COLLEGE ON THE CHEAP

With the 2016 elections in full swing, it’s time for the candidates to propose the traditional raids on the federal treasury.  In emulation of Franklin Roosevelt’s 1936 New Deal, Lyndon Johnson’s 1964 Medicaid and George Bush’s 2004 Part D Medicare, the Democratic presidential frontrunner Hillary Clinton advocates a $350 billion 10-year plan to make college education more affordable.

It’s true that attaining a college degree can cost a fortune.  Room, board, fees and tuition at Northwestern University in Evanston, Illinois, now runs $62,500 per year.  If you prefer Duke U, Durham, N.C., plan to fork out $67,650.  And for this, after four years, you get a diploma which may or may not entitle you to a job.  Richard Vedder, an Ohio University economist and expert on college costs declared: “Colleges and universities may be the least cost-effective institutions in the United States.”

So what will throwing another $350 billion at the schools accomplish?  If history is any guide, colleges will simply raise tuition costs.  There’s nothing unusual about this; the third-payer system in effect in health care over the years is further evidence that as the money supply increases, the cost of the service goes up to match it.

As with most financial problems, the solution is not to be found in a government program. It’s the individual whose money is at stake that must craft the remedy.  In this case, a suitable method is already available.  The student does not attend an overpriced ivory tower.  While living at home, spend your freshman and sophomore years at a local community college; as a junior and senior attend a convenient state university.  Summer jobs may generate enough money that, by living on the cheap, you can avoid student loans, for going into debt is a killer. 

You’ll be told a degree not earned at an exalted university is inferior and stigmatizes the recipient.  That’s bunk!  For the motivated student, the route I suggest provides as fine an education as four years at Harvard or Princeton.  Scholastic benefit is dependent upon the student’s effort, not the credentials of the faculty or the attractiveness of the campus.  Without a doubt, spending a bundle you don’t have on an expensive school makes as little sense as “Zero to sixty in three seconds.”

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 In addition to this Straight Talk by Al Jacobs, I’m now generating a monthly Financial Newsletter.  It normally appears the first of each month and may be viewed on my website.  Click onto http://www.onthemoneytrail.net/

POVERTY; SEEK AND YE SHALL FIND

The article by Margot Roosevelt, a prominent American journalist and direct descendant of President Theodore Roosevelt, cannot be ignored.  She pinpoints Orange County, California, where I reside, as an area with “. . . poverty growing dramatically, along with income inequality, homelessness and overcrowded housing.”  Her claims are shocking; I’ve lived here for decades and never seen what she reports.

Of concern to Ms. Roosevelt is the “opportunity gap,” by which the children of the affluent enjoy “abundant supports and resources” while those of the lower-income and less educated receive “stalled or declining social mobility.”  This she attributes to “a dire housing shortage for the middle class and the poor,” the result of a “two-tiered economy, with more and more wealth concentrated in fewer and fewer families.”

Equally dire is an “educational disparity,” wherein “the percentage of high school dropouts and high school graduates living in poverty is rising sharply.”  That 72% of students from fashionable Laguna Beach Unified School District are eligible to attend UC and USC schools, while only 39% from low income Anaheim Unified, is the result of a masking of “vast racial, ethnic and geographical gulfs,” while acknowledging that  “less than half of low-income students are proficient in English.”

The subject of health is then introduced, with an admission that “obesity-related diseases are on the rise.”  The only recommendation is that the trend is “likely to continue if we don’t find ways to reduce childhood obesity.”

The final two sentences of the article seem to encapsulate Ms. Roosevelt’s grasp of the particulars: “Some of these issues can’t be solved by charity.  We need the leadership of elected officials.”

In response, I’ll offer a testimonial.  I grew up during the Great Depression.  During most of my youth my parents and I lived in an unfashionable 1-bedroom apartment in St. Paul, Minnesota.  Money was always in short supply, but that didn’t cause me to fail in the classroom or stuff myself into obesity.  There were other students whose parents appeared to be more prosperous, but I never envied them nor felt I was entitled to what they had.  I got by adequately and my father always managed to see I had the required dime so I could join my friends each Saturday at the movie matinee.

