Why Have Student Loans At All? Let’s Get the Burdens of Debt off College Students’ Backs — And Make Wall St. Pick Up the Tab

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Yves here. As much as I am a fan of having state supported higher education, the “making Wall Street pay for it” will backfire if not framed properly. The author, Les Leopold, advocates a transaction tax as the way to pay for increased support for schools.

The shortcoming here is that transaction taxes are NOT designed to be revenue-generators (although they do produce tax receipts). They are meant to reduce the activity that it taxed. And there is no question we need to shrink our bloated financial sector. Many economists, such as Simon Johnson in his 2009 article in the Atlantic, The Quiet Coup, pointed out how the banking sector had become disproportionately large relative to the size of the economy since the early 1980s. Brad DeLong describes how more and more economists are coming around to the point of view that a lot of financial sector is purely extractive:

Over the past year and a half, in the wake of Thomas Philippon and Ariel Resheff’s estimate that 2% of U.S. GDP was wasted in the pointless hypertrophy of the financial sector, evidence that our modern financial system is less a device for efficiently sharing risk and more a device for separating rich people from their money–a Las Vegas without the glitz–has mounted. Bruce Bartlett points to Greenwood and Scharfstein, to Cechetti and Kharoubi’s suggestion that financial deepening is only useful in early stages of economic development, to Orhangazi’s evidence on a negative correlation between financial deepening and real investment, and to Lord Adair Turner’s doubts that the flowering of sophisticated finance over the past generation has aided either growth or stability.

Four years ago I was largely frozen with respect to financial sophistication. It seemed to me then that 2008-9 had demonstrated that our modern sophisticated financial systems had created enormous macroeconomic risks, but it also seemed to me then that in a world short of risk-bearing capacity with an outsized equity premium virtually anything that induced people to commit their money to long-term risky investments by creating either the reality or the illusion that finance could, in John Maynard Keynes’s words, “defeat the dark forces of time and ignorance which envelop our future”. Most reforms that would guard against the first would also limit the ability of finance to persuade people that it performed the second, and hence further lower the supply of finance willing to take and bear risks.

But the events and economic research of the past years have demonstrated three things. First, modern finance is simply too powerful in its lobbying before legislatures and regulators for it to be possible to restrain its ability to create systemic macroeconomic risk while preserving its ability to entice customers with promises of safe, sophisticated money management. Second, the growth-financial deepening correlations on which I relied do indeed vanish when countries move beyond simple possession of a banking system, EFT, and a bond market into more sophisticated financial instruments. And, third, the social returns to the U.S.’s and the North Atlantic’s investment in finance as the industry of the future over the past generation has, largely, crapped out. A back-of-the-envelope calculation I did in 2007 suggested that in mergers and acquisitions the world paid finance roughly $800 billion/year for about $170 billion/year of real economic value–a rather low benefit-cost ratio–and that appears to be not the exception but the rule.

I should, before, have read a little further in Keynes, to “when the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done”. And it is time for creative and original thinking–to construct other channels and canals by which funding can reach business and bypass modern finance with its large negative alpha.

So I’d suggest that the two agendas in Les Leopold’s piece be a little less tightly linked: we should institute transaction taxes to redirect capital away from speculation to productive activity. And we should also have more public support for higher education, since many students will simply forgo college if the price is becoming a debt slave. The system we have in place is bad for everyone involved except for the administrators at colleges and the people directly involved in the student debt business. Whatever revenues transaction taxes raise can help fund public education. But we should not look to them as a sole source

By Les Leopold, whose latest book is How to Make a Million Dollars an Hour: Why Hedge Funds are Siphoning away America’s Wealth. Cross posted from Alternet

Anyone with a heartbeat knows that Wall Street took down the economy, killed millions of jobs and hasn’t had to pay a penny for the damage it caused. In fact we are paying them for crashing the economy in the form of trillions in bailouts and low interest loans.

Well, maybe it’s time for Wall Street to contribute, rather than siphoning off our wealth. How about a sales tax on all transfers of stocks, bonds, and derivatives in order to fund tuition-free higher education?

Why are high schools free but colleges aren’t?

Access to higher education is vital to our economy and to our democracy. Today a college degree or post-high school professional training are the equivalent to what a high school diploma provided and signified a generation ago. For over 150 years, our nation has recognized that tuition-free primary and secondary schools were absolutely vital to the growth and functioning of our commonwealth.

By the middle of the 19th century, New York City also provided free higher education through what would become the City College of New York. Hunter and Brooklyn colleges also were tuition-free, as was California’s rapidly growing post-WWII state college and university system. The GI Bill of Rights after WWII provided significant resources to over three million returning veterans to go to school tuition-free, which in no small part, helped to build American prosperity for the next generation. (Tuition was even provided if GIs attended private colleges and universities.) A further impetus to free higher education came as America fell behind the USSR during the Sputnik-era space race.

But the spread of free higher education stalled and then retreated precisely as Wall Street began to grab more and more of the nation’s wealth. As financialization transformed the economy starting in the late 1970s, average wages flattened while Wall Street incomes shot through the roof. At the same time taxes on the super-rich collapsed placing more and more of the burden on working people. Lo and behold, free higher education rapidly became “unaffordable.” Wall Street then swooped in with loans as students and their families loaded up on debt in order to gain access to higher education. This is the very definition of financialization.

As Student Loans Rise, the Rich get Richer

As student loan debt climbed ever higher, the super-rich continued to rake in more and more income, especially in comparison to the rest of us.

Many financial elites rose to riches by packaging and selling every kind of toxic asset imaginable. They made fabulous amounts as they pumped up the housing bubble, and then made even more as it imploded. It turns out that wealth was based on hot air, as well as plain old cheating. (See How to Make a Million Dollars an Hour [3] for a detailed account.) So far, neither Wall Street nor its super-rich patrons have been forced to pay for the damage they caused.

How to Make Wall Street Pay

It’s not easy to tax the super-rich when they have their hooks so deeply into both political parties. However, the student debt crisis opens the door to force a provocative public debate:

  • Are we resigned to be vassals to Wall Street elites or can we redirect resources to invest in our young people?

  • Are we going to saddle our kids with decades of debt or are we going to make the Wall Street gamblers pay the damage they caused?

The financial transaction tax (aka Robin Hood Tax or Speculation Tax) hits hard at Wall Street gambling. A small sales tax on all financial transactions will come almost entirely from those who are gaming the system by rapidly moving money in and out of markets. Eleven European nations are about to institute such a tax and have found excellent ways to enforce it. (If you or affiliates don’t pay by using shell companies and other tricks, you don’t do business in our country.) England has had one on stocks for the past 300 years and it works just fine. Clearly, a sales tax would successfully collect from the superrich.

Of course, you’ll hear Wall Street apologist moan and grown about how such a tax will kill jobs, steal from your pension funds, and rob your kids’ piggy-banks. All lies.

Unless you play with your 401k like a high frequency trader—which means you’ll be fleeced by them anyway—you won’t feel this tax. Neither will your pension funds, which are not supposed to churn your investments anyway.

As for jobs, when was that last time Wall Street produced real jobs on Main Street? They would just as soon finance a job smashing merger or the movement of jobs out of the country. The only jobs that would be hurt are a few at high frequency hedge funds that milk markets by making millions of automated trades per second. For the sake of financial stability and fairness, they should be put out of business anyway.

No, when it comes to hitting Wall Street elites, a financial transaction tax is just about perfect.

Let’s encourage Elizabeth Warren to take the next step

Senator Elizabeth Warren opened the door to this debate as she attempted to stop student loan interest rates doubling to 6.8 percent in July. On July 1, they doubled [4]. She wants the Federal Reserve to loan money to students at the same rate it charges too-big-to-fail banks, which is next to nothing at 0.75 percent.

Of course, most politicians and pundits think she’s off her rocker. How dare she try to interfere with “market forces”? But as Ellen Brown of the Public Banking Institute shows in her excellent rejoinder (“Elizabeth Warren’s QE for Students: Populist Demagoguery or Economic Breakthrough? [5]“), it makes economic as well as ethical sense to invest in our young people. In fact, it makes a whole lot more sense than propping up too-big-to fail banks that have grown even fatter since the crash.

But why have any student loans at all?

Why accept the perverse idea that students should saddle themselves with decades of loan repayments in order to gain access to higher education? Even with interest rates at 0%, we’re still asking students and their families to load themselves up with tons of debts in order to get access to the advanced skills and knowledge our economy and our democracy desperately need.

Isn’t it in the national interest to invest in our young people, rather than loading them up with debt?

Can we really beat the Street?

Maybe. It starts with having the nerve to ask for what we really want, rather than compromising before we start. Do we think Wall should pay reparations for what it has done to the economy? Do we think it fair to use that money to fund free higher education in order to rid our young people of crushing debt? If the answers are yes, we can start organizing.

The next step is to convince those working on the Robin Hood Tax to tie it to free higher education. That would allow financial transaction tax advocates to reach out to an enormous constituency—students and their families.

