Economics, Historically, History, Politics

Tea Party and Occupy Wall Street on Income Inequality

There is a new Democrat proposal for a Reasonable Profits Board that would monitor profits made by oil & gas companies in order to apply a windfall profit tax of any profits the board deems are beyond reasonable.  This proposal is part of their Gas Price Spike Act.  The failure here is twofold.  One, they simply focus on the total dollar amount of net profit, and fail to account for net profit margin, which is a better indicator in comparing the profitability of one industry to another.  When you compare net profit margin of different industry segments, you discover that the various aspects of the oil & gas industries rank in the middle of the pack.   Two, those pushing this legislation discount the fact that profits lead to reserve capital which allows for the stability of a company to weather future economic upheavals.  It also allows a company to invest in expansion and exploration.  Profits are the essential foundation for future growth.  And, the accumulation of capital is vital to the growth of wages.

This is the sort of legislation that the Occupy Movements get behind as they often equate profit seeking in itself as evil.  Where the Occupy Movement and Tea Party do agree is the outrageousness of the bailouts.  “The banks got bailed, we got sold out!”  The two movements can also agree that the use of Federal regulations as a means to gain profits that are privatized while the losses are socialized is abhorrent.

It is the government’s rigging of capitalism that is to blame, not capitalism in itself.  Profits and losses are essential for capitalism to work effectively.  Dr. Daniel J. Smith, Assistant Professor of Economics at Troy University, simplifies it:

Where the Tea Party and Occupy Movement move apart is the attack on capitalism by OWS and Occupy’s misconception on what capitalism is.  Occupy and the Tea Party agree that there is too much corporate money in politics and it provides a significant conflict of interest for our elected representatives.  Who are they elected to represent?  The corporate donors to their campaigns or the citizens who elected them?  The Tea Party has mostly focused on the lobbying efforts to effect regulations to unfairly benefit some while hindering competitors.  Occupy has focused more on campaign contributions and the influence that money brings.  Both are correct and need to broaden their horizons to incorporate the other’s viewpoint more into their own thoughts and actions.

The Tea Party, though, focuses accurately when placing much of the blame for the corruption of crony capitalism on government, and not capitalism in itself.  Economist Chris Coyne attempts to explain:

Occupy borders on Libertarianism with their views on the Fed and the bailouts, but those views have been pushed to the back burner in the media.  Lest the two Movements find common ground, the focus of the media attention has turned towards Occupy’s rage against income inequality.  Here is one area the two sides split apart.  Income inequality is a flawed argument and focuses on the wrong criteria.  Occupy and the media cite statistics using snapshot data to compare income earners as comprising one group from one year compared to new people representing the same quintile in another year.  What they fail to point out is the mobility of different individual earners moving from one income bracket to another over the course of time.  This movement of individuals through the economic ranks is called income mobility.  In order to put all the available statistics together and gain some perspective, there is a 22 page study done that examines income mobility in the United States from 1996 – 2005 as well as cites data from previous studies that you can read in its entirety at United States Department of the Treasury website.

The key findings of this study show:

  • There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period.
  • Roughly half of taxpayers who began in the bottom income quintile in 1996 moved up to a higher income group by 2005.
  • The composition of the very top income groups changes dramatically over time. Less than half (40 percent or 43 percent depending on the measure) of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Only about 25 percent of the individuals in the top 1/100th percent in 1996 remained in the top 1/100th percent in 2005.
  • The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
  • Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups.

I want to repeat the one in bold.  Among the top 1% of income earners in 1996, less than half remained in the top 1% in 2005.  This top 1% that is so vilified is ever changing in who actually comprises it.

Dr. Steven Horwitz, Professor of Economics at St. Lawrence University, has done a wonderful job of using the information available in the previous studies that indicated similar trends in income mobility by summarizing it in an easy to understand video:

It is important that Americans do not forget that our economic freedom is the cornerstone of the foundation for the opportunity to build personal wealth.  That opportunity must be balanced by personal responsibility.  Too many talk about government policies needing to level the playing field by punishing those who are successful and unfairly subsidizing those who fail.  But, the proper role of government is to work for the common good, not for the good of selected classes, as one of our Founding Fathers, John Adams, so eloquently spoke:

Government is instituted for the common good; for the protection, safety, prosperity, and happiness of the people; and not for profit, honor, or private interest of any one man, family, or class of men.

