Monday, November 17, 2014

Raúl Carrillo — How the U.S. Government Could End the Student Debt Crisis Today

Instead of loaning students money, the federal government could just pay for their tuition, without causing any significant economic problems.
Yes! Magazine
How the U.S. Government Could End the Student Debt Crisis Today
Raúl Carrillo
h/t JLC in the comments


Dan Kervick said...

I think the important point is that education should be socialized, as should be the case with retirement support. A portion of our material resources and human labor resources should be dedicated to the education of the young. And another portion of those resources should be dedicated to the support of the retired. Bringing monetary mechanics into the picture tends to obscure the changes that will be needed in the underlying social decision-making over the employment of non-monetary resources.

Policy recommendations that are structural, and not counter-cyclical, should be formulated in such a way as to still make perfect sense in a full employment economy, where there is no real opportunity of using monetary expansion to harness unemployed resources for new uses, but where changing the way we do things always means the reallocation of resources from some uses to other uses, and from some people to other people.

Tom Hickey said...

What may seem quite obvious from the systems point of view and social engineering may appear differently at the individual level and a lot of people function on the individual level. At the individual level, many people think in terms of values, on one hand, and beliefs on the other. Often values and beliefs intersect to color perception of the facts. A lot of people are firmly convinced that the optimal outcome result from motivation by individual incentive and that reward should be based entirely on individual merit.

Economics is about production, distribution, and consumption/saving of scarce resources, and it's distribution that's the social issue. The current system is set up to reward personal initiative and demonstrated merit based on rationing by price. This is assumed to result in optimal performance of the social system.

Unless and until the public in large enough numbers becomes convinced that the system is biased against them and are willing to do something about it, nothing will change.

The way it works is that TPTB push the public as far as they can in order to determine the boundary and then they pull back just enough to keep the game going.

Matt Franko said...

I think Raul is/was with the Modern Money Network people in NYC.... rsp,

Dan Lynch said...

-- I would oppose my public dollars being used to support private universities and particularly religious schools.

-- my suggestion is to offer free (or nearly free) public universities and vo-tech to qualified students. The number admitted to a particular program would be based on the anticipated demand for graduates. In fact, I propose that the university should guarantee graduates a job in their field.

-- I'm undecided about the exact method of funding, but lean toward either giving per capita education grants to states (with lots of strings attached, of course) or else nationalizing public universities and letting Uncle Sam manage them.

-- Steve Keen's debt jubilee proposal would be a good way to address existing student loan debt.

In general, I like the idea of free public education, but I think admissions should be planned and managed.

Agree with Tom that this is all wishful thinking at the moment. We can't fix the economic problems until we fix the political problems. But... it's useful to educate the public that a better world really is possible. Knowledge is power.

OT, but Raul mentioned that FDR supported a Job Guarantee. That is not accurate -- the New Deal work programs were not a JG (for better and for worse) and FDR did not particularly like them as he viewed them as a sort of dole, and FDR made no effort to make the job programs permanent.

Ryan Harris said...

There is a giant mismatch between the skills that are taught in universities and the skills required by the private and government sectors -- there are far more liberal arts and science degrees than demand for those skills. There is no mechanism to keep supply aligned with demand. On the contrary, as Demand grows, universities tend to have more money flow into their "impacted" programs and can afford to become more selective. Maybe the primary purpose of universities isn't to provide workers needed by the private sector?

Maybe the government should be stop promoting education as an elixir for all economic ills since universities do a terrible job at meet demands of the economy. Maybe they should simply promote higher education, even make it compulsory and free because it makes better citizens, better voters, and better workers.

The problem is that when government turns away from the economic argument for education, government would appear to have a responsibility, even an interest in education. Maybe government and society at large are the primary beneficiary of education, more than the individual.

When the motivation is simply to pull yourself up by your brain straps, the argument can be made that you should pay for your own education. In order to prevent misallocation of resources and waste, prices need to instill discipline and loans are one way of ensuring that people have access to education but don't splurge on too much.

I say if the rhetoric is true, and a person can no longer get any job worth having without an education, then we've reached a tipping point it should be compulsory and paid for like the rest of public education with tax dollars. Masters degrees should be free to the top half of graduates. And the top half of Masters should have free Phd programs. Post docs specialization training, well, they can always get their own funding.

Dream on. Never going to happen in the world filled with deficit hawks and austere minded folks.

Ignacio said...

Dan what you describe is how, more or less, works in Europe. I don't see any reason why this shouldn't work in USA. It's all ideological. Unfortunately the 'we are running out of money' thinking is regressing some of the European model too.

A lot of European public technical schools are highly prestigious, and you don't need top of the line universities to provide very competent professionals. For example Spain education has been providing a surplus of highly trained engineers and M.D. to the rest of Europe for a long time (it's a bit outrageous though, that a lot of this high education funded by the state is exploited by foreign nations and corporations just because the stupidity and uselessness of both, public and corporate, national leadership and lack of skills of the wealthy to create value at home, but that's a topic for other thread). And many (not all, and some are prestigious and have been improving in the last decades) private schools have worse prestige than public schools (often seen as a vehicle for wealthy kids that cannot get a degree in the public system to get one).

