Streetwise Professor

January 27, 2012

Obama’s Economic Incoherence Goes to College

Filed under: Economics,Politics — The Professor @ 7:19 pm

Obama gave a speech on higher education at my erstwhile employer, the University of Michigan.  It is noteworthy for two reasons.

First, it gives further proof, as if further proof were needed, of his economic incoherence.  The Smartest Man in the World is as thick as a sequoia stump when it comes to economics:

Appearing before a raucous student crowd in Michigan — a potentially critical swing state this year — Obama outlined plans to boost total federal spending on Perkins loans from $1 billion to $8 billion. He also announced plans to push for the creation of a $1 billion competition encouraging states to contain public tuition rates, among other things.

. . . .

Noting that student loan debt now exceeds credit card debt, the president said Washington is “putting colleges on notice. You can’t assume you’ll just jack up tuition every year.”

“We should push colleges to do better,” he said. “We should hold them accountable if they don’t.”

. . .

Obama warned Friday that rising tuition costs are now threatening to surpass the ability of government to help pay for them. Between 1999 and 2010, inflation adjusted prices for undergraduate tuition, room and board rose 37% at public schools and 25% at private colleges, according to the National Center for Education Statistics, part of the Education Department.

We can’t keep subsidizing (skyrocketing) tuition,” he said. “Sooner or later we’re going to run out of money.”

Uhm, think that tuition might be skyrocketing in large part because college attendance is so heavily supported by government funds?  Is it really a surprise that prices for a good go up when demand for it is stimulated by targeted federal largesse?   If you are, I have a large sum of money I would be willing to share with you: all you need to do to collect is share your banking details.

And note also the all too typical dialectic.  Stimulating demand leads to higher prices, which are politically unpopular.  But rather than ending the demand stimulus, the progressive mind thinks it far better to prevent the price rises.  Here it starts, as it usually does, with the progressive leader jawboning, threatening, and cajoling those who have the temerity to raise prices in response to demand subsidies to abstain from doing so.

If that works, the result is predictable.  There will be shortages, more crowded classes, and a decline in quality on all dimensions.

If it doesn’t work, the progressive will conclude that threats are insufficient, so government coercion must be employed to prevent the adverse, though entirely predictable, effect of the initial policy.  There will be price controls or some other constraint on universities’ ability to charge market clearing prices.  At which time the shortages, crowded classes, and decline in quality will occur.

So regardless of whether Door #1 or Door #2 opens, quality declines.  Yeah.  That will create loads of human capital that will contribute to growth and higher incomes.  (Not to mention that all too much of the money in these progras is completely wasted in subsidizing useless degrees, thereby creating a new wave of recruits for Zuccotti Park.)

We have seen the same dynamic before, in health care.  And we ain’t seen nothing yet.  Just wait until Obamacare kicks in.

No, when geniuses like Obama conclude, after flooring the accelerator, that the car is going too fast, they do not ease up on the gas.  No, no, no.  That would be to admit a mistake of pushing it too hard in the first place.  Rather, they keep the gas pedal floored–and then jam on the brakes.  Like I say.  Pure Genius.

The other noteworthy aspect of this speech is that Obama apparently decided that it was impossible to pander to two of his constituencies: those employed in higher education (a heavily Democratic group), and 18-22 year olds in college or with ambitions to go.  He is opting to pander to the latter, which is quite interesting.

Back in ’08, Obama merely had to mouth soaring pieties about hope and change yadda yadda and the college-age crowd swooned.  They were energized, at virtually no cost.

Evidently Obama doesn’t think that the old magic is sufficient to catalyze the intense support from this demographic.  He has to promise goodies.  Billions in goodies.

Potentially very revealing.

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  1. Is the US really too poor or broke to offer every American a free higher education? Or is pouring money into a country that proscribes the death penalty for apostasy far more important according to the conservative mind?

    Which is it?

    Comment by Sublime Oblivion — January 27, 2012 @ 8:12 pm

  2. Sublime Oblivion, if you actually took an economics class – please demand a refund.

    Comment by Percy Dovetonsils — January 27, 2012 @ 8:44 pm

  3. Hmmm…have you checked the polls SWP?

    Obama is beating Romney by six points in Michigan, and that’s before unleashing his $1 billion corporatist vwar chest on the man playing the part of the heel from Bain Capital, and beating Newt by a mile, 51-38. Santorum is out of money (surprise!) after the Iowa GOP schemed to make him finish second and provide conservatives at least some non-Paul alternative to Romney thanks to Newt being Newt. So now Santorum’s dropping out, which leaves only Newtomney and the one GOP candidate who’s drawn more support from independents and Democrats than anybody else…Ron Paul. But of course, you hate Ron Paul, and so does the GOP Establishment, so they’re going to nominate Romney, you’re going to back him, and he’s going to lose. Maybe you should salve your conscience by voting for Gary Johnson…he’s secular, and libertarian, and as far as I know has no positions on Russia whatsoever though he’s been on the same shows as RP.

    You might as well send Rand a check now for 2016…if we still have free elections in 2016.