Our country again and again comes dangerously close to completely turning away from the ideals of a free economic system that led to one of the greatest nations the world has ever seen.  The more we concentrate on being envious of those more successful than ourselves, insist that government provide for us what we have failed to provide on our own, the less responsibility we take for our own successes and failures, then the less freedoms we will have remaining.  Everyone needs to remember that being poor is not a permanent condition in a free economic society.  If some of us continue to give up our freedom to take responsibility for ourselves, then we will lose the opportunity to pursue a better life for ourselves as well.  By surrendering our responsibility, thus our empowerment, to a government entity, our individual liberty shall continue to erode.  Here, we all still have the opportunity of economic mobility as long as we maintain and broaden our economic freedoms.  Abraham Lincoln, first Republican President of the United States of America, wisely concluded:

“Again, as has already been said, there is not of necessity any such thing as the free hired laborer being fixed to that condition for life. Many independent men everywhere in these States a few years back in their lives were hired laborers. The prudent, penniless beginner in the world labors for wages awhile, saves a surplus with which to buy tools or land for himself, then labors on his own account another while, and at length hires another new beginner to help him. This is the just and generous and prosperous system which opens the way to all, gives hope to all, and consequent energy and progress and improvement of condition to all. No men living are more worthy to be trusted than those who toil up from poverty; none less inclined to take or touch aught which they have not honestly earned. Let them beware of surrendering a political power which they already possess, and which if surrendered will surely be used to close the door of advancement against such as they and to fix new disabilities and burdens upon them till all of liberty shall be lost.”

For capitalism to work, for opportunities to abound for all, the incentives have to be in place for people to pursue personal excellence.  Income distribution is one of the primary incentives for individuals to utilize one’s unique talents to be successful.  When people are incentivized to excel by allowing them to enjoy the fruits of their labors, we all are better off.  Dr. Daniel J. Smith touches upon these incentives and the importance of income distribution in improving all our lives:



15 thoughts on “Tea Party and Occupy Wall Street on Income Inequality

  1. The Reasonable Profits Board idea is being pushed by Dennis Kucinich. I wouldn’t worry about it because it is going nowhere. Dennis gets a little far out there sometimes. I have not heard or read anything about the Occupy Movement getting behind this idea. The main thrust of Occupy, as I see it, is that there is too much money in our politics which is corrupting the system. The game has been rigged to favor the top 1% and big corporations preventing the 99% from getting a fair shot. It started with young people coming out of college that had done the things they were told to do, study hard and get a good education, but when they graduated the jobs were not there. The collapse in 2008 wiped them out and virtually no one was hiring. When people started looking around to see what caused the ecomonic collapse, they saw the big moneyed interest, like the banks, getting bailed out and the top 1% still doing really well. It is a misreading of Occupy to think they are against capitalism. It is the government’s rigging of capitalism that is to blame. The system needs to be rebalanced, not eliminated. The Adam’s quote is so appropriate, “Government is instituted for the common good; for the protection, safety, prosperity, and happiness of the people; and not for profit, honor, or private interest of any one man, family, or class of men.” But we have had private interest use their money to buy excess infuence over the government for their profit. I have used the puppet and puppet master anology before, with the private interest pulling the strings of elected officials. Maybe a better analogy would be a hooker and a john. The hooker (elected official) wants the money to keep their nice things (office, trips, power) and the john wants something massaged for their money (tax breaks, deregulation). It is a mutually corrupt relationship and both are guilty. The big difference I see between the Tea Party and Occupy is where they place primary blame. Both the hookers and the johns would be in big trouble if the Tea Party and Occupy were to come together and say it doesn’t matter who gets primary blame, we are taking the money out of the system. If elected officials didn’t have to bend over backwards to raise money night and day, we might get a majority of them in office to do the country’s business. Level the playing field and provide equal opportunity (not equal incomes). The rich and the powerful, since the beginning of time, have tried to use their money to push for special privileges to increase their wealth and power. The founding fathers could have set up an oligarchy, after all many of them were the rich and powerful of their day. But instead they gave us a representative democracy that allows us to push back with our larger numbers.

    Posted by danielfee | January 28, 2012, 9:46 pm
    • Thanks for stopping by Dan.