And yes, we also we need some admitted lying to Congressorganizational magic, not unlike what sparked Occupy Wall Street. Perhaps, websites like AlterNet.org can link up with like-minded media outlets and progressive groups to form a vast coalition of the pissed-off! Millions might be ready for that.

The anger toward Wall Street is there. The outrage over ever-rising student debt is there. Now is the time to connect the two and provide some extra organizational juice.

No one has a magic bullet and no one can guarantee success. But unless we try, we will guarantee that Wall Street and its Washington minions will continue to rip us off.

Surely we have enough creative energy to build another path.

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  1. wunsacon

    We should find ways to lower education costs — not increase subsidies that probably greatly contributed to the absurd administrative costs students are suffering from now. “More subsidies” probably will worsen the situation.

    1. washunate

      Awesome that this is the first comment.

      The single largest problem in higher ed is that the price is too high. Can’t wait for the monetarists to claim that we need bloated admin structures to keep the economy humming!

      1. Susan the other

        Clearly what we need are jobs. Jobs that make sense. For that to happen anytime in the next 100 years, we need to plan those jobs and how they fit into an economy for the long term. So we need to plan. Higher ed should fill those jobs with well trained young people. I don’t see why we can’t do a serious jobs program in conjunction with higher ed. So like teaching to the test (which I hate) we could train for the job. No student loans allowed.

        1. washunate

          I wholeheartedly would have agreed a few years ago. But personally, I’m now convinced we face a fundamental management problem, a crumbling credibility of leadership across all of our major institutions. I simply would empirically deny that we have a training or skills shortage. What economy are you describing? Where are these jobs?

          Also, philosophically, I’m personally uncomfortable with the jobs meme. Paid employment is a means to an end, not an end in and of itself. Universal unemployment insurance is much better than pointless ditch digging, both in terms of minimizing oppression and in terms of minimizing the capability of corruption and careerism to undermine the public purpose of the activity.

          Or more soundbitey, we don’t have a jobs problem, we have an income problem.

          1. Massinissa

            I agree with Washunate. The problem is really-existing-capitalism as a whole. Adding jobs for everyone will ease the problem, but most of the problems like usury and banking power, etc, will not be overly effected. The entire capitalist system is rotten, and minor fixes like stimulus and job creation are merely bandaids ultimately.

            1. jrs

              and education is even less of solution than jobs because it’s yet another level removed from the basic problem of people not having money.

            2. A Real Black Person

              If most people who want jobs have them, they will be much less likely to cause problems. In lieu of jobs, the working age population, especially young men, must be occupied otherwise, they will act out. China’s government is terrified of their population acting out, so they doing as much they can to maintain a high level of employment.

        2. Kurt Sperry

          I don’t think (further) vocationalizing of post secondary education is a good idea. Fundamentally we need better educated citizens and not people trained to perform labor–however complicated.

          1. A Real Black Person

            “Fundamentally we need better educated citizens and not people trained to perform labor–however complicated.” Speak for yourself. Just don’t ask or demand that people who are not part of the the bourgeoisie pay for your bourgeoisie-themed education or demand that the sons and daughters of the working class take out student loans to receive your bourgeoisie themed education. Most of us are not capitalists and actually have to work for living so we need to be better trained on how to perform labor. Most people don’t live in a post-work, post-scarcity utopia, although your class does try hard to create that illusion.

            1. jrs

              People here must know each other a lot more than I have ever surmised, they know each other’s class and everywhere, what are you guys all seeing each others tax statements. Education will sometimes get your foot in the door, it’s often not the key to any sort of advancement the possibilities of which don’t exist anyway, however.

          2. rob

            What an uneducated thing to say.A vocation is a living.Be it masonry,electrical engineering,brain surgery,well drilling,accounting,patent law,hardware engineering,software engineering,writing,etc.Everyone who actually DOES something in this world is functioning in their particular vocation,hopefully.Everyone needs to do what they like,and are good at.The rest are chattel.The useless.They are just hangers on.
            For children and the retired,this is fine.But someone without a vocation, is just taking up space.
            A big problem in the poorly highly educated classes, is they don’t understand WHY they have a degree of “higher learning”. And the world compensates them…too much.Learning must not be their vocation, for they end up with a skewed understanding.A bad doctors vocation isn’t medicine.Maybe he ought to be a plumber.

            1. rob

              If I took the emphasis of that statement incorrectly,I apologize.I suppose it could have been meaning that rather than purely vocational training of whatever sort.Civics and history and even philosophy,would do more to create what Jefferson hoped for; in an educated electorate being the best champion for his republican dream.The greatest strength the american way has ,is education.enlightenment.
              Obviously,our current malaise, is caused by improper education and ignorance.

            2. A Real Black Person

              “Everyone needs to do what they like,and are good at.The rest are chattel.The useless.They are just hangers on.
              For children and the retired,this is fine.But someone without a vocation, is just taking up space.”

              Seems like you’re blaming the unemployed for not having a job as if there are enough jobs that line up with the interests and aptitudes of everyone but people are choosing to be shiftless.

              Most vocations that pay well, pay well because there are lots of barriers to entry. Getting into a paid apprenticeship program for most trades is a competitive process and many applicants are turned away.

              1. Carla

                On Independence Day, 2013, I just want to say thank you, A Real Black Person, for your comments on this post. And right on.

            3. Fran

              A big problem in this country is that those in power in the early 80’s created a system that allowed and awarded those in business to: picture a giant squid> Matt Taibbi
              *leverage companies with debt and steal any money available:I could list other ways but the following will help: steel plants; airlines; auto; mattress, baking.
              It was especially helpful to get unions and their “bloated pay packages”: per hour pay, vacation, sick, and most important their pensions.
              Anyone like me; in a vocation I enjoyed; construction knows this well.
              The ultimate goal by the moneyed people is to make blue class and middle management people resent the pay packages of the remaining strong unions: public workers: education, police, firefighters, and usless bureaucrats.

              The strategy has worked. Walmart has helped to drive wages down and even has 30 hour per week (under full time to save Walmart from paying benefits) collecting food stamps and other govt subsidies to exist.

              The power of this recession has been increased by lack of buying power by those who remain employeed. Austerity due to imagined USA bankruptcy has also helped to drive unemployment higher and longer than ever before.

              We on the lower side of middle class are truly only able to maintain because of:
              2 income families; imports from China.
              When looking at average wages the lower 3 quintiles per person you see no gains. It is only because of the addition of both spouses working that there are gains for them.

              Trickle down economics as presented by Ronald Reagan has only resulted in the lower classes to be pissed on.

              1. rob

                I totally agree.I think the movie “heist;who stole the american dream”, does even more to detail the current class warfare disaster.

                The “Powell memo”,1971,was the plan of action that the chamber of commerce, and the buisness/banking circles have put into effect since carter.deregulation,privatization,free trade,financialization,etc.The forces that were very well organized to repeal the gains of the new deal era.and the power earned by labor and the working class post WWII.
                These think tanks and foundations and their money sources have been aligned against real progress in this country ever since.
                I also think this malaise in higher education,and education in general is also related.The assaults of the class war are not just one or two fronts.The entire fabric of society have been subverted,co-opted and played out.
                So yeah, I agree.

        3. John

          Yes, five year plan, Soviet Union style, is the ticket. Does anybody remain who still believes in capitalism?

    2. KnotRP

      Read a post about July 4th and Bernays,
      then turn to the next post about how expensive
      it is to go to college (really, to produce a
      well informed, hopefully prepared citizenry),
      while lamenting that things never seem to change.

      I think the whole point here is that nobody really
      wants and educated citizenry.

      Watch what they do, not what they say, eh BernayzzzzzZZZZ….

  2. Joe Schmoe

    You’ve obviously never taught college students. Half of them shouldn’t even be there. Let’s reduce education spending.

    1. Yves Smith Post author

      You’ve somehow managed not to notice how many bright people from the wrong ethnic backgrounds don’t get past high school. Some countries (France for most of the 19th and 29th century, I believe this is no longer true) did a great job of making sure that bright kids from poor backgrounds were found and tracked to elite universities. By contrast, the salient characteristic of higher education in the US is the comparatively high proportion of well groomed, well versed but not always the brightest people at elite colleges, and how often really smart kids from less advantaged families wind up in third tier schools or going straight into earning an income. At McKinsey, I regularly ran into secretaries who were brighter than the associates. And that was in the 1980s. I’ve seen even more of that as time passes. You just have to look, it’s everywhere. Start with retail stores. At least 1/4, more often well over half, the staff is too smart to be doing that, and if you chat them up, you’ll find some of the smart ones never got to college.

      And haven’t you heard of expectancy theory? With an attitude like yours, no wonder your students didn’t perform.


      1. Eric Zuesse

        Boy, did you hit the nail on the head!

