Category Archives: economics

Tuesday Talks: Tuition-Free College and Education in General

JOHN BUTERBAUGH:
The main argument Governor Cuomo makes for tuition-free college is that it prepares the workforce of the state for the future. It is quite clear that automation and outsourcing has put pressure on American workers to seek employment outside of manufacturing. More and more jobs will require college degrees. However, what this bill doesn’t do is combat rising student loan interest rates that can keep students in debt for decades. Sure, it helps prevent debt. Yet for many New Yorkers, this bill comes far too late. College graduates who are in debt now will still be unable to renegotiate their student loan interest rates. College students will continue to have to pay for room and board which is becoming more expensive.

This bill also doesn’t seem to acknowledge a very large group of people – blue-collar workers. The state government and society often claim that college is the way to go. It often seems it is the only way to go. However, for many workers, college is irrelevant and a waste of time. It doesn’t achieve their goals. This comes at a time when many trades cannot be outsourced. You can’t, for example, send a bridge to China for a worker there to weld it. It’s impractical. Welding is an insanely high-demand job. We place a lot of emphasis on education, but where is the leadership for training people for these jobs?

Governor Cuomo realizes that his plan doesn’t help a lot of people. He even calls his plan a “fight for the middle class.” It doesn’t provide free tuition to wealthier families who should be able to foot the bill themselves. But, what about the working poor? What about concerns about dwindling social mobility in our post-industrial economy? What about the fact that there continue to be people who work long hours every week and still cannot make ends meet? My qualms over this bill are not related to the residency requirement after receiving the tuition scholarship. This requirement is pragmatic in that it aims to make a return on its investment through taxation of graduates’ income. Plus, 80% of graduates in New York state stay anyway. My real issue with this bill is that it does not address key concerns facing working-class New Yorkers. They will also be paying the taxes that support the ability of young middle-class Americans to remain in the middle class.

My hope is that this bill, despite its imperfections, shines a lot on our true intentions when it comes to bettering our society. My hope is that low-income high school students will have more of a reason to graduate high school so that they can go to community college or a four-year program. Many students give up because high school diplomas aren’t good enough for most jobs, and they couldn’t afford college anyway. However, we can’t always predict future decisions. Humans are irrational beings after all. Despite all this, I support this bill because it is leadership in the right direction. It understands that education is not an entitlement program but rather an empowerment program. We invest in students so that they have the skills and power to improve our society. I pray that this actually happens, and if the program fails to deliver improved outcomes, we must be mature enough and courageous enough to demand some changes.

PATRICK WOOD:  Well said, John. The bill isn’t perfect, and leaves a lot of issues unaddressed, but before delving into that, I think it’s important to celebrate this monumental step forward. After many of our peer nations offered free 4-year university for citizens (and in the case of Germany, even non-citizens), the USA finally has a state that has gotten its priorities straight and offered the same. Hopefully this gives credence to a movement and the momentum of the free college movement spreads. I absolutely agree that we are continuing to overlook the great value of vocational schools.

Unfortunately, most bachelors degrees are worth less than they used to be in terms of relative earning potential and the proportion of graduates who find work in their fields quickly. Those who know they don’t want to pursue a STEM field or a graduate program may actually be in a better position having taken a couple years to learn a trade than the person who spent four years getting a bachelor’s degree. There will always be a need for mechanics, beauticians, plumbers, electricians, and other specialized services – it’s a wrongheaded approach to push high school graduates away from these careers.

JOHN: I think one possibility is that it might open up unintended consequences. If a lot of students go for the scholarship, it might make the value of their degree lower than before. This is because job markets are competitive in that you must be “more qualified” than another person. Social sciences have a lot of students, but you need even more education to stand out because an undergraduate degree is simply not enough in most cases. For a political science major, you might need to get a law degree. Most psychology students will need postgraduate education, maybe for research, therapy, or a school psychologist.