      I think there are competing views within Occupy as well as the Tea Party. I know the Tea Party got mischaracterized much in the media, so I’ll assume Occupy does as well.

      Government is too involved in all aspects of our lives starting with public education and not allowing school choice. Then we are strongly encouraged to attend college through government grants and loans. With more money being available to students to attend college it drives up tuition costs, thus requiring even more loans/grants. Thus more government spending and more students starting adulthood in (higher) debt.

      There is an inaccuracy in the conventional wisdom that big business is for “deregulation”. On the contrary, more complex regulations give big business a decided advantage against small business. Big businesses and big unions can be granted special dispensation from specific regulations that effect everyone else giving them an unfair advantage against their competitors. Unfair tax regulations are most abundant and even outwardly campaigned on by both major parties. Big companies can negotiate tax credits, such as Motorola last year in Illinois.

      When you hear the Tea Party scream for deregulation, they are primarily calling for simpler and fair regulations first. Especially tax regulations. They want to see companies be able to compete in a fair and free market. Next, there are too many government agencies and czars running our lives that extend even beyond all the complex regulations that have come by way of congress. Many small business don’t get past the planning stage and regulations are one of the primary reasons. The simplest solution is smaller and less government and a beginning of lessening the regulations we have in this country. It doesn’t mean removing all regulations or even most regulations. It just means starting to review them and repeal them and helping our country work it’s way back to a more free and a more “fair” nation.

      Posted by G | January 28, 2012, 10:58 pm
      • G,
        No doubt any movement has competing views within it. There will always be the real radicals and the pragmatics in each group. What is happening in Oakland is getting out of control and needs to be rethought or their actions will hurt the entire Occupy movement. Just like those people who showed up with guns and racist signs tainted the Tea Party. Of course the media always loves the sensational and that is what gets the air time.
        I thought you were a big fan of Thomas Jefferson? Wasn’t he was one of the biggest proponents of free public education for all, including all the way through university? I believe that we do have school choice. You can home school, send your kids to a private school or a religious school, and we have charter schools (which Obama really promotes) that are part of the public system (at least here in Florida) all of which provide you a choice. I think the term “school choice” is really a code word for privatizing all schools. But those pushing “school choice” are not saying that the mandatory requirement for kids to attend school should be repealed. Or that the government should stop collecting taxes for education. No, what they really are looking for is a new industry in which tax dollars can be funneled into their pockets. I do hear some parents complain that they don’t think they should have to pay school property taxes if they pay to send their kid to a private school, because they effectively have to pay twice. I get that argument, but by the same token those of who don’t have kids still pay school taxes to educate other peoples kids. Should we be demanding that our school taxes be eliminated and only people who can afford to send their kids to school should get and education? That would be very short sighted. In a more complex world and with jobs that require much higher skills we need a more, not less educated population. We have steadily lost ground to other countries that are providing public education to all, while we have this private versus public battle.
        The issue of college tuition is a different situation. Yes, we do strongly encouraged kids to attend college because we need a more highly educated work force. Most could never attend college without loans and banks won’t make student loans without a government guarantee. I don’t follow the logic that “with more money being available to students to attend college it drives up tuition costs, thus requiring even more loans/grants.” If more students are attending college, that is an increase in supply for the universities. When there is an excess supply of something it typically drives the price down. So shouldn’t tuition rates fall with more students? There is something else at play here, other than normal supply and demand relationship. What I think is happening in education is similar to what happened in housing. A big debt bubble is being built. The on-line for profit colleges are at the forefront and they depend on the government to provide or back loans. Then these loans are being securitized. We have exceeded a trillion dollars in student debt. But you can’t place the blame on the students who are trying to get ahead in life by getting and education.
        You are correct, there is an inaccuracy in the conventional wisdom that big business is always for “deregulation”. Many do lobby for more complex regulations to give them a decided advantage against small business. They want the “deregulation” to apply to them but the “regulation” to apply to others. I also agree that unfair tax regulations are most abundant and even outwardly campaigned on by both major parties. Big companies do negotiate tax credits and will play one state against another. But it is not just companies, it is also individuals with very high net worth. That is why I wrote my latest post about Capital Gains; The Tax Subsidy for the Ultra Rich. Mitt Romney makes a great foil because he is a perfect example of how they work the system.
        So why, if the Tea Party is screaming for deregulation and they are primarily calling for simpler and fair regulations first, especially tax regulations, aren’t they getting behind Obama? He has called for the exact same thing. He said he wanted to simplify and streamline the tax code, close loop holes and he even suggested lowering the tax rates. He has also said that he wants to eliminate unnecessary regulations. He is proposing to streamline government if Congress will give him the authority to merge agencies, which would mean few czars and less overlap. O.M.G., Obama is not a closet Muslim, he is a closet Tea Partier!