        Dumb children of the aristocracy (e.g., George W. Bush) go to Harvard, when they should instead be learning to be plumbers or electricians, but bright children of plumbers or electricians should be going to Harvard, which won’t have them because their parents don’t have the money.

        Any college, such as Harvard, that charges on any other basis than ability to pay should lose its tax-exempt status and be fined a percentage of its existing endowment for having criminally accumulated its endowment.

        1. JK

          “Any college, such as Harvard, that charges on any other basis than ability to pay should lose its tax-exempt status and be fined a percentage of its existing endowment for having criminally accumulated its endowment.”

          This is an interesting concept. I’m not on board with the whole “fine them” thing as it seems too punitive to be successful. However, threatening the colleges in their pocketbooks like that would certainly give policymakers leverage over them. The issue is crafting that policy in a creative enough way to accomplish the goal of getting the best and brightest in those colleges regardless of background.

          I know Princeton does something like this on a needs-based basis, and I think their athletics also have something along those lines. I assume Harvard does something similar. The issue, of course, is the small size of those types of programs at the best schools.

          Regardless, this would be an interesting idea to explore from the standpoint of creating an powerful financial incentive for these colleges to actually dig up those students deserving of entry but from disadvantaged backgrounds.

    2. J Sterling

      You sound like the guy who had a great idea for Hollywood: only make movies that made a profit, and don’t make any movies that don’t. Great advice, but if they knew which movies would make their money back in box office, they’d have done it already.

      Reducing educational spending by half won’t change the percentage of students that shouldn’t be there on brains from 50% to 0%. If anything, it’s likely to raise the percentage (the great universities of Europe in the days of aristocracy weren’t noted for the brilliance of the average student).

  3. Hugh

    Student loans won’t be done away with because they are such great ways to loot and control the looted.

    Today universities have become corporate both in structure and mission. For their mission, they turn out workers beaten into submission by debt for corporations and do research for and with corporate America. In their administration and bureaucracies, they are indistinguishable from any other corp. And like corporations in general, they are fierce defenders of the status quo.

    Any reform of universities would entail dumping most of their superstructure. The number of faculty should be increased and focused on teaching. If that includes research, all the better. But now it is research which is the be all and end all. In many disciplines, the rate of worthwhile research accounts for only a few percent of what gets published in a year. The faculty’s time would be better spent in teaching. At the same time, much of undergraduate teaching is being done by grad students and adjuncts. They should be better paid. The adjuncts could be converted to fulltime faculty and the grad students’ teaching loads could be cut back so that they would have more time to learn their fields. As it is, academia is way ahead of the rest of society in creating a feudal hierarchy of lords and serfs, although the rest of society is catching up.

  4. Aussie F

    Finland has a totallu free education system; no streaming, very few exams and no pointless assessments. The result? One of the best education systems in the world.


    The secret:

    “Finnish early childhood education emphasizes respect for each child’s individuality and the chance for each child to develop as a unique person. Finnish early educators also guide children in the development of social and interactive skills, encouraging them to pay attention to other people’s needs and interests, to care about others, and to have a positive attitude toward other people, other cultures, and different environments. The purpose of gradually providing opportunities for increased independence is to enable all children to take care of themselves as “becoming adults,” to be capable of making responsible decisions, to participate productively in society as an active citizen, and to take care of other people who will need his [or her] help.”

    1. washunate

      I see what you’re saying, but you’re talking about effects rather than causes.

      Finland’s system is premised upon three foundational aspects of their society:

      1. low wealth concentration/two tiered justice system
      2. homogenous society
      3. small population


      The US is a large, diverse nation, so 2 and 3 are inherently unreplicable.

      Of course, if we tackled number 1, we would find, like magic, that ‘problems’ like educational disparities would essentially disappear as major issues.

      1. Malmo

        There is no reason the Finnish model or reasonable variation of could not be applied to a heterogenous (not sure what you are getting at here? Are Fins all clones?) and higher populated country. The basic ideas contained in the Finnish system on what it is to be an educated person–a whole person–are in no compelling way necessarily limited to so called low populous, homogenous peoples. One thing is for sure. It’s miles beyond what passes for education in the USA.

        1. anon y'mouse

          as far as I have been able to make out, the hetero/homogeneity meme is code for:

          I don’t want to pay for the nappy-heads! they are defective due to a combination of genealogical and cultural reasons, and education and too much effort will be required to get those types up to speed which will drain coffers for my bright, white sons/daughters.

          of course, that’s just one of my brain farts. also, they don’t seem to realize that much of the reason poor people don’t “do well” in school is directly caused by poverty. if you have nowhere safe to exist, and home is a ceaseless round of worrying about whether there will be enough food and other material goods to go around, you definitely don’t have anyone to help you study or materials to do it with, much less a quiet “room of one’s own”. povery imparts intellectual deficits from birth as well, since poor people don’t (can’t afford, really) to do the extracurricular special things like reading and educational toys, cultural trips, etc. our overall “culture” which tends towards the anti-intellectual doesn’t help much, either.

          a lot of the “out of school” inequality stuff helps reinforce the in-school sort–these kids then go on to poorly staffed and funded public schools who deal with the constant onslaught by simply passing people through whether they can do anything besides write their own name or not. this helps the thinktanks with that idea that “public schools are failurues” when in fact, they do a great deal but have very little to work with and are constantly having that little cut down to less and less.

          so, the inequality that was present from birth persists, and so do the differences between classes/races (it is MUCH more a class issue than it is a race one, but most don’t even admit class exists, since poor white people got there through commission of some personal sin supposedly).

          all this to say that the divisions in our society both drive this and get replicated because of the attitude that the homo/heterogeneity meme represents.

        2. A Real Black Person

          “here is no reason the Finnish model or reasonable variation of could not be applied to a heterogenous (not sure what you are getting at here? Are Fins all clones?)”
          No they are not clones, but they are more similar than different which is very significant. First off, there is less economic inequality because there is enough to go around (fewer poor people means fewer disgruntled people.) and there is probsbly alot less political disagreement due to less diversity. There are fewer subcultures and less distrust. In my opinion, it is diversity that gives certain groups the rationale to target another group for derision or exploitation. In small homogeneous populations, there also tends to be less genetic diversity. In small homogeneous populations, IQ, variations and personality trait variations are less numerous and therefore not as problematic as they are in larger societies . ( Large corporations now administer personality tests in addition to requiring a college degree–that is not to promote diversity.)Something close to the Finnish system can be observed among small populations of the wealthy. There is more proactive behavior and less bickering about who gets what. In small wealthy enclaves,called Superzips by Charles Murray, people tend to look out for one another. Something close to the Finnish system is applied to small programs designed for high intelligence children–those children don’t need lots of structure and reach their potential without worrying about making their peers look bad in comparison. I’m sure that something close to the Finnish system has been tried in a liberal, diverse inner city in America but I can guarantee that it failed within three years. The costs and problems probably spiraled out of control. The Finnish system, like many things, including college, doesn’t scale up.

          ” Finnish early educators also guide children in the development of social and interactive skills, encouraging them to pay attention to other people’s needs and interests, to care about others, and to have a positive attitude toward other people, other cultures, and different environments.”

          Early education does do that or at least did it in the early 1990s, in Pre-school and Kindergarden. It’s up to the individual ,in the long term, to decide to care about other people’s interests (more difficult in a country with a larger population and more diversity since not everyone likes the same things) and have a positive attitude towards other people. (extroverted people with decent intelligence and a decent upbringing tend to be more positive . A lot of what creates a positive person is is due to a number of positive experiences,especially if they are shared experiences ) It’s usually people who have their basic needs met, and are economically comfortable, who have the free time to explore different cultures or different environments.

          1. anon y'mouse

            please do not support the “extroverts are better” idea. they are not, in my experience, any more caring about other individuals or better able to empathize about facts of another’s life. they are just able to gab more with other individuals and not feel drained and self-conscious.

            introverts are not self-absorbed. generally, they are idea-absorbed, and are quite interested in other people just not necessarily the brown-nosing that so many “normal” people expect in order to interact socially. in small groups with less political structure, they generally do quite well.

            it takes both kinds to make a functioning world. also, how a person acts on the outside has little relation to how they are on the inside. being glib might mean that you never think beyond what’s going around in conversation and the latest-greatest popularity contest, aka narcissism. that we take that type of expression and assume the person is happy, well-adjusted and caring of others and people who do not “present as well” lack all of those characteristics is a mistake although extroverts can honestly be all of those things as well.

            1. A Real Black Person

              please do not support the “extroverts are better” idea.
              I don’t support it. Natural selection supports that claim. Men who are extroverted and have average intelligence pass their genes on more often than introverted an idea-obsessed man.

              ” it takes both kinds to make a functioning world.”Well, you’re dead wrong about that. Most of the world doesn’t “function”. We clearly favor one type of person over the other. Introverts can function in the way you describe, but often aren’t given a chance to. It isn’t uncommon to find a mal-adjusted introvert, partially, because we expect them to be mal-adjusted.

