Making Public Universities Private

Richard Vetter has an interesting article at Minding the Campus with a strange start.  You should read the whole thing as vouchers for college is an interesting idea.  Near the beginning of Let’s Privatize State Colleges he categorizes colleges:

Some of them are renowned highly selective research institutions like the University of California at Berkeley or the University of Michigan, while others are relatively obscure schools with an open admissions policy. But all receive some degree of subsidization from the state government where they are physically located.

Writers love groups of three: Papa Bear, Mama Bear, and Baby Bear.  In Bonanza there is Adam, Hoss, and Little Joe.  In the Brady Bunch there is a dad with three boys marries a mom with three daughters.  When you add in the Brady’s housekeeper there are three groups of three.  Perfect.  Yet Richard has just two: Berkeley and open admissions.  It is particularly strange because the middle, what we will call comprehensives, is almost surely the majority of state college enrollment.  Here is a 2016 story for the University of Wisconsin System.  There are (rounding) 43,000 students at Madison (a Berkeley clone), 11,000 at the colleges (they have open admissions or close to it) out of 179,000.  The remaining 125,000 or 70 percent are enrolled elsewhere.  To call the 125,000 comprehensives is slightly expansive but that is what we are going with.  States will vary but comprehensives are likely a majority of enrollment nationwide.

Sidebar: The University of Wisconsin Milwaukee has 26,000 students and doesn’t fit as a comprehensive because it has a significant doctoral program but it is not, sorry, Berkeley.  The Carnegie classification is much more detailed. Check the numbers at the link.  There are 130 doctoral schools with very high research and 741 masters degree schools which is the traditional definition of a comprehensive.   We will use the term comprehensive to include these second tier research programs and some schools without a masters program.  We know there are more categories.  End Sidebar.

The comprehensives, as defined in the sidebar, are the biggest group of students.  Richard is not just talking about Berkeley.  Richard has a neat idea: Let’s give money to needy and/or accomplished individuals rather than schools.  He says:

Why don’t we provide vouchers for college attendance like some states do for students going to K-12 schools? The aid could be more explicitly targeted to kids who are either relatively poor or who excel academically.

We like vouchers for K-12 but are not supportive of Richard’s proposal for three (there is that number again) reasons: gamesmanship, lack of confidence in the state, and it is not a priority.  First, there is the opportunity for gamesmanship.  Do 529 accounts count? Is your parents’ income and assets considered if you go into the armed forces and then return to school?  The current system has enough of these challenges.  Making the potential returns bigger will only exacerbate the current challenges.

Second, we are expecting each state to come up with and adjust a system that prevents gamesmanship and deals with grad students, veterans, varying programs, and finances.  For example, 150 credits are required to sit for the CPA exam in most states.  Do you get five years in accounting but four years in finance?  We are not confident that the state will make things better.  Colleges have employee contracts that are set up before enrollment.  Under Richard’s system when a college does not reach enrollment targets there will be a big financial problem.  What will be the state’s plan for short-term versus long-term financial problems.  Will contracts be honored?

Third, and most importantly, state college vouchers should not be a priority for conservatives.  The reason vouchers for K-12 are a priority is to encourage competition.  Comprehensives are already intensely competitive within state and sometimes among states and they often have a program or two where they compete with the flagship school(s).  The flagship schools compete among states.  There is lots of overlap in the Wisconsin (Madison) and Minnesota application pools.  College vouchers might increase competition but there is already intense competition.

If we are going to spend our time on education we need to worry about (of course, three things) K-12 vouchers, union issues, and free speech, especially in college.  Vouchers for colleges is a fun topic to kick around among  conservatives (why not allow students to use them at private schools?) but it shouldn’t be a priority.

 

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Socialism Is Economic Foolishness

David French is off The Donald beat and writing about Bernie Sanders and school choice at NRO.  It makes David sound much better.  He seems almost surprised that Act Naturally would favor public schools.  It is not a misguided attack by the candidate.  Act Naturally is a socialist and he supports lack of choice for deodorants, schools, and everything else.  He, Bernie, always thinks he knows better than the consumer.  David has an almost beautiful conclusion:

Sanders makes his intentions crystal clear. In his plan, he writes, “We do not need two schools systems; we need to invest in our public schools system.” This is exactly wrong. One size does not fit all. Sanders looks at parents and declares that he knows best. Parents should look back at him and respond, quite simply: I know my child, and I want to shape his destiny. Your collective solutions cannot meet my family’s [educational] needs.

