Why I Will Vote NO on Michigan’s Proposal 5

How I Am Voting on Michigan’s Six Statewide Ballot Initiatives, Part 2:
Why I Am Voting NO on Proposal 5

On Tuesday, November 6, I will vote NO on Proposal 5, “A Proposal to Amend the State Constitution to Limit the Enactment of New Taxes by State Government.”

I am voting NO because I don’t think the rich asshole who is bankrolling this proposal should get to call the shots for the entire state and subvert the process by which an elected legislature does the job of representing the citizens.

If this sounds a lot like why I am voting NO on Prop 6, as I discussed in my previous post, it’s because — wouldn’t you know it? — it’s the same rich asshole behind both proposals.

The text of Prop 5 as it will appear on the ballot on Tuesday reads as follows:

This proposal would:

Require a 2/3 majority vote of the State House and the State Senate, or a statewide vote of the people at a November election, in order for the State of Michigan to impose new or additional taxes on taxpayers or expand the base of taxation or increasing the rate of taxation.

This section shall in no way be construed to limit or modify tax limitations otherwise created in this Constitution.

Proposal 5 is a recipe for fiscal disaster. It’s a Tea Party scheme to establish minority rule over anything having to do with taxation in Michigan, and it is bankrolled by the rich asshole who is also behind the almost equally stupid and dangerous Prop 6. Prop 5 is opposed by everyone from the United Auto Workers, the Sierra Club of Michigan, and the League of Women Voters to Republican governor Rick Snyder and the Michigan Chamber of Commerce.

Supporters of Prop 5 seem to be limited to the rich asshole and his family, Grover Norquist, and a group known as the Michigan Alliance for Prosperity that buys into Tea Party ideologies about taxation and is heavily financed by the rich asshole through the Liberty Bell Agency, which is run by the rich asshole’s son. Also on board with Prop 5 are the Koch-funded Americans for Prosperity and the freaky fringe Chamber-of-Commerce-wannabe that is the National Federation of Independent Business, which doesn’t even have the sense to be embarrassed by the dishonesty that is evident in its own acronym: NFIB.

And there’s a good reason that everyone with at least half a brain is opposed to Prop 5: If any future tax increase, no matter how slight, has to be approved by a 2/3 majority in both houses, then there is virtually no way any future tax increase could ever pass. Roger Martin, spokesman for the NO-on-5 organization Defend Michigan Democracy, writes that

No tax reform proposal (cut, new tax, closing a loophole or ending a tax break) has ever passed the state Legislature with a supermajority vote. It just does not happen. So, this is not [just] about making it harder to raise taxes….It’s about making state government impossible.

If Prop 5 passes, it would take the yea votes of 25 state senators (out of a total of 38) to pass any proposed increase, which is also to say that it would only take 13 senators to block it. In the House, 73 representatives (out of a total of 110) would have to vote yea under Prop 5 rules, while it would take only 37 representatives to block the legislation.

Prop 5 is thus the love child of a rich, selfish asshole and a virulently anti-tax, anti-government strain of Republicanism that is unfortunately becoming increasingly mainstream, as evidenced by the long, depressing list of dittohead hypocrites who have somehow gotten themselves elected to public office (and who apparently see no irony in living off the generosity of us taxpayers by collecting paychecks and enjoying generous benefits that are funded by the taxes they profess to abhor) and who have sold their souls (and sold out their constituents) by signing Grover Norquist’s so-called Taxpayer Protection Pledge.

The Republican party has spent the last two-plus decades trying to brand itself as the “down with taxes!” party, no matter the cost to the economy or to our most vulnerable citizens. That ideology has become a central tenet of even mainstream Republicanism now, as evidenced by the selection of zombie-eyed granny-starver Paul Ryan as the party’s VP nominee. And now they want to be able to force it on the citizens of this state whether they have a mandate from the people (i.e. a majority in the legislature) or not. Our answer to this has to be a resounding NO.

In other words, Prop 5 would guarantee that the Tea Party gets its way with respect to taxes in Michigan whether it is in power or not. That is of course incredibly undemocratic, but it is also a matter of serious concern for anyone who gives a damn about the social safety net or can imagine a time when emergency measures might have to be taken (such as in the aftermath of a natural disaster) to find a way to raise revenue in a hurry. Further, its passage could jeopardize Michigan’s bond rating, according to the Ann Arbor News, “as lenders [become] wary of our ability to maintain revenue.” The News adds that, should Prop 5 pass, citizens of Michigan can also expect to see increases in the fees we will pay for state-provided services, from license plates to university tuition, and that municipalities would have to take drastic measures to try to blunt the impact of sharp reductions state support, which would be likely to include reducing or eliminating local services and increasing property taxes.

The reality is that sometimes taxes need to be increased or new ones imposed. Times change. Infrastructure ages. So does the human population of the state. And especially in times of prosperity, toward which I hope (and believe) we are now beginning to return, I think it is perfectly appropriate to expect those of us who can afford it to kick in a little more, to support the changing needs of our state and to think about protecting our citizens in the future when things may not be going so well economically. I for one happen to like roads and schools and libraries and first-responders and environmental protection of our natural resources.

But if Prop 5 passes, it would be very, very difficult for the state to find ways to manage its changing – and yes, sometimes increasing – needs for revenue because it would be almost impossible to get a 2/3 majority. As the Ann Arbor News reports,

No one on either side can recall a tax that passed by two-thirds of each chamber. It does not happen.

