Congratulations to this week’s winners.
Council: Rhymes With Right – Don’t Ken And Josephine Terry Have “Absolute Moral Authority”?
Noncouncil: Natasha Smith-“Please God. Please make it stop.”
Full voting here.
Ockham’s Razor – Since October 2001 – by Scott Kirwin
Archive for June 2012
Congratulations to this week’s winners.
Council: Rhymes With Right – Don’t Ken And Josephine Terry Have “Absolute Moral Authority”?
Noncouncil: Natasha Smith-“Please God. Please make it stop.”
Full voting here.
What, you honestly didn’t think it would be this easy did you? Just because a partisan measure passed without 0 Republicans in either the House or Senate, then rammed through the latter using a procedural maneuver, one that has become increasingly unpopular as the details are discovered since its passing, you didn’t seriously believe a divided court’s ruling would determine the President’s fate in November?
Obama has passed a huge, unpopular tax on the American people. Taxes are powerful incentives for change. Don’t forget that it was a tax that started us on the path of independence nearly 240 years ago. If the GOP isn’t scripting ads promising to repeal this unfair tax (unfair because it penalizes young people who don’t consume much in the way of health care in favor of older people who do), then it doesn’t deserve to win back the White House.
Nothing worth having comes easy. Let the president have his victory lap and his bump in the polls, but begin the attacks. Ann Althouse already has.
Half a trillion spent on poverty, yet people are still poor according to this study.
When the War on Poverty was declared in 1966, my family was still classified as poor. Both my parents worked and raised six children, sending all to private schools. Thanks to their efforts today it is solidly middle class with several members reaching its upper part of the category.
My family did it without receiving government money. How?
1. Our parents sent us to college or helped us into solid vocations. Not all of my siblings are university educated, but they all had solid careers in professions such as nursing, teaching and the trades.
2. Our parents encouraged us find the right partner and to stay married – the single most effective way to stay out of poverty. Our parents taught us to value ourselves and to find partners who did the same. Of six children all have married partners with strong work ethics and ambition. Only 1 has divorced and it took nearly 20 years to overcome the financial impact of that divorce (she eventually married a fine man I’m honored to call my brother-in-law.)
3. Our parents instilled in us a sense of pride based on our work. It didn’t matter what that work was, as long as we stayed working and continued bettering ourselves by adding new skills and training. Even today one of the first questions asked is how are jobs are going. It may seem old fashioned, but to a family that skipped meals as late as the mid 1950’s – America’s Happy Days – one’s job is the best indicator of family health.
4. We were taught to forgo immediate gratification for longer-term benefits. This has driven many of our spouses to distraction numerous times, but the end result is that we are savers not spenders. All are thrifty to a fault, as one would expect from the children of those who came of age during the Great Depression.
5. We were raised with the philosophy that emphasized self-sufficiency. If we couldn’t do something, we often ended up learning to do it ourselves because there was nothing worse than having to rely upon someone else. Reliance easily became dependence which in turn became subservience, and both the Irish and the Bohemian sides of my family left servitude behind with the Old Country.
From the British publication New Scientist:
Global Warming alarmists have been trying to tie themselves to established theories such as evolution and relativity for years, and have pilloried those who question their theories as religious zealots who don’t understand the scientific method. The dogma of the Green Religion demands absolute fealty, and a common attack on those of us who dare question it are that we don’t understand science.
Too bad the facts show that we do, we just don’t reach the conclusions based on the evidence that the global warming alarmists leap to. That makes us apostates in their eyes which is fine by me; I view Science as a refuge from dogma and doctrine not a substitute for them.
“It just so happens that the green religion is now taking over from the Christian religion. I don’t think people have noticed that, but it’s got all the sort of terms that religions use … The greens use guilt. That just shows how religious greens are. You can’t win people round by saying they are guilty for putting (carbon dioxide) in the air.” – James Lovelock, environmental heretic. Wonder how long before he is burned at the stake, with his “excommunication” covered by carbon credits issued by one of Al Gore’s trading firms.
Congratulations to this week’s winners.
Council: Simply Jews – Soviet propaganda: leaving Dr. Goebbels in the dust – Part II
Noncouncil: Gates Of Vienna- Multi-Culti Child Snatchers
Full voting here.
