greater net worth than the bottom 90 percent, based on Federal Reserve data. Yet two-thirds of the proposed Republican budget cuts would harm low- and moderate-income families, according to the Center on Budget and Policy Priorities.
For a country that prides itself on social mobility, where higher education has been a traditional escalator to a better life, cutbacks in access to college are a scandal. G. Jeremiah Ryan, the president of Bergen Community College in New Jersey, tells me that when the college was set up in 1965, two-thirds of the cost of running it was supposed to be covered by state and local governments, and one-third by students. The reality today, Dr. Ryan says, is that students bear 78 percent of the cost.
In fairness to Pakistan and Congo, wealthy people in such countries manage to live surprisingly comfortably. Instead of financing education with taxes, these feudal elites send their children to elite private schools. Instead of financing a reliable police force, they hire bodyguards. Instead of supporting a modern health care system for their nation, they fly to hospitals in London.
You can tell the extreme cases by the hum of diesel generators at night. Instead of paying taxes for a reliable electrical grid, each wealthy family installs its own powerful generator to run the lights and air-conditioning. It’s noisy and stinks, but at least you don’t have to pay for the poor.
I’ve always made fun of these countries, but now I see echoes of that pattern of privatization of public services in America. Police budgets are being cut, but the wealthy take refuge in gated communities with private security guards. Their children are spared the impact of budget cuts at public schools and state universities because they attend private institutions.
Mass transit is underfinanced; after all, Mercedes-Benzes and private jets are much more practical, no? And maybe the most striking push for reversal of historical trends is the Republican plan to dismantle Medicare as a universal health care program for the elderly.
There’s even an echo of the electrical generator problem. More and more affluent homes in the suburbs are buying electrical generators to use when the power fails.
So in this season’s political debates, let’s remember that we’re arguing not only over debt ceilings and budgets, but about larger questions of our vision for our country. Do we really aspire to take a step in the direction of a low-tax laissez-faire Eden ...like Pakistan?
Nicholas Kristof, "Our Fantasy Nation?" New York Times June 5, 2011, p. WK9.
So long as we continue to ride in the back seat and say nothing to the driver, we can't really complain about where we're headed or our destination once we get there.
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May 30, 2011, 8:00 a.m.
Allocating Costs; Setting the Price
The Sunday Des Moines Register of May 22, 2011, had a major, page one spread about the rising costs of a college education. Except it wasn't about the cost of education. It was about the rising price of that education, comparing the increase in the share of those costs allocated to tuition with the rising price of peanut butter, milk and eggs. More on the Register's piece on down the blog.
First, here is my 300-word-limit response in the next week's Sunday Register, May 29:
Legislature shifted the cost of education
Nicholas Johnson
Des Moines Register
May 29, 2011, p. P20
"The Challenge for Students, Parents and Schools: Runaway Tuition" (May 22), helped focus attention on the rising price of a college education.
Unfortunately, it conflated the "price" (to the student and parents) with the "cost" (to the universities) of that education.
Can universities do more to reduce the costs of education? Can they increase the quality and utility of that education? Absolutely.
However, it's both unfair and inaccurate to suggest that the sole cause of rising tuition is the increase in costs resulting from poor management by the Iowa Board of Regents and administrators.
A major reason for the increase in tuition is not the cost of education, but the allocation of those costs between taxpayers (who receive a public benefit from a well educated workforce) and the private beneficiaries (the students who go on to better jobs and lives).
When California universities charged no tuition, that didn't mean they had no costs. It meant taxpayers paid those costs.
The most appropriate allocation? That's a debate worth having.
But for now, let's recognize that it is the Iowa Legislature that has chosen to allocate an ever-increasing share of the costs to students' tuition; not
the Iowa Board of Regents, universities' administrators or faculty members.
Here are some early excerpts from the Register story the week before, followed by some comments.
Iowa's two largest universities expect to pocket millions of dollars in extra tuition revenue next fiscal year, with the vast majority going to pay for
additional faculty, programs aimed at lowering dropout rates and other student services, officials said.