If Prop 5 passes, that means no tax increase would ever be approved by the legislature nor would any new tax ever be imposed, except perhaps in the most extraordinary of circumstances, and maybe not even then. I am thinking specifically, of course, about that time back in the spring of 2011, when Republicans in the U.S. congress, including VP candidate Ryan, argued that funding for disaster relief be offset by cuts to other programs. As usual in their zero-sum world, they played politics rather than focusing their full attention on the people of Joplin, Missouri, and others who had suffered extraordinary losses in a series of violent storms. Rep. Ryan and his GOP running mate, Mitt Romney, have since both come out in favor of shifting primary responsibility for disaster relief to the states. This would be an especially catastrophic shift for states whose legislatures are hamstrung by idiotic constraints like Prop 5 and by damn-fool legislators who signed Norquist’s no-new-taxes pledge. (And it is of course one more strong argument in favor of re-electing President Obama.)

In sum, Prop 5 is short-sighted, greed-driven, anti-democratic Tea Party bullshit. For the love of everything, please vote NO.

University of I’ve-Got-Mine

In a recent post, I set out to discuss a proposal by the University of Chicago economist Luigi Zingales that advocated equity financing of higher education, which he outlined in a June 2012 New York Times op-ed, but reconsidered that project when I realized that Zingales’s political connections, including his close association with GOP vice presidential candidate Paul Ryan, made for a more interesting story, especially in light of the author’s coyness with respect to his political motivations, about which the Times article and accompanying author bio are silent. In making his pitch for equity funding of higher education, he presents himself strictly as a professor and an economist, situating his authority and credibility on the topic entirely in that context. He is of course a professor of economics, but there is no question that his position is also very much informed by his political affiliations, which he does not disclose. As my own position is also political, I have no objection to hearing out the positions of others who come to their beliefs by way of their politics, including when theirs are different from mine. But I think it is important to be forthright about political orientation and values if we intend a healthy debate, and Zingales was not at all forthright in those respects in his presentation to readers.

In this post, I revisit the op-ed, but not because I think his idea deserves to be taken seriously. It doesn’t. Zingales has established precisely zero credibility for one of his central claims, in which he attributes the decreasing affordability of higher education to “crony capitalism,” which he further claims enriches professors at the expense of “everyone else.” As I discussed previously, his unwillingness or inability to acknowledge that the overwhelming majority of professors in the U.S. are not pulling down anywhere near as much bank as he is seems disingenuous. As I also observed, his credibility is further challenged by an impressive tolerance for cognitive dissonance that enables him to give bestie Paul Ryan and his family a pass despite their extensive record of self-enrichment via federal generosity, which I guess is somehow not “crony capitalism” but rather just good old-fashioned free-market capitalism the way God intended.

Rather, I have reconsidered because that op-ed was read and taken seriously by a lot of people, meaning that it has become part of the mainstream of public discourse on the very real problem of college affordability for American students, and especially because it is a fine example of what is so incredibly wrong with the assumptions that inform a lot of that discourse.

Zingales proposes that “Investors could finance students’ education with equity rather than debt. In exchange for their capital, the investors would receive a fraction of a student’s future income — or, even better, a fraction of the increase in her income that derives from college attendance.” According to the author, “Equity contracts would diversify the risk of failure, with highly compensated superstars helping to finance the educations of less successful college graduates,” although it is not at all clear how that would work.

He further claims that the contracts will somehow “avoid pushing graduates into lucrative jobs just to pay off debt,” which sounds great in theory, but I don’t think it could possibly be true in practice. I don’t see how such an arrangement wouldn’t push graduates toward “lucrative jobs,” including by initially pushing them towards undergraduate majors that are considered more likely to lead to such jobs. I doubt Dr. Zingales is naive enough to believe otherwise, and since he provides no evidence to support his claim, I suspect that he is being disingenuous, especially when he adds this part:

Most important, these contracts would provide financiers with an incentive to counsel students wisely, as financiers would profit from good educational investments and lose from bad onesThis would create more informed demand for the schools, exerting pressure on them to contain costs and improve quality.

Leaving aside for now the suggestion that improved quality is somehow a logical result to expect from budget cuts, I am wondering what “good educational investments” that would result in “profit” for the “financiers” might look like. The specifics are left to our collective imagination. But the focus of media attention to the topic suggests that the operative definition of a good educational investment is one that maximizes future earnings in relation to tuition investment, on the assumption that a good investment is definable in exclusively economic — and exclusively individual — terms.

One influential study of “return on investment” (ROI) conducted by PayScale (a company that collects and analyzes salary and other career-related data) ranked 853 U.S. colleges and universities according to the extent to which “what you pay to attend” is worth “what you get back in lifetime earnings.” You probably won’t be surprised to find that of the top 20 schools with the highest ROIs, all but two are private, six are Ivies, and the total tuition at all but three tops $200K. Apparently even that astronomical tuition investment is totally worth it because of the “projected net return on investment” over 30 years: $800K for the #20 college on the list (Rensselaer Polytechnic) and over $1M for the institutions ranked 1-9.

Thankfully, as of course we all know, the playing field for admission even to elite universities is completely level, and so there is no object whatsoever for any student who would like to attend a high-ROI institution. (Alevei![1]

There is also the role of undergraduate major in calculating ROI. U.S. News recommends “College Majors with the Best Return on Investment,” and Fortune reveals “The 15 College Majors with the Biggest Payoffs.” Kiplinger offers a helpful list of the “Worst College Majors for Your Career” and Time outlines the “20 Best- and Worst-Paid College Majors.” The “best ROI” majors include (pre-)medicine, engineering (looks like any kind will do), economics, finance, or anything that leads to a career in the pharmaceutical industry. Selecting one of these financially promising majors, according one expert, will justify going to a more expensive school” because “there’s more job opportunities” and these jobs “pay better.”

So, is majoring in philosophy (Kiplinger‘s 4th “worst major”) at Stanford (4th highest institutional ROI) a good educational investment or a bad one? Can a high-ROI school compensate for a low-ROI major, or vice versa? Is it still a good investment to pursue a high-ROI major, like electrical engineering (5th “best major”), even if it’s at a low-ROI institution?