We know automation is happening and we know outsourcing is happening. I definitely believe that we should promote professions or vocations that are the least prone to those happening. We need to prepare students for a world that has less routine skills and more critical thinking and creativity. Instead, in many cases, we are teaching students to simply accept information and not challenge it. This is setting them up for failure. If not failure, we set them up for a career where they only have to accept orders. In many cases, this is law enforcement and the military.

PATRICK: I don’t see NY state providing free higher education as a bad thing, even though it certainly puts a vocational schools and a private colleges in a worse position. Teaching students to accept information and not challenge it is more a problem related to current campus political atmosphere and less inherent in the concept of university.
If these are the only jobs, the government will have a lot more motivation to conduct military operations where we don’t need to be.
JOHN: What I’m talking about isn’t necessarily college’s fault. I’m discussing education before that. In many cases, schools are run like businesses where we value productivity far more than creativity. Why? The students aren’t going into fields like manufacturing where they do something repetitive. “Do your work” is the mantra far more than “Oh, that’s unusual and interesting. Tell me more about that.”
PATRICK: I agree. I think students feel very constrained in how far they can push boundaries in expressing themselves. Both just in expressing opinions and in their formal work.
JOHN: I’m not encouraging disrupting class. The students have to remain on topic. What I am saying, however, is students should have an opportunity to look at an issue in new ways.
PATRICK: I think my issue here is that students are typically afraid to go against the grain. They think they’ll it’ll be a stain on their record and rightly or wrongly often believe that more creative and unique thinking isn’t “what the professor is looking for.”
A friend of mine at law school told me on the day of the final “just quote the damn professor in your essay and you’ll get an A.” Whether that’s the truth of not, it’s the prevailing belief.
JOHN: I think a lot of it comes down to how we assess student learning. It’s far easier and more objective to grade a student using a Scantron. It’s far more difficult to grade a student on creativity or critical thinking through essays or projects. I also don’t believe everything needs to require novelty in thought. Sometimes common sense suffices. I think the common sense perspective should remain a part of the discussion to keep people grounded. I also believe people should seek out new information and new ideas.
I think in scientific research, for example, it helps to take risks. You are required to find something new. If you just memorize a textbook, you’re not really contributing much to the field.
PATRICK: I think introductory level classes should be structured to develop basic understanding of underlying principles and common sense, trying to stick to objectivity
JOHN: But absolutely you need a scientific foundation
PATRICK: And upper-level classes are for seeking something new and really branching out.
JOHN: You have to be able to connect new information to old information.
PATRICK: Exactly!
JOHN: I think there are simply excellent, excellent universities with a lot of talented faculty members and students. I think America has some of the best-performing students in the world. But we also have a lot of low-performing students who are impoverished and might act out because they don’t feel school can do anything for them.
It’s very difficult, and I work with these students personally, to teach them positive behavior. In many cases, teachers will outline expectations and then the students go home to a difficult home life that unteaches them everything school did about behavior.
It feels like a battle honestly. What can we do?

PATRICK: I’m not a great person to ask, but I think part of the value of school is keeping kids safe while they are attending.