It is almost beautiful because it needs one more sentence after we have inserted education above.  The sentence might go like this: Your collective solutions cannot meet my or my family’s needs in any area.

Economic Foolishness Sweepstakes

The economic foolishness sweepstakes is on.  The Donald has planted his flag by raising taxes (tariffs) on Americans to punish China and other countries.  He also failed to allow exceptions to the Jones Act for LNG.

Speaking of natural gas, Andrew Cuomo has stopped a natural gas pipeline so New Yorkers can’t get natural gas by sea (because of the Jones Act) or land.  The WSJ reminds us that it is part of a pattern for Andrew:

He has also banned drilling for natural gas in the rich Utica and Marcellus Shale that lie under the state, and he has blocked another natural gas pipeline upstate. Due to pipeline constraints, the utility Con Edison in March suspended natural-gas hookups in Westchester County north of New York City.

Kamala Harris want to fine companies that don’t achieve [“]pay equality[“].  We can’t have that term without quotes.  Really, we are not making this up.  CNN says:

In an interview with CNN on Sunday, shortly before Harris headlined a town hall in Los Angeles, the California Democrat called pay equity a “really big issue” where “if you lift up the economic status of women, you lift up the economic status of families and communities and all of society benefits.”

We need to give you a long quote to show you what she is saying:

“This will radically change the way we enforce equal pay in America,” reads the plan. “Our current equal pay laws rely exclusively on proving instances of individual discrimination and place the burden entirely on employees to hold big corporations accountable. … Under our plan, for the first time in American history, companies will be held responsible for demonstrating they are not engaging in pay discrimination.”
Under the plan, companies with 100 or more employees will be required to obtain a certification from the Equal Employment Opportunity Commission within three years of the plan’s passage by handing over employment data to the government. Companies with more than 500 employees will have two years to receive the certification. And each company will be required to display whether they met the certification on their company’s website.
Those companies that do not receive the certification will be met with a stiff penalty: For every 1% gap in pay between men and women that persists after the EEOC accounts for experience and job titles, a Harris administration would fine companies 1% of their daily profits during that fiscal year. [Emphasis added]

With Kamala companies will be guilty until they can prove themselves innocent.

Meanwhile the Morning Jolt tells us that  Pete has called for four tax increases:

A “fairer, which means higher” marginal income tax, a “reasonable” wealth tax “or something like that,” a financial transactions tax, and closing “corporate tax loopholes.”

We have no idea why higher taxes are fairer.  It would have been a good question as would have been why would any wealth tax be reasonable.  We would also like to know what he thinks a loophole is.  If fairer is higher then we would expect him to find many loopholes.

Sidebar: We have not used the word crazy to describe any of these proposals.  We thinks this speaks well for our restraint.  End Sidebar.

We are not sure who will win the economic foolishness sweepstakes.  We are only sure that America will lose.

A Ray Of Sunshine

We are depressed with The Donald raising taxes (tariffs – Hokey smokes, Pete is right) on Americans to show the Chinese.  We are with the editors at NRO:

Trump responded to the setback in talks by raising tariffs, and China reciprocated. The escalation of the trade war poses increasing risk to our economy, as stocks have been signaling. The best course for the U.S. now would be to reach a swift resolution in the current talks — getting back to the deal that seemed to be on the table before China miscalculated — and then switch to a strategy for changing Chinese behavior that does not depend so thoroughly on possibly backfiring tariffs.

Meanwhile, here was a ray of sunshine from Mark Perry at Carpe Diem:

RelatedCNBC reported today that “Walmart’s U.S. store managers earn an average of $175,000 per year and receive benefits including parental leave, health benefits and 401(k) contributions. That’s higher than the average salary of some of the country’s best paying jobs, including dentists, who make an average $174,110 a year, according to U.S. News & World Report, and lawyers, who make an average of $141,890.”

Who-d a-Thunk It? Walmart managers make more than dentists and lawyers on average? And I’d bet [we were sure before the update] many of them started as hourly associates and worked their way up to store manager…. but, but, but I always heard those retail jobs at Walmart were dead end jobs….??