        Posted by danielfee | January 30, 2012, 5:24 pm
  2. LOL. I do not believe anything Obama says. Remember this?

    Actually, Jefferson was a strong proponent of education, but believed it should be controlled at the local level through a Ward. There would be a limited number of scholarships and the remaining students would pay a tuition.
    Personally, I’ve no issue in the public at large paying for education because a basic-educated populace benefits us all. I would shut down the Department of Education and return more power to the state level. School districting does not work. Property values go up in a good school district and go down in a poor one so parents can get their kids in a good school. I’m just saying give parents the freedom to send their children to the school of their choice via vouchers. Allow for other schools to come into an area and compete for the money and have those schools regulated at the local level.

    As for college tuition, you have your economics backwards. You said, “If more students are attending college, that is an increase in supply for the universities. When there is an excess supply of something it typically drives the price down. So shouldn’t tuition rates fall with more students?” Students are the consumers, not the product being supplied. College Education is the product being supplied. When more consumers demand a product, the cost of the product increases.

    You are correct that there will be a student loan bubble, because there is an secondary education bubble about to burst. It is exactly just like the housing bubble, and the government is to blame. The government gives guarantees for a large amount of the student loans will be repaid by the government (the tax payers!) if the student fails to meet their obligation. Since the Feds encourage loans to be given out, then guarantee the loans, they increase the available money towards education artificially increasing the demand for education causing an increase in the cost of education.

    How many times do things like this have to happen until people realize that government is not the solution, but are the problem?