And which is the better investment: $200K in tuition for an anthropology major (#1 “worst major”) at a high-ROI institution or at a lower-ROI university at half or even a third of the cost? Will equity financiers want to invest in anthropology majors at all? Might their “wise counsel” include discouraging students from pursuing low-ROI majors? Should anthropology and all other low-ROI majors then be reserved exclusively for those students who can pay their own way?

Will financiers support students who want to attend higher-cost high-ROI institutions if they pursue low-ROI majors? Will they support students at low-ROI colleges at all? Is a low-ROI major and/or attendance at a low-ROI institution a bad investment? Is it a better investment not to go to school at all?

Zingales doesn’t address these issues, not a surprise since he never even gets around to defining “good educational investments” beyond announcing that “financiers would profit” from them and “lose from bad ones.” But it does seem like a free-market guy like him would be totally down with the ROI-rankings game. By the way, his own institution offers “far above median” faculty salaries and enjoys considerable renown, despite its less-than-stellar institutional ROI ranking (#78).

And while Zingales offers no evidence for his claim that somehow equity financing will “avoid pushing graduates into lucrative jobs just to pay off debt,” the framing of his proposal in relation to the investor’s incentive for profit suggests that in the system he envisions, the “wise counsel” of the “financiers who would profit from good educational investments” may well steer students toward high-ROI majors if not compel high-ROI major selection as a condition of funding.

I would love for this to be nothing more than some slippery-slope paranoia on my part, but I don’t think it is. For one thing, there is just no evidence that Zingales’s formulation assumes any kind of educational or cultural value beyond the individual ROI model for the student and “profit” for the “financier.” For another, the ubiquity of ROI as the central assumption of recent public discourse on the topic of the value of higher education suggests that it is not. And for yet another, programs that tie eligibility to very specific kinds of “educational investments” are already part of the discussion. For example, the Amazon Career Choice Program for warehouse employees of the behemoth online bookseller (and everything-else seller) is, according to its FAQ page, “unlike traditional tuition reimbursement programs” in that they “exclusively fund education only in areas that are well-paying and in high demand.” (Those are my italics, but it was not my idea to use “exclusively” and “only” redundantly. Thanks to my low-ROI undergraduate major, today I can easily recognize such graceless syntactic constructions, and the satisfaction I take in doing so is what they pay me with instead of money.)

But none of this quite gets at the real problems with the discourse in general and the Zingales proposal in particular, one of which is this: There is no cultural consensus that students will make the best educational decisions when they base those decisions primarily (if not solely) on the basis of expected individual financial ROI. Should we accept that assumption as a logical guiding principle for any serious discussion of higher education? The case has not been made convincingly or really at all that this kind of thinking is the wisest course for our society, and I have a pretty strong suspicion that it is not. [2]

And speaking of unconvincing arguments, Zingales insists that despite how all this looks, what he is advocating “is not a modern form of indentured servitude.” In his pre-emptive defense against the charge, which he is right to anticipate, he reveals another problematic ideological stance that has gone mostly (but not entirely) unchallenged in the wider public debate of whether college is “worth it.” Zingales says that what he is proposing is not indentured servitude but rather

a voluntary form of taxation, one that would make only the beneficiaries of a college education — not all taxpayers — pay for the costs of it.

I could not agree more that the beneficiaries of a college education should absolutely be paying for it. Where Zingales and I disagree is in our respective understandings of who the beneficiaries really are.

The problem is not that we have a system in which those who are not “the beneficiaries” of higher education are somehow the ones paying for it. The problem is that too many of the beneficiaries are not paying anywhere near enough for it, too many of them resent what little they do pay, and too many of them would like to pay even less.

This is at least in part because a lot of people honestly don’t see themselves as beneficiaries of the education of other people, which I have to agree is a logical conclusion in the context of the dominant ideology that informs popular opinion on the topic of higher ed, which is (say it with me) that it is all about individual financial ROI. In that context, why would people see themselves as beneficiaries of any education but their own?

But they are. We all are. That a whole lot more people benefit from the education of a single individual than merely the individual and that these benefits are cumulative and span generations is indisputable. We are incredibly fortunate to live in a mostly safe, mostly civilized, and relatively prosperous society with extraordinary rights and resources that are foundational for anyone who wants to build anything. That Americans have achieved so much that is truly extraordinary — think moon-landing extraordinary, Internet extraordinary — is a direct result of the high cultural value that we the people have placed on education in general and higher education in particular, in which we have invested accordingly. In this sense, and I want to make clear that I think this is the sense that matters most, higher education is not merely or even primarily an investment in an individual.

But somehow the idea that it is has become a powerful cultural assumption. Yes, the individual benefit of a college education is undeniable, but it makes no sense to assume (or to try to dictate) that it is valuable only in terms of the financial return to the individual (and to the “financier” who pays for it). What an incredibly cynical, short-sighted, and unimaginative view that is.

Imagine what our society might look like if Americans had always thought that way. Imagine a United States with no G.I. bill, no Claiborne Pell, no cultural tradition of education as a public good. How many valuable advances and innovations in the sciences, technology, medicine, and yes, the arts and the humanities, would never have happened if only affluent people could access a quality university education, if the only higher education open to most Americans was training to be good little worker bees in jobs that are some billionaire’s idea of what is best for us?

The debt that a student takes on is all too individual, but the benefit of that individual’s education is collective. And until we can find a better way to make higher education more affordable and more accessible, we ought to be working harder to support individuals for whom student loans are the only option, even the ones who don’t opt for high-ROI majors and those for whom high-ROI institutions are out of reach. Students who choose alternatives to financial self-enrichment, who choose to pursue work in areas that make life worth living not only for themselves but also for others — and that includes pre-school teachersartistsanthropologists, and philosophers, as well as doctors and engineers — are good educational investments even if “financiers” don’t ever recoup a dime of “profit” off them.