Many times in my life I’ve been “broke,” but never once have I been “poor.”  Broke is a financial condition; poor is a mental condition.  And finally, I’m convinced that few, if any, problems can be solved by charity—and even fewer by elected officials.

 

Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.onthemoneytrail.net/

 

LATE REPORT ON THE ECONOMY

The July 31, 2015, report from the U.S. Labor Department sounds ominous: Second quarter salaries and benefits for private sector workers grew at the slowest pace in the past thirty-three years.  Moreover, it appears companies are able to find workers they need without boosting pay, a sign the job market remains mired in the Great Recession.  Nonetheless, federal spokesmen from President Obama on down repeatedly laud the nation’s vibrant economy and extol an unemployment rate currently at 5.3%—all as millions of Americans search vainly for suitable jobs, while millions more have simply given up looking. 

How is it possible for the official unemployment rate to be in the 5% range while perhaps 20% or more of employable adults remain unable to find work?  It’s because of the gimmickry which the Labor Department employs in the counting.  By employing an official definition of unemployment as only “persons without jobs that have actively looked for work within the past four weeks,” they may ignore the vast bulk of jobless citizens.  This doesn’t help put anyone to work, but it makes the administration look good—which is what the political business is all about.

Playing games with the economy is nothing new.  It’s been done by ruling establishments for the full span of recorded history.  A recent example: The German Weimar Republic sought to pay huge First World War reparation obligations by merely creating printing-press money.  The result: The cost to mail a letter rose from 5 marks in 1921 to 20 billion marks by 1923.  Another illustration: Before the U.S. government began simply throwing money at the Great Depression of the 1930s, the slump was initially denied by then President Herbert Hoover when he famously declared that “Prosperity is just around the corner”—a corner which took a full decade to round. 

What can the citizenry do to remedy the problem?  I’m sorry to report that as a group, nothing much.  Prosperity is not a collective endeavor; it must be a personal accomplishment.  This was never better expressed than by an unnamed man who, during an earlier recession, declared: It’s every rat for himself.

 

MEET YOUR KISSING COUSIN 

The report from NASA is provocative: “Scientists find Earth’s ‘Cousin.’”  The article which follows announces that scientists at Ames Research Center in Mountain View, California, have found “another Earth-sun twin system” with the potential for “liquid water on the surface . . . that could mean life.”  The planet is designated Kepler-452b;  the source of this discovery is the Kepler Spacecraft, launched from Cape Canaveral Air Force Station on March 7, 2009.  During the past six years this project, which employs countless scientists and technicians, has been scouring the heavens in search of planets which may support living organisms.

Though this may seem enticing at first glance, a few details must be revealed.  Our “cousin-Earth” is not exactly next door and therefore ripe for discovery.  It resides in the Constellation Cygnus, approximately 1,400 light years distant.  If we could launch a rocket toward it at 30,000-miles-per-hour—the same speed as our recent space mission to Pluto—it would take 31.2 million years to arrive.  It goes without saying that if earthlike beings inhabiting Kepler-452b, possessing a technology comparable to ours, should wish to visit us, we’ll not see them for 31.2 million years.  Nonetheless, the Kepler project, which has thus far cost $550 million, will continue to function as planned, with each successive “discovery” lauded as another important victory for science. 

During the Cold War era there was justification for the space race.  We were in competition with a hostile Soviet Union and the technological expertise we might develop could be a factor in guaranteeing our national survival.  Here in the 21st Century this is no longer the case.  Except for providing grants for selected beneficiaries and salaries for a lot of chosen people, it’s difficult to describe exactly what NASA’s 2015 budget of $17.4 billion actually does for the average American.

Just as there was a slogan which commemorated America’s success in the space program of the 1960s and 1970s, and which immortalized a generation of explorers of our solar system, you may be certain we will craft a slogan for our current involvement in the heavens.  In all likelihood it will be: One small step for mankind; one giant leap for the gratuity.

Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.onthemoneytrail.net/