              1. Yves Smith Post author

                That is bullshit.

                The reason extraversion has been rising in the US is we’ve been actively acculturating for it in the way we raise kids. A fair portion of introversion v. extraversion is nurture, not nature. I’ve seen various studies on that.

                And don’t give me the alpha male BS either, which is the extreme end of extraversion. Studies have found betas actually enjoy better reproductive success.

                Extraversion is prized in the US but not very much in other cultures. What we see as healthy extraversion here is often seen as boorishness and a lack of sensitivity to boundaries abroad.

                1. A Real Black Person

                  ” A fair portion of introversion v. extraversion is nurture, not nature. I’ve seen various studies on that.”

                  All I’m going to say about the nature vs nurture thing is that there’s a difference between being inhibited and introverted. The way those studies are done, researchers can easily overlook something like that if they are out to prove a hypothesis which goes something like this “aha- you see, extroversion can be taught. Therefore, introverts are just malfunctioning extroverts.”

                  “Studies have found betas actually enjoy better reproductive success.” Why wouldn’t they? There are more beta males than alpha males–of course beta males would do better collectively. Alpha males are more likely to die violently or get sent to prison in our form of civilization, but when if they manage to avoid those pitfalls, I sincerely doubt they are at a disadvantage in passing their genes on. It’s not like most straight women are repulsed by alpha males.
                  Another word for them, I think, is “bad boys”.

                  I think you and I have different definitions for what makes a person an extrovert. To me, extroverts are people who enjoy the company of others and get lonely if they are alone for more than 1-2 hours. They like being the center of attention and love talking about themselves or making people laugh. Most extroverts make friends easily and love to socialize. Most cultures embrace extroversion the way I have defined it.

                  “The reason extraversion has been rising in the US is we’ve been actively acculturating for it in the way we raise kids.”

                  I don’t think it’s been ‘rising’. Introverts were never particularly liked by extroverts. There was never a Golden Age for introverts in U.S. society. Like everywhere else, people in the U.S. like to hammer the nail that sticks out. Someone who doesn’t understand culture norms of a given culture will always be seen as a boor, at worst. That’s not a reaction against extroversion.

        3. washunate

          The point about homogeneity and population is that there are practical implications to scaling programs up in size and across multi-cultural backgrounds, from language to racial segregation to religious traditions to core values to management bureaucracy. Not that it can’t be done; rather, that the implementation challenge can’t simply be wished away as if it doesn’t exist. Furthermore, there is a certain strain of America-bashing that holds Europeans up as if their model is somehow superior, when it is actually the US that is a far more diverse society.

          I would challenge you to name one major country that has a diverse population and a successful education system – it can’t be done, because the only diverse major nation on the planet is the US :) From small countries like Finland and Norway to large nations like Germany and Japan, there simply is no nation whose demographics compare to the US. That is the area where we truly are unique.


          But the bigger point is that the Finnish educational model doesn’t solve the problem; it’s simply a reflection of the broader socioeconomic condition of their social contract (or whatever you want to call it). If you imported US style wealth inequality and the two tiered justice system, the outcomes would quickly break down.

          We know early childhood education is important, and the neighborhood public school is a fundamentally American ideal. Quite frankly, it’s insulting to American public education to imply that education is the problem.

          The problem is wealth concentration. End the drug war and implement universal health insurance and universal unemployment insurance and break up the media conglomerates and prosecute the financial fraudsters and the war criminals and raise the minimum wage and mandate paid leave and rebuild our infrastructure and passenger rail and clean up our environmental contaminations in low-income communities and all the other policies we need to enact.

          Then come back, and you’ll see that childhood education is working pretty well.

  5. rob

    As much as I feel we should hang “wall st” ,out to dry..in any and every way we should.I don’t think a tax in any way will help wall st pay for anything.I agree with Yves, that a tax on say ,derivatives and all the cdo’s and swaps and all that fancypants stuff,should be levied…but besides to go to social security, it is really to make those stupid deals go away.A 50% tax ought to do it.
    I think that if any tax is levied against wall st for anything like tuition,the wizards of wall street will just change the names of their crap,thereby not haveing to pay taxes from whatever source a lawmaking body ,enumerated.While at the same time the swindlers in the academic industrial complex,will use these “promised” future revenues to justify greater spending on themselves.
    My only quibble with the piece is that the first thing that needs to happen, is that the US GOV’T, must be taken back by the people.These new representatives ,can then dismantle the financialization mantras wall st is stealing our money with.Tax the hell out of these schemes ,they call innovative financial products and sophisticated investment arrangements…again, say 50%-90%…or whatever is needed to stop these extractive swindles.
    Then the gov’t can pick up the cost of education.I say this because according to our founding documents, gov’t is supposed to be accountable to the people.Not to THE MONIED INTRESTS alone.
    After all, there is a barbeque day coming….remember.What is it we are celebrating?Enslavement by the corporation?Working for nothing?Closing your eyes while you hold onto whatever you have, and don’t think about tomorrow?Saying”screw independence,if I can’t have a king, at least I want a monied aristocracy?
    People do need an education.In my opinion, first and foremost to learn history.their birthrights.human struggle,to get where we are, to know where we can go.and to even be shown where we are going…
    these are the truths that are self evident.
    right now, people don’t know squat, except what they choose in their jobs/careers, and whatever else they are told.
    Rather than justifying wall st by allowing them to say, they are paying for your kids education.we need to curtail their activities,and use the resulting productive societies surpluses, to do what the proper civic model,shows we ought to.
    As of now, I say boycott the fourth.of july.It doesn’t mean anything anymore.To celebrate it like the declaration of independence and the bill of rights still hold true,is to sully the accomplishment of bringing forth these ideals into the minds of people.

  6. DP

    Yves, I know you’ve written about it on other occasions, but I think any piece on the growing student loan debt problem is incomplete if it doesn’t note the outrageous growth in the cost of higher education over the last several decades. Students at the supposedly elite universities pay multiples of what they did 2-3 decades ago to take a much higher percentage of classes from graduate students. Salaries of administrators and other overhead costs have soared, tenured faculty teaches fewer classes. Price fixing among so called elite universities is rampant, with the universities down the pecking order drafting on them and increasing prices in lockstep.

    The financial services industry is vile but I’m not sure the higher education industry is far behind. What other industry besides health care has increased its prices at a 7-10% annual rate for 30+ years regardless of economic conditions?

    1. Dan Kervick

      College has become a pay-to-play racket in a neo-feudal economy and social caste system. Getting that degree is the essential requirement for being allowed into the upper castes and for even getting one’s foot in the door for half of the economy. Naturally, then, people are willing to pay fortunes and indenture their futures when the choice is between hope and lower-caste oblivion.

      1. petridish

        Except that that “ticket to the higher caste” thing isn’t working so well anymore. When EVERYONE has something, it’s not worth very much.

        Run-of-the-mill college degrees are kind of like granite counter tops in that regard.

        1. A Real Black Person

          Status and high wages come from scarcity. You can’t have winners without losers.

          Employers need to realize that exceptionally talented people can’t be socially engineered into existence to the quantity they would like. There’s no point in encouraging more people to go to school, if you are going to spend more time weeding out the lower quality graduates who went to schools who don’t have admission standards as strict as the more selective schools.

          1. A Real Black Person

            I’m pretty sure that there are many resumes with a degree listed on them that go into the Recycle Bin.

            A degree ,by itself, doesn’t mean someone is qualified for a position.

      2. Ed

        I agree with Dan Kervick. You are basically paying for a license to go job hunting at this point. The question is when do college costs get to the point where they are too pricey even for that.

    2. washunate

      Right on, that’s the trifecta of key drivers of wage stagnation and price inflation.

  7. F. Beard

    “A mind is a terrible thing to waste.”

    I have to blame Progressives and liberals for their unprincipled approach to problem solving. FDR, for example, did not save free market capitalism; he saved the banking cartel, the cause of the problem in the first place! Government deposit insurance was not the solution; rather a universal bailout with new fiat (many people lost their savings in failed banks) and a risk-free Postal Savings Service to deposit the new funds in was.

    But then was then and perhaps much of what should be politically possible today was not possible then. But let’s “progress” (verb), eh? The solutions we should aim for today are not necessarily FDR type solutions but should be PRINCIPLED ones based on justice and yes RESTITUTION for what has essentially been theft. Let’s get to dragging that Overton Window UPWARDS, huh? Left and Right are so passé.

    Righteousness exalts a nation, but sin is a disgrace to any people. Proverbs 14:34 NASB

  8. Bkrasting

    Egad! Yves thinks a transaction tax is the solution to everything.

    The cost of college in the US for 2012 was ~$500Bn. Lets just charge W.S. for all of that cost. What a dumb plan.

    The total earnings for the S&P 500 is only $1Tn. How does Yves think she can make a dent in college cost with a transaction tax?

    1. Jim Haygood

      Every tax ultimately is enforced at gunpoint.