However, this system won't be able to compete with the best private universities because they cannot give the guarantees to the best academics in each field to pursue their own interests, fund projects and offer as much benefits. So the ecosystem of some (very few) american universities is very hard to replicate within a public system (although not all is wine and roses and has it's own costs). But there is place for both IMO and USA could replicate the success of public universities if the people in charge wanted, including access to very cheap/free universal education of quality.

However, the high education system needs some deep review, the current tendency towards 'corporate bureaucracy and governance' and the lack of understanding how research and science progress works, it's hampering true research. Not only an endless stream of ever rising machine of paperwork has been created, but some obscure ideology of free market fundamentalism applied to science has been created, implementing some sort of 'market of ideas' that you have to sell to the government and the private sector with immediate application in mind, if possible. Not only is this creating false incentives, it's also a bogus concept that does not work in practice.

Research is highly inefficient, with many dead ends, and unfortunately we have to take the risk but that's how doing science works. Fundamental research that is successful is by far the best 'economic multiplier' humanity has, yielding usually incalculable value for future generations, and trying to externalize R&D from corporations or other governments agencies to universities while removing a big chunk of apparently 'useless' (to whom?) research programs is plain wrong. For example, most of the corporate giants born in the last 20y or the 'internet economy' owe their success to stuff that was researched in places like Bell labs decades ago or fundamental research in the late WWII or early 50's like those of Turing. Not to say that we owe most of the modern economy to stuff like Planck constant. And real technological progress always lags 50y-100y from current theoretical science research. (sorry for the rant, but not enough attention is paid to this)

Calgacus said...

Dan Lynch: That is not accurate -- the New Deal work programs were not a JG (for better and for worse) and FDR did not particularly like them as he viewed them as a sort of dole, and FDR made no effort to make the job programs permanent.

Raul's statement is of course far more accurate than the above astonishing ones. FDR did not like them? - For one, who was FDR's "deputy president"? - and what was his job? Because they certainly were more or less a JG, the New Deal job programs were very successful and very popular, except among the 1%ers. FDR famously welcomed their hatred, and even more famously, was a pragmatist who liked what worked, and the New Deal job programs did. The WPA was only (tragically) terminated during the war, when it was of course a skeleton of its former self.

Dan Lynch said...


-- FDR was a pro-business conservative who only reluctantly went along with the New Deal job programs. While his advisors urged FDR to make the job programs permanent, FDR was content to end them when WWII came along. This was discussed in an article that Tom published earlier: Roosevelt would support no abiding government guarantee of employment.

-- Unlike a JG, the New Deal jobs were not available to all takers.

-- Unlike a JG, the New Deal jobs paid different wages for different positions.

-- the New Deal job programs were controversial at the time. Conservatives didn't like them and complained that they were make-work.

-- Employers said the "WPA is bad for people since it gives them poor work habits. They believe that even if a man is not an inefficient worker to begin with, he gets that way from being on WPA." Having been on the WPA made it harder for alumni to get a job because employers said they had "formed poor work habits" on the WPA.' -- Wikipedia

-- The organization's initials were said to stand for "We Poke Along" or "We Putter Along" or "We piddle around" or "Whistle, Piss and Argue." -- Wikipedia

There was an attempt to revive the WPA in 1946, but the proposal couldn't get any traction in Congress.

I personally believe the New Deal job programs did a lot of good, just saying that they were never a JG and that FDR was never enthusiastic about them.

Calgacus said...

Yes, I see we both commented on Nasser's article last year. Alan Nasser — How Franklin D. Roosevelt Botched Social Security - I found I was rewriting my response there almost word for word. Again, FDR said he would deficit-spend if needed for full employment before he was elected. He did not need convincing by his wise advisers or anyone else, as Nasser & other faux-left revisionist mythologists contend.

In addition to belittling FDR's actions - which were based on FDR's understanding of economics, manifestly superior to Nasser's - Nasser speaks as if FDR was an absolute despot, rather than a politician. As I suggested before, this is infantile. The WPA was ended as a sop to reactionaries, at an extremely rare time when it was almost useless and therefore uniquely vulnerable.

Unfortunately there is still no remotely satisfactory economic history of the New Deal & FDR. They're all crap. Some few I trust, e.g. Alain Parguez, Marshall Auerback put this more politely. Schlessinger should have forced his pal Galbraith at gunpoint to write a full one, not just a teaser.

The differences between the New Deal programs were big enough to clearly have macro effects, which is the main thing. A bit bigger and they would have been a JG. Wage rate differences are and were usually a mistake, but they don't make something not a JG - the lowest rate is the JG. They were close enough for former WPA worker Minsky to sometimes call his main JG proposal simply "the WPA".

Calgacus said...

"differences between the" is a meaningless stray phrase I neglected to edit out.

Dan Lynch said...

former WPA worker Minsky

I've heard that from several people, but as near as I have been able to determine, Hyman Minsky could not have worked for the WPA.

Minsky graduated high school in 1937, finished his B.S. in '41, then went to Harvard for grad school. Only heads of households who were on relief qualified for the WPA, so it's hard to see where well-to-do college student Minsky would fit in?

Other than academia, I believe the only real-world job Minsky ever had was a stint consulting for a bank.