I guess it’s easy to blame the student debt crisis on college students and graduates and professors and administrators, or to propose a funding scheme like Zingales’s that does nothing to address the real causes of increasing college unaffordability, starting with the national disgrace that is the systematic public divestment from state universities. I guess that’s easier than taking on the devastating consequences of student-loan debt on individuals and on the U.S. economy in any meaningful way.

It is hard not to be discouraged at the moment, especially given the possibility that the nation might elect a smirking, dishonest presidential candidate whose idea of fiscal responsibility is disparaging poor people and stashing millions in overseas accounts to avoid paying his taxes. And never mind his equally dishonest, free-marketeer, I-built-that running mate, whose own accumulation of wealth via government subsidies entitles him to a description so many times stronger than hypocrite that even this low-ROI English major can’t think of one that rises to the occasion.

But I hope that the cynical ideology that an educational investment is (and ought to be) an individual thing, that the point of education is an exclusively individual benefit, that the benefit can only be measured as a return on investment that can be counted only in dollars, and that any notion of a “greater good” is socialism and therefore bad does not discourage and even prevent people from pursuing educational goals that aren’t an obvious fast track to generating big revenue for themselves (and “profit” for their “financiers”). The last thing we need in this country is to continue to celebrate and reward the ideology of greed that has gotten us into so many of the messes that we are collectively in today. If we allow that ideology to continue to define our education policy, it is not going to be a win for most of us.


Notes:

[1] Of course it is not at all clear that factors that have nothing to do with quality of education, such as the socioeconomic privilege and social advantages that many high-institutional-ROI students and alumni enjoy, can be ruled out as significant influences on a high-ranking institution’s ROI. That is, such a return may not be a function of the institution itself but rather reflective of the relative privilege of the students most likely to be admitted. On a related note, see Thomas Edsall’s March 2012 New York Times article “The Reproduction of Privilege,” which  identifies “anti-democratic trends” in the admissions policies of the “most competitive” colleges, many of which are of course also high-ROI institutions.

[2] And don’t even get me started on how all this institutional ROI business does absolutely nothing to address the highly problematic role of elite colleges and universities in perpetuating social inequality. In discussions of ROI, that function goes completely unremarked even though it a key feature of what makes a high-ROI institution such a “good educational investment” in the first place. These institutions actually exacerbate the class divide, as Thomas Edsall observes in “The Reproduction of Privilege,” cited in Note 1 and linked again here.

Calling the Kettle Crony, Part 1: Mitt Romney

As I wrote last week, getting your head around the idea of GOP vice presidential candidate Rep. Paul Ryan (R-WI) as even remotely credible on the topic of calling out “crony capitalism” requires a superhuman tolerance for cognitive dissonance or an extraordinary sense of humor or both.

Specifically, I suggested that the very idea of Rep. Ryan’s endorsement of A Capitalism for the People: Recapturing the Lost Genius of American Prosperity, a new book decrying “crony capitalism” by the University of Chicago economist and self-proclaimed drain on the economy Luigi Zingales, is kind of a ridiculous, hypocritical outrage that really ought to be hilarious but isn’t because of what Rep. Ryan’s power and influence could potentially mean for actual people who are not Paul Ryan or Luigi Zingales.

As I hope I made clear in that post, this is by no means to suggest that Rep. Ryan is not an expert in crony capitalism. Of course he is. [1] That’s part of what makes him such a great match for his running mate, Governor Mitt Romney.

The campaign, including a Republican primary season that I hope I never have to try to convince any sane person to believe actually happened, has been a long, brutal slog for the governor, and over the course of it, one thing that has become increasingly obvious to everyone is that the many gifts and blessings bestowed upon the presumptive GOP presidential nominee by his creator do not include a sense of humor. And yet even knowing that, I am still able to find it remarkable that in the course of deploying one of his favorite general-election campaign tactics — righteously accusing President Obama of crony capitalism (claims that have earned him four Pinocchios — reserved for “whoppers” — from the Washington Post‘s Fact Checker column) — Gov. Romney somehow manages to do it every single time with an impressively straight face. My mom sometimes says, “I never get too old not to be disappointed by people,” and I guess I have to say I hear that.

To be fair, though, everyone in the world who is not Kristi Yamaguchi knows perfectly well that Gov. Romney is well acquainted with crony capitalism, so at least theoretically, goes the logic, he should be able to recognize it when he sees it. And, speaking of Kristi Yamaguchi, Wayne Barrett reported in the Daily Beast in May that

one circle of Romney donors [is] tied to a tainted Olympic contractor who has given more than a million dollars in campaign donations. After being granted immunity by prosecutors, the contractor, Sead Dizdarevic, admitted making $131,000 in cash payments to Romney’s predecessors. The cash was used, at least in part, to subsidize the IOC gifts. Yet it was Romney, not his indicted predecessors, who awarded Dizdarevic the hospitality deal that’s made him the ticket king of the Olympics to this day.

David Simmons also testified in the 2003 federal trial of Romney’s predecessors, in a case that was ultimately dismissed. But unlike Dizdarevic, Simmons pleaded guilty to a federal tax misdemeanor as part of a cooperation agreement that allowed him to avoid a multi-count felony indictment.

According to the Salt Lake Tribune, the guilty plea was connected to Simmons giving a fake job to John Kim, the son of a critical IOC member, to qualify him for a sham visa, and then submitting fraudulent tax and immigration filings to cover up the alleged conspiracy.

Since that time, Simmons and his family have given more than $317,000 to Romney and affiliated campaigns, and business associates of the family have added nearly $160,000 more. Simmons and his wife, Melinda, donated $32,100 themselves, going back to 2006.

The stories of the many interesting maneuvers that Mitt Romney had no choice but to finesse if he was going to succeed in his important mission to make Kristi’s Olympic dreams come true in Salt Lake City are many, various, and complex, so I encourage you to read Barrett’s meticulously researched article in its entirety.

