Twofer

We get two good opinion pieces in the Wall Street Journal today.

1. Student Loan backfire: Default rates don’t lie.

Whereas credit scores used to be similar for young people with or without student-loan debt, New York Fed economists find a divergence after 2008. “By 2012, the average score for twenty-five-year-old nonborrowers is 15 points above that for student borrowers, and the average score for thirty-year-old nonborrowers is 24 points above that for student borrowers,” they note in a recent report.

If I were running for office, I would promise to give student loan borrowers more loans to help pay off their loans.

2. Michael Saltzman gives an economics lesson to VP Joe Biden.

Advocates of a higher minimum wage arbitrarily selected 1968 as the historical reference point. It’s no wonder: That’s when federal minimum wage hit its inflation-adjusted high point.

How about picking other arbitrary years to track the minimum wage and inflation? If you used 1948 instead of 1968, the minimum wage’s inflation-adjusted value would only be $3.81 an hour. If you chose 1988, the adjusted minimum wage would be $6.50 an hour.

And, if we pick a time before the minimum wage existed, it would be $0. What a distraction. I wish I lived in a world where when someone suggested raising the minimum wage to ‘help’ someone (get votes), everyone just laughed at them.

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My limited vp debate observations

I don’t watch much of the debates, which surprises my friends.

I watched about 10 minutes of last night’s debate. Here are some of the things I observed and some thoughts on what I have heard since.

Joe Biden reminded me of Will Farrell’s character in the late summer movie, The Campaign. Fake teeth, hair plugs and cheesy charm and all.

More folks should be bothered with the way politicians on both sides refer to ‘tax plans’. It’s unclear what the point of their ‘tax plans’ are. It seems like one key point is to raise even more tax revenue. I don’t care about raising more tax revenue. I would rather hear politicians talk about how they are going to lower spending and minimize taxes for everyone and do the job of executing the Constitution with the most minimal impact on society as possible. Since we don’t hear much of that, I know the direction of government is still a long way from where I’d like it to be.

Democrats say that it was a draw or gave a slight edge to Biden. I even heard some Democrats praise Biden for his distracting behavior.  If a Republican acted in the same fashion, I doubt the Democrats would be praising it. They would call it a loss.

I don’t often quote the Bible, but a caller to a radio show this morning shared his thought on the debate in the form of Proverbs 29:9 and I thought it was good:

If a wise man has an argument with a fool, the fool only rages and laughs, and there is no quiet.

Biden’s remarks on Iran scared me and would have been enough for me to decide not to vote for that ticket if I was undecided.

I heard Ryan give a few zingers. I thought that bringing the unemployed back into the economic picture and saying that they aren’t feeling the recovery was a good line.

However, I also think Ryan (again in my small sample of about ten minutes) got into eye-glaze territory when he was explaining his Medicare proposal.

Just scoring on body language — which is about what any of these things are good for — I would say Ryan carried himself well against a more seasoned performer.

Ryan looked more ‘vice-presidential’ and like he has some future leadership potential. He didn’t fumble, which is all he needed to do.

As I mentioned earlier, Biden looked like a caricature of a politician portrayed by Ferrell.

 

Trade-offs

Nice job Joe Gerarden, in the video below, for getting Joe Biden to admit that government subsidies have increased college tuition.  Here I criticized Obama for seeming to be unaware of this fact of basic economics.

I’ll give the Vice President credit for demonstrating a better understanding of basic economics than President Obama.  He admits that government subsidies have increased tuition.

I also agree with Biden that subsidies have increased the number of college students.  That is basic supply and demand.

But, unlike Biden, I’m not confident that’s a good thing.  Too bad Mr. Gerarden didn’t have a counterpoint for that.

How do you convince someone like Biden that more college graduates isn’t necessarily a good thing?

After some discussions about this topic with the “more is better” (MIB) crowd, I’ve been asked, Do you want to be the one to tell Susie she can’t go to college and has to figure something else out?

I think the MIB crowd envisions two outcomes for potential college students:

  • Outcome 1: Allowed to go to college and then you have a better shot at the good life.
  • Outcome 2: Not allowed to go to college and then life will be miserable and a struggle.

I see two problems with this vision.

First, I would not need to tell Susie that she cannot go to college. No one disallows Susie from going to college, except for Susie herself.  It’s her decision.

Just because demand for a college education is lower in a world without government subsidies, doesn’t mean that someone is telling anyone they can’t go to college.

It means fewer people choose college because they view their other options as having more relative value without the government subsidies distorting the picture.

We all make similar economic choices every day without noticing it.  You might pass on your first vacation choice because airfare is too expensive and settle on your second choice and still enjoy yourself.   Or you choose the less expensive cut of meat or the lower priced bottle of wine at the grocery store.

Second, having a college degree isn’t the determining factor between success and failure many people seem to think it is. 

I know statistics say that college graduates have higher lifetime earnings, but remember that statistics can be misinterpreted.  College graduates include a few degree programs that do have high wages (primarily due to artificial constraints on supply) like doctors.  Also, a few business folks do climb to the top of their bureaucratic piles and make a lot of money.  Take just these two groups out of the college crowd and the earnings for the rest begin to look closer to a lot of non-college grads.

Also, remember, the non-college grad group includes a lot of folks that may not spend as much time in the work force because they raise families.

Remove some of the outliers from both groups and college grads and non-college grads start to look a lot more like our friends and family.  I know plenty of both who have done well.

So, nobody is telling Susie that she can’t go to college and she isn’t being consigned to a miserable life. Rather, she’s deciding for herself to pass up on the $100,000 liberal arts degree to start a cupcake catering business in her kitchen that eventually grows into a successful business.