I’ve often wondered if Nixon had been a Democrat whether there would have been a Watergate investigation by Washington Post reporters.
Thanks to Matt Drudge for this.
Another Bloomberg article on the education bubble. This one by Richard Vedder, director of the Center for College Affordability and Productivity, and an economics professor at Ohio University. Vedder points out an incongruity about the economy and educational situation in the United States that has bothered me for years.
U.S. employers complain that they can’t find enough skilled employees. Then how do we explain why almost 54 percent of recent college graduates are underemployed or unemployed, even in scientific and technical fields, according to a study conducted for the Associated Press by Northeastern University researchers?
The cause is more fundamental than the cycles of the economy: The country is turning out far more college graduates than jobs exist in the areas traditionally reserved for them: the managerial, technical and professional occupations.
This is partly due to firms outsourcing their training to other firms, and to the educational institutions themselves who are apparently too busy offering classes on the History of Surfing, Happiness, and the HBO series The Wire. Companies used to hire competent people and then train them. Today they expect them to come to the job not only trained, but able to integrate into an existing project with minimal learning curve.
As an intellectual, college educated adult and the parent of a teen, I’m concerned about the split between the job market and the educational system. Like every parent I want to provide the best start to my kid as possible. But when I look at the academic world, its cost in terms of time as well as money, I’m wondering if the path that I followed still makes sense. Vedder estimates that students spend 30 weeks a year in school and less than 30 hours a week on academics. In the best quote I’ve seen on the expense of higher education he echoes Churchill when he concludes “never have so many dollars gone to teach so many students for so little vocational gain.” With the average cost of a year of public college at $22,000 and of a private one at $43,000 a quick bit of (high school) math nets the per-hour cost of the education using Vedder’s hours spent at $24.50/hour (public) and $47.77/hour (private).
Is there a better way? For many parents and potential students there must be, but if so what?
At those rates one could realistically hire a full-time private tutor – and good ones at $48/hour. But if you do would you demand him or her teach your child about Happiness or watch HBO? If not, why would you as a parent allow your child to waste his time on such fluff – especially when he is bearing more of that cost by becoming indebted?
Indebtedness is one of the worst possible burdens one can put on one’s child. It limits options at a time when a young person should be exploring them. A trip to Europe to visit friends becomes impossible when time off means missing student loan payments. It’s much more difficult to pursue a once-in-a-lifetime career opportunity while an existing job makes the student loan payments. Parents might argue that college offers other experiences that aren’t quantified by the degree such as personal growth and enrichment, but they fail to appreciate that this is a tradeoff between the limited opportunities of college life with the broader and more lasting opportunities in the broader world. Some have commented that it is their duty to provide the best of both worlds to their children by paying for their educations, thereby freeing their children of the consequences of indebtedness. As a parent who believes in the importance of personal sacrifice for the sake of children, it is difficult for me to argue against that point except to state that the skyrocketing cost of education has pushed the cost of education beyond the means of all but a minority of parents, and that for most of that minority the dollars spent on education will have to come from somewhere such as retirement savings. This means that such parents are actually shifting the burdens from their children’s college age to their middle age when they will be relied upon to care for them in their retirement.
Is the tradeoff worth it?
Attending college can offer worthwhile experiences to the developing young adult, but the indebtedness and time spent pursuing a degree have reached a point where other opportunities and experiences have to be sacrificed. For some the sacrifice may be worth it, but parents and college hopefuls have to weigh the lost opportunities in their decisions.
Cross-posted at the Moderate Voice.
Father’s Day essays tend to be nostalgic, exploring the writer’s feelings towards his or her father, are often hackneyed and tend towards the maudlin. I haven’t thought about Father’s Day much to be honest, because when I was dwelling on my relationship with my father I hadn’t yet become one. Before my child I searched for my father like many men do whose father disappeared from their lives (my father dropped dead at his job when I was a boy) or never entered them in the first place. When I became a father I realized that no matter what my personal feelings were towards my father, it didn’t matter. It was time for me to set all that aside and focus on being a father to my child.