JOHN: What do you mean by safe?
PATRICK: Mostly physical safety but perhaps also refuge from a difficult home life
Even if, as you say, a lot of what is taught in school is unlearned.
JOHN: A lot of students take pride in demonstrating challenging behavior because they see it as power. And a lot of students don’t want to come off as vulnerable, they act tough. Or they are so used to conflict and drama that peace and quiet is boring; so, they engage in drama to keep themselves entertained. It’s a big deal when kids get into a fight because it’s exciting.
PATRICK: Fair point but I think the fights and conflicts are perhaps better had within the confines of the school building instead of the home or the street. There are more adult figures who care about the safety of the students there.
JOHN: I haven’t seen as many physical fights, but students often battle teachers to refuse work or deny that they were talking when the teacher was trying to do a lesson. I will say the students are much better behaved 1 on 1 because they aren’t trying to perform. What I mean is a lot of students act bad because it makes them cool to their friends. So, they’ll talk back to the teacher or even curse at them. Then there’s the times the teacher talks to the student, and the student doesn’t even respond to the teacher and continues talking to their friends.
PATRICK: Right. Better to look “hard” than like a suck up to the teacher.
JOHN: I don’t need students to suck up to me or another teacher. I just want the students to focus on learning.
PATRICK: That can be perceived as sucking up or worse. You certainly face a real challenge.
JOHN: A lot of the students come to school and want to learn and get good grades, but then you have a handful of kids who don’t care about that. They end up disrupting and distracting other students. Just a handful of students in a class can make a big difference in the classroom environment.
PATRICK: It will be interesting to see how New York’s private colleges respond to SUNY tuition becoming free. They will most likely have to up their scholarship offers considerably to keep enrollment numbers up, we’ll see how they respond to this narrowing of their income stream.
JOHN: They definitely don’t like the bill because it will hurt their enrollment, but they might end up having to reduce their tuitions to compete.
PATRICK: We’ll soon found out just how heavy that blow is, and what they plan to do to compensate.
JOHN: They might want to boost their postgraduate programs because the Excelsior Scholarship doesn’t apply to postgraduate studies. I think a shift is very likely.
PATRICK: Their hand will be forced.
JOHN: Postgraduate tuition is higher than undergraduate tuition anyway. Prospective jobs requiring postgraduate coursework are generally higher-paying and more competitive.

New York’s Tuition-Free College Plan

Governor Andrew Cuomo proposed tuition-free college in a rally beside progressive populist Bernie Sanders last January. This month, the New York Assembly and Senate overwhelmingly approved the plan as part of the budget and Cuomo is expected to sign it into law. Bill A03009 aims to prepare New York’s workforce for the future through higher education. The plan is to provide free tuition to eligible applicants at one of its many public universities and community colleges.

The Excelsior Scholarship provides certain students with an award that covers the cost of their tuition at a public university or community college. This program will receive $87 million in state funding.

To be eligible for the Excelsior Scholarship, applicants must…

  • Be a resident of New York State at the time of application
  • Have an adjusted gross income of less than $100,000 for the 2017-2018 school year, less than $110,000 for the 2018-2019 school year, and less than $125,000 for the 2019-2010 school year.
    • This means you and your parents (or if you’re married, you and your spouse) must make less than the numbers provided to be eligible for the scholarship.
  • Not already have a Bachelor’s degree if they seek a Bachelor’s degree or not have an Associate’s Degree if they seek an Associate’s degree
  • Not already have a scholarship that pays for their full cost of attendance
  • Enroll at least 12 credits a semester and completes at least 30 combined credits a year
  • Attain the grade-point average needed to successfully complete your coursework
  • Complete a two-year, four-year, or five-year program within two, four, or five years, respectively. Allowable interruptions to this requirement are the death of a family member, medical leave, military service, and parental leave.
  • Live in New York state and not be employed in another state for as long as you received the scholarship. For example, if you received an award for a four-year program, you must remain in New York state for four years. Exceptions to this rule are completing undergraduate coursework and attending graduate school. If the applicant violates this rule, you must the scholarship becomes a loan the applicant must repay.
  • Apply for the scholarship before the deadline the college president sets. The college president can also decide which students will receive the scholarship if funding is insufficient. Priority goes to current students of the college.

The Enhanced Tuition Awards provide certain students with a scholarship that covers the cost of their tuition at a four-year private, not-for-profit college. This program will receive $19 million in funding. The sum of these awards, student TAP funds, and institutional scholarships would be equal to $6,000.

To be eligible for this program, you must meet the same requirements as those above for the Excelsior Scholarship. However, fewer students can take advantage of these awards as the state only allocates $19 million to this program.

Greater Scheme will discuss the potential consequences of this bill in a separate article.

The Need for Speed: Are Faster Trains the Solution?