    Posted by G | January 31, 2012, 6:55 pm
    • G,
      I thought that last sentence would make you LOL. I watched the video. That is a pretty weak argument over a process issue to conclude that you don’t believe anything Obama says. They had many public meeting during the health care debate, but there were also closed door meetings to get some groups signed on. It is very subjective to say one way or the other if it was an open or closed process.
      What I find interesting is your argument for abolishing the Department of Education is that you believe states should have more control, but at the same time you also argue that local school district control doesn’t work because of the problems created by varying property values creating rich and poor school districts. However, the exact same argument can be applied at the federal vs state level. There are some states like Mississippi, Louisiana, Alabama, that are poorer states which have historically had poor school systems and consistently lower education rankings. When it comes to receiving federal funding, these states receive far more back then they pay in tax revenues to the federal government. But if they are going to receive federal dollars it cannot be with “no strings attached.” If your argument is that states should only get back what they put in, then the southern states will fall even further behind in levels of education as well as other government services. Then all parents in that state will subjected to a substandard or failing school system. I have to admit there are times that I wished we had a federal policy that balanced distributions to the states based on what they paid in, because then many of the “red states” might begin to realize how beneficial the federal system is to them.
      Vouchers won’t cut it. In a voucher system could they be used across state lines if the state’s school system was failing? Vouchers are nothing more than a means for funneling tax dollars into a private school system which would be a further hit on public school funding. Let’s play out the voucher scenario where parents get to choose to send their kids to the “good” schools. First, you have to provide every parent with the same level of voucher or else you would introduced discrimination into the process. Now every parents has, let’s say a $1500 voucher, to use in choosing a “good” school for their kid. What percentage of schools in each state might qualify as “good” schools? I don’t know specifically and it will vary state to state, but let’s assume 50%? Now every parent will compete to get their kid into the “good” schools, and half will lose out. These schools will be able to cherry pick the best students, because of course they will want to do everything they can to keep their “good” school ranking. Those who get shut out will have to send their kids to the “not so good” schools by default. You end up with a two-tiered school system. If they aren’t lucky enough, or their parents don’t have enough political pull to get the kid into one of the “good” schools, that kid will have the stigma of graduating from an inferior school. Even though they may have achieved good grades, they were from a not so good school and that will carry through into their opportunities for getting into college or getting a job. The other option is to do a lottery system for the spots in the “good” schools. You still end up with a two-tier system, but now it is just luck of the draw. But isn’t luck of the draw essentially the same as being assigned to your neighborhood school? Except you do have some choice as to what neighborhood you live in, so you do have freedom of choice. Ask any real estate person and they will tell you that the school district is an important factor in choosing the location of a residence.
      But let’s take this type of system even one step further. Now that every parent is getting a $1500 voucher per kid why should local school boards be able to establish their own millage rates? If they were permitted to continue to establish the rates at a local level, wouldn’t each start dropping their rates since there is an equitable redistribution based on a flat rate per kid? So you would have to abolish all local school boards and tax at the state level with a statewide rate and then redistribute back to parents directly. Of course this is opposite of what Jefferson was promoting with local control at the ward or county level. If in your opinion this is a better system, why wouldn’t it be even better if it was done at a federal level to eliminate the disparity between states? I have another question, why don’t conservatives apply the same redistribution of wealth argument against state governments that they do with the federal government? Any type of voucher system will be a means of wealth redistribution at whatever level of government it is applied. If you are against wealth redistribution, wouldn’t the next logical step be to eliminate all school property taxes and have the parents pay directly to send their kids to what ever school they chose. That would give parents the ultimate freedom of choice. That is if they can afford to send their kids to school. But what happens to all those people who couldn’t afford to send their kids to school? I guess they just won’t get an education. But if we had this type of system, we would have to eliminate the laws that require each kid has to attend school because that would be an individual mandate on parents to educate their kids. And we know conservatives hate individual mandates.
      Just recognize vouchers for what they are, a method to transfer tax dollars into the hands of private corporations. They are not looking to eliminate the government taxing for this service (or any other service), what they really want is authority of government to tax for their benefit not the public good.
      As for college education being the product that is supplied and when more consumers (students) demand this product, the cost of the product increases, this would be true for products that have a capacity limitation. Education is different than other products, especially when you factor in on-line schools. There is virtually unlimited capacity to teach. A bigger supply of students should allow educators to spread their fixed costs over a larger based and drive down the average cost to deliver the education. We need a more highly educated population to compete in a more globalized world, the solution is not to limit access to higher education.
      I find it amazing how conservatives can take any situation and turn it around to place the blame on government. As I wrote in my post, The Real Legacy of Ronald Reagan his famous quote “that government is not the solution to the problem, government is the problem” is the most insidious part of Reagan’s legacy. It undermines the entire system of self governance. I agree that we have a big problem with special interest that have captured the government and the revolving door between the two is a major problem that must be addressed. But as we have deregulated industries (or passed regulations bestowing special benefits on some industries or persons) over the past 30 years and allowed more corporate interest to infiltrate the political process, it has resulted in a self reinforcing circle. I don’t know if you have read Lawrence Lessig’s book “Lost Republic” yet, but it really addresses this issue head on. The only way to break this circle is for the people (the 99%, Tea Party and Occupy) to reclaim the government, not just complain that it is the problem. It is only the problem because we have become cynical and allowed special interests to have their way. The way I see it, conservatives are advocating for even more of the same things that got us to this point. Further deregulation and reducing governments size and influence is not how we the people will regain control of our government. “Free markets” and capitalism are not a governing system, it is an economic model. Government controlled by a small group of wealthy elites (which is where I believe we are) is an oligarchy. A merger of government and corporate interest (which is where I believe we are heading) is fascism. For a representative democracy to survive the government must act on behalf of the majority and public good. This means that it will often be adversarial relationship with business and at odds with the desires of special interests. If we continue to trash our government and believe it is the problem not the solution, how do we ever reclaim a representative democracy?

      Posted by danielfee | February 3, 2012, 10:37 am
  3. Regarding Steven Horwitz’s graphs showing social mobility, I have a hard time believing that such large numbers move from the bottom 20% to the top 20%, or even the top 40%.

    Posted by John Pennington, San Francisco | February 3, 2012, 12:04 am
    • I suspect that this is something of a statistical artifact. Young workers who are destined to rise often begin at low wage. These are people from affluent families who can afford college and have other advantages. Workers in low wage jobs such as cleaning and washing dishes, and who come from poor backgrounds, rarely rise more than one income level, if that, and then only if they get out of the work they are doing.