I want to begin by making a distinction between “father” and what I think can be best characterized as “sperm donor.” Fathers don’t have to share DNA with their children, in fact some of the best fathers have been step-fathers, fathers of adopted children, and even family friends or male relatives. I’m not even sure they must be men; it is possible for the right type of woman to play a fatherly role just as it is possible for a man to be motherly (to limit the abuse of pronouns, assume that fathers must be men in this essay.) These are men who gave their time to raise a child, worked hard to support them, and were there for them emotionally throughout their childhoods. These are men who never broke their promises, nor made a child feel anything but the most important person in that man’s life and always put the child’s interest and that of the family above his own.
Contrast that with “sperm donors” like this fine specimen who has more than 20 kids with at least 15 women. For all intents and purposes this guy could have jerked off in a cup and for that he doesn’t deserve the honorific of “father.” Yes, father is an honorific, or at least it should be, and just because a man lives with his children doesn’t mean he deserves it.
In my time I’ve known men who aren’t there for their children even when they share living space with them. Often these men are still children themselves, caught up in their own narcissistic thoughts and pleasures. They may resent their children for getting in the way of their selfish pursuits, whether it’s a drink with the guys or a date with a hot girl from the office. I’ve known men who curse their own fathers for misdeeds in their childhood, focusing all their hatred on a fading image stuck in the past growing more distant with each passing day, while they ignored their relationships with their own children, completely oblivious to the mistakes they commit today while struggling to keep each detail of the decades-old transgression alive in their mind.
Unlike sperm donors a father thinks about his family first and himself second. There are no caveats to this, no qualifiers about “personal happiness” or terms involving the word “self” in them at all. Being a father means submission to a greater good: your family. Everything that you do is for the family, everything that matters in your life comes from the family. Your identity is through your family, and without your family you are nothing. Secondly, becoming a father requires a personal choice. I still remember the torment I went through when I was forced to choose between remaining a selfish human being and becoming a father. It was a painful choice, so painful that for me it became a kind of death. On that day long ago the person I was died, and the man I became, the “father” was born. Like any true rebirth it was confusing, frightening but exciting. I felt the world around me expand, leaving behind the selfish shell that I had been since birth and feeling and experiencing the world in new ways. I gained new sensitivity to the suffering of others, a thin skin that bleeds all too easily along with the maturity to handle the pain. I gained the strength to do what was necessary to bear the burdens that my new identity imposed on me, plus an awareness of my surroundings that later became the foundation for what I laughingly called “daddy radar” – the unconscious tracking of one’s children at all times. On that day I became a man, for what greater honor for a man is there than to become a father?
Fathers are instinctively self-reliant. Television might characterize us as childish buffoons in commercials incapable of feeding our children without our wise wives, but fathers today not only know how to feed their children, they think ahead so that their children will not go hungry through the coming week. That means not only working to create the cash to buy the food, it now means knowing how to buy that food and prepare it. While some fathers may still have the luxury of a woman to prepare daily meals, a father’s instinct means that he learns to do it himself so that his children are fed at the proper time. Today’s father not only knows his way around the kitchen, he knows his way around the house, the car, the office and everywhere in between. He is a jack-of-all-trades because that is what his family needs, and if he doesn’t know how to do something, then he knows someone who does.
A father has intuition that would excite a KGB agent. A father knows his children so well because he has been paying attention to them since well before their births. He knows what a child thinks because he has been with him or her for years, paying attention to their comments, answering their questions and consoling their tears. He has seen their struggles, their triumphs and their failures. He has seen good report cards and bad, suffered through last-minute homework, and followed the soap opera that teenagers call “life.” By tying this experience with his own as a child, he makes it impossible for his children to lie to him. When something doesn’t feel right to him, he doesn’t ignore the problem. He challenges his child, determined to discover what is going wrong in his or her life. Even though he may be exhausted or perhaps even afraid of what he will find, he will doggedly pursue the root of his child’s problem, finding a solution and implementing it no matter the cost.
A sperm donor knows little of none of this, and tragically may be incapable of even recognizing his ignorance. A father may even pity men like these who are incapable of understanding the sublime joy of being the last to fall asleep in his house, his children asleep in their rooms, his wife next to him in bed, his universe ordered and secure. But then he remembers that they have chosen their paths in life and ultimately their fates.