In the meantime, while we are on the topic of astonishing hypocrisy, let’s remember back to Gov. Romney’s February 2012 op-ed in the Detroit News, in which he called the U.S. auto industry bailout “crony capitalism on a grand scale.” As if that bit of evidence of his astounding lack of self-awareness weren’t sufficiently spit-take inducing, Mitt “Let Detroit Go Bankrupt” Romney really brought his A game when he announced in May 2012 that he is now prepared to “take a lot of credit for the fact that this industry’s come back.”

Of course, this probably sounds completely insane to any normal person, so let me explain. What you may not realize is that opposing the bailout in November 2008 and then calling it “crony capitalism” in February 2012 is absolutely what saved the auto industry and with it approximately one million jobs. [2]

The liberal media is of course withholding the credit that Gov. Romney “will take a lot of,” thank you very much, for no other reason than to help his political enemies. So don’t believe all that stuff the Washington Post reported in May 2012 in their pitiful lamestream-media attempt to debunk the governor’s not-even-joking claim that he is responsible for saving the auto industry. The Post — if that is its real name — would have us believe its outlandish claim that

Many independent analysts have concluded that taking the approach recommended by Romney would not have worked in late 2008, simply because the credit markets were so frozen that a bankruptcy [which Romney advocated] was not a viable option.

The Post is also guilty of relying on sources who have little experience with or understanding of the industry, such as former GM executive Bob Lutz, who also rejected Gov. Romney’s bid for credit. (“What these people always deliberately forget is there was no money,” Lutz said, because of the meltdown of the global credit market. “Nobody had any money.”)

And don’t believe Reuters, either. They reported in February that Lutz, a Republican, was “infuriated” by Romney’s charge of crony capitalism. “This is the lie that gets told again and again and again — government intervention wasn’t necessary, that this was creeping socialism, that Obama wants to take over or give a sweetheart deal to the unions,” he said. Lutz also dismissed Romney’s claim that “we didn’t need the government and this could have been a privately run bankruptcy with the normal Chapter 11” as “fiction.” [3]

But can you blame Mitt Romney, a man who wouldn’t have an elevator in his garage or a dancing horse that gets him tax breaks worth $77K a year if he didn’t get pretty much everything he wants in this life, for thinking he can have this auto-bailout things both ways, too?

So, let me quickly summarize here, because I can see how this might all be a little confusing: For Mitt Romney, the auto bailout is nothing less than a disaster for the industry and an egregious example of the worst kind of crony capitalism that saved a lot of jobs for which we should all thank Mitt Romney. Everybody clear now? Good.

As I was working on this post, I was starting to think that Rep. Ryan and Gov. Romney truly take the absolute effing cake when it comes to astonishingly shameless hypocrisy on the topic of Crony Capitalism and How It Is Destroying America.

But it turns out I was wrong about that. An op-ed that recently came to my attention suggests that the title of Absolute Effing Cake-Taker When It Comes to Astonishingly Shameless Hypocrisy on the Topic of Crony Capitalism and How It Is Destroying America would perhaps be more appropriately awarded to its author.

More on that in Calling the Kettle Crony, part 2, coming later this week. File it under “I never get too old not to be disappointed by people.”

Notes:

1. If you didn’t have time to follow the links in last week’s post, allow me to direct you again to some of the credentials that qualify him. Particularly noteworthy are Joe Romm’s article, “Paul Ryan And His Family To Benefit From The $45 Billion In Subsidies For Big Oil In His Budget,” and Bob King’s “Koch brothers have Paul Ryan’s back,” as well as “Ryan Family Financially Benefits from the Health Insurance Industry,” by Tara Culp-Ressler, and “Ryan’s Shrewd Budget Payday,” by Daniel Stone.

2. Here’s Gov. Romney in February 2008:

If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Now here he is in February 2012:

The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better.

And finally May 2012:

My own view, by the way, was that the auto companies needed to go through bankruptcy before government help. And frankly, that’s finally what the president did. He finally took them through bankruptcy. That was the right course I argued for from the very beginning. It was the UAW [United Auto Workers] and the president that delayed the idea of bankruptcy. I pushed the idea of a managed bankruptcy and finally when that was done, and help was given, the companies got back on their feet. So I’ll take a lot of credit for the fact that this industry’s come back.

3. According to the Post, the bipartisan Congressional Oversight Panel had this to say at the end of 2008:

The circumstances in the global credit markets in November and December 2008 were unlike any the financial markets had seen in decades. U.S. domestic credit markets were frozen in the wake of the Lehman bankruptcy, and international sources of funding were extremely limited. Bankruptcy with reorganization of the two auto companies using private DIP [debtor in possession] financing did not appear to be an option by late fall 2008, leaving liquidation of the firms as the more likely course of action absent a government rescue.

The Post also reported that President George W. Bush’s Council of Economic Advisers projected in December 2008 that

the direct costs of American automakers failing and laying off their workers in the near term would result in a more than 1 percent reduction in real GDP [gross domestic product] growth and about 1.1 million workers losing their jobs, including workers for automotive suppliers and dealers.

The Companies They Keep

On Crony Capitalism, Partisan Hackery, and Higher Education

The economist Luigi Zingales published an interesting op-ed in the New York Times on June 13 titled “The College Graduate as Collateral,” in which he proposes a financial aid program in which venture capitalists would finance college attendance for students who can’t afford to pay for it themselves. “In exchange for their capital,” Zingales writes, “the investors would receive a fraction of a student’s future income,” which would be collected on behalf of the investor by the IRS. After my initial reaction (i.e. what could possibly go wrong? ), I decided to give what he’s suggesting a little more consideration because heaven knows we need some creative alternatives ASAP for helping non-affluent students pay for college without the risk of indebting themselves (and/or their loved ones) for the rest of their lives.

