Tuesday, April 23, 2019

What if Democrats Understood Economics?

The last few days have been full or statements of idiocy from the 623 announced Democratic presidential candidates, and made me think of how even an undergrad econ student should understand where they're wrong.

Since I only have time to focus on one, Elizabeth Warren, Fauxcahontas, proposed to pay off $1.25 trillion in total student debt over ten years, and also called for a $100 billion increase in federal student aid that does not have to be paid back.  She also proposed that public two and four-year universities be completely tuition-free by way of a "state/Federal partnership".  And a new, super duper, ultra tax for billionaires that I need better numbers on to see if that's remotely realistic. 

This article will emphasize the free college.  I feel bad about writing about stuff that's so blatantly obvious - you, dear Reader, are far too smart to believe Democratic primary promises - but I hope I can add a piece of information or two that might be helpful for you.

First off what's wrong with higher education in one word?  Government.  Too short?  How about this?
  1. Colleges and well meaning parents have created the narrative that the only way to get a good job is college.  That creates an almost total demand - virtually every child in that generation thinks they need college.
  2. The number of real seats in classrooms to put equally real student butts into is far smaller than the number of said butts.  There's no quick fix for this imbalance because the number of qualified teachers is too small to embark on a grand plan to add thousands of other colleges to drive prices down.  This means demand is far beyond supply and is going to stay that way.
  3. When demand vastly outpaces supply, prices go up.  In a free market, with people spending their own money, some percentage would say, "that's too expensive" and find a way around the problem.  But it doesn't matter what the price is, because government has guaranteed that grants, scholarships, and loans are available to pay for those seats regardless of the costs.  
  4. The politicians can't ration or cut money for college loans and grants because they would be called mean, haters, or the old standby, racist.  Not providing infinite student loans would deprive some poor underprivileged student of their chance - their chance to take out an enormous loan while betting they'll be able to pay it back and not go bankrupt.
  5. In order to appear "concerned about rising costs", government imposes more costs for more administrators and more hoops for the colleges to jump through.  The colleges couldn't care less because the cost just raises tuition so it gets stuck onto the student's loan.  But the politicians can say they're doing financial oversight of the colleges.
Everything wrong with education comes from government screwing it up by supplying lots of money.  Warren's answer?  "Let's do it again, only harder!!"

Let's be honest here.  There's more evidence of simply stunning economic idiocy.  A college degree is valuable - to the extent that it still is valuable - because not everyone has one.  Not everyone can master the work.  If everyone has an Associates or Bachelor's degree (depending on which candidate is promising), it will become equivalent to today's High School diploma.  You can actually see this already happening in that the only degrees that help graduates to get hired are the ones with strong skills imparted.  There simply aren't many jobs for holders of degrees in Philosophy, Literature, or Offended Minority Studies.  Any 12th grader wanting to major in those things needs to know they're going to go deeply in debt and have a meager life when they graduate. 

If college becomes "14th grade", the perks and higher pay will go to the Master's Degree holders, the Ph.D.s or some degree that doesn't exist yet.

But you don't have to take my word for it.  What we predict with simple application of econ 101, "Supply and Demand" is already true in South Korea where college attendance is almost 100%.
Seongho Lee, a professor of education at Chung-Ang University, criticizes what he calls "college education inflation." Not all students are suited for college, he says, and across institutions, their experience can be inconsistent. "It’s not higher education anymore," he says. "It’s just an extension of high school." And subpar institutions leave graduates ill prepared for the job market.

A 2013 McKinsey study found that lifetime earnings for graduates of Korean private colleges were less than for workers with just a high-school diploma. The unemployment rate for new graduates has topped 30 percent.
I've used the following graph several times.  As I said the last time, it's kind of old but searching for updates wasn't fruitful.  It shows the inflation of college tuition (top) vs. medical care (mid) and the official cost of living (bottom).  This is the effect of the unlimited loans and other free money. 

From John Uebersax on Creative Commons (Wikimedia).

Here's the hard question.  Does Warren actually know this?  Does she actually know her ideas can't work and will just destroy colleges and force more people into the pursuit of higher degrees?  Back during the Obamanation, Bamster did an end run around the law and appointed her to "staff up" the just-created Consumer Financial Protection Bureau, which she did and that apparently involved economics.  But I also found some criticism of her work by one of her professors back at Rutgers, before she did the affirmative action gig at Harvard.  He didn't think too much of her intellectual prowess. 

It could be that she just thinks Democrat primary voters are complete idiots and will vote for her because of this idea. Or it could be she's a big enough idiot to believe it herself. 


  1. Some demonrats ARE morons and DO believe they can spend unlimited amounts of OPM with no negative consequences. Many DO understand reality and how the economy works. The problem is both groups HATE America and seek to destroy it. One of the most effective ways to destroy a country is to bankrupt it. THAT is the actual agenda driving the lefts EVERY action.

  2. Here's the hard question. Does Warren actually know this? Does she actually know her ideas can't work and will just destroy colleges and force more people into the pursuit of higher degrees?

    Of course she knows this. If she didn't know this, then the first time she ran into anybody who pointed out it couldn't work, she would react with shock and fear. But she doesn't react that way, instead she quickly and smoothly responds with another half-truth in the doublethink. The only way her mind can perform the doublethink is if she already knows all the flaws in the arguments and all the moves to evade them. Doublethink is method acting, it makes lies more convincing by getting more of the semi-conscious mind believe the lie; this makes a more consistent body language presentation.

  3. "What if Democrats Understood Economics?"
    If Democrats understood anything except the will to power, they wouldn't be Democrats.

  4. My mother was born in 1925, and was able to pay for her college degree (BA) by working during the summer as a typist, and other odd jobs. She told me she earned one dollar a day as an artist's model. She worked her way through college, which is something you can't do today.

    By all accounts Senator Elizabeth Warren (D., Mass.), AKA Pocahontas, isn't stupid, nor is she ignorant. Whether her plan would work or not is immaterial. Her plan, along with her other promises, might get her elected - and that's all she cares about.

    The little indian is almost 70 years old. How long is she going to keep this up? When will she retire? I'd guess that with her evident good health, she'll stay at the hog trough until she's around 90, which means she'd have time to watch the train wreck her plan would create. She's not worried, as someone would put a stop to it long before the tank cars spill the fuel they're carrying. That would allow her to claim that her program would have been a success, but it was blocked by the enemies of The People.

    Your points about supply, demand, and cost are well taken. In the bad old days a student had to be good enough to go to college. Getting admitted was a big deal. Now, that's not the case.

  5. My mother was born in 1925, and was able to pay for her college degree (BA) by working during the summer as a typist, and other odd jobs. She told me she earned one dollar a day as an artist's model. She worked her way through college, which is something you can't do today.

    You don't mention if your mother took a full time class load but as college tuition has increased at triple the "cost of living", it has gotten rather difficult to work three months and pay for nine off those earnings.

    A lot of companies offer a tuition reimbursement program as one of their benefits of full time employment. That means people are typically going to take one or two classes per term and twice as much time (or more) to graduate as a full time student but they graduate with no debt and maybe eight years of experience. It's how I paid for college and I know several people who got degrees as well as others who took classes for specific things they were working on.