A father understands that it is up to him to live his life as a pillar of steel sandwiched in concrete to support his family. He suspects that his own personal growth paradoxically came through his submission to fatherhood, but he doesn’t dwell on that fact much. Like most fathers, he doesn’t dwell much on his own well-being, not when there is the well-being of the members of his family to consider. Finally, he knows that to truly honor his own father he must become a father that inspires his own children to one day write trite essays and stories on Father’s Day.
I subscribe to New Scientist, a British weekly science publication because of a life long interest in the natural sciences. Unfortunately to enjoy stories on the Theory of Everything or excited baryons I have to put up with the magazine’s neo-Socialist bias. The publication regularly pillories anyone who questions the “settled science” of anthropogenic causes of global warming as “deniers” while attacking hydraulic fracturing (“fracking”) of rock deep in the earth’s crust to release oil and natural gas, even though there is little evidence that the process is environmentally harmful. The editors must feel that such unscientific and irrational attacks on fossil fuels are what their readership demands judging by the letters they publish.
From the May 9, 2012 issue, letters section.
The real danger from fracking is not the small earthquakes it can cause or even the disposal of the chemicals used in the process (28 January, p 8). It is that we may discover a glut of gas that will drive down the price of all fossil fuels. Natural gas will not replace coal, but will simply increase our use of what will have become a cheap energy source.
One of the problems I have with many people who claim to be “environmentalists” is their ignorance of basic market economics. A “glut” of natural gas will not “drive down the price of all fossil fuels;” an abundance of natural gas will force the price of natural gas down. It will not necessarily cause the prices of other fossil fuels to fall. A comparison of the historical prices of natural gas, coal and oil finds that there is some correlation in prices between oil and natural gas and oil and coal (correlation coefficients of .81 for oil and coal, .85 for oil and natural gas), but not between coal and natural gas (correlation coefficient of .46). For comparison, the correlation between the price of crude oil and the year was .79 reflecting the fact that prices generally go up over time.
Bill Powers, writing for Financial Sense, details the price relationship between natural gas, oil and coal. Historically natural gas traded at the “10-1 rule” against oil, meaning that the price of a million BTU of natural gas should be roughly 1/10th that of a barrel of oil. When looked at in terms of energy content, that relationship is “6-1”, or 1/6th the price of oil. Stephen Brown and Mine Yucel, two researchers at the Federal Reserve Bank of Dallas, have determined that during rising oil prices, the 6-1 relationship is more accurate while the 10-1 relationship is the norm when oil prices are falling. In terms of coal, Powers notes “With the price of Central Appalachian (CAPP) coal currently trading at $73 per ton, up from $60 per ton for much of last year, a recent study by Credit Suisse (CS) indicates that natural gas prices would need to rise to approximately $6.30 per mcf before coal and natural gas trade at parity for electricity generation.”
Today’s natural gas price is $2.25. With oil at $83 a barrel, natural gas is now trading against oil at a 36-1 ratio. Most utilities in the US have the capability to switch off coal fired generators and switch on natural gas powered generators, or vice versa, to use the cheapest fuel source available on the market. And they have switched. Coal is now responsible for 34% of US electrical generation, the lowest level since 1973 when statistics began and roughly on par with natural gas generation.
By the writer’s logic falling natural gas prices will somehow manage to lower the prices of fossil fuels, but why wouldn’t falling natural gas prices impact renewables like wind and solar? In fact in an oversimplified view of supply and demand, that’s exactly what would happen. Natural gas demand would dry up the demand for other fuels, both fossil and alternative, causing the supply of these sources to become more abundant. The abundance in turn would cause the price to fall to match the decreased demand, making these sources attractive alternatives to natural gas. Eventually supply and demand across all sources would reach equilibrium, just as predators and prey in a wilderness will eventually achieve a stable balance.
But this simplified state ignores the reality that coal will not be produced at a loss so it will not be mined. Since oil and gas occur naturally together its possible that a a glut of oil will coexist with an abundance of natural gas. In the past natural gas was simply burned off as a byproduct of an oil well, but oil cannot be disposed of as easily. Wind and solar are threatened by cheap natural gas, and have yet to come up with an economic energy storage medium. Natural gas can be liquified and stored. Oil can sit for years in a tank field, and coal in a pile ready to release their energy immediately upon need. Neither wind nor solar are capable of that. The electricity they create must be used immediately which is fine during a sunny day or when the wind is blowing, but on a still night it’s either do without energy or use a fossil fuel or nuclear backup.