Zingales, the Robert C. McCormack Professor of Entrepreneurship and Finance and David G. Booth Faculty Fellow at the University of Chicago, is critical of the “crony capitalism” that he (rightly) sees as driving the U.S. economy into the ground and threatening democracy in this country in the process. In June, he published a new book on that topic, A Capitalism for the People: Recapturing the Lost Genius of American Prosperity (Basic Books, 2012). The equity-financing idea he discusses in the op-ed as a means for paying for college is explored in greater detail in the book. (Reviews here and here. Fairly generous preview here.)

Time out here to say that what I initially planned as no more than a minor digression at this stage of the post, which was going to be about the ways that we as a society fund and value higher education, ended up as a total derail. In my defense, there is no question in my mind that really all this stuff is ultimately about the same kind of thing.

Anyway, when I saw that A Capitalism for the People, a book whose central argument is (as Zingales puts it in an interview with the Independent) that “Entrenched big business interests are taking the country over, while lobbyists and political insiders make millions from their personal connections to an ever-expanding federal government,” has been endorsed by 2012 Republican vice presidential candidate Rep. Paul Ryan, well, it just turned out to be the kind of information that I could not possibly deal with in the brief aside I had initially planned for it.

Ryan’s endorsement of A Capitalism for the People is interesting on oh so many levels. For one thing, just in case anyone had any question about it, the endorsement answers unequivocally that Ryan is in fact a man for whom irony, if it is not completely dead, is in a deep, deep coma or at the very least an ongoing drunken stupor. It would be a cliché to say that Ryan invented crony capitalism — for one thing, he’s a young guy and it has been around for a long time — but his activities as a member of Congress suggest that he is certainly an enthusiastic and capable student of the genre. And the guy on whom he has recently staked his own fortune (Oh, not literally, of course, ha ha. You can rest assured that he’ll keep making tons of money no matter what happens in November) is no slouch, either. They are a wonderful team for representing a party whose astonishing hypocrisy has yet to find anything close to its bounds.

Here is Ryan’s blurb for the book:

In A Capitalism for the People, Luigi Zingales exposes the pernicious collusion of big business and big government — offering the sharp analytical perspective of a world-renowned economist and the unique personal perspective of an immigrant living the American Dream. This must-read for policymakers and citizens alike serves as a lucid call to action for rediscovering what makes America exceptional. Oh, wait, did Luigi say something else besides ‘an ever-expanding federal government’? Sorry, I was busy trying to destroy Medicare as we know it. LOL!

OK, I added that last part.

But seriously, don’t let the Paul Ryan Stamp of Approval stop you from checking out A Capitalism for the People. Might as well know what we’re dealing with here, although I can definitely empathize with any reluctance you might be feeling if your mother raised you as mine did, i.e. to understand the extent to which we are all judged by the company we keep.

Anyway, I have heard that Ryan actually does read (which as we all know is not a prerequisite for the job of vice presidential candidate), so he might actually have read A Capitalism for the People. If he did, my hat is off to whatever mad skillz he would have had to muster in order to negotiate like the champ he is the cognitive dissonance that any normal human being in his position would experience in response to an actual critique of crony capitalism. It’s probably a lot easier if you think of “crony capitalism” as something that people like Barack Obama engage in. (Republicans, by contrast, create synergies in smart public-private partnerships. See the difference? You’re welcome.)

But back to Zingales. After reading few of his articles in the mainstream press in addition to the Times piece, I decided to hear him out on his idea for equity financing of higher ed. While my survey of his work is far from exhaustive, on the basis of what I read, I figured I would let him slide and give him the benefit of the doubt and not immediately write him off as one of those “let ’em eat indentured servitude” types who can’t wait to dismantle the public funding of higher education or public education in general or public everything else or all of the above. But his association with Paul Ryan is obviously troubling, as is his affiliation with the Manhattan Institute, the conservative think tank that published A Capitalism for the People and for which Zingales serves as a contributing editor for the Institute’s City Journal (alongside such luminaries as the former New York Times reporter and Iraq war propagandist Judith “the aspens are turning” Miller). The Manhattan Institute even has its very own Center for the American University (CAU), so they can concentrate on this kind of thing full time. And just today, the CAU proclaimed that “Ryan’s Plan Is Good for Higher Ed,” which might give you an idea of where they’re coming from.

Which brings us to the June 2011 article that Zingales published in the City Journal, “The GOP’s Strongest Candidate,” which concludes thusly:

Wisconsin congressman Paul Ryan says that he’s not running, and I assume he means it, but the GOP clearly needs a candidate more like Ryan than like Mitt Romney, currently the party’s leading candidate and a favorite of the establishment. A candidate in Ryan’s mold, from the Jack Kemp tradition of libertarian conservatives who helped make the GOP great, would be a strong believer in free markets who is not beholden to the bailout-addicted big-business establishment. This kind of candidate, if the GOP could only find him, could win in 2012 and help get the nation’s economy back on track.

Oh, if they could only find him! But you probably see the problem here: He doesn’t exist. That’s why they can’t find him.

I will concede that Paul Ryan meets the criteria for “a candidate in Ryan’s mold,” but that’s as far as I would be willing to go. However, I would be happy to dispute any claim or even a polite suggestion that a candidate in that “mold” (and perhaps especially including Ryan himself) is somehow something other than “beholden to the bailout-addicted big-business establishment,” because come on.

What, you want evidence? OK. How about this: In another June 2011 article (published just one day after Zingales’s “Ryan, Ryan, he’s our man!” City Journal column excerpted above), Newsweek White House reporter Daniel Stone explains “Ryan’s Shrewd Budget Payday” for us:

When House Budget Committee Chairman Paul Ryan unveiled the GOP blueprint for cutting government spending, he asked Americans to make sacrifices on everything from Medicare to education, while preserving lucrative tax subsidies for the booming oil, mining and energy industries.

This sure looks like it could be an example of beholden-ness. But no! It turns out that this part of Ryan’s proposed budget has absolutely nothing! to do with doing any favors for Big Oil. As Stone reveals, it is just about a man trying to provide for his family, like anyone would do!