    Comment by Mr. X — January 27, 2012 @ 9:40 pm

  4. At least if Ron Paul lost through a combination of demonization, guilt by very loose association (OMG! One supporter in Tucson is an anti-Semite! God only knows how many of Obama’s supporters are anti-Semitic), age discrimination, and total pure Establishment ballot stuffing via Diebold machine, the GOP could say like Goldwater in ’64 it was an honorable defeat. Instead the Fox News sheeple are going to ‘hold their noses’, and lose anyway.

    Comment by Mr. X — January 27, 2012 @ 9:42 pm

  5. And notice the trend too in Michigan…Romney was supposedly leading as recently as November 2011. Now you may say who cares about the Rust Belt and that Michigan is skewed by Detroit. Ok. But then there’s Ohio…Cleveland is not quite as African-American as Detroit, but not too far back. And Pennsylvania with Philly, Pittsburgh, and Alabama red in between. Ok that’s the joke, not quite reality.

    So in my view the GOP is gonna lose the entire upper Midwest…and therefore it cannot afford to lose even one state with a large Hispanic population i.e. New Mexico, like it did in 2008, much less Virginia (lotsa federal employees there) or any of the Carolinas where African Americans will still turnout while conservative evangelical turnout could be depressed with a Mormon RINO at the top of the ticket.

    So you, and all your fans, might as well resign themselves to four more years of Obama right now. Oh sure, maybe he’ll throw your crowd a bone and start attacking Iran to send relations with Russia temporarily back into the autumn 2008 deep freeze. But since that’ll trigger $200 a barrel oil, the West will end up screwing itself more than Russia. As Zerohedge points out today, a hell of a lot of ‘Iranian’ crude is suddenly about to be labelled ‘Russian’ or ‘Azeri’ crude, making Turkish, Indian, Russian, and Chinese middlemen even more rich. How’s that for progress, idiot neocons? They were hoping to put Iran’s back to the wall and make the mullahs lash out like Japan in 41′. Instead they’re just going to make the mullahs and their ultimate ‘enemies’ in Ankara, Moscow and Beijing richer.

    Comment by Mr. X — January 27, 2012 @ 9:47 pm

  6. S/O. Dovetonsils has it exactly right. First, there is no such thing as “free” education, just as there is no such thing as a free lunch. Second, giving anything away tends to lead to overconsumption: some people who are in college should not be there. Period. Third, in our system in particular leads people to make bad choices in major and curriculum precisely because they do not pay the full cost. We have too many sociology, anthro, English, etc., majors.

    It’s not a matter of affording. Even absent budgetary constraints, offering free, or heavily subsidized college education is a bad idea.

    European “free” education->a lot of superannuated students who end up learning nothing productive.

    And re Afghanistan. Wow, random even for you. And by the way . . . they don’t “proscribe” the death penalty–that would mean ban it. They prescribe it, maybe.

    The ProfessorComment by The Professor — January 27, 2012 @ 10:35 pm

  7. lOL, Republicans will not vote for Ron Paul, a racist conspiracy nut job, I mean he keeps falling further and further behind in the polls.

    Also he is obviously doing WORSE than Romney with independents based on polling numbers.
    Poll Date Sample MoE Gingrich Romney Santorum Paul Perry Spread
    RCP Average 1/12 – 1/26 — — 31.3 27.0 15.8 12.8 — Gingrich +4.3

    Now Romney versus Obama Romney stands a chance based on polling, Paul none at all.

    Comment by Andrew — January 28, 2012 @ 7:33 am

  8. The embrace from Russia Today and looney Alex Jones is the kiss of death to Ron Paul . The propaganda department in KGB think the American people is as stupid and easily manipulated as the neo-soviet Mindless Voting Cattle in Russia . But they are wrong pure disinformation should not be confused with misinformation, information that is unintentionally false.

    Unlike traditional propaganda techniques designed to engage emotional support, disinformation is designed to manipulate the audience at the rational level by either discrediting conflicting information or supporting false conclusions. A common disinformation tactic is to mix some truth and observation with false conclusions and lies, or to reveal part of the truth while presenting it as the whole (a limited hangout).

    Comment by Anders — January 28, 2012 @ 8:10 am

  9. I agree, but I would that I am shocked by how clueless someone must be to think the following is terrible: “student loan debt now exceeds credit card debt”. Student loans are, up to a point, a sensible strategy to finance investment in human capital. Within reason, it is a good thing. Credit card debt means you cannot manage your household budget. It’s bad. As my friend would say, finance isn’t rocket science–and I know because I used to be a rocket scientist! Still, the people in power are clueless about basic economics and finance — or, perhaps worse, understand it full well but prefer to pander to the masses.

    Comment by Jack — January 28, 2012 @ 8:39 am

  10. Another simple point that ends up manhandled: tuition increases of 2-3% annually are not what I would call skyrocketing. It’s roughly in keeping with inflation. On the contrary, I thought the figures were much higher, because of what’s called Baumol’s cost disease (a terrible name for the concept).

