Maybe parents might want to consider the effects of pushing their children to get a college education:
Cyndee Marcoux already was stretched thin, thanks to the $80,000 in student loans she racked up after getting divorced and going back to school a decade ago. Her breaking point came in 2010, when her daughter defaulted on student-loan payments of her own.
That’s because Ms. Marcoux, a 53-year-old library administrator in Seekonk, Mass., co-signed for about $55,000 of her daughter’s loans. When the daughter was unable to keep making payments, Ms. Marcoux was on the hook—a burden that forced her to reshuffle her entire life. To scrape up the extra $550 a month she owed, she sold her house, then took a second job registering emergency-room patients on the weekend overnight shift. “You work your whole life and never pay a bill late,” says Ms. Marcoux. “You don’t ever think your kid isn’t going to pay.”
As certain internet writers have noted, this outcome wasn’t exactly unpredictable. When supply of college-educated labor outpaces demand, due in large part to federal subsidy and state propaganda, it should come as no surprise that the average income of college-educated individuals decline. And since demand for college has outstripped supply (though it should be noted that supply is radically increasing right now, almost like a bubble), two things began to happen at once: wages for college-educated workers declined while the cost of college education went up. The outcome? Lots of college grads are stuck with a lot of debt and no way to pay for it.
Making matters worse, the federal government—in conjunction with the major banks who lend out college loans, service the debt, and even act a collections agencies in the event of default—has conspired to basically make the recipients of student loans into debt slaves by preventing students loans from being discharged in bankruptcy. Furthermore, the federal government strongly encourages parents to co-sign for their children’s college loans by requiring their financial information when filling FAFSA.*
All this has started to bite a good number of parents in the rear. Deservedly so, I might add. Hopefully this will help other parents to wake up and start to actually consider whether a) their child should really go on to college and b) whether they will legally bind themselves to pay for their child’s worthless majors.
* Note: while this is only technically required to determine students’ grant status, it is assumed that parents are going to pay for their children’s education (hence the parents’ expected contribution) portion of the FAFSA calculation. Parents implicitly agree, since they are often expected and encouraged to sign for their children’s loans. Thus, the rarely-challenged assumption is that parents are good for their children’s education costs.
Sixty percent of women in the United States who are 65 or older do not have enough income to cover basic expenses without help, even if they are married, according to the report.
That is compared to 41 percent of men in that age group.
The report compares income, not including food stamps or help with utility bills, to very basic monthly expenses for housing, food, transportation and health care. For a single person, this Elder Economic Security Standard Index, developed by Wider Opportunities for Women, estimates an annual income of $19,000 to $28,000, depending on whether they own their homes outright, rent or pay a mortgage. For married couples, the necessary income to cover basic expenses ranges from $29,500 to $39,000.
More than half the nation’s elderly do not make enough. But women, who typically outlive men, are more vulnerable. Nearly half of white women, 61 percent of Asian women and three-quarters of black and Hispanic women have incomes that fall below the Elder Index levels. Men 65 or older report incomes that are almost 75 percent higher than women’s.
There are two trends that promise a miserable future for women.
First, the sexual revolution, which has enabled female promiscuity on a scale heretofore unseen, has done serious damage to marriage, and will continue to do so as men realize that informal LTRs are preferable to legal marriages. This means that women are less likely to have husbands in the future, ad will be less assured of having access to a man’s wealth. This will be problematic for women since it is already difficult for them to make ends meet without spousal or government help.
Second, the current federal spending trend is unsustainable. Quite simply all the benefits that today’s retirees take for granted, plus all the other benefits that politicians continue to promise them in their various bids for election, will simply not exist in the future. People cannot have everything, which is one way of saying that resources are finite. At the current rate of consumption, they will eventually be squandered, and no one will have anything. This means that women will be even worse off because the government will not be able to provide for them anymore, particularly if environmentalists of the left wing manage to impose their plans for destroying the economy for Gaia.
Women will have three options to avoid this mess. They can either take their future financial security into their own hands by getting degrees and jobs (and real jobs, wherein one actually contributes to the economy and doesn’t merely engage in busy work), they can marry beta providers (trololol), or they can become part of an alpha harem (and here alpha refers to a man who can command resources to provide for multiple women). My guess is that women will go down first path until the bottom falls out of the economy and demand for superfluous workers declines, and then they will go down the third path, which will incidentally lead to the decline of civilization.