      Strange how anti-gunners like to send out guys with badges and guns to extort funds for their pet projects.

    2. Yves Smith Post author

      I see you read only the headline and are straw manning based on that. Keep that up and you won’t be welcome to comment here any more.

      In addition, you know full well that the volume of other products (bonds, and most important, FX and derivatives) greatly exceeds the volume of actual real economy transactions, and that the size of the other markets exceeds the market cap of the stock market. International trade flows are only 1/60th of international capital flows. CDS written on mortgage securities and CDOs were 4-5 times the actual value of housing. Corporate CDS are estimated to be 6-8x the value of the bonds on those companies.

      And I clearly stated what the purpose of transaction taxes are.

      1. AbyNormal

        jeeeze how did i miss the dreamer of single thought headliner himself, Bruce i want my mug on the front of the rolling stone :-/

        The truest characters of ignorance are vanity, and pride and arrogance.
        s. butler

  9. Danb

    This is a multilayered or complex issue. As a college teacher at a decidedly non-elite institution I can attest to having each year at least 4-6 top notch students who the lack savior faire and $ of higher socioeconomic class students but not raw intelligence. And I have students who in my view are dumped into college because that’s where the current system channels them. Many say their high school counselors tell them if they do not go to college they will be losers working at Wall Mart. It is also the case that colleges throw loan money at these kids as if it were a freebee.

    A few do not belong in college, both because of interest and preparation. They suffer by sitting there (classes are not meaningful to their dreams, and young people should pursue their dreams) and indirectly make the other students and professors endure their torpor as they text, fidget, fail to take notes, etc.

    The biggest issue I see, however, is that the economy itself is in contraction due to modern societies reaching the limits to growth. Most colleges and universities think they are preparing the workforce of the future. They are not; this is a classic case of planning backwards: for a debt-fuled growth economy. The world is entering into degrowth and higher education, caught up in neoliberalism, is clueless that this is the driving force.

    1. Susan the other

      The growth paradigm of the past century was more and more dependent on debt at ever higher levels which in turn created it’s own weather system. That kind of growth should be over because those levels of debt led to impoverishment of societies and environments for the sake of return on investments. So in truth it was no growth at all. It was fake growth. It was a vast taking. And the whole country is so numb from the rip off we still can’t quite shake the brainwash out of our ears. You should induce your uninspired students with a taste of reality. If they are caught texting they can only redeem themselves by teaching class the following day. And they will be evaluated by the class at the end of their lecture.

    2. Susan

      Ditto Danb. Colleges and universities are ill-prepared and ill-preparing students for the degrowth reality.

      While my son graduated from The Fisher College of Business and had a some good some bad state university education, plenty of standard business BS and a few really good courses in environmental studies, he came to feel cheated when he saw Inside Job and realized that, in his words, he’d been “duped.” He was courted (with large sums) by Amazon and quickly learned what he’d suspected about working in the corporate sector. It sucks. Walked away from the huge sums to save his heart and health. Good for him. He’s now dating a woman who decided against college. Equally bright, she has invested in learning to build adobe houses, permaculture and herbal medicine and other less expensive practical trainings. Who is more prepared by their education investments for the reality of the degrowth economy?

      As a former college faculty member, I can attest to the variety of students who show up on the first days of a semester. Some of them are amazing engaged thinkers. Others are ill-prepared, plain not interested. They are nonetheless, with each tuition payment, adding another link in the chain that carries a huge weight – one they may never escape. And for what? They will graduate and continue working in a low-wage service sector economy until it does finally collapse.

      On a brighter note, Free Cooper Union is on the right track. http://us7.campaign-archive2.com/?u=964ad2f631fe6f5f4389676d5&id=801392dd82&e=95a5efd614

  10. petridish

    Of course college should be made affordable again, however it’s to be done, but it should also be made COLLEGE again and not just sleep-away high school or vocational school with beer and sex.

    Wall Street should be taxed into oblivion because it is destroying the fabric, promise and economy of America, pure and simple. No further justification or higher purpose for the revenue is necessary.

    Taxing Wall Street to pay the high cost of college as it currently exists is to legitimize and accept the farce that the American “education” system has become. 0% “student loans” serve the same purpose.

    What is it with Americans anyway? As long as something can be made affordable or, better yet FREE, there is apparently no need to address or assess its quality, value or function. And Wall Street reform must always be justified in some way other than that it’s just plain necessary and long-overdue.

    1. wunsacon

      >> it should also be made COLLEGE again and not just sleep-away high school or vocational school with beer and sex.

      And sports worship.

      1. anon y'mouse

        they need the stipend so that they can spend their full-time daily hours completing the requirements of their schooling, and not working for money to live on or commuting to work for money to live on.

        every hour taken away from one’s education diminishes the likelihood of getting good grades and persisting in school until graduation. even those polled who were asked if they were provided free tuition and books said they could not return to school due to working to pay for a living. and this was according to a B & M Gates Foundation study I read (“Four Myths of Higher Ed” or somesuch title).

        every one of us can’t be a superhuman who works full time and goes to school full time. myself, I am so mentally incompetent that I can only do one or the other, and not both. that is because I try to give my all to whatever i’m doing at the time, and not have divided energies and attentions. granted, the Brave New World we are entering wants us all to be cyborg super(wo)man simply to get a look-in.

  11. Hal Roberts

    I doesn’t matter how many top notch educated people we have in the country if the powers that be won’t let new business start up or, if the rally call of the day is out sourcing jobs and reduce power emissions. We need boots on the ground job’s in order to support any kind of demand (KISS). If we pay off all the student loans then the students are going to have to head to the unemployment line ( cart before the horse), Just like trickle down. ???

    1. AbyNormal

      more ‘new businesses’ created from identical education of the past?…thank you for providing case in point
      I see it all perfectly; there are two possible situations — one can either do this or that. My honest opinion and my friendly advice is this: do it or do not do it — you will regret both. Kierkegaard

      1. Hal Roberts

        The education of the past built more and did more with a lot less than what we have today and a plenty of spoiled rotten timothy law brat could learn a good lesson from a trip to the wood shed. It seems the innocent are going to get screwed anyway. Increasing the tax burden on the people of the state to feed teachers (state) is just more Fascist trickle down waste in the name of the “children” ah. It’s just another way to further the game of support the top 10% (30K and above), get your Globalist butts to the wood shed. lol

        1. rob

          Troll alert.

          are you worrying about those bloated teachers making $35,000 a year are you?

          1. Hal Roberts

            I have had a few teachers in my life to know what they make (pay) at at each level of seniority which tops out around 6 figures in S.C., at least 35K is a living wage ( starting) you can pay for a place to live and a car and their pay goes up with time even if they don’t get a raise. If we are going to add a tax, the proceeds should go to fixing the problem of adding jobs not substring the status quo of the Backward Trickle down program regurgitating stimulus in the top 10% which leaves the economy in need of More Stimulus. Thats the big scam of trickle down.

            There is a deference between telling the truth and being a troll.

            1. rob

              You know teachers making 6 figures in south carolina?
              Teaching what? may I ask.
              If this is at a university, is it a public or private institution?

  12. washunate

    Great point about transaction taxes. The idea of tying taxation to an unrelated spending program is inherently pointless and politically unstable. The national security state and financial bailouts are completely unfunded.

    Basic public education is a valuable public good. But post-secondary education – particularly as currently configured in our bloated higher ed sector – is private consumption. Nearly all the gains accrue to the employees, partners, and students. We don’t need more four year grads, let alone masters and Pee H Dees. The vast majority of work in our economy requires basic literacy and numeracy; we actually need very few architects and electrical engineers and microbiologists and anesthesiologists and accountants and lawyers and so forth.

    We should nationalize basic higher ed and run it as a core government function, and the rest should be paid for by private actors. If employers actually cared about higher ed, they’d pay for it.

    If we simply had universal unemployment insurance, most students could then handle the risk of dropping out of useless programs and look to do something productive and meaningful in our society.

    1. A Real Black Person

      “. The vast majority of work in our economy requires basic literacy and numeracy; we actually need very few architects and electrical engineers and microbiologists and anesthesiologists and accountants and lawyers and so forth.” Getting people to compete for those jobs regardless of a need for them

      a. depresses wages/lowers costs.

      b. Creates jobs for middle class people. This is very important in an economy with no more traditional industries in which to employ people.
      c. IMO, Diminish the likelihood that the wealthy will be challenged in anyway. It’s hard to rally against the problems of the system, when many of the good jobs (government and finance) require your student loans to be in good standing. Steve Jobs, Mark Zuckerberg, and Bill Gates are not products of higher education. They’re just smart people who came from good families (where I’m sure a high level intelligence and other desirable traits are hereditary).