That decision comes as the cost of earning a four-year degree in Iowa at a public university continues a steep march upward and pushes students to take on more debt, which, at $26,066 per graduating student, is the fourth-highest average in the country.
In the past 30 years, the average cost of tuition and fees at an Iowa public university has jumped 707 percent, more than four times the rate of inflation. College costs have increased each of the past 30 years for students and their families.
Meanwhile, a new survey shows families and students saddled with rising tuition and debt, stagnant wages and an uncertain job market are questioning whether a traditional college education is their ticket to the American dream.
Some universities are trying to respond to the converging forces with innovative classroom approaches and three-year degree programs. . . .
Americans are reassessing what they get for their tuition dollars.
Fifty-seven percent of those surveyed by the Pew Research Center say the higher education system does not provide a good value for the money they spend, and 75 percent say college is too expensive for most Americans to afford, according to findings released last week.
Jens Manuel Krogstad, "Runaway tuition: A challenge for students, parents and schools," Des Moines Register, May 22, 2011, p. A1.
I acknowledge in the response to the Register's report, "Can universities do more to reduce the costs of education? . . . Absolutely." Frankly, I don't know enough to support that "absolutely" judgment. It's based simply on the intuition and experience that virtually every individual, business, government agency, and institution that is willing to address in detail its systems and processes, goals and operations, can probably come up with ways to reduce costs, at least a little -- often while improving quality and outputs.
It may well be that the salaries of universities' personnel, and the other costs of education (as distinguished from the price of education, tuition), have increased significantly further and faster than inflation in the costs of producing other goods and services. If so, that's a matter well worth investigating. If the increases represent necessary costs, held to the minimum, wise investments, and other consequences of skilled, creative and attentive management, that's one thing. If not, if alternative decisions could have produced greater quantity and quality of service at lower cost, that's another.
The point, for purposes of critiquing this Register story, is that it only addresses the increases in the price of education, not the costs of providing that education.
Beyond that, there was another opinion piece in the Sunday paper [May 29] of even greater relevance to America's future than my 300 words.
Robert Reich, the former U.S. secretary of labor, is now an author, columnist, blogger, and professor of public policy at the University of California at Berkley, testifies before Congress from time to time. The Register published as an essay an excerpt from his May 12 testimony before the U.S. Senate Committee on Health, Education, Labor and Pensions. It's vey much worth reading in its entirety; indeed it could be characterized as must reading for every American and public official.
To give you an idea of his subject, and thesis, here is is lead paragraph:
How did we go from the Great Depression to 30 years of Great Prosperity? And from there, to 30 years of stagnant incomes and widening inequality, culminating in the Great Recession? And from the Great Recession into such an anemic recovery?
Robert Reich, "How Our Prosperity Became Stagnation," Des Moines Register, May 29, 2011, p. OP1.
In the course of answering those questions, here's what he had to say about the role of higher education:
Government also widened access to higher education. The GI Bill paid college costs for those who returned from war. The expansion of public universities made higher education affordable to the American middle class. . . .
Starting more than three decades ago, trade and technology began driving a wedge between the earnings of people at the top and everyone else. The pay of well-connected graduates of prestigious colleges and MBA programs has soared. But the pay and benefits of most other workers has either flattened or dropped. And the ensuing division has also made most middle-class American families less economically secure.
Government could have enforced the basic bargain. But it did the opposite. It slashed public goods and investments -- whacking school budgets, increasing the cost of public higher education, reducing job training, cutting public transportation and allowing bridges, ports and highways to corrode. . . .
Coping mechanism No. 3: Draw down savings and borrow to the hilt. After exhausting the first two coping mechanisms, the only way Americans could keep consuming as before was to save less and go deeper into debt. During the Great Prosperity the American middle class saved about 9 percent of their after-tax incomes each year. By the late 1980s and early 1990s, that portion had been whittled down to about 7 percent. The savings rate then dropped to 6 percent in 1994, and on down to 3 percent in 1999. By 2008, Americans saved nothing. Meanwhile, household debt exploded. By 2007, the typical American owed 138 percent of their after-tax income.