Thanks to Darwin Barton
There’s something to be said for raising your kids on a daily basis and that’s what I’m working on doing. A few years back my husband and I made the tough decision for me to quit my job and it’s been really nice, actually, since we’re able to have me watch the kids all day while he works. I love him to death but I wish he made a bit more money only because our life has changed dramatically in the last few years. We’ve not cut back on certain things like home alarm systems and the organic produce we like to buy but others like trash pickup and things like that had to go to make room for our new lifestyle. I don’t feel bad about it though because it means I get to be with the kids and do what I like to do which just makes me feel good about how I’m living my life. I know the kids appreciate being able to have their mom around!
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So I missed this last week, but I was away. We’ve been noticing that Pittsburgh has been faring well in income growth of late compared to other regions.. but Wendell Cox in Newgeography.com takes it a bit further and adjusts for regional cost of living differences to measure recent growth rates. We weren’t number 1, but note what picture they used: Personal Income in the 2000s: Top and Bottom Ten Metropolitan Areas
The question of the artificial states has recently been brought up by the referendum in Southern Sudan on whether the southern part of the country should declare political independence from the northern part of the country. An article in New York Times (link) succintly discussed few notable fact-checked evidence of the increasing ethnic, political and economic North-South division within the country. As a single country, Sudan performed terribly in development outcomes. According to CIA World Factbook (link), the country suffers from high rates of extreme poverty and illiteracy. For instance, the official share of population below poverty line is estimated at 40 percent – almost twice the average of North African states. In addition to poor development outcomes, the country is plagued by significant political and ethnic fragmentation into largely Muslim, Arab-speaking north and predominantly Christain, English-speaking south. The political independence of South Sudan is the only contemporary evidence of the re-establishment of land borders alongside the ethnic division.
In the recent paper entitled Artificial States, Alberto Alesina, William Easterly and Janina Matuszeski presented two formal measures of artificial states. Aside from the measure of ethnic division, the authors constructed the measure of straightness of border lines. The hypothesis suggests that squiggly geographic border lines separate the states alongside the ethnic division. On the contrary, straight border lines suggest increase the probability of the emergence of artificial states plagued by ethnic and linguistic fractioning. The authors presented the empirical evidence, suggesting that fractional land borders are highly correlated with the GDP per capita. In addition, the share of ethnically partitioned population within the country is systematically decreasing the GDP per capita in cross-country comparison. The intuitive ideas behind the empirical evidence suggest that at the end of colonial period, colonizers that set straight borderlines between the emerging countries incured significant economic cost to newly formed African countries in terms of lost GDP. The evidence from Alesina-Easterly-Matuszeski study suggest that a 1 percentage point increase in the fraction of country’s population belonging to groups partitioned by the border would decrease the GDP per capita by 1.3 percent. On the other hand, countries with squiggly geographic borderlines enjoy significantly higher GDP per capita.
The post-colonial period in Sudan was characterized by two civil wars which outbroke in 1972 and 1983. In 1956, Sudan gained the political independence from Great Britain. Contemporary borderlines were predominantly determined by the colonial authorities in African states prior to the wave of independence of many African nations. The emergence of the artificial states is rather a consequence of poor colonial policies than of high bargaining cost of ethnic groups within the country in setting country borderlines. Hence, the economic effects of colonial legacy can persist over time. Consider the evidence from Cameroon. The country was originally colonized by Germany. During the World War I, Northern Cameroon was occupied by Germany while the rest of the country was colonized by the French. Between 1916 and 1960, the country was a unique experiment of how the establishment of the institutional setting of European countries affects domestic development outcomes. A recent study by Alexander Lee and Kenneth Schultz (link) suggests that in the areas formerly occupied by the British enjoy higher levels of wealth and improved access to clean water while the rest of the rural country, after having been colonized by the French, suffers from significantly hindered access to clean water and worse provision of public goods. Even though the colonial patterns do not apply to urban areas, lessons from Cameroon suggest that the impact of post-independence public policies and colonial legacy on the level of wealth is of the same importance even when linguistic and ethnic fragmentation persists over time.