Pictured: Amtrak train on the Acela Express service, which runs from Boston to Washington.

By John Buterbaugh

I was riding around in my parent’s car and somehow the topic of Richard Hanna, a former Republican congressman from the Utica area, came up. My dad’s support for him has grown as he has flown with him on a plane. He’s learned he is a common-sense guy who makes enough money not to owe anyone favors. He thinks he should run for Governor of New York. However, he said the only downside of him would be that he wouldn’t support funding high-speed rail construction in New York state (even though the federal government would provide most of the funding, if at all). My dad thinks this would be a cool idea, and I agree. We disagreed on how feasible it is.

Supporting high-speed rail will be met with a lot of popular opposition. First, it’s not a sexy idea — people find social justice or terrorism far more interesting. Second, people will complain that billions of their tax dollars will be wasted on a system that people won’t even use and will take too long to build. Third, people like the independence of driving around a car because they don’t have to stop for anybody and they can go exactly where they want. They don’t see the need for trains. That’s how most commuters in upstate New York and most of America like to travel. There is one thing most commuters don’t like — they generally don’t like driving to New York City and having to pay a premium for parking. It’s a pain. People in Long Island think you’re crazy if you drive into the city. The Long Island Railroad is the busiest commuter railroad in North America in large part because of its convenience.

If high-speed rail is going to happen, New York City will have to be a part of the equation. I don’t know what the number of people who would start using a train would be if it were high-speed. If high-speed rail is to work, it would have to connect the Megalopolis that is Boston through New York, Philadelphia, and Baltimore to Washington. These cities have enough commuters to support this system — businesspeople and government workers can travel a lot. It would make airfare cheaper between these cities due to the increased transportation competition.

But I don’t know if high-speed rail is the answer. Is our goal to get people to places faster to show we can improve our infrastructure or discourage traffic, sprawl, and parking annoyances? If it’s the former, maybe we need high-speed rail. We put a man on the moon after all. We can put pieces of metal on the ground that makes trains go faster.

However, if it’s the latter, maybe we just need to make riding a train more pleasurable and give people more reasons to ride. Perhaps free Wi-Fi would do that. Maybe having a free movie would be nice. Maybe if the trains arrived on time. If people started enjoying trains more and had some entertainment to pass the time, we might not even need high-speed rail. It would be a lot less expensive, and we could accomplish the same goal.

Simplify Healthcare – Seriously

By JOHN BUTERBAUGH

Although the single-payer system may seem like a radical system, it is the system that would be most effective in simplifying the health care system and control rising healthcare costs. When hundreds of thousands of doctors want the single-payer system, the American people should listen. We have already observed the benefits of a government-financed healthcare system in countries such as Canada and the United Kingdom. Healthcare costs in those countries are much smaller than those in the United States. There are a number of reasons why this is the case.

First, doctors don’t have to waste money determining how much a private insurance plan will cover for medical expenses. As a result, more time is spent seeing a patient and less time is spent on paperwork and other administrative costs. We would be saving billions of dollars every year doing this.

Second, people would no longer delay treatments or operations. Treating an illness or injury as soon as possible prevents the medical problem from getting worse. When an illness or injury is untreated after a long time, it becomes more and more expensive to treat it. Many people avoid going to the hospital because of the mountain of debt that might ensue. In fact, the leading reason that Americans go bankrupt is because of medical bills. In this way, a single-payer system is the most fiscally responsible system.

Third, a single-payer system means that government insurance agencies can determine true medical costs, which are often not well-defined, and negotiate based on that. Patients have less leverage in negotiating for cheaper prices. They have to accept medical costs as they are because the other option is further deterioration of their health or even death. When the government is allowed to negotiate, it has more leverage because it can make certain professionals exclusive providers of a service so long as it is high quality.