It turns out a constituency within his own personal investments stood to benefit from those tax breaks, Newsweek and The Daily Beast have learned. The financial disclosure report Ryan filed with Congress last month and made public this week shows he and his wife, Janna, own stakes in four family companies that lease land in Texas and Oklahoma to the very energy companies that benefit from the tax subsidies in Ryan’s budget plan.

[….]

Aside from the land-lease income, Ryan could also personally benefit from the package of subsidies and incentives he has fought to protect. According to a report from the Joint Committee on Taxation, Ryan himself would be eligible to recover money from the government for investments the four family companies might make in such things as machines and maintenance if they didn’t pan out on the properties and failed to generate revenue.

See? He wasn’t trying to help the oil companies in any way ! So take that, haters.

(And I am sure I don’t have to point out that having his investments guaranteed by the federal government should in no way be taken as an endorsement of “big government!” By that I mean it shouldn’t be taken as an endorsement of the kind of “big government” that might help other people’s families.)

But wait. Stone has more:

Ryan’s office says the congressman wasn’t thinking about himself or the oil companies that lease his land when he drafted the budget blueprint that extended the energy tax breaks. “These are properties that Congressman Ryan married into*,” spokesman Kevin Seifert said. “It’s not something he has a lot of control over.”

(*Editor’s note : Back in the olden days, they used to call that kind of thing “sleeping your way to the top.” I mean, that’s what they would have called it if a woman did it. LOL!)

But now I’m confused. Not thinking about oil companies? Not trying to provide for his family? Who was he thinking about, then? I mean, we’re talking about a hugely expensive provision that ought to have been an easy target in a proposed budget that slashes pretty much everything else. So are we to believe that it just sort of happened, miraculously and serendipitously, without any kind of thought or planning or intent, that the oil subsidies somehow escaped becoming one of Rep. Ryan’s tough choices ?

Yes! That’s right! It is just a lucky, happy coincidence that sparing these enormous tax breaks for the oil, mining, and other energy industries (as long as they aren’t green) would just accidentally happen to result in the continuation of lucrative benefits to the budget’s author and several industries to which he is no way beholden! Alevei!

So I have to say, this all leaves me with some questions about Zingales’s judgment. And now that I have a better idea about the kinds of characters with whom he associates, it is much more clear to me why in the Times op-ed that this post was originally going to be about, he had to go and resort to a completely bogus and unoriginal party-line characterization of career academics (a group which, as he does point out, includes himself, although there is more to say about that and I will say a bunch of it below).

And who could be more credible than an actual professor when it comes to helping to disseminate the kinds of facepalminducing stereotypes of professors in which some on the right seem to delight in trafficking?

Specifically, Zingales does this by suggesting that student financial aid in the form of Pell grants (direct aid to students that does not have to be paid back) and subsidies that support federally guaranteed student loans (by keeping interest rates relatively low — although I’d like to introduce you to mine sometime — and paying the interest as it accrues on behalf of students while they are still in school) constitutes “an undue subsidy for the producers (universities)” that results in “the creation of a privileged class (professors like me) at the expense of everybody else (students and taxpayers).”

You know, because professors are exempt from federal taxes! (Wait, you didn’t know that?) And we are a completely distinct class of citizens from students because we were never students ourselves! (Pay no attention to all those diplomas we had to get in order to get hired by a university.) And we never needed financial aid! And even if we did, none of us are still paying back our student loans! And even if we are, it’s not like any of us have been paying them back for 10 years and have already paid back twice what we borrowed in the first place and still aren’t there yet!

Anyway, where was I? Oh yeah, Zingales and that “privileged class” of professors.

In the AAUP’s 2012 survey of faculty salaries at 1,251 U.S. colleges and universities, Zingales’s employer, the University of Chicago, ties with Columbia University for the #2 spot in the rankings of Average Faculty Salaries by institution for 2011-12. (Harvard edged ’em out for the #1 spot by just $600 at the full-professor rank. That’s gotta hurt.) The AAUP reports the average salary for full professors (Zingales’s rank) at Chicago as $197,800, which if you have ever met any professors, you probably will not be surprised to learn (or maybe you will be, I don’t know anymore) is enough to earn Chicago the enviable designation of “far above median,” reserved for institutions whose faculty salaries are in the 99th percentile nationwide.

I hope it is obvious from this that not all professors are “professors like” Zingales when it comes to their earnings and that most professors (i.e. the 99% of all U.S. professors who are not at institutions with salaries that are “far above median”) are in fact not at all like him in terms of salary or membership in the “privileged class” in which he correctly acknowledges his own position.

And let’s make it clear that I am making the case for his unique privilege among faculty members in the U.S. solely on the basis of the published median at his rank at Chicago, meaning that I am not factoring in the additional earnings that Zingales enjoys as compensation for his professional activities outside the university, which also serve to differentiate him from most of the rest of us. Additionally, I am also not factoring in his status as the holder at Chicago of a named chair as well as a named fellowship (“named” indicating that these positions are funded by endowments) — as I mentioned above, he is the Robert C. McCormack Professor of Entrepreneurship and Finance and David G. Booth Faculty Fellow — which suggests that his salary is likely to be greater than the median for full professors at his institution, most of whom presumably do not hold an endowed chair or fellowship, let alone one of each.

In the AAUP analysis, faculty salaries at Western Michigan University, the very fine state university where I am a faculty member, are classified as “far below median” for all academic ranks, including mine: associate professor. Associate professor salaries at WMU are in the 18th percentile, which even an English major like I was can easily see is indeed “far below median” (We’re #339! We’re #339!) and which is of course to say that

The average associate professor at 82% of U.S. colleges and universities earns more than the average associate professor at Western Michigan University.

(I highlighted that because seriously.)