In spite of considerable degree of inefficiency, the persistence of inefficient and ethnically fragmented states is continuously marked by poor economic and development outcomes, often accompanied by civil-war conflicts such as military violence and genocide by the Sudanese army in Darfur. An interesting theory has been recently put forth by Daron Acemoglu, Davide Ticchi and Andrea Vindigni (link) who suggest that rich political elites seize state capture and democratic politics by expanding the size of bureaucracy. Hence, to gain political support, the coalition of elites chooses an inefficient structure and organization of the state.
The phenomenon of artificial states is not abridged to least-developed countries and developing world. Even in the group of advanced countries, several countries emerged despite a considerable degree of linguistic, ethnic and cultural fractioning within country borders. The evidence from Switzerland suggests that a continuous transition to a peaceful and stable democracy is possible. Amid highly fragmented linguistic and cultural characteristics such as four official languages and the persistence of GDP per capita divergence between high-income German cantons and low-income French cantons, Switzerland is characterized by envious political stability and economic performance. The genuine feature of federal political system is a consistent fiscal decentralization such as jurisdictional competition between units within the federalized structure in various areas such as taxation, regulation, health care etc. Hence, a decentralized fiscal structure and division of powers require a limited federal government and a high degree of autonomy within the federation. Thus, despite a multilingual population, the Swiss model of federalism is marked by political stability, peace and prosperity.
The phenomenon of artificial states in advanced countries is not confined to Switzerland itself. What distinguishes the Swiss model of federalism from centralist political systems in its neighboring countries is a high degree of political autonomy in Swiss cantons. Competition between jurisdictions within the federation nonetheless generates different economic outcomes. However, the outcomes generated by jurisdictional competition preclude adverse effects caused by either state capture of democratic politics or redistributive taxation between jurisdictions. In Switzerland, cantons with favorable public policies such as low tax rates on labor and capital, sound regulation and competitive provision of health care, have enjoyed persistently higher levels of wealth compared to cantons in the rest of the country. Of course, the coexistence of diverse ethnic and lingual groups within the single state requires common values, integrated into formal institutions.
Contrary to common perception, the artificial state may not be characterized exclusively by ethnic and linguistic fragmentation. To a large extent, Germany and Belgium could be classifed as artificial states. In Belgium, Flemish-speaking north of the country consistently outperformed French-speaking south on various indicators and outcomes, including income per capita, international test scores and employment-to-population ratio. The political and linguistic division of Belgium into high-income Flemish part and less developed French part reflects the essential dilemma of artificial states – should a single country with fragmented and heterogeneous population be abandoned and whether ethnicity borders should represent country borderlines. In fact, linguistic fragmentation of Belgium to the extent that Flemish and French part of the country adopted different administrative and education systems, led to persistent inability of two majorities to form a government. In 2007, The Economist opined that Belgium should cease to exist. The unification of Germany (Wiedervereinigung) integrated two parts of the country with vastly different institutional setting into a single political unity. However, Eastern and Western Germany were known for completely different political and economic system. The unification has incured many adverse effects. A significant difference in wage and price levels between East Germany and West Germany caused continuous migration of East German labor into West Germany, thus decreasing the productivity growth in East Germany. Consequently, the unification of the country led to the adoption of West Germany level of prices and wages in Eastern part of the new country. The artificial increase in price-wage level increased the unemployment rate in Eastern Germany to double-digit level, not least triggered brain-drain and capital flight. Hence, the unification of Germany as an artificial state resulted in persistent income per capita divergence between high-income West Germany and low-income East Germany. The unification of Germany into a single country should indeed never happen. In fact, adverse effects of the unification on East German productivity and wages would not lead to continuous increase in unemployment rate. If East Germany maintained a high degree of political autonomy, the transition to market economy would not be restrained by the adoption of West German price-wage level that could not be sustained by low productivity level in East Germany. To avoid the pitfalls of the artificial states, West and East Germany would be better off, had the countries never been reunified.
Recent national referendum in South Sudan on whether the southern part of the country should declare political independence from Sudan again pondered over the persistence of artificial states. The empirical evidence on poor development outcomes in several African countries suggests that borderlines, disregarding the ethnic distribution of the population within the country, are highly correlated with low income per capita. The unique solution of the artificial states is the adoption of political federalism. Under fiscal decentralization and limited government, federalism enables peaceful and prosperous existence of fragmented ethnic and linguistic structure in a single state. For instance, former Yugoslavia, known for highly fragmented ethnic, linguistic and economic disparities, ceased to exist not because federalism would not be a genuine political system but, ultimately, because of severe economic mismanagement, powerful and centralized government that disdained the principles of political autonomy and market economy, causing severe hyperinflation and the collapse of the federation that eventually resulted in a decade of civil wars and military violence. The evidence from Yugoslavia suggests that between 1950 and 1990, drastic economic divergence occurred. The lesson suggests that the essential condition for the efficiency of federalism as a political system is high political autonomy and fiscal decentralization, both of which enable the competition between public policies.