Unfortunately, a big reason why we do not have a single-payer system is because private insurers would lose business and pharmaceutical companies do not want to cut drug prices. These entities are beholden to stockholders who invest to reap dividends. Healthcare companies cannot keep stockholders investing and keep prices low. Nevertheless, with all the complications caused by the Affordable Care Act and the industry itself, it becomes necessary to reconsider the system as a whole. Every system has its benefits and flaws, and we should develop a system regardless of ideology that gives people the healthcare they need.

On Democratic Socialism in Europe and America

By JOHN BUTERBAUGH

If it weren’t for Donald Trump and his campaign announcement speech, the Republican primary candidates would not even be discussing immigration. Moreover, without Bernie Sanders running as openly socialist, we would not even be discussing democratic socialism. Hillary Clinton wouldn’t dare discuss democratic socialism or many left-wing policies without the presence of Bernie Sanders.

Quite often, the debate on ideologies touches on electability, e.g., “This candidate cannot win because they are too ideologically extreme.” For our purposes, we shall discuss the ideologies and the efficacy thereof as opposed to discussing knee-jerk reactions to policy proposals.

Democratic socialism, unlike authoritarian socialism, depends on the people to combine efforts and collectively control the means of production and decision-making. In Sanders’ home state of Vermont, co-ops — where the workers own the company — are abundant. Authoritarian socialism, as seen in the People’s Republic of China, thwarts popular will and establishes leadership that prevents any sort of parity. People have argued over the effectiveness of democratic socialism in Europe, for example. “Democratic socialism hinders economic growth” or “Democratic socialism increases public debt.” There is no doubt, however, that democratic socialism has been consequential in Europe. Western and Northern Europe formed democratic socialist governments during the Cold War to provide enough for the people so that they would not turn to more radical forms of socialism, i.e. Soviet-style communism. Governments would guarantee universal healthcare, higher wages, and often free higher education.

The issue with the European model of democratic socialism is that it depends on a low military budget. European countries are able to invest in universal healthcare and education precisely because they do not have to spend much on defense. In the United States, military spending was 17.6% of national government spending. The military spending of other NATO countries (including Canada and 26 European countries) ranged from 0.4% to 6.7%. Currently, the U.S. spends $789 million of its military budget on European defense, and a current proposal would quadruple that commitment. With NATO countries in Europe living under the American security umbrella, they can afford to spend less money on their militaries.

The United States also faces issues in establishing a universal healthcare system. Not only has the 1980s conservative movement inspired people to oppose non-military government expansion, America is also the home of Big Pharma. Pfizer, Merck, and Johnson & Johnson are multi-billion dollar pharmaceutical companies based in the U.S. They help contribute to the fact that the U.S. holds 40% of the global pharmaceutical market. Publicly traded companies such as these three depend on stockholders for investment. As a result, they must post large profits so that stockholders can reap the dividends and continue investing in their company. Big Pharma has a strong lobby in Washington that protects their profits. On the other hand, European governments have an easier time negotiating prices with pharmaceutical companies. European countries have a lower share of profit-driven companies that would lose out on a profit if their drug prices were lowered. In the U.S., the incentive to sell medicine for profit causes the entire medical industry to prefer administering drugs over preventative practices.

Public sentiment has nominally opposed socialism due to an erroneous association to Soviet-style communism. However, the federal government has established a number of socialist programs that Americans appreciate. Teddy Roosevelt formed the Food and Drug Administration to keep Americans safe from harmful foods. FDR launched several recovery programs and Social Security. Eisenhower taxed the wealthiest Americans at 90% and launched the Interstate Highway System. Lyndon Johnson’s Great Society created Medicare and Medicaid. However, Johnson’s military intervention in Vietnam faced so much opposition that the spirit of the Great Society faded. Afterward, Nixon cracked down on drugs, and Reagan taught the American people to mistrust the government for anything other than war (on other countries or on drugs). This is why Bill Clinton and Barack Obama had such a hard time selling their healthcare initiatives to the American people.

