Posts tagged with: economics

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I commented last week on the “textbook bubble” (here) and have commented in the past on the “higher-ed bubble” and the character of American education more generally (see here, here, and here). To briefly summarize, over the last few decades the quality of higher education has diminished while the cost and the number of people receiving college degrees has increased. The cost is being paid for, in large part, through government subsidized loans. But with the drop in quality and increase in quantity, a college degree is not as impressive as it used to be; in many cases it no longer signals to employers what it used to. When a critical mass of those loans goes into default, we will have another housing-bubble-esque crisis on our hands. At the same time, government loans, which are largely indiscriminate with regard to the risk of the applicant and guaranteed on the backs of taxpayers, have incentivized colleges and universities to raise the costs to students for the sake of increased expenditures, inflating the bubble even more. Now, Alex Williams of The New Times reports last Friday,

The idea that a college diploma is an all-but-mandatory ticket to a successful career is showing fissures. Feeling squeezed by a sagging job market and mounting student debt, a groundswell of university-age heretics are pledging allegiance to new groups like UnCollege, dedicated to “hacking” higher education. Inspired by billionaire role models, and empowered by online college courses, they consider themselves a D.I.Y. vanguard, committed to changing the perception of dropping out from a personal failure to a sensible option, at least for a certain breed of risk-embracing maverick.

An increasing number of students are realizing that they, to quote Good Will Hunting, do not want to be $150,000 in debt for an education that they could have gotten “for a $1.50 in late charges at the public library.” (more…)

Below is an excerpt from a 1925 Washington Post editorial on President Calvin Coolidge’s Inaugural Address. The comments speak directly to the moral arguments Coolidge was making for a free economy. It is the kind of moral thinking about markets and taxes we desperately need today from our national leaders.

The excerpt comes from an excellent book, The High Tide of American Conservatism: Davis, Coolidge, and the 1924 Election by Garland S. Tucker, III.

Few persons, probably, have considered economy and taxation moral issues. But Mr. Coolidge so considers them, and his observations give a fresh impression of the intensity of his feeling on this subject. He holds that economy, in connection with tax reduction and tax reform, involves the principle of conservation of national resources. A nation that dissipates its resources falls into moral decay. Extravagance lengthens the hours and diminishes the rewards of labor. “I favor the policy of economy,” says Mr. Coolidge, “not because I wish to save money, but because I wish to save people” [emphasis added]. He would protect those who toil by preventing the waste of the fruits of their labor. The burden of taxation is excessive. It makes life more meager, and falls hardest upon the poor. The United States is fortunate above other nations in the opportunity to economize. It is at peace and business activity has been restored. “The collection of any taxes which are not absolutely required, which do not beyond reasonable doubt contribute to the public welfare is only a species of legalized larceny,” is Mr. Coolidge’s vigorously expressed conclusion on the subject of economy.

It’s a logical, simple, and a deeply moral message. Some might call it common sense. Our times and the economic peril we face clearly calls for a commitment to reducing government spending and our tax burden. It has fallen on deaf ears in Washington and much of America. Coolidge’s words resonate today because it is the cure for our fiscal cliff and the ailing economy. And as Coolidge understood so well, it is the moral thing to do.

Blog author: dpahman
Thursday, November 29, 2012
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According to AEI author Mark Perry, there is another education-related “bubble” to worry about: the textbook bubble. He writes that this textbook bubble “continues to inflate at rates that make the U.S. housing bubble seem relatively inconsequential by comparison.” He continues, “The cost of college textbooks has been rising at almost twice the rate of general CPI inflation for at least the last thirty years.” Given that many students use loan money to purchase books as well as pay for classes, we might think of this as one of the many sources pumping air into the student debt bubble. But what choice do students (or professors, for that matter) have than to surrender to the textbook “cartel,” as Perry characterizes it? This bubble popping, while a bad thing for the textbook bubble-boys committed to the old, cartel-style model, could be a small relief and contribute to slowing the growth rate of the student debt bubble. (more…)

We need to trim government programs today in order make way for bigger government tomorrow.

That seems to be the message former treasury secretary and Obama economic advisor Larry Summers delivered today at the Washington Ideas Forum:

“If we want to have the same kind of society we always had…you may see some upward drift in government,” he said. “That’s why you need to work ever harder to eliminate government activities that don’t need to take place.”