We will be left with much further to fall when the gas runs out. That is because the cheap energy will have prevented the introduction of renewable-energy infrastructure, so we won’t even have that to fall back on.
Like Santa Claus, the tooth fairy and Obama’s humility, peak (fill in the blank here) is a myth. Peak oil remains a controversial topic among environmentalists and gold bugs for a reason: there’s no proof it exists. From an oil perspective the world can be broken into the following areas: places with cheap oil, that is places like Saudi Arabia and Russia where oil is easy and cheap to pull out of the ground; places with not-so-cheap oil such as Venezuela, Mexico, the United States and Canada; places that may or may not contain not-so-cheap oil; and places that don’t have oil at all. What we are finding is that the last area in the list, places that don’t have oil, are gradually getting smaller and smaller as it turns out they have oil and join the places with not so cheap oil area due to improved techniques for finding oil where none was expected. New engineering methods such as fracking have lowered the cost to recover oil that was once thought unrecoverable, making the oil cheaper to pull out of the ground. The higher the price of oil, the more incentive there is to find and refine the last drop of oil, and the higher the price becomes due to demand, the more likely new supplies will be found and those with known reserves thought uneconomic to exploit begin to produce. Similar arguments can apply to natural gas and coal, both much more abundant than oil. There may in fact be peaks for these fossil fuels, but they are hundreds of years if not a thousand years away.
In the meantime, we will be testing the theory of climate change with abandon.
Econmatters writing for Seeking Alpha states, “Although the amount of emission generated from natural gas is still under hot debate, depending on if you take the ‘life-cycle calculation’ approach, natural gas is generally considered cleaner burning than coal and petroleum. A Congressional Research Service’s 2010 report concludes if natural-gas combined cycle plants utilization were to be doubled from 42% capacity factor to 85%, then the amount of power generated would displace 19% of the CO2 emissions attributed to coal-fired electricity generation.” General Electric which makes both fossil fuel and wind turbines finds switching from coal fired to natural gas plants could save 150 million tons of CO2 by 2020. Environmentalists might argue that life-cycle calculations show natural gas emits more CO2 than other fossil fuels, but such calculations are never applied to alternatives methods of power generation such as wind and solar. They can’t be, since natural gas is itself a storage medium for energy. There are as of yet no large scale storage methods for electricity generated by wind turbines or solar cells, and if there were their manufacture, transport and storage would have to be included in such life-cycle calculations.
I am unconvinced that global warming is occurring and that humans are behind it, but the US has the ability to lower its carbon footprint thanks to cheap natural gas. But this isn’t good enough for environmentalists like the letter writer in New Scientist. Instead of viewing natural gas as a way to lower greenhouse gas emissions today, he despairs over its impact on methods of power generation that are impractical, expensive and polluting (ask the Chinese about the damage to the environment manufacturing solar panels cause.)
The author of the letter to New Scientist represents a type of reactionary that I’ve watched take over the conservation movement during the last 20 years. They arrogantly believe they completely understand the world in all its complexities. They know fully its fossil fuel reserves, even as new deposits are discovered on a daily basis. Their rigid thinking ignores the resilience of markets, the creativity of scientists, engineers and inventors, and the progress of science and industry. Their dogma sees humanity as a blight on the world, an Eden bespoiled by the breath of every child or the touch of every human hand, forever preaching that doom shall befall us unless we return to the old ways, whether it’s leaving the village to return to the forest, the city to the farm, or as today forsaking the modern world to return to our barbarous “natural” state of subsistence living and high mortality. Luckily these people have been for the most part ignored throughout history and instead of stopping progress have been run over by it. But they never quit since they are sustained by their faith. They simply dust themselves off to try again to inflict their dystopian vision of the future and idyllic view of the past upon the rest of us.
I have become used to finding such religious arguments in science magazines, but it doesn’t mean that I agree with them or even enjoy them. But I suppose they remind us that even the brightest, most atheistic scientists are not immune to irrational beliefs.