      Posted by John Pennington, San Francisco | February 5, 2012, 11:26 pm
  4. John,

    Thank you very much for stopping by.

    Click on the link in the post to the study done by the US Dept. of the Treasury. You’ll find that the Treasury data showed that 86 percent of taxpayers in the lowest income quintile in 1979 had moved to a higher quintile by 1988 and 15 percent of them had moved all the way to the top quintile. It also shows that in 1996, those that comprised the lowest quintile of income earners, by 2005, only 42.4% remained there. Of the others, 28.6% moved to the 2nd, 13.9% to the middle, 9.9% to the fourth, and 5.3% to the highest.

    When you consider that this is consistent over multiple studies over different time periods, you realize that over longer periods of time, fewer and fewer people remain in the lowest income bracket. They move up and are replaced by those new to the work force, such as children coming to the age of adults or newly arrived immigrants.

    Posted by G | February 3, 2012, 7:55 am
  5. Dan, the video of Obama was a tongue-in-cheek jab at him. The thing about most professional politicians (on both sides of the aisle) is they are very skilled in talking ambiguously and leading the listener into hearing what they want to hear. Obama is especially skilled at this.

    I was amused that you brought up Thomas Jefferson in defense of your argument, but you misstated his stance. Then when I corrected his stance, you then acted as if I was using Jefferson to back up my point. I wasn’t. I was simply making a correction of the facts. You also waste time attacking hypothetical points I’ve not even made.

    Vouchers are simple. I’ve already stated that everyone has a vested interest in an educated populace and all children should have the opportunity to attend primary & secondary schools on the tax payers dime. It will save tax payers money in the long run. Education vouchers will put accountability and choice back in the hands of the family where it belongs. All students should have access to vouchers so they can attend the school of their choice. You argue this will lead to good schools and bad schools, but a bad school won’t stay in business because students will be able to go somewhere else. Competition is good.

    As for undergraduate education, the reason for the influx of availability of online classes is due to the influx of money available to students to pay for the classes. Much of that money is due to the federal government guaranteeing the loans to the students. Eventually, the market for college courses will peak and at that point, the cost of college prices will begin to drop or stagnate. The problem is, the increase in the money available has also encouraged schools to offer degrees in areas that truly make little sense for a student to have invested in the education. Thus saddling a student with debt and a degree in something that won’t help the student earn the income to meet their obligation.

    You talk about the government being the solution to all our ills, but what happens if/when the “people take back the government”? What would you have the people do with it? Majority rules (aka a tyranny of the majority)? I hope the people are smart enough to shrink it. The world is too complex for any government to micromanage. More freedom, less government is the only solution.