Summers deserves credit for attempting to incorporate reality into the liberal economic worldview. Government will have to take an increasing share of GDP just to keep up with the growth of current government programs. But we can’t afford the programs we have now, which means we must, as Summers says, “eliminate government activities that don’t need to take place.”

But his message will fall on deaf progressive ears. Liberals are generally opposed to giving up any government funding of private activities, much less give up actual government activities. Remember just a few weeks ago when President Obama mocked the idea of defunding PBS? And the mere suggestion of cutting off taxpayer funds for the president’s favorite billion dollar corporation—Planned Parenthood—causes him to reach for his veto pen.

American liberalism suffers from a political paradox: There is no realistic way for America to keep paying for all the programs liberals want to keep—and there is no realistic scenario in which American liberals voluntarily give up any of those programs. Unfortunately, the only resolution to the problem will be an economic crisis that leads to forced austerity measure. That’s the future reality all of us will be forced to contend with tomorrow since liberals refuse to contend with present realities today.

I will not indulge in any sort of “what would Dorothy Day do” when it comes to thinking about the current US Catholic Bishops’ Conference taking place in Baltimore.  However, it is interesting to ponder this woman who exemplifies so much of 20th century Catholicism and the bishops’ agenda, especially as the bishops discuss cause for her canonization, while on the same day failing to pass a pastoral message on economics.

Their last pastoral letter on economics was in 1986, “Economic Justice for All”. Certainly, many things have changed since then, but as Dorothy Day knew, “the poor you will always have with you”. Her life tells much of the story of the 20th century: socialism, suffrage, labor unions, a failed live-in relationship and abortion. But it also tells the story of redemption: a love of Christ and His Church, Scripture and prayer, the Rosary and Psalms.

In 1960, Dorothy Day returned money sent to the Catholic Worker house by the city of New York – interest on the house owned by the Catholic Worker Movement. In her letter to the city, she said, “We do not believe in the profit system, and so we cannot take profit or interest on our money. People who take a materialistic view of human service wish to make a profit but we are trying to do our duty by our service without wages to our brothers as Jesus commended in the Gospel (Matthew 25.)”

She was chided for this. Some thought the money should have been kept and used for the poor. A benefactor told Dorothy that it was interest from the benefactor’s estate that was donated; what was wrong with interest? Dorothy acknowledged she was only doing the best she knew how, and that,

[o]f course we are involved, the same as everyone else, in living off interest. We are all caught up in this same money economy. Just as “God writes straight with crooked lines,” so we too waver, struggle on our devious path – always aiming at God, even though we are conditioned by habits and ancestry, etc. We have free will, which is our greatest gift. We are free to choose, and as we see more clearly, our choice is more direct and easier to make. Be we all see through a glass darkly. It would be heaven to see Truth face to face…There is no simple solution. Let the priests and the economists get to work on it. It is a moral and an ethical problem.

Dorothy Day would be the first to say her poverty was voluntary. She did not expect everyone to live as she did. She felt profound allegiance with the poor, and chose the most personal approach of all to serving them: she became one of them, lived with them, ate with them, served them.

“Let the priests and the economists get to work on it.” That sounds like a perfectly reasonable idea, from a perfectly radical follower of Christ.

(image of Dorothy Day: copyright by Vivian Cherry)

Writing on The Corner over at National Review Online, Acton Research Director Samuel Gregg points to the election and, refreshingly, tells us that, “I’m not one of those who, in recent days, have seemed inclined to indulge their inner curmudgeon, apparently convinced that it’s more or less game-over for America and we’re doomed to Euro-serfdom.”

Gregg, author of the soon-to-be-released and available for pre-order Becoming Europe: Economic Decline, Culture, and How America Can Avoid a European Future (Encounter Books, January 2013), explains why there are, still, important differences between Eurotopia and the United States. For one thing:

… the strength and persistence of private entrepreneurship continues to substantially differentiate America’s economic culture from that of Europe. America remains ahead — and, in some areas, continues to pull ahead — of most of Europe when it comes to private innovation. As noted in a World Bank report earlier this year, the elements that fuel innovation, such as ease in obtaining patents and availability of venture capital, continue (at least for now) to be far stronger in America than in most of Europe.