    2. anon y'mouse

      that’s a lie, and you know it.

      why? because the employers won’t hire without the degrees.

      because the employers take the degrees as certification that you have the base-level interest and aptitude to do the jobs, if not necessarily all of the training.

      because the employers do not want to pay anything for the training. because they want the benefit of the training (even poorly done) without paying for it if they can get away with it, and with all of the other forces driving oversupply of labor (not necessarily more students—how about those people who used to work in one department being phased out when that revenue stream diminishes and simply applying their same skills to the new jobs?).

      because they have no loyalty to the employees or anyone else except the very short term bottom line. therefore, your training is none f their concern. they just want a cog to fit the machine, and they want the lowest cost but also least troublesome cog (fitting in to the culture, putting up with bullshit, which I will agree is much of what one learns by going to college for the non-technical aspect). they also want a long list of experience and specialized training, which is nearly impossible to get without either paying for the training, being self taught, or largely the student taking on the cost of all of that themselves, with little guarantee that it will pay off in the longer term.

      it seems that instead of the student getting all of the benefit of post-secondary ed. they assume almost all of the risk—risk that it won’t be enough, that they won’t do the “right” specialization tasks or learning, or that even the small amount that they -could- learn in an on-the-job setting will be too costly for the employer.

      I suspect that most of us would rather go back to “working from the mailroom up” if we could be assured that there will be something to show for it at the end, and that we will be retrained along the way to fit the “new” economy. but what I see is that they want to age-out people like they used to do with equipment. the only problem is, most of us don’t slowly deteriorate into rust or die at the end of their functional usage period in this-hot-market-of-the-moment.

      our whole system has become too focused on the short-term. also, overpopulation which none of us thinks we are responsible for.

      1. washunate

        The problem isn’t employers being picky over who they hire. Of course if you have 1 job opening and 2 unemployed applicants, you are going to take the higher credentialed applicant.

        That’s Caste 101.

        Rather, the problem is employers having a monopoly on worker income. That’s why universal unemployment insurance is needed – to give workers a safety net between jobs.

  13. Hal Roberts

    I don’t want give anyone the wrong idea I like the idea of taxing wall st. transactions. I just think the money should go to help rebuild infrastructure to build a broader base of demand and support for the economy in a quicker way.

    1. AbyNormal

      keep strokin that ‘woodshed’ dream and ‘wrong idea’ will only be left to the eye of the beholder…

      “Certain souls may seem harsh to others, but it is just a way, beknownst only to them, of caring and feeling more deeply. It is only by way of pain one arrives at pleasure.”
      marquis de sade

  14. Susan the other

    I am ready to sign on to the coalition of the pissed-off. But my position is extreme. I think higher education should be free. I think we should pay all students a stipend. I think all graduates can work for the state for 2 years at a lower salary to do some payback. Blah blah. But I do not think it matters at all how we finance this. Yes of course get WS to buy some indulgences; earmark it for education. That’s fine. But it is not the solution. The solution is public policy for free higher education. Student loans are an obscenity.

    1. petridish

      Free is a big problem in this context, especially when the cost is absorbed by the state. As long as everyone pays taxes and taxes pay for college, everyone has a right to demand their piece of the pie and that pie will necessarily cater to the lowest common denominator.

      In order for a college degree to be valuable, it must be more about doing the intellectual work than just getting your hands on cheap money to do the time, or having it be FREE.

      High school is free, higher education should be AFFORDABLE if, and only if, you can cut it academically.

    2. rob

      I like “The coalition of the pissed off”.,that sounds like a fourth of july rallying call. Weren’t the founders a “coalition of the pissed off”?

  15. TC

    I disagree with the premise that, “transaction taxes are NOT designed to be revenue-generators (although they do produce tax receipts). They are meant to reduce the activity that it taxed.”

    In all my years I have yet to hear a retailer whine that, sales taxes are reducing their business activity. If there is perceived value in something being sold and purchased, then a sales tax will be paid without any protest whatsoever, either from the seller or the purchaser.

    As for subsidizing a college education and making it free of charge, I cannot say I am fully on board. At this point in an individual’s personal development free will rather should be enticed requiring a person have skin in the game. That’s why I strongly support Elizabeth Warren’s S.897, the Bank on Students Fair Lending Act. Not only does this approach require students have skin in the game via a low-cost loan financed at the Fed’s discount window, but Warren’s bill likewise paves the way for full nationalization of the Federal Reserve for the sake of its providing credit for something other than bailing out insolvent, toxic waste generated by a bunch of wreckless fee junkies.

    As for the #WallStreetSalesTax, I am fully on board here, too. However, I view this as a means of attack on reactionary Republicans and sold out Wall Street Democrats (like Obama) who would sooner piss on the graves of Americans who fought for justice in the form of the social welfare state the nation thus far has institutionalized and cut, cut, cut for no other reason than dutifully behave like the fascist they’re paid to be, doing this rather than actually lifting a finger to uphold the constitution they have sworn to defend–a constitution whose principles in purpose are definitively stated in the preamble.

    1. Susan the other

      Did you catch the Fed board meeting on cspan last nite? I just got in on the last 10 minutes and it seemed like a gathering of Martians.

    2. Yves Smith Post author

      Please google “Tobin tax”. A sales tax is not a transaction tax.

  16. The Heretic

    A free high quality education is a good thing, but not enough to bring a decent level of prosperity to the students after they graduate. Those graduates need jobs, and as a society, we need those graduates to do work that is useful for the health and sustainabilty of our society. So what we need for our nation is a vision for what we could become, and then employ some of the people of our nation to get there.

    1. petridish

      In my experience, the words “free” and high quality” never belong in the same sentence unless that sentence states explicitly that one precludes the other.

      1. Yves Smith Post author

        City College of NY used to provide an excellent education for working class children of NYC. A lot of scientists and academics came through CCNY before it got to be crappy. It was good for at least the first generation after WWII.

        1. petridish

          I assume, Yves, that you cite City College of New York because it was free or nearly so. But I’m not gonna lie, the phrase working class children of NYC made me wince.

          This isn’t remotely the same country that it was after WWII.

          There’s just no space between free and freeloader these days.

          1. Carla

            “There’s just no space between free and freeloader these days.”

            I had some sympathy for some of your earlier comments. Now I just pity you.

          2. Yves Smith Post author


            Huh? That is what CCNY was DESIGNED TO SERVE, basically kids of immigrants who were smart. We do have classes in this country. What’s wrong with institutions that set out to promote upward mobility? Going to CCNY used to say you were smart and hardworking even if you were also from the wrong side of the tracks (which was pretty hard to hide if you grew up in Queens ex Forest HIlls or Harlem).

            Here is a partial list of noteworthy CCNY alumni:

            Julius Axelrod 1933–1970 Nobel laureate in Medicine
            Kenneth Arrow 1940–1972 Nobel laureate in Economics
            Herbert Hauptman 1937–1985 Nobel laureate in Chemistry
            Robert Hofstadter 1935–1961 Nobel laureate in Physics
            Jerome Karle 1937–1985 Nobel laureate in Chemistry
            Arthur Kornberg 1937–1959 Nobel laureate in Medicine
            Leon M. Lederman 1943–1988 Nobel laureate in Physics
            Arno Penzias 1954–1978 Nobel laureate in Physics
            Robert J. Aumann 1950–2005 Nobel laureate in Economics


            Solomon Asch – psychologist, known for the Asch conformity experiments
            Julius Blank – engineer, member of the “traitorous eight” that founded Silicon Valley
            Adin Falkoff – engineer, computer scientist, co-inventor of the APL language interactive system
            George Washington Goethals 1887 – civil engineer, best known for his supervision of construction and the opening of the Panama Canal
            Dan Goldin 1962 – served as the 9th and longest-tenured administrator of NASA.
            Robert E. Kahn 1960 – Internet pioneer, co-inventor of the TCP/IP protocol, co-recipient of the Turing Award in 2004
            Gary A. Klein 1964 – research psychologist, known for pioneering the field of naturalistic decision making
            Leonard Kleinrock 1957 – Internet pioneer
            Solomon Kullback – Mathematician; NSA cryptology pioneer
            Lewis Mumford – historian of technology
            Charles Lane Poor – noted astronomer
            Howard Rosenblum 1950 BSEE – NSA Engineer; developer of the STU (Secure Telephone Unit)
            Mario Runco, Jr. 1974 – astronaut.
            Jonas Salk 1934 – inventor of the Salk vaccine (see polio vaccine)
            Philip H. Sechzer 1934 – anesthesiologist, pioneer in pain management; inventor of patient-controlled analgesia (PCA)
            Abraham Sinkov – Mathematician; NSA (National Security Agency) cryptology pioneer
            David B. Steinman 1906 – engineer; bridge designer (Class 1906)
            Leonard Susskind 1962 – physicist, string theory

            1. petridish

              Whew. Consider me TOLD.

              But, back in the day, my working class father cautioned us against expecting (let alone demanding) that anything worthwhile be free. The price, of course, was not always paid in dollars.

              Those conversations took place around a kitchen table located “on the wrong side of the tracks,” a fact of which I am quite proud and make no attempt to hide.