Update: According to Walmart “75% of its Walmart U.S. store operations management team members started as hourly employees.”

It is the natural financial life cycle of humans in our age of abundance.  Folks build skills while working low paid (and often menial) jobs and fighting financial challenges while they are young.  They use these skills to manage their finances and build a career.  There are lots of individual exceptions.  Some folks like Bill Gates go for it and make it big early.  Other folks go for it and fail.  Check out the restaurant turnover in your hometown.  Some folks fail to build skills because of chemical dependency or other issues. Still it is what most people do and a good plan for most folks.

This is why increasing the minimum wage is such an insidious idea.  It doesn’t just throw people out of work but it can ruin their lives.  The ray of sunshine from Mark reminds how well the natural financial cycle does work.

 

A Little Disagreement With Deirdre

Deirdre Nansen McCloskey was one of our favorite people even before she became who she is now.  MWG was a grad student with a few toes in economics but more in accounting and The Rhetoric Of Economics really helped us understand the differences between the two disciplines.  Her insight into the significance of what she calls The Great Enrichment (Jonah Goldberg calls “The Miracle,”  we like Deirdre’s name) are priceless.  Deirdre is at work on NRO debunking the myth that Sweden is a socialist country.  Ian Burell is over at The Herd talking about the economics of soccer in How Football Raised Its Game.  It is a bit confusing because he calls soccer football and he is specific that he is discussing English soccer.

Sidebar: The English part of English soccer is not exactly right either.  England, Scotland, Wales, and Northern Ireland all have their own separate national teams but England and Wales are join together in professional soccer so Welch teams can play in the Premiership league.  Cardiff City did this year but was relegated.  End Sidebar

Deirdre takes those to task who use Sweden as an example of socialism starting right with her NRO title, Sweden Is Capitalist.  You must read it all but here is a taste of it:

If “socialism” means government ownership of the means of production, which is the classic definition, Sweden never qualified. When little Sweden’s economists were second in academic standing only to big Britain’s, in the early 20th century, they were “liberal” in the European sense: free-traders opposed to central planning and governmental ownership. None of Sweden’s manufacturing or extractive industries has ever been socialized, this in contrast, for example, to the experiment after 1946 in the world’s first innovative economy [that’s Britain], when the Labour party’s Clause IV nationalized the Bank of England, coal, inland transport, gas, steel, health services, and much else. Sweden never followed even the more modest example of America’s temporary nationalization of railways during the First World War. Sweden’s Systembolaget, the state liquor store, was sold off in 2008, as it has not yet been in all the U.S. Apoteket, the maddeningly inefficient Swedish-government drug-store monopoly, was privatized, too, praise the Lord.

We know Deirdre is right but we have a soft spot in our heart for the state liquor stores in New Hampshire.  Well, one in particular.  New Hampshire has made a few miles of I-89 a toll road so there is the New Hampshire State Liquor Store and Safety Rest Stop right on the highway.  It is a great way to speed you on your vacation.

Our disagreement with Deirdre comes from the last two words of this:

Like the Land of 10,000 Lakes [that’s Minnesota], Sweden is a place of private ownership and thrusting [that’s what it says] inventors, Swedish bachelor farmers and pretty generous social provision, pretty good schools (with vouchers) and terrible weather. [Emphasis added]

We would agree that Minnesota can get a little hot in the summer but Sweden sounds like a lovely place.  The southern part is close to perfect for us:

In Götaland, where you’ll find the cities Gothenburg and Malmö, winters are shorter and milder, while daytime summer temperatures normally range from 15 to 25 degrees Celsius.

Malmo is almost 56 degrees north (a little south of Juneau, Alaska) so the sun isn’t too intense.  It is as close to perfect as weather gets for us.

Ian is trying to generalize from soccer to all labor markets

Clearly there are costs to progress. Yet ultimately we should give thanks to the power of globalisation in transforming our national game, which has been revived by the free movement of labour and capital – and bear in mind the wider lessons for other parts of the economy as we cheer on these teams.