So you’ll have to forgive me for thinking that it is really something for Zingales to imply that professors in general are central to the budget problems associated with higher education (rising tuition costs, increasing student debt) because we are pulling down so much bank, which please. I mean, it is really something if that is in fact what he’s saying. His phrase — “a privileged class (professors like me)” — is ambiguous as to whether he means that most or all professors are “like” him by virtue of our simply being professors, or whether he means to designate specifically and exclusively the few who are “like” him by virtue of their high salaries (by academic standards, anyway), which are actually quite rare in a profession in which salaries are overall relatively ungenerous when you consider that an expert with a doctoral degree at the absolute top of their game and the height of their career is considered to earn “far above median” with an annual salary that doesn’t even crack $200K.

Still, within the academic world, as in most of the rest of the world, $200K is one hell of a lot of money, so if what he means is that we’re all in it with him by virtue of our simply being professors, then it’s a pretty disingenuous statement, since 99% of us will never get anywhere near the mythic “far above median” world that he enjoys. Even if he does not mean to imply that his extremely privileged situation is even remotely like the average experience of postsecondary faculty nationwide — and the AAUP numbers and I can both tell you it is not — that is a distinction that is going to be lost on a lot of his readers. (“After all,” he says, “how can we scholars criticize crony capitalism when we benefit from it?” We scholars. Even a lot of professors who aren’t far above median –professors like me are scholars.) It would be kind of adorable if so many people didn’t already believe that we’re all pulling down six figures and working maybe two hours a week and didn’t already resent the living hell out of us for it. As prolific and celebrated a writer as this guy seems to be, he could have easily avoided that kind of ambiguity if he’d wanted to.

Zingales calls higher education “the least competitive and most subsidized industry of all.” As an example of that, he notes that “Nearly eight million students received Pell grants in 2010, costing $28 billion.” He does not mention that the maximum award is $5,500 for an individual student in an academic year or that the average award in 2011-12 was $3,711. Given that tuition and fees at public universities are usually in the neighborhood of about $10,000 [1] per year for in-state students (a figure that does not include room and board, estimated at about another $10K annually by several of the schools whose cost data I consulted on this topic), the Pell grant program may be costly, but the grants don’t go very far when we’re talking about actual students. As Thomas B. Edsall recently pointed out, “In 1979-80, the maximum Pell Grant covered 99 percent of the cost of a community college, 77 percent at a public four-year college and 36 percent at a private four-year college. By 2010-11, these percentages had dropped to 62, 36 and 15 percent respectively.”

(Zingales also doesn’t mention that if his favorite not-beholden strong believer in free markets had his way, the Pell problem would be even worse, as Richard Kogan and Kelsey Merrick report in their April 2012 analysis, “President’s Budget Would Reduce Pell Grant Shortfall; Ryan Budget Would Nearly Triple It.”)

And Zingales asserts that “Just as subsidies for homeownership have increased the price of houses, so have education subsidies contributed to the soaring price of college. Between 1977 and 2009 the real average cost of university tuition more than doubled.” That sounds a lot like what I read yesterday in the Chronicle of Higher Education, which reports that “Mr. Ryan has been vocal in saying he thinks that increasing federal student aid enables institutions to continue to raise tuition.”

So, is Zingales Ryan’s point man on higher ed? You know what? I actually don’t care whether he is in any official way or not. It’s just the same old partisan hackery whether Zingales is an official campaign surrogate or not, only in this case it’s dressed up as intellectual discourse and as such it represents a less-than-transparent attempt to legitimize Ryan’s appalling budget proposal and his candidacy. No thanks.

For that reason, I decline to engage in an analysis of the relative merit of his proposal for equity financing of higher education, although my original intent was to take his proposal in good faith and engage with it accordingly. There is no question that my position on this topic is political, so I don’t have a problem with his position also being political. The difference is that I do not pretend mine isn’t. [2]

If you would like to read more on the equity-funding idea, please check out Matt Yglesias‘s far more concise take on what’s wrong with the proposition than mine would have been.

To close, I am going to turn things over to another economist, one whose judgment of character and command of the issues as they affect most Americans who are not wealthy has in my view a lot more to recommend it. Dr. Paul Krugman has this to say about Zingales’s golden boy:

Like Bush in 2000, Ryan has a completely undeserved reputation in the media as a bluff, honest guy, in Ryan’s case supplemented by a reputation as a serious policy wonk. None of this has any basis in reality; Ryan’s much-touted plan, far from being a real solution, relies crucially on stuff that is just pulled out of thin air — huge revenue increases from closing unspecified loopholes, huge spending cuts achieved in ways not mentioned.

Read Krugman’s whole article. It’s good.

To summarize: Some guys who have got theirs don’t want anyone else to have what they have. You’ll have to forgive me for getting tricked temporarily into thinking that there might actually be something new and worth talking about in Zingales’s op-ed. But no. Nothing to see here.


[1] The $10K figure is an approximation made on the basis of published tuition and fee schedules at nine state universities in various regions of the country surveyed for this post. The numbers in parentheses given for each school on the list below represent the total tuition and fees for one academic year (not including summer) and do not include costs for books and supplies, room and board, other living expenses, or any additional fees that may be required for particular majors or programs of study.

Arizona State University, Tempe ($9,724)

The University of Georgia, Athens ($9,842)

The University of Iowa, Iowa City ($8,057)

Kansas State University, Manhattan ($7,195)

The University of Maine, Orono ($10,594)

Rutgers University (NJ), New Brunswick ($13,073)

The University of South Carolina, Columbia ($10,488)

Washington State University, Pullman ($11,386)

Western Michigan University, Kalamazoo ($9,138)

[2] Here in its entirety is the information about Zingales that accompanies “The College Graduate as Collateral,” his June 13 New York Times op-ed:

Luigi Zingales, a professor of entrepreneurship and finance at the Booth School of Business at the University of Chicago, is the author of “A Capitalism for the People: Recapturing the Lost Genius of American Prosperity.”