    Comment by Jack — January 28, 2012 @ 8:43 am

  11. Anders: re your very useful distinction between propaganda and disinformation. Your description of disinformation captures exactly what I concluded about Zero Hedge. Classic disinformation MO.

    And X man, re ZH: I don’t give a flyer about relative traffic stats. And if I’m so irrelevant, why do you spend so much of your life obsessing about me and what I write? Hell, I don’t have the time to read what you write: I can’t imagine how much time it takes you to write it.

    The ProfessorComment by The Professor — January 28, 2012 @ 11:18 am

  12. Jack–Good point re cc debt vs. student loans. So many targets of opportunity [stupidity] in that speech!

    The ProfessorComment by The Professor — January 28, 2012 @ 11:20 am

  13. You’d think that RoPaul would recognize the embrace of RT and AJ would be the kiss of death, but RoPaul and his minions hug and kiss right back. Sorry. Bad mental image :p [but accurate!]

    The ProfessorComment by The Professor — January 28, 2012 @ 11:22 am

  14. @ SWP, almost as horrible as imagining the meeting between Sublime Oblivion and Mr X and the object of their desires, VVP……

    Comment by Andrew — January 28, 2012 @ 12:19 pm

  15. Andy Dzughashvili, let me give you a clue about presidential elections in the U.S., since they’re not the same as in Kiwi-land or in Tbilisi where Saakashvili is comparing himself to a king in the 13th century who ruled for life (can’t imagine what ya’ll would say if Putin started comparing himself to Ivan Grozny)…U.S. elections are won or lost on a state by state basis. Remember Florida in 2000? Al Gore winning the popular vote didn’t matter.

    Meaning if Obama is leading in more states than Romney, he’s gonna beat Romney, irrespective of how many dolts who won’t vote and probably have no idea who Romney is answer those RCP polls. Meaning the ‘mainstream’ candidates who get bazillions of hours of free advertising from the mainstream press you tout so much are still gonna lose to the object of SWP’s fake ire, Obama.

    Sheesh, I’m laughing hard at how many Republicans are suddenly bitching about the same smear tactics that were used against Paul being deployed against Newt. There’s enough dirt on Newt to take him down plenty without having to make stuff up like Elliot Abrams did, but these idiots never learn that the likes of Abrams view them as pro-war sheeple to be manipulated with made up claims.

    And SWP, you make a fair point, up to a point, but your site is interesting for what it reveals about what The Man is thinking, and which websites are top on his Majesty the Status Quo’s $hit list. Your arrogant defense of legislation about which you know next to nothing while poo-pooing genuine experts on constitutional law like Stewart Rhodes or others who tell you SOPA or NDAA are blatant, unconstitutional power grabs is awesome to behold.

    Plus, you seem to have some shady State Dept. friends and perhaps some buddies at the CME who are still sweating out what Corzine’s gonna say about their complicity in his heist.

    Beyond that, this site is mostly just a hardcore Russophobe asylum for people who get some weird pyschological satisfaction from gathering around and telling themselves that no matter how shitty, planned or corporatist and controlled the economy is becoming from Europe to the U.S., somebody somewhere in Russia will hate their life more.

    Comment by Mr. X — January 28, 2012 @ 7:13 pm

  16. “Your arrogant defense of legislation about which you know next to nothing while poo-pooing genuine experts on constitutional law like Stewart Rhodes or others who tell you SOPA or NDAA are blatant, unconstitutional power grabs is awesome to behold.” It also creeps me out that a so-called libertarian gets absolutely no heebie jeebies, NONE, from a creepy little homo like Lindsey Graham sneering on CSPAN, “Shut up! You don’t get no lawyer!”

    I mean for the love of God, do you not care how far the TSA gloves go up your crotch so long as Uncle Sam is doing something to spite the Kremlin?

    Comment by Mr. X — January 28, 2012 @ 7:15 pm

  17. Ahem, your reading comprehension is poor as usual.

    Saakashvili was comparing the current rebuilding of Georgia with the work done by David the Builder, in both situations Georgia was recovering from a brutal occupation, and required immense efforts to repair.

    Media in Georgia have pointed out that the President warned that it would take a collective effort lasting many many years to repair the damage done by Russia.

    Now, I don’t like everything that Saakashvili (his family name is apparently Saakaian, an Armenian name from Javakheti BTW) has done, but considering the situation in the country when he came to power, the changes are immense, and for the most part for the better.

    Now, as to comparing oneself to David the Builder, well he was a King who promoted religious tolerance, and successfully created a united Kingdom of Georgia that incorporated not only Georgians, but also Apsua, Azeri, and Armenians, Chechens, Dagesh, Kipchaks, Ossetians, etc in a spirit of racial tolerance. He is still greatly respected as a historical figure in those areas formerly part of the Georgian kingdom, particularly in Azerbaijan and Armenia (the Armenians try and claim him as Armenian….)

    Meanwhile your love interest Putin has frequently compared himself to Andropov, and lauded the man, he also lauded Stalin, and Ivan Grozny for that matter.

    Comment by Andrew — January 29, 2012 @ 1:46 am

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