    Posted by G | February 4, 2012, 5:48 pm
    • G,
      I agree that Obama is very skilled in politics which allowed many, on both the left and right, to project their beliefs onto him. To this point, I hear the left complaining all the time about Obama’s actions in Afghanistan. They claim he promised to end the wars but then he added more troops. They did not listen. What he actually said was he would end the Iraq war and refocus on Al Qaida and Afghanistan.
      In your argument in favor of vouchers you stated that “bad school won’t stay in business because students will be able to go somewhere else.” There is an implicit assumption in your argument that all schools will become private schools, in order for them to be able to go out of business. But a public school system will not go out of business. It will simply deteriorate further as it is drained of funds and the best students. What is also assumed in a voucher type system is that a privately run school will be an available choice in all locations. Private schools will only go where a profit can be made, so larger population centers would see competition, while smaller towns and rural areas would not be able support a wide variety of competing schools so they would be stuck with one or two at best. In some areas it might not even be profitable for one school. Then what do parents do? Send their kid 150 miles to the nearest big city that has school competition? What is also missing in your argument is what happens to the student when the “bad” school shuts down. Those students, after being in that school system for several years, now have to find a so called “good” school to transfer into. But a bad school shutting down does not translate into good schools having more student stations available. So you have a whole bunch of students that are now trying to get into schools that may have a few or no available spaces. Maybe the very top students of that “bad” school will be able to land a spot, but what about the rest of them? Do they have to wait a year or two until another school opens up in their area in order to resume their education? What a voucher system really comes down to is a way to subsidize the tuition costs for those parents that are already sending their kids to private schools. Competition is the fig leaf argument that is utilized to cover up the fact that it would be a transfer of public education dollars to private schools. There is no way we would ever be able to move to a totally privatized education system and expect that all kids would be able to attend school.
      I think your arguement that the “reason for the influx of availability of online classes is due to the influx of money available to students to pay for the classes” is totally backwards. The bottom line driving force behind undergraduate education is that we live in a much more technical and specialized world and a high school education cannot take a student far enough into specialized education. We as a society encourage all students to seek higher education, which is a good thing. We need more highly trained people to stay on top. Very few are able to attend college without obtaining a loan, which is just a basic fact when you look at the average family income and the average cost of tuition, not to mention room and board and books. So the loan guarantee program is there to meet this need because it has an overall benefit to the society’s general welfare. The fact that a loan program exists does not by itself create the desire for a student to attend undergraduate school or even graduate school. No doubt there are some degree programs that make little sense but these will fall by the wayside as students recognize that they are of no benefit. I am sure you are not suggesting that government should decide what degree programs are offered. 🙂
      What other tool do “we the people” have other than government for implementing policies that the majortity are in support of? You are concerned about “tyranny of the majority”, what about “tyranny of the minority”? Take Citizens United for example. When more than 80% in this country are in agreement that corporate donanations made anonymously should not be permitted, why shouldn’t we be able to ban corporate money in elections? Nobody is talking about government mirco-managing everything. What I advocate is a government that establishes the basic ground rules to create a fairer and more level playing field and then enforcing those rules vigorously. As I see it, that is the role of self-governance. Following the Crash of 1929 and the Great Depression, we as a society put many of these ground rules in place and we had a vigorous economy, the biggest economic boom in history, and the vast majority shared in that prosperity as we built the biggest middle class in history. That began to change significantly in the 1980’s. As Hyman Minsky identified it, in 1982 we shifted from “managerial capitalism” (1933-1982) to a “money-manager capitalism.” But our regulations did not keep up with this shift, and in fact, many of the ones that were in place were removed. This provides financial institutions with a lot of “freedom” to create new financial products in totally unregulated areas, like derivatives. The numbers are staggering. Since 1988 the cost incurred by financial market participants has risen from around $2.5 billion to around $528 billion, a 20-fold increase. The aggregate market capitilization of the stock market in 1975 was $800 billion, which was about 50% of GDP. Since 1975, the GDP has increased about 8-fold but the stock market valuations have risen 20-fold. The aggregate value of stocks is equal to around 120% of GDP. At the same time, manufacturing was decreasing and we stopped making things here. What we made instead was “financial products” like derivatives to the tune of an aggregate nominal value of $600 trillion dollars, 10 times as large as the entire world ecomony GDP of $60 trillion. This is what less government, more freedom in the financial markets has brought you in the last 30 years. Plus, don’t forget when this excessive speculation blows up, which it always does, where do these freedom loving financial titans turn? To the taxpayers to bail them out. But the Repubican Party is promoting in this election that we give them less regulation and more freedom to do what they want with the financial system. If we the people, using our government, don’t take away the spiked punch bowl, the folks on Wall Street will kill us all of alcoholism, and with it bring down capitalism returning us to the days of fudalism.

      Posted by danielfee | February 5, 2012, 11:38 am
  6. You keep attempting to make assumptions on my behalf, but it only undermines your arguments.

    School choice does not put an end to public education. It makes it more accountable, better, and less expensive. Vouchers actually lower the cost of public schools. Thus far, what vouchers do exist offer money below the public school cost/student amount, leaving even more money for the public schools to work with.

    Every child is unique and has unique needs to education, so why shouldn’t parents have the ability to find the school that best fits their child’s needs? Do you truly believe in a one-size-fits-all-government-solution? Do you truly disagree that holding public schools accountable for the education of those within their responsibility will improve their efforts/results?

    What is the risk of allowing American families the freedom of choice in education? I believe that most believe that the USA is dragging behind where we need to be in education compared to the rest of the civilized world, and what we have done thus far is throw more and more money fruitlessly at the problem. Most of that money ends up in teachers’ salaries who are in teachers’ unions and pay union dues that are recycled back through the political process in the form union political donations towards politicians who will continue to pursue their education monopoly.