Amid linguistic fragmentation, the competition between jurisdictions rewards competitive public policies by higher income per capita which ultimately boost the inception of public policies in less developed parts of the federation. Hence, without jurisdictional competition and political autonomy, ethnic and linguistic fragmentation of the country may ultimately result in political instability which, in addition, generates poor economic outcomes.
Forbes: Where Americans Are Getting Richer.
You betcha… No. 6.
They have a companion piece: 10 Highest State Income Tax Rates For 2011. Might be worth noting that Pennsylvania is not on that list, nor anywhere near close. Look at those state income tax rates and compare them to Pennsylvania’s. A lot of those states will also have sales taxes far above Pennsylvania’s in addition to that.. and most without the exemptions we do for things like food and clothing. The clothing exemption has a minor news point today in this in the Trib: Canadians to cash in on Black Friday in W.Pa. Worth a read for all those who think Pennsylvania is taxsylvania or something like that. Busloads of people coming here because our taxes are much lower. Maybe all those shopping tourists will stop in Pittsburgh along the way and make up for all the Marcellus Shale businesses that are boycotting us?
Now got back to spending some of that increased income.
A few months ago a guest blogger on ‘The Baseline Scenario’ blog, StatsGuy, wrote a post entitled ‘Good Government Versus Less Government’. It was described as a ‘must-read’ in a post by Tyler Cowen on ‘Marginal Revolution’ and received a great deal of attention on a range of other blogs including Scott Sumner’s (here).
StatsGuy draws attention to the fact that the size of government component of the Heritage Foundation index of economic freedom is negatively correlated with the other components of this index. He concludes that the Heritage Freedom index is really a composite of measures that get at two different things: good government, and less government. His bottom line:
‘Overall, the Good Government factors tend to dominate, and drive a lot of the correlation with good economic and quality of life outcomes. When one splits out the factors, the case for Less/Weaker Government weakens substantially, and the case for Clean/Non-Corrupt/Efficient government strengthens considerably’.
Some other researchers have similarly objected to the inclusion of size of government in economic freedom indexes. For example, Peter Lindert describes this as ‘guilt by definition’ on the grounds that it tends to make big government and the welfare state look bad merely by describing this national attribute as contributing to lower economic freedom (‘Welfare states, markets and efficiency: the free lunch puzzle continues’, 2007: 6).
At least one contributor to the discussion of StatsGuy’s post made the point that if economic freedom has two different dimensions, a lack of correlation between those dimensions does not necessarily mean that one of them is irrelevant. For example, it is possible for both size of government and quality of government to be important to economic growth.
I recently had an opportunity to test whether this is so in preparing a background paper for the 2025 Taskforce, which was established by the New Zealand government to advise how average incomes in that country could be raised to equate those in Australia by 2025. The analysis provides some support for the view that size of government is an important component of economic freedom indexes.
The analysis uses the Fraser Institute’s index of economic freedom because this provides a consistent measure of institutional quality over a longer time period than the alternatives. The data set relates to ‘advanced economies’ as defined by the IMF – this data set includes high income jurisdictions with small governments, such as Hong Kong and Singapore, as well as OECD countries. The regression, based on panel data, explains average per capita GDP growth in each decade in terms of several variables including two components of economic freedom at the beginning of each decade, the size of government index and ‘other economic freedom’. The relevant regression results are presented in Table A 2.3, p 43 (the right hand column).
The coefficients on both the size of government and ‘other’ economic freedom variables were significantly greater than zero – suggesting that smaller size of government has a positive effect on economic growth. The magnitude of the estimated coefficient on size of government is about half that on ‘other’ economic freedom, but that is about twice as large as I had expected it to be on the basis of the weight of size of government in the economic freedom index (20%).