Walter Russell Mead writes the best postmortem of the Walker Recall effort in Wisconsin. In it he explains how government solutions bind the disparate groups together on the Left, and how the public sector unions provide the glue.
Two big things unite them: a general sense of being on the same side in opposition to the economic and social right, and the belief in a strong, well-funded state. Some want the state to enforce mandates and empower them to reshape and uplift the bitter clingers. Others want the state to fund their universities, create jobs for their communities or otherwise provide concrete benefits. But for all of them the progressive, bureaucratic government machinery of the 21st century is both the prize for whose control they struggle and the agent they hope will make their dreams real.
The problem is that this alliance has damaged the Left and turned it into a backward looking conservative group.
In contemporary America, the public sector unions are essentially a conservative constituency. That is, their core goal is to get more resources in order to fight all but superficial change in the structures their members inhabit. They want ever growing subsidies to the postal service, the public school system, the colleges and universities, even to health care — but they do not want the kind of reforms that could make these institutions more efficient, more productive, more serviceable.
To the extent that these unions shape the Democratic agenda, Democrats aren’t just the party of government; they are the party of inefficient, expensive, unresponsive, bureaucratic government. They are the party of government workers first and foremost, and if there is a clash between the interests of the providers of government services and their consumers (between, for example, unqualified, unmotivated life-tenured public school teachers and kids), the unions come at these issues from the standpoint of protecting workers first, others second.
In terms of the blue social model, they are the party of the bitter clingers: the power of public sector unions among Democrats is a power that inhibits Democrats from putting forward innovative, future-facing ideas (about schools, health care, and so on) and keeps them focused firmly on the defense of the past.
The failure of this group to win the recall, an election that it chose in a state where it thought it could prevail, makes Walker’s survival (and the survival of his lieutenant governor and three of four state senators who also were on the ballot) so damaging to the Left. Unfortunately the Left has chosen to ignore the lesson, viewing the loss as a conspiracy between corporations, the GOP and the Supreme Court (which struck down prohibition against corporate donations in the Citizen’s United case.)
After reading about the recall results from several different sources, I’ve noticed that funding sources supporting Walker are identified as coming from outside of the state: “Democrats and organized labor spent millions to remove Walker, but found themselves hopelessly outspent by Republicans from across the country who donated record-setting sums to the governor’s campaign,” (AP). “Unions pointed to Walker supporters’ outspending his opponents by a more than 7-1 margin, 70% of it from outside the state,” (CNN). “Gov. Scott Walker’s victory Tuesday night in a recall election in Wisconsin raises tough questions for President Obama and Democrats nationally as they scramble to assess what it means for the enthusiasm of their voters, the power of their ground game, and their ability to compete against the huge sums of money Republicans have been raising,” (NY Times). Mead counters this, writing, “For one thing, the left had more money on its side in Wisconsin than many reports acknowledge; $20 million from labor groups,” according to an estimate by the MacIver Institute that shows how Big Labor allotted close to $16 million that personally targeted Walker. It is doubtful that this money came from within Wisconsin.
Where did the “outside spending meme” come from? “Adding to this gargantuan challenge of recalling only the third governor in American history was the flood of secret corporate cash distorting our democracy—a dangerous example of a post-Citizens United America,” AFL-CIO president Richard Trumka said. While $20 million may not be a flood to a well-heeled union leader like Trumka, it’s not exactly a drizzle to those who aren’t as wealthy as a union boss.
Mead worries that the Left has missed the point of the election. “(T)he lesson of the election isn’t that the right has too much money; the lesson is that while the left still has plenty of passion and fire, it has, thanks in part to the power of public sector unions, largely run out of compelling ideas.” While I agree with him that a healthy, dynamic left wing isn’t a bad thing (seriously, it’s not to a libertarian like me who supports pieces of what has been tarred as the “liberal agenda”), I do hope the Left stays distracted from the truth by misreading the lessons of this recall election until after the election in November. Then after that I hope it gets its act together and presents Americans with choices that aren’t torn out of the UK’s Labor Party platform circa 1955.
Be sure to read Mead’s entire article in its entirety here.
Bloomberg has an article up today about the student loan bubble. It doesn’t mention the student loan bubble directly, and instead focuses on the predatory lending practices by private lenders on students (Students Pay SLM 9.25% on Exploitative Loans for College). Expect more of these articles as Democrats like Dick Durbin try to whip up support for a student loan bailout.