Socialism works when it is implemented properly and in the right context. Too often socialism is seen as a system that coddles millions of “learned helpless” individuals with welfare money and food stamps. Socialism can be something greater, and in fact, it is. It’s about liberating workers from the excesses of capitalism. It’s about understanding that it is not the government that runs industry; it’s the American people who run industry together. It’s about understanding that education is not an entitlement program; it is an empowerment program that creates an informed society. Moreover, through socialism, the government protects a key tenet of capitalism: competition. By itself, the free market fails to break up monopolies. Thus, the government has a duty to prevent companies from providing poor or expensive service through regulation or breakups. Socialism is not a fringe ideology; it is one that looks to create the best society for the people.

Socialism cannot succeed in America unless the American people unite in favor of it. The Democratic Party has won the presidential popular vote in five of the last six presidential elections. However, in the last 12 Congressional elections, the Republican Party has won the House nine times and the Senate six or seven times. The fact of the matter is that voters turn out more to vote for president (54.9% in 2012) than they do for Congressional midterm elections (36.4% in 2014). The American people cannot expect a socialist president to be consequential unless there is a political revolution across the board. We have to democratically elect a socialist president along with a cooperative Congress.

ECON 2-14: The Economics of Love

By JOHN BUTERBAUGH

I’ve held the view that there is a false dichotomy between love and money for some time. High-earning women are more likely to be attracted to high-earning men. Women will use terms like “hard-working” and “ambitious” to describe the kind of men they want to marry as opposed to “rich.” However, there is a correlation between men who have those descriptors and socioeconomic status that can’t be ignored.

Economics is concerned with the management of scarce resources. Men and women who are attractive (either physically, financially, or emotionally) are scarce resources (normally we would use the term “special”). People seek stability, companionship, compatibility of interest, etc. They invest in people and hope to find a payoff in the form of having a companion for the rest of their life. They enter into a contract called a marriage. They combine resources such as housing, bank accounts, and personal possessions. Divorces deal with how those resources are divvied up.

In Western culture, the concept of affectionate individualism is built on the premise of investing in love and compatibility to achieve security. If love fades, the security is often at risk, and women have also achieved more financial independence, providing less desire to enter an institution built on security. In Eastern culture, especially India, couples enter arranged marriages that follow the old way of combining resources. In a way, Easterners are more willing to acknowledge that a marriage is an economic institution. There is no pretense of passionate love. Arranged marriages are less likely to end in divorce because they invest in security and stability first, and love may grow as a result.

Airport Economy and Health

By NANG KHAI

It wasn’t a brutal winter in New York. Yet, I managed, or rather, found an excuse to fly down to Florida for winter break. It’s hard to complain about the weather down there, and it’s easier to gossip about its conservative political environment with big pockets of liberalism. Of course, Florida has created a huge demand for airline services and airports.

Airports are essential for winter vacation when road trips aren’t as romantic as the summer ones. (Perhaps the winter scene gets a bad rep or is not romanticized much). Of course, being able to sleep on the ride there is a plus. Flights that require multiple transits or stops are often the most affordable option for consumers. They also introduce the concept of a layover, or the act of waiting for an airplane to connect you to the next airport. These sorts of flights are logistically efficient for the airline companies and great for airports because they increase the likelihood of fliers buying something during the long wait. So, here, we have a small economy or a system that benefits a long list of sectors or people.

However, it is all “supply and demand” as my professor used to say. Moreover, it is always the weak ones that get hurt the most. The lack of affordable food, the “closed” economy of the airport, and often, the monopoly of “fancy” overpriced restaurants initiated the demand for fast-food chains. It is the invisible hand that had forced or — to sound polite — encouraged travelers to consume cheap and unhealthy junks of this nation. It is the greed or the excessive and brutal nature of capitalism that had fostered the rise of cheap chains and well-informed consumers to reluctantly stand in line for the dollar menu.

There you go. Another rant from Khai, another vicious cycle of America’s economic system that favors the bourgeoisie and impoverishes the proletariat.