              Just sayin’.

    2. allcoppedout

      I doubt much beyond technical education gives work skills beyond bureaucratic lying. If we all did science and this had the same effect on all as those of us who do it now, we’d have very different politics. Currently only 6% of scientists align with GOP-Tory (about 35% Democrat-Labour) with most regarding politics as drivel. There is no political teaching in science. Of course, we may be born with our political inclinations – still leaving the question on why so many left-leaning people go into it.
      We could abolish non-tech HE and might see benefit for poor people in this – less certificated quacks could be a boon. The poor really pay for everything if you think about it and it might help t take rich people’s toys off their backs.

  17. REader09

    Higher education is a system designed to perpetuate the status quo, serfdom and poverty, according to Paul Fussell’s 1992 book, Class: A Guide Through the American Status System.

    1. petridish

      An impartial, affordable, meritocratic higher education system allows a person to rise above serfdom and poverty.

      The tell here was in the title–the AMERICAN status system.

      1. REader09

        the higher education system as we know it worldwide is to push information as knowledge, corporate job skills as wisdom, brainwashing and conformity as education. if Rousseau forcefully argued during the Enlightenment, life’s sole purpose is to be idle. If he were around today, he would probably have already said, man is born free but everywhere he is in jobs. Education is not about confirming what we already know. It’s about proving ourselves wrong. It’s about taking us to a position where we have not been before.

        1. JTFaraday

          Hah! I said that on a thread on this site:

          JTFaraday says:
          March 10, 2013 at 1:21 pm

          If Rousseau were writing today, he would probably find himself saying “Man is born free and everywhere is in jobs.”

          Then the peasants and the salonniers would join forces and harass him off the continent.


          Timely in light of the line on education today, where anything that doesn’t lead directly to an existing job is to be purged from the curriculum.

          This doesn’t even fit with the neoliberal yap on “innovation.”

          Who are these people?

  18. allcoppedout

    Higher education as we have it is the answer to almost nothing. I’ve taught before and after the mass expansion in the UK. The comment that most people in our classes and Yves’me rather patronising reply are strangely both right. One gets pretty good at handling the teacher-mincers Susan hints at – yet try stopping that kind of behaviour and much worse in the Middle East without a machine gun (I had plenty of good students there too).
    The problems are much deeper than ‘who pays’ and those of us who believe all education should be free can always find examples like Sweden where it is, yet students are still in debt. I was an undergrad on a scholarship 40 years ago studying science. My dad gave me what he would have paid as the parental contribution if I’d been on a grant anyway. I played some good rugby and cricket in return. As for the education bit (even in science), I’d have been better off with it at 14 or 25 – for most people 18 is entirely the wrong time.
    Some will contest the notion that 18 is the wrong age, but if I am right, ‘who pays’ is entirely the wrong place to start. I’ve taught in the UK, France, Holland, various bits of Africa and the Middle East and Brazil the USA.
    Nearly all my best students were mature (Post 28), often working and part-time.
    I totally concur on Yves’ observation the ‘secretaries are smarter than the bosses’. We should wonder in this what ‘use’ higher education is if it produces “unintelligence”. Not the sort of stuff to foist on people we care for. In one business school I taught in most of the ‘office girls’ got MBAs – and continued as clerical assistants (OK – I conned a couple of them into teaching a few classes for me and the penny dropped).
    The French model never worked as Yves suggests and there was always a royal route there similar to UK public schools into their grandes ecoles. The most stunning progression I witnessed in business teaching were the sandwich course students returning from a year at work. These courses were expensive to administrate and have gone. We used to provide day-release or night-class supervisory management courses (then a qualification for university entrance) and get superb work from working people who had not achieved at school. Their work was much better than on post-grad certificate, diplomas and MBAs. Guess which course survived! Standards here in schools and universities collapsed around 1992.
    Most of the people Yves rightly wants to see in higher education won’t get there even if we wave Sooty’s magic wand and make if free. And a good 75% are not fitted to the dross textbook learning and offer anyway. Plenty of surveys show it’s the networking before university and entrance to the top institutions in combination that matter for earnings.
    My old man started as a bookie’s runner, left the war as a warrant officer, did a crazy teacher training course (they beat up a lecturer who insisted on teaching in Latin) and was a headmaster when I became an undergrad. As an academic he couldn’t cling to my shirt-tails (he left school at 13). He would breeze humanities at any level and I used to be able to teach retired people like him in inter mural programmes (now gone here too). Now we are back to short, paid teacher training for soldiers in the UK.
    Standard degree level stuff can be taught at about $1000 a year and universities could go ‘social media’ with practical outlets in local sports clubs, theatres, media production, r & d, bars, social care, hospitals and so on. A university of the air with projects.
    Of course, even this neglects the fact that many people are still disadvantaged by early experience and school-university focus on the academic and forcing people into it to earn more than the “wasters” who can’t do it. Pulling down our chronic hierarchy takes more than paying for higher education by a transaction tax that might be the pin that bursts the finance curse.
    I would deeply suspect any colleague who thought more than half her class fitted for higher education as we are forced to offer it. No one who thinks that can really care. In my experience we cynical bastards do far more for our students than the smiling brotherhood smearing the kwality and excellence of the new whitewash. They sound like Yves bashing the guy who told the truth above. I left the system to teach as I please to people who want to turn up plus a day job assessing people who at least aren’t paying me by taking debt on.
    What we need is radical change that can be achieved by big aspiration without big government. All I could do about student debt (’emancipated’ by my joint first and various post-grad)morally was make sure I don’t get paid on the back of it. HE needs change to make it other than part of the current meritocracy scam.
    Positive plan? Yep. School until 14. Job/earning guarantee via national-international service (with classroom time until 18) – that you can dip into as an unemployed adult – university of the air (all basic material public domain) and Internet with new local-social-global social activity centres (existing facilities) and chances to engage at any time including after retirement. Give various tranches of this to private sector management. Economists and politicians to work on getting this done, not relying on current vapid control fraud economics. Wealth tax and prevention of private money in any politics (criminal offence)we can vote on.

  19. bluntobj

    Sayings become cliche because they have a good measure of reality, and people hate being reminded of reality.


    Things that are free soon become worth exactly what you pay for them.

    As a collorary:

    The “cost” of providing a service to “students”, if paid wholly from a third party, will inevitably rise until it contains and overwhelms the payor’s ability to pay.

    Please see medicare, social security, health insurance, obamacare, and cost/price trends in any debt financed industry or field if you want proof.

    Here are a couple additional questions:

    If we accept that there are few jobs for college graduates now and in the near future, and those jobs that are within their experience level are poor and low wage, why exactly is the author proposing to make education effectively free for students, which has a great likelyhood of swelling student enrollment?

    If we accept that humans have a basic motive to value what they earn and pay for, what value will be placed on an effectively “free” education? Perhaps the same value a high school diploma has now?

    When has the concept “make someone else pay” had a result free of negative consequences?

    1. Yves Smith Post author

      If the price of “free” is that you have to pass pretty rigorous entrance exams, that “free” is suddenly prized.

    2. A Real Black Person

      “If we accept that there are few jobs for college graduates now and in the near future, and those jobs that are within their experience level are poor and low wage, why exactly is the author proposing to make education effectively free for students, which has a great likelyhood of swelling student enrollment?” The author doesn’t seem to accept that. That may have something to do with the author being an educated woman and a common perception among educated women that there are very few decent paying jobs for women that don’t require a college credential.

  20. rob

    My pet peeve,wheneve “higher education” is thrown around;is the lack of meaning that really has.Or even more specifically the loaded insinuation that more education means greater anything.
    I understand the need for more specific technical education/experience when it comes to anything real.as in engineering or brain surgery or growing vaccines,etc.
    Most education is not technical.
    Lawyers are almost worthless.Humanities, just mean getting along with people.Economics,marketing,business classes are just how to be a cog in a machine already decrepit.
    Every bit of it is just useful to each and every person as a means to getting paid by someone for something.
    The first problem we face is the inequality of the pay scale.In my experience, the people who work the least,get paid the most.This fools the rest in between to assume some sort of inherent value in what the least of us do,like CEO’s of large corporations.Or their lawyers.
    This woven fabric of an economy, is the problem.An education won’t solve this.But if you are lucky, you too can sit on your bottom all day and get paid so much, it is characterized by how many zero’s come after the other numbers.But really, being a stonemason, or a waiter, or a mechanic of any trade, is all a person needs to find fulfillment. Right now, the compensation scale is the worst aspect of these life choices.Specifically due to the lack of healthcare,education,retirement choices a person recieves from these occupations.
    I have always seen a sort of wisdom by the europeans who had lived in some little town,and had a sense of connection to the past 500 years or so… This comfortable life that some people eeked out.That wasn’t getting them “anywhere”, but led to a life of contentment.There isn’t anything more to life than being happy.Being happy in your production and usefulness.Being happy in your cost to others.Being happy to leave a “way” of being for those will come later.
    The world and all of our lives are just a temporary dillemma.As joseph campbell put it”to find your bliss”.You must joyfully partake in the sorrows of the world”.
    While the vast majority of billions of people are living here and there.Some in hell ,some in heaven..A very small percentage are on the course to take any joy from everyone else so that they can count their beans till kingdom come.
    Humanity has to strike an equillibrium , to exist.
    This is what education should be about. All humanity must find this equillibrium, or none of us will.
    Populations can go down.We can tread lighter on the resources of the world.Americans can learn this too, if we want to last for a thousand years.We have to set our sights on the long game.
    In america, a four day work week where people can earn a decent living can only happen if some people and their corporate structures don’t suck up every inch of life,from them.The rest of the days can be for personal growth and personal,spiritual,and community development.The quality of an educational system will be judged by the fruit of the tree.Today, that fruit is rotten and/or poison…
    Where we find money to include the necessary education to the next people, is just a question.That isn’t anything but political in nature.It isn’t like there isn’t a ton of money being spent for all the wrong outcomes,that wouldn’t be better spent teaching children and young adults,the world we can live in. Illuminating the possibilities.Enumerating the pitfalls.
    The jobs of the future , must fit within this framework,if we are to improve. otherwise we are on the path we are on.And those of us with eyes to see and ears to hear, know where that is going.