The same report specified that it is young firms driving innovative growth in America. Among America’s leading innovators in the Industrial R&D Investment Scoreboard, more than half were created after 1975. They include firms such as eBay, Microsoft, Cisco, Amgen, Oracle, Google, and of course Apple. By contrast, only one in five leading innovators in Europe is young. In America, young firms make up an incredible 35 percent of total research and development done by leading innovators. Their European counterparts account for a mere 7 percent in the old continent. That’s great news for America and a major headache for Europe over the long term.

Read “Are We all Europeans Now?” by Samuel Gregg on NRO.

As a part of our evangelical outreach at Acton, we have commissioned four primers from different evangelical traditions on the intersection of faith, work, and economics. The books will be written from the Baptist, Wesleyan, Pentecostal, and Reformed traditions and will be released throughout this coming year.

The first book released is the Baptist primer written by Chad Brand. Chad is professor of Christian theology at The Southern Baptist Theological Seminary in Louisville, KY as well as the associate dean of Boyce College. He has served as pastor of three Southern Baptist churches and interim pastor of several others.

In Flourishing Faith, Dr. Chad Brand shows how by examining key issues of the history and theology of political economy: work, wealth, government, and taxation with its various implications. Brand then explores the philosophy of how government relates to political economy and highlights how Baptists have contributed. Insightful, provocative, and generous.

Regarding Flourishing Faith, Dr. David Allen, dean of the School of Theology at Southwestern Baptist Theological Seminary says:

Chad Brand has helped to fill a lacuna on the subject of work, economics, and civic stewardship in the Baptist tradition. Serving as something of a primer, Flourishing Faith examines key issues related to political economy such as vocational calling, wealth, government, and taxation. Interesting, informative, historically and biblically based, Chad’s book is an important and helpful addition in this sometimes neglected, but currently crucial area of our national life.

Christian’s Library Press has published this book and it is available here. Acton will be exhibiting at the Evangelical Theological Society’s annual meeting next week. This book along with others will be available for discounted purchase at Booth 121 in the Exhibit Hall.

In an essay for Big Questions Online, a site that examines questions of human purpose and ultimate reality, Rev. Robert Sirico considers whether morality is intrinsic to the free market:

Is a hammer intrinsically moral?

Your reply would most immediately be: “It depends on what it was used for. If employed to bash in the heads of people you do not like, the answer is no. If employed to help build a house for a homeless people, your answer might be yes. In either case, the precise answer is to say that the hammer is neither moral nor immoral; it is the person who chooses its use that can be evaluated morally.

Attending to these Big Questions will enable us to more deeply evaluate the economic organization of society. So the real issue here is not a financial one, but an anthropological one: What is man? Who am I? Why am I here? Where did I come from? Where am I going? What are my responsibilities to myself and others? How we answer these kinds of questions will have an enormous impact on every facet of our lives, including how we work and buy and sell, and how we believe such activities should be directed— in other words, on economics.

Read the rest of the article and join in the conversation at Big Questions Online.

Based on Nicholas Eberstadt’s book, A Nation of Takers, this Seussian video depicts the dangerous dependency of entitlements and the importance of liberty.

(Via: Values & Capitalism)

Washington Post columnist Robert Samuelson says everyone seems to understand that the private sector creates jobs. Everyone, that is, except the New York Times. Samuelson calls the Times’ decree of government job creation “simplistic” and that it has a “flat-earth quality”.

He explains that if the government adds jobs – expands government – it comes at taxpayer expense.

But if the people whose money is taken via taxation or borrowing had kept the money, they would have spent most or all of it on something — and that spending would have boosted employment.

Job creation in the private sector is mostly a spontaneous and circular process. People buy things they need and want. Or businesses and private investors take risks by investing in new products, technologies and factories. All this spending, driven by self-interest and the profit motive, supports more jobs. In a smoothly functioning market economy, the process feeds on itself. By contrast, public-sector employment grows only when government claims some private-sector income to pay its workers. Government is not creating jobs. It’s substituting public-sector workers for private-sector workers.

With knowledge of how the developing world struggles to create jobs, Juan José Daboub, former Managing Director of the World Bank, concurs: (more…)