By John Stang
Susan Bodnar at CNN writes about conservative political scientist Charles Murray’s research indicating a gap between wealthy and lower class societies in America. She compares it to a child like development:
A more inclusive look at the United States might reveal some commonality between beer drinking slouches and latte-sipping, yoga-loving elites who live in accomplishment ghettos. Perhaps this country is undergoing a developmental transition, a kind of socio-cultural adolescence. Teenagers typically manage the onslaught of hormonal and cognitive growth by splitting reality into volatile oppositions, like adults versus kids, up moods versus down moods, or acceptable versus unacceptable ideals of good and bad. They seem chaotic but in between the oppositions kids forge a new adult identity. In our country today, what if the distance between the upper and lower classes is a middle stage from which a more mature and interconnected nation can grow?
Consider what this country has lived through from 1960 – 2010: the assassinations of John F. Kennedy, Martin Luther King, Jr., Robert F. Kennedy; Watergate; birth control, in vitro fertilization, organ transplants, a man on the moon, cell phones, computers and the Internet; wars in Vietnam, the Gulf, Iraq and Afghanistan; September 11; two recessions; the Exxon Valdez, Three-mile Island, and the Gulf oil spill; Columbine, Virginia Tech and the shooting in Tucson, Arizona. They have also enacted civil rights legislation, created opportunity for those with disabilities, accepted changing roles of women and started to comprehend different types of sexuality. After all these emotionally complex societal events, it makes sense that there are still aspects of our national life that don’t work perfectly. The country hasn’t finished cohering from the messy process of change.
(Credit: Shelby Duchow fro posting this to Facebook)
By John Stang
Reihan Salam at National Review explains why student loans are not profitable for the federal government to start out with:
To see why the government’s cost of borrowing doesn’t capture the full cost of making a student loan, consider an example similar to one that Debbie Lucas at the MIT Sloan School of Management uses. Let’s say the government issues $100 million in 10-year U.S. Treasury notes to finance $100 million in student loans with 10-year repayment terms. Assume that after the 10 years is up, the student loan portfolio has suffered losses such that the U.S. Treasury bonds cannot be fully repaid with the loan repayments alone.
Does the government then default on its debts? Of course not. It taps taxpayers to make up the losses and repays bondholders in full. Note that this makes taxpayers equity investors in the student loan program – it is their money that will be used to absorb 100% of any losses on the loans to ensure U.S. Treasury bond holders are always repaid.
That highlights a key point: the interest rate on U.S. Treasury securities tells us what investors want to be paid to lend with zero risk of default. Federal student loans are not, however, free of default risk. The U.S. Department of Education expects thatabout 19 percent of loans made to students in 2013 will default at some point. Yes, cost estimates can build those default rates in, and Congress can charge an interest rate on student loans that more than fully offset such expected losses. But any unexpected losses, those that might occur if the economy weakens, wouldn’t be covered, placing the default costs squarely on taxpayers.
For a solution, Mike Konczal advocates for a public option for public universities:
Beyond ensuring equality of opportunity, another advantage of this approach is that it would help stop cost inflation. Free public universities would function like the proposed “public option” of healthcare reform. If increased demand for higher education is causing cost inflation, then spending money to reduce tuition at public universities will reduce tuition at private universities by causing them to hold down tuition to compete. This public option would reduce informational problems by creating a baseline of quality that new institutions have to compete with, allowing for a smoother transition to new competitors. And it allows for democratic control over one of the basic elements of human existence—how we gather information and share it among ourselves.
By John Stang
Matt Yglesias writes in his new book The Rent is Too Damn High about how to make urban housing cheaper and its impact on the economy. He notes how right and left politics get in the way of this and how both can offer solutions in different ways:
That’s why housing is so expensive in the major coastal metropolises and also in the core downtown areas of lower-cost midwestern cities. The appropriate policy response is to stop disparaging apartment buildings as tenements and stop preventing developers from building them. People should by no means be “forced” to stop owning and driving cars, but there’s no reason for regulations to incentivize these activities. Progressives and urbanists need to move beyond their romance with central planning and get over their distaste for business and developers. Conservatives need to take their own ideas about economics more seriously and stop seeing all proposals for change through a lens of paranoia and resentment. Lastly, politicians of both parties who like to complain about “regulation” and “red tape” ought to spend some time looking at the specific area of the economy where red tape and regulation are most prevalent.
By John Stang
Josh Barro thinks the deficit problem will solve itself, but politicians like to meddle too much:
You’ll note that I didn’t write that policymakers will have to “take action.” That’s because, if they do nothing, the budget will move toward balance on its own. Last year’s debt ceiling negotiations produced a deal that is scheduled to produce $2.5 trillion in spending cuts over 10 years. Meanwhile, the George W. Bush-era tax cuts are set to expire at the end of December, which would mean an extra $2.8 trillion in revenue.
However, it is widely expected that Congress and the President will intervene to stop many of those gap closing measures, just as they have done in the past. Obama remains committed to making permanent the tax cuts that apply on incomes below $250,000, which is about 80% of the total. Republicans want to make all of the cuts permanent, and all of the GOP presidential candidates want to cut taxes even further than that.
By John Stang
Social and moral psychologist Jonathan Haidt believes the biggest motivator for the Tea Party is letting karma take it’s course:
Liberals have difficulty understanding the Tea Party because they think it is a bunch of selfish racists. But I think the Tea Party is driven in large part by concerns about fairness. It’s not fairness as equality of outcomes, it’s fairness as karma—the idea that good deeds will lead to good outcomes and bad deeds will lead to suffering. Many conservatives believe the Democratic party has been the anti-karma party since the ’60s. It’s the party that says, you got pregnant? Don’t worry, have an abortion. You got addicted to drugs? Don’t worry, we’ll give you methadone. It’s the party that absolves you from moral irresponsibility.
The Tea Partiers don’t hate all government: just government they see as subverting karma, subverting moral responsibility. This hatred is, I think, a derivative of their love of proportionality. They’re perfectly happy with social security, a retirement scheme which Franklin D. Roosevelt deliberately portrayed as a form of fairness, you pay in and you get out.