He concludes:
The fundamental economic challenge ahead is to restore the vast American middle class. That requires resurrecting the basic bargain linking wages to overall gains, and providing the middle class a share of economic gains sufficient to allow them to purchase more of what the economy can produce. As we should have learned from the Great Prosperity -- the 30 years after World War II when America grew because most Americans shared in the nation's prosperity -- we cannot have a growing and vibrant economy without a growing and vibrant middle class.
"To restore the vast American middle class" is going to require, among many other things discussed by Reich, a restoration of affordable post-high school college education -- as well as a reduction in the price of community college education, and skills training in the trades.
Had we been hell-bent on deliberately evolving into a third world country's population, with a statistically insignificant percentage of super-wealthy at one extreme, and 90 percent or more struggling just to get by, we would have adopted almost precisely the policies we have. That's not to say that it was deliberate. Others can explore the conspiracy theories. But that is the result.
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December 18, 2008, 9:20 a.m.
Kiva -- "Best Buy" in Gifts
(Brought to you by FromDC2Iowa.blogspot.com)
Consumer Reports product ratings pick "best buys."
This time of year, even though times are tough, Americans are still looking for advice on which charitable contributions are a "best buy."
How about a "contribution" that is in fact a loan, with a history of virtually 100% repayment by the borrowers, that comes back to you and can be loaned out again over and over. Now if that's not a "best buy" what is?
Some relatively well-off families realize that they all have enough "stuff," and that rather than buy more things that aren't really wanted, won't be used -- or will soon break if they are -- they'd rather give gifts in each others' names to worthy charities. (Actually, some families that don't yet have enough stuff do the same.)
If that idea appeals to you, too, here's a suggestion I think you'll find appealing.
Because it's a "loan" rather than a "gift," and because the third-world entrepreneurs you'll be loaning to -- unlike the banking beneficiaries of Bernanke's $7.7 trillion largess with taxpayers' money (see yesterday's, Nicholas Johnson, "Forget Madoff, Focus on Bernanke," December 17, 2008) -- have a virtually 100% record of paying back all loans, you can "give" your money over and over again.
Kiva, the organization that administers this program, is growing in popularity. Loan applications that used to take days for Kiva supporters to fund now are on and off the Web site in hours -- sometimes minutes. At one point this past year they actually ran out of unfunded applications! This past week alone they've loaned out well over $1 million, to some 3500 new entrepreneurs, from some near-8000 new "members."
Look over the Kiva Web site and you'll see why.
I wrote about Kiva last year about this time, and thought it might be a nice blog entry to re-run every December. Here it is:
December 26, 2007, 10:15 a.m.
The Charitable Gift That Literally Keeps on Giving . . .
and Costs You Nothing
How can you give away your money and still have it? Sound too good to be true?
Well, it is true. Read on.
While we're enjoying (or suffering from) the excesses of the holiday season, a good many Americans' thoughts turn to what we should be doing for others.
Add it all up and divide by 300 million Americans and it turns out we're averaging nearly $1000 in charitable contributions from every woman, man and child. Last year we gave a total of $295 billion, 83% of which came from individuals. We averaged contributions of 2.2% of our disposable income (65% of all households earning under $100,000 a year were contributors). (Of that total nearly half went to religious organizations and educational institutions.) Add to these numbers the value of the donated time of that half of our population that does volunteer work of some kind each year, and we can feel fairly good about what we're doing for others. Jeffrey Thomas, "Charitable Donations by Americans Reach Record High; Individual giving accounts for 83 percent of $295 billion total in 2006," USINFO.state.gov, June 26, 2007.
And yet, despite our best efforts, there are still over one billion people "living" (if it can be called that) on less than one dollar a day; every day 24,000 children die of hunger; 10 million under the age of five die every year of the diseases resulting from a lack of clean water. UN Secretary-General Kofi Annan, "A World Mired in Despair of Poverty 'Will Not be a World at Peace,'" October 17, 2003; Jan Eliasson and Susan Blumenthal, "Dying for A Drink of Clean Water," Washington Post, September 20, 2005, p. A23.