One fairly obvious question that might be asked is that if size of government is so important, how is it that some countries with big governments, an obvious example is Sweden, have managed to maintain relatively strong economic performance. I have attempted to answer this question in the chart below which compares per capita incomes in Sweden and Australia (Penn World Tables, rgdpch with some extrapolation using IMF growth estimates). The results of the simple analysis presented in the chart suggest that if Sweden had not undertaken substantial economic reforms (including some improvement in the size of government component of economic freedom as well as other components) it would have performed poorly. The chart also suggests that Sweden’s economic growth performance could have been much better if it had a smaller government.
This analysis doesn’t tell us that every country could become a paradise if only it had a small government, or that countries with big governments are dreadful places to live. It just suggests that big government is not a free lunch. The lack of correlation between the size of government and other aspects of economic freedom is interesting, but it doesn’t mean that size of government doesn’t matter.
The beginning of September saw good news flowing in many corners of the economy.
The consumer made a comeback in July-in both income and spending. Personal income in July posted a 0.2 percent gain, following no change in June. The July figure was a little lower than the consensus expectation for a 0.3 percent rise. More importantly, the wages & salaries component rebounded 0.3 percent after slipping 0.1 percent in June. This component would have been even stronger had it not been for a dip in government payrolls from laying off temporary Census workers. Private industry wages and salaries gained 0.5 percent in July, following a 0.1 percent dip in June. The consumer sector bounce-back should help support overall economic growth.
And retail sales followed the consumer. Chain-store sales improved in the August 28 week, according to Redbook’s tally which shows a plus 3.0 percent year-on-year pace vs. a plus 2.6 percent pace in the prior week. The positive trend is very steady, showing a four-week average of 2.8 percent over the past two weeks and 2.9 percent over the five prior weeks.
ISM’s manufacturing report on business reported a PMI that came in at a stronger-than-expected 56.3 for a sizable eight tenths gain from July. The reading is well over 50 to signal month-to-month growth and in the comparison with July, and points to growth at an accelerating rate. Further this growth is in business activity like production, employment, and inventories. These three factors all accelerated in August. The ISM report is solid and includes strength in both exports and imports and an increase in prices paid that reflects demand for inputs. Jobs in manufacturing have now grown for 9 straight months and last month reflects hiring that is accelerating.
Initial jobless claims are now edging down, as they have for the past couple of weeks. Initial claims for the August 28 week came in at 472,000 compared with a revised 478,000 in the prior week and the 2010 peak of 504,000 the week before that. The four-week average fell 2,500 to 485,500.
And the overall private sector is providing jobs again… that sector added 67,000 positions after a 70,000 boost in July. Leading the way was a 45,000 boost in education & health services, with health care up 40,000. Professional & business services returned to positive territory, rising 20,000 after dipping 3,000 in July.
Income, Spending, and Saving All Grow in May
According to the Bureau of Economic Analysis the month of May provided a triplet of economic good news — personal income, spending, and savings all grew. Furthermore, income grew even greater than consumer expenditures and consequently, savings grew as well.
All three measures added similar gains in March of this year.
Personal income has remained fairly stable over the past three months, growing between 0.4% and 0.5%. Over the same period, disposable income has averaged about 0.5% growth. For consumers to be able to spend more on discretionary purchases, their disposable income must of course increase.
Spending has been less stable, recently. In February and March we finally saw spending growth increasing, after the recessionary downward trend of 2009. The first uptick however post-recession had consumers increasing spend without as much additional income, which meant shoppers were relying more on credit to spend and saving less. In April, however, that changed. Spending was constant, while income continued to grow. And in May? We’re now seeing an even better reading: more income growth, but with some additional spending as well.
The figures for motor vehicle sales in April will be released today. The consensus estimate is that 8.8 million autos were sold in April, which would be the same number of autos sold in March.
At 8:30 AM EDT, the monthly Personal Income and Outlays report for March will be released. The consensus for Personal Income is an increase of 0.4% over the previous month, after there was no change in February. The consensus for Consumer Spending is an increase of 0.6%, and the consensus Core PCE price index change is no change, and it was flat in January and February.
At 10:00 AM EDT, the Construction Spending report will be released, and the consensus is a decline of 0.3% compared to the previous month as weakness continues in all segments of the construction industry.
Also at 10:00 AM EDT, the ISM Manufacturing Index for April will be released. The consensus is that the index value will be 61.0, which would be an increase of 1.4 points over March, because of strong new orders reported for March.
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