The article bothers me for several reasons. First, the title. I realize that the reporter Janet Loren is not responsible for this, but I would hesitate to call a loan “exploitative” at 9.25% while federally backed loans are currently 6.8% (Stafford) and 7.9% (PLUS). The article highlights the experience of Mirella Tovar, a 24 year old graphics designer who amassed $98,000 in debt to private lenders now making $730 a month part time as a waitress. The interest rate on her debt is 10.25%. The difference federally guaranteed loans and private loans is only $22,000 ($135k vs $157k). We are not talking loan shark rates here. Loren hedges a bit, writing, “private lenders feature mostly variable rates that can be more than twice what some people pay in the U.S. program,” – some people being those who acquired federally guaranteed loans prior to June 2006 when rates were half of what they are today. Ms. Tovar started school after those lower rates had expired in June 2006.
Secondly, it’s not just the lack of credit history that affects the interest rate students pay. Loren fails to mention that federally guaranteed loans cannot be discharged under bankruptcy while privately financed loans can (please correct me if I’m wrong here.) Shouldn’t private lenders be allowed a higher rate of return to balance this risk?
Finally, the Bloomberg piece suggests that Ms. Tovar would have been better off with federally guaranteed loans, “I tell them to take private loans as a last resort,” she said. “I wish someone would have told me that.” But then Loren does not mention that with federally sponsored loans, Ms. Tovar would not have been able to amass $98,000 in debt, because federally sponsored loans have a $31,000 cap.
My wife graduated medical school in 2006 with $210,000 in federally guaranteed debt. The word “doctor” conjures up dollar signs to some people, but the average salary of a family doctor is $130-150k which isn’t much when your minimum loan payments are $25,000 yearly, and taxes on that amount add an additional $8,000 making it roughly $33,000. By the time we pay off her loans in about 10 years, that $210,000 will have cost our family over $350,000 including taxes. Every month I pay the bill it’s not easy, but we chose this path and in the wife’s case I believe the investment has been worth it.
Is a $98,000 investment in Ms. Tovar’s career as a graphic designer worth it? The fact that she is working as a waitress leads me to believe not. But I happen to know several graphic artists who have built successful careers over the years and would be happy to put the Bloomberg reporter in touch with them for their perspective. Ms. Tovar needs to get in at the ground level of her field, and will likely have to move away from home to do it. Life entails risk, and while Ms. Tovar has proven herself to be a terrible gambler by amassing such a sum of debt, she still has opportunities to put her degree to use. It won’t be easy, but starting life as an independent adult will never be.
There is no doubt that there is a student loan bubble, but banks aren’t solely to blame. Like most complex problems there are complicated factors behind them and plenty of blame to go around. Politicians who score points by throwing taxpayer dollars around to look generous and gain votes, then write laws making it impossible for people to discharge the debt in bankruptcy. Universities which waste money on expanded facilities and questionable curricula. Parents who spend more time researching a new car instead of their child’s education choices. Students who have had everything handed to them and are shocked when the gravy train stops. Unfortunately the article missed all of that and does little to suggest a way out of this mess.
It is tempting to call for a bailout of students such as Ms. Tovar. But are you personally willing to pay for her poor career choice and financial sense? What about the millions of degree holders who took out student loans and paid them back? Is it fair to them? I put a sleeping child in the back seat every Saturday morning for a Summer to drive the wife to an early chemistry class, and waited late at night in a dodgy section of Philadelphia with him in the back for the train to arrive carrying the wife from her classes. In between I built a career to make enough money to support us while she attended school. Is it fair to us that Ms. Tovar should be saved by the federal government while we’ve been working hard and paying taxes while paying off student loans?
I opposed the bank bailouts and still do even though most economists argued they were necessary. I believe in personal responsibility whether its a graphic arts student or investors in a bank, and view the bank bailouts as creating a moral hazard where gains are privatized while losses are passed along to those of us paying taxes. While I would love nothing more than to rid my family of my wife’s student loan debt, I realize that it is our responsibility bear the consequences of our decision and what to see that philosophy applied fairly to everyone.