Nor are these the only fellow humans in need of economic assistance of some kind.
Clearly, our government should do more of our share to help the rest of the world. But the fact remains that, even with increased government aid and individuals' philanthropy, we can't do this job ourselves.
So what to do?
You've heard of Lao Tzu's Chinese proverb, "Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime." The only trouble with this solution is that the man, or woman, may not be able to afford a fishing pole -- or whatever else they may need to not only feed themselves, but start a modest fishing business.
Enter Kiva.
It has been said that information, or an idea, is an example of a kind of property that you can give to many others and still retain it yourself.
So it is with the money you give to Kiva. They use it, but you still have it. It's money that's not given, it's loaned (and to a recipient of your choice, not theirs) from a Kiva account in your name that you control. Because the repayment rates are so nearly 100% -- much better than what many of our commercial banks get -- you'll be able to loan that money over and over again.
Concerned about your $25 contribution going to a charitable organization paying its CEO over $250,000 a year -- sometimes millions. "What difference will my little contribution make?"
Well, with Kiva every penny of your loan goes to the recipient of your choice. There is no overhead! (Of course, you can also contribute to Kiva, to support its administrative costs, but it is certainly not required, and if you do it is a separate transaction.)
As the Kiva Web site explains:
Kiva lets you connect with and loan money to unique small businesses in the developing world. By choosing a business on Kiva.org, you can "sponsor a business" and help the world's working poor make great strides towards economic independence. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates from the business you've sponsored. As loans are repaid, you get your loan money back.
In this political season, this is an approach that ought to appeal to all. Liberals should appreciate this opportunity to help others. Conservatives should support the idea of loans rather than gifts, and giving to businesses rather than making "welfare payments." Libertarians ought to like the idea of keeping the government ("our tax dollars") out of it.
Want to do something really effective about "the immigration problem" from the south? Loan the little money needed by potential entrepreneurs in Mexico, Central and South America. It will help enable them to continue to live better in their home country, employ others in the community, circulate their profits with purchases in their local economy, and better support their children. Want to help build families, and provide education for children? Favor women recipients.
The minimum contribution to a loan request is $25 -- and it looks like that's what a lot of contributors choose. But it's amazing how fast, once a loan request is posted on the Kiva site, that 40 individual Kiva contributors, together, can come up with a requested $1000 loan.
The Web site reports this morning [Dec. 26] that this week alone $750,000 has been contributed for loans, 17,000 new lenders have joined Kiva, over 1000 new businesses have been started, 323 entrepreneurs finished paying back their loans, and the average loan, once posted to the Web site, was fully funded within 7.5 hours.
The only "cost" of this operation to you is the "opportunity cost" of what you would have earned on that loan if, instead of loaning it through Kiva, or spending it at Starbucks, you invested it at 5% interest. How much is that? On a $25 loan literally "a dollar and a quarter" -- $1.25.
Of course, there are costs of this program -- it's just that they're paid for by the recipient of your loan, not you. Kiva partners with microfinance institutions in the recipients' home countries -- what Kiva calls its "field partners." The field partners are funded with the interest paid by recipients to the field partner on your loan. Yes, there is interest. But it is a small fraction of the prohibitive rates of interest charged by for-profit individuals or institutions in the recipient's country.
As a lender you can read all about your recipient of choice, the record of the field partner administering your loan, often see pictures of their project, and get regular updates on the progress of their business and repayments. Not only does it not cost you anything, it also makes you much closer to the ultimate recipient than a charitable contribution to a national, state or local organization.
Charitable giving is important -- essential to the continuation of many non-profits in our country. We need to continue to give generously.
But there is this additional option: become a "bank," a "microlender" to worthy potential (and existing) entrepreneurs in third world countries.
Now, while you're thinking about it, check out http://www.kiva.org, and see what I've been talking about.
Make it a Happy New Year -- for you, and for the series of recipients who will benefit from that first Kiva loan of yours over the years to come.
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