    I’ve done the research. I’ve not just searched out information to back my previous beliefs. I have looked at all sides of this debate and know that freedom of choice in education is what will be best for our society. There are always drawbacks, but there will be far more gained than what is lost. I ask you to research both sides of the issue at length, not just that information that backs up what you currently believe, but both sides in depth. I feel confident that you will come down on the side of freedom.

    Posted by G | February 5, 2012, 3:42 pm
    • G,
      I am not attempting to make assumptions on your behalf, I am playing out your preferred scenario to it logical conclusion. You said “ bad school won’t stay in business.” Explain to me how a bad public school goes out of business. It doesn’t, unless I am missing something in your argument? That is why I said there is an implicit assumption that you are referring to a private school system, in order for it to be able to go out of business. You also did not address what happens to the students when the “bad” school goes out of business. Where does the additional student capacity come from in the “good” schools. I am sorry, but I don’t think you have thought through how a large scale voucher program plays out in a combined public and private system. As a private system student capacity expands, fueled by vouchers, the public system will by necessity need to contract. When the “bad” private school fails, parents will turn to the public sector for a bailout. They will expect that the failing private school be absorbed into the public school system. They will not demand that the “good” private schools take over the failed schools. Just image the outrage if the government was to tell one private school they had to acquire another failed private school. It won’t happen, and I suspect you would be one of the people shouting that the government can’t tell private business what to do. Once again the voucher system is an attempt to set up a system to privatize the profits but socialize the losses when they occur.
      I also do not accept the premise that we do not currently have school choice. First, parents can choose where they want to live and many select the location of their home based on the public school system in that area. Second, we have magnet schools and/or charter schools which are part of the public school but run by private operators. With this type of arrangement if the charter operator fails the school is absorbed back into the public system and the student capacity remains in place. Third, there are private religious schools (I spent a year in a Catholic school in 1st grade). Fourth, there are private prep schools which many upper income parents choose for their kids. Finally, home schooling is also a choice for parents. I believe that parents do have “school choice.”
      Do I truly believe in a one-size-fits-all-government-solution? No, the public school system sets the baseline for education standards. There is nothing that prevents any school district, public or private, from exceeding the baseline. If the next question is, do I think the government should establish the baseline standards, the answer is yes.
      There is no risk in allowing American families the freedom of choice in education. They have choices available today as I outlined above. I think you finally revealed one of the primary motives of supporters who are behind a voucher program. It is an anti-union ideology. Vouchers will allow for public school funds to be shifted to private education companies and at the same time reduce the funding for public schools which will weaken the teachers unions. I am not sure how it is where you live, but in Florida our public school systems have seen a major reduction in funding as a result of declining home values. The argument that we are throwing more and more money fruitlessly at the problem, is a canard. As we have seen in Wisconsin, Ohio and other states the majority of people do support the rights of workers to collectively bargain. When elected official have attacked union rights directly there has been a public backlash. That is one of the reasons that stealth anti-union arguments such as “school choice” are promoted.

      Posted by danielfee | February 6, 2012, 2:01 pm
  7. Personally, I find it ridiculous to tie property taxes directly to school funding, but I’d leave it up to each state and each locale to figure out the best way to work it all out for themselves.

    Again, school vouchers are quite simple. When there are bad schools, parents will start looking for a better school for their children. That will create a market for an alternative. Bad schools will have an incentive to make corrections or else lose money. The parents will hold schools accountable leading to stronger education opportunities and improving all schools. Public schools will still exist as they will still have a competitive advantage. However, public schools will have the incentive to provide a better education to their students or risk losing them.

    School vouchers empower the poor to give their children a better education. There is a flaw in your scenario that there is currently school choice because people have the freedom to move to a better school’s district. If the demand to live in the better school’s district has raised property values in that district above one’s economic means to move there, then the poor’s freedom of choice in education is greatly diminished. It is not an anti-union ideology, it is simply offering more freedom to American families. The only reason there is opposition to school vouchers is because unions fear being held accountable and facing competition. The state having what effectively amounts to a monopoly on education does not serve our children or our future well.

    Posted by G | February 7, 2012, 8:03 pm
  8. Thank you for showing that in many areas, the both groups overlap. The left could use its own Tea Party movement.

    Posted by leavergirl | March 16, 2012, 5:27 pm


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