    1. JEHR

      Dear Rob and Allcroppedout: I would dearly love to read your very long comments but when you do not paragraph properly with blank lines between paragraphs, I do not bother. You see, some people scan a comment to see if it is worth reading and when it is, they read. When the scanning is impossible, we do not bother to read.

      Look at the way bluntobj and anonymouse set up their comments.

      When you take into account the readers’ wishes for a readable piece, you will get very happy readers.

  21. Tyler Healey

    “Whatever revenues transaction taxes raise can help fund public education.” – Yves

    Rodger Mitchell and all of MMT will tell you that federal taxes do not pay for federal spending.

    Federal taxation destroys money. Its purpose is not to generate revenue, but quell inflation and harmful behavior.

  22. b2020

    The proper tax for free education is inheritance tax. If we are to take serious claims of merit and meritocracy, then it makes perfect sense to target systemically dangerous inbred wealth. It also makes sense to dedicate the revenue to providing everybody an education gated only by aptitude and effort, i.e. public schools and universities that are comprehensively funded. The only reason to restrict admission is access to specific teachers and faculty members that are in demand due to their merit.

    Personally, I would put a recipient-side lifelong limit of 35 years times 50 weeks times 40 hours times minimum wage for receiving donations and inheritance payments – tax free or taxed as regular income – with a 100% inheritance/gift tax on everything above that limit. I’d even throw in a flat income tax on all income (interest included) in exchange for an inheritance tax that eliminates the born millionaire.

    The revenue of the inheritance tax should not be available for anything not related to a level playing field – education, maybe child care.

    1. A Real Black Person

      Pure meritocracy is passe in this country. We value social currency more than merit. Many times, the person who gets a “good job ” gets it because they know the right person. Wealth redistribution and meritocracy goes against the human instinct that most people have to help people inside their social circle before they help outsiders.

      Then again, we have automated or outsources most of the real work overseas, so many of the jobs that remain involve paying people to socialize.

    2. Lambert Strether

      Taxes at the top income levels should be confiscatory to prevent an aristocracy of inherited wealth, and to prevent the government being bought out by the loose cash the 0.01% have lying around. Taxes do not, however fund spending, although there may be perception advantages to a perceived dedication of revenue.

  23. Jennifer

    Yves you know Dean Baker has written extensively about a FTT? He frames it as a general revenue producer and as a check on extensive, purposeless trading. There was a recent web presentation on it, the amount of money which can be raised by a pretty small tax-it’s either 1 or 2%-is pretty amazing. Also, apparently there is a FTT on the books in New York state although right now it’s at 0.

    1. Yves Smith Post author

      I need to go argue with Baker. Tobin taxes are to discourage activity. The revenue goodies are secondary. You are going to create a mess if you design a transactions tax mainly about revenues. And it will create enough bad side effects as to play right into the hands of the bankers.

  24. Conscience of a Conservative

    Wall Street’s an easy target, they commit lots of abuses, but the response to crimes is legal prosecution, not to look at the crooks as a source of student funding. Fixing Wall street means enforcing the laws, creating transparency in the markets and downsizing too big to fail banks.

    As far as student funding. Giving students more money to throw at institutions will only result in higher education costs and more schools like NYU that have people like Jacob Lew on their payroll getting rediculous benefits such as free mortgages for housing they don’t need.

    We need to be careful, thougtful and prudent. Yes the students from the lowest income households need access to higher education or a good trade school, but it needs to needs based , apply to those students that are capable of doing well and securing a job and avoid giving funds to those students that come from families skilled at shielding income and assets. And we need to avoid conflating solving a funding issue for higher eductation with that of ensuring fairness in our financial system and avoiding systemic risk.
    Lastly the issue of pensions is not a red herring, we all have skin in the game with regar to ensuring our pensions are able to acheive the highest returns with prudent risk an aren’t funding another agenda.

  25. allcoppedout

    My dogslexia is sometimes apparent. Susan is right that education should be free plus stipend. Yves is right that ‘free’ means passing the qualifying. There’s a problem here in that qualifying is class-based because of royal routes in our education systems. I taught loads of mature students who did badly at school and did very well at university – but most of them came from the same school system in which only 10% passed the qualifying (it’s 60% now here odd as there are indicators real IQ is dropping).

    In the UK people send their kids to qualify in public schools that charge very high fees (14K compared with 9K at university), or move house to ensure the best state schools.

    It’s a real treat to teach keen, clever people – but a real thrill to teach someone school failed and branded ‘fit to empty trash’ to a good honours degree (she was dyslexic too).

    Our universities should get somewhere near real need through some kind of training needs analysis, but even this tends to leave out people who aren’t going to hack the entrance grade. My best students have never needed ‘teaching’ – others (now the majority) need a year before they are ‘worth teaching’.

    Any real change has to recognise that many are not suited to academic study and won’t benefit from it. Many who can are so disadvantaged by home and school (or disability where we have improved a bit) they need special help. But we need to realise many need equality of opportunity and income but some other route.

    I’m inclined to think we should fund this much as rearmament has been in the past with the end of preventing war. There has always been plenty of money. We just let the wrong people use it for the wrong ends.

  26. impermanence

    Banking is theft, plain and siimple. No matter the form it takes [in this era of financialization], all institutions essential become banks; so whether it’s etra-large with peperoni and green onions, lawn mowers, autombiles, houses, or college educations, it’s all about the debt [banking].

    Get rid of debt and your will have solved most of society’s ills.

  27. nothing but the truth

    – why are universities running hedge funds?

    – why are universities becoming part of the revolving door?

    – where is the chart of the top 20% income of university officials?

    – why are we surprised that the university-keynesian-revolving door complex has become permeated by corruption and high costs (at the cost of whom) ?

  28. Yancey Ward

    Here’s a thought- don’t waste the ages 5-18 the way we do. Seriously, read any blog you want, and they are populated by “college-educated” people who can’t write in standard English. What Yves is proposing will only guarantee the further erosion of quality that we see in K-12 education.

  29. Jack Parsons

    The US student debt bubble somewhat over a trillion $$. As the economy drifts toward an unpleasant stasis, these bonds will slowly drop in real value. And so, a modest proposal: the US mint a trillion dollar student debt coin, buy out all student loan debt, and sink it. Down the toilet. Then, kill Sallie Mae and let the private debt business do what it wants.

    This would be an enormous investment in America’s future, AND would buy a generation’s allegiance to the party which did it.

  30. www.slideshare.net

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  31. Jimo

    Two points:

    A. Having the government fund higher education directly rather than funding the students means that the check on higher education spending ceases to be a 19 year old with little sophistication or power (or short-term incentive) to query why education spending is so excessive and increases at such high rates. Instead, the Treasury — with the GAO — in tow will review these institutions’ accounting and likely will fail to accept the b/s put forward about why spending is so extreme (e.g., “Why again in Adjunct Professor Petreus being paid $200k for doing next to nothing?”).

    B. Of course, one alternative all along has been funding higher education not through debt but through equity. Once upon a time, we had such a system. It was called steep progressive taxation. Now that this has been all but eliminated (what was Mitt Romney’s tax rate – at least for the few years he would make public?) an alternative is literally taking an equity stake in student expenses. Imagine if ex-students had to send a copy of their tax return each year to the DoE and then make arrangements to pay, say, 3% of their earnings — whether $25k or $25M — in payments until the 30th year after graduation or turning 65 years old (whichever was earlier). No longer would graduates feel pressured to take jobs primarily (or solely!) on the basis of earnings. Yet, others who did manage to earn big bucks would also ‘pay it forward’ and truly bring balance to the government’s balance sheet.

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