Another comparison of European countries and the US is that the teams in European soccer leagues have much more economic freedom than American teams.  European teams do not have restrictions like salary caps so the rich teams almost always win.  They also play in multiple competitions.  There are exceptions as Ajax almost broke through in the Champion’s League this year and Leicester City won the Premiership in 2015-16 but such events are rare.  More common is that Bayern Munich has won the Bundesliga the last six years and is poised to make it seven next week.  The poor teams are often fighting relegation.  Relegation means that the better teams from the lower leagues are promoted consistent with economic freedom.

Top soccer players and coaches, as Ian explains, are extraordinarily talented.  The players are also extraordinarily expensive costing teams (called transfer fees) as much as €222 million to buy their contract.  Ian’s argument supports restricted immigration for talented individuals rather than open borders.  That’s the wider lesson.

We have four lessons about Sweden and soccer.  First, capitalism makes countries and the individuals in them rich.  The same capitalism makes soccer great and soccer players rich.  Second, Sweden is both rich and capitalistic.  Both Deirdre and Heritage agree that Sweden and the US have about the same degree of economic freedom.  They both agree that there are differences but some are in one direction and some in the other.  Thirdly, the impact of importing extraordinarily talented soccer players might tell us to bring in similar folks in other lines of work but it does not suggest that we have open borders.   Lastly, weather preferences are personal.  The weather preferences for Deirdre and MWG don’t seem to match.

 

The Donald And The Jones Act

Kevin D. Williamson is at his acerbic best in encouraging The Donald to permit waivers from The Jones Act for natural gas distribution.  Kevin asks a great question and gives us the answer in no uncertain terms:

So why are people in New England importing natural gas from Russia?

Welcome to the batty world of trade protectionism.

The United States has on the books and enforces an antediluvian piece of legislation known as the Jones Act, signed into law by that great malefactor of his day, Woodrow Wilson. The Jones Act forbids the transportation of goods, commodities, or people between U.S. seaports unless the vessels used are manufactured, registered, flagged, and owned in the United States — and owned and crewed by U.S. citizens or permanent residents. It’s the reason why a cruise ship picking up passengers in Fort Lauderdale can’t disembark them in Key West — and also the reason why we can’t get natural gas from the Gulf Coast to users in the Northeast and in Puerto Rico.

We might have played the Puerto Rico card more blatantly.  We are not sure if folks care about the WASPs up in the northeast.  We have a question: Can The Donald do that, give a waiver to The Jones Act to help out the US?  We don’t know the answer but we support The Donald giving a waiver.  We also support legislation to eliminate The Jones Act permanently.  Then cruise ships can stop wherever they please and we won’t help out Russia by hurting Texas and New England.

 

 

Elections Matter

C.J Szafir and Colin Roth from the Wisconsin Institute of Law and Liberty reflect in the WSJ on the challenges and joys of having elected a leftist empty suit as governor (that is our term not theirs).  There is much to be concerned about but C.J. and Colin find a reason to rejoice:

[The new governor’s] budget leaves alone former Republican Gov. Scott Walker’s 2011 collective-bargaining reforms, known as Act 10, revealing that strong fiscal reforms can create a legacy that is practically impossible to unwind even when the political pendulum inevitably swings back.

Mr. Walker and a Republican-controlled Legislature passed Act 10 to solve a $3.6 billion state budget shortfall. The law, among other things, significantly limited public employee unions’ ability to bargain collectively and required public employees to pay more for their benefits—5.8% of pension contributions and 12.6% of health-care premiums.

We will add another reason why there is reason for fiscal joy: retirement incentives.  Long serving employees tend to be the highest paid.  Our department was an exception because of the market but generally a new faculty member (and other state employees) makes substantially less than the person he replaces so there are what we call salary savings.  Where salary savings go is an important budget issue that is beyond the scope of this post.

Wisconsin has strong post retirement benefits that mean a good pension and support for healthcare in retirement.  In our case, at current rates, we will pay for health care until age 115.  Thus, the payments an employee makes for healthcare and retirement disappear in post-employment.  Our computation that the tax on working for our first year of retirement would have been 117 percent.  That is, we had more spendable income from retirement that we would have had from working.

We don’t know if Scott and the GOP did it on purpose but it is a nice example of saving money by getting the incentives right.  And they did it by saving the state money so they ended up with double savings.  It is nice to hear that our current governor is sticking with it.