Student Loan Forgiveness Is a Bad Idea

Eli Leher gets to half of the problem here:

This would amount to an open-ended subsidy that would benefit many of America’s largest corporations (the universities themselves) forever.

The other half was addressed in Josh Barro's post:

Consumers are not imposing discipline on the market in the way I would expect—they fail to shop around for the best education value, and sometimes they buy education products that are worth less than their cost.

Forgiving student loans prevents what needs to inevitably happen: We need to start getting our money's worth out of education.

Romney Has The Best Tax Plan For Me

Actually I'd do better under 9-9-9, but I'm not under any illusion that it could pass. Romney's plan eliminates taxes on capital gains and dividends for the middle class. The chief "complaint" is that the middle class realize very little of these types of income. This is actually a feature of the plan. People would shift their saving habits given the new incentive and it would cost the government very little in lost revenue for them to do so.

The problem with the analysis is that the middle class has alternatives (Retirement and Education accounts) that eat up most of their savings. Given the alternative Romney offers, I'd expect shifts from these specialized accounts to general investment accounts, all at very little cost to the government.

I would certainly ditch my 401k with it's ridiculous 2-3% expense ratios in favor of an account I could run myself for under 1%.

Student Loans For "Useless" Degrees

One of my favorite right of center pundits, Josh Barro says:

These are not people who got screwed. These are people who have gainful employment available to them and made follow-your-dreams life choices that reduce their incomes. That’s their prerogative; it’s not anybody else’s problem.

This is true, but the "following your dreams" part is not the bad part. Everyone who is capable of making money doing what they love and are best at should do that. What's dumb is to go into a huge amount of debt for an advanced degree that doesn't result in a suitably large change in income over a more basic or general degree.

Would Occupy Wall Street Protesters Understand What They Want?

To put it succinctly, I think they want policy that is not so supportive of rentiers. This means reduced copyright and patent protection, reduced licensing, and elimination regulations and tariffs that only serve to reduce competition and enrich the few. In addition they should ask for monetary policy that is not so afraid of inflation. These things would increase employment and decrease income inequality.

What they'll get instead is populist lip service on higher taxes for the 1% and "getting money out of politics".

Fire Your Bank: OMG Edition

Some time ago I fired my bank, Wells Fargo. The reason was twofold:

1) TARP - Instead of complaining about cronyism and the moral hazard of FDIC and bailouts, I decided to put my money in a bank that did not need a bailout.

2)The Fee Dance - I managed to avoid (most) fees by carefully paying attention to account types, minimums and add-ons. My father, who lives in Canada, decided to open a U.S. account to link to Paypal and did not pay attention to these details. They charged fees for "services" that cleaned out his initial 150 dollar deposit in less than 6 months, before he even had a chance to look at the account balance. Instead of whining about fees and carefully maintaining balances and watching for fee hikes, I just went to a bank with no fees on an interest bearing checking account, oddly enough there are plenty of these around.

When I see this story, the part that makes me sick is not the fact that he said they have a "right to make a profit". It's the part about "populist rage". The solution to this fee problem is easy: take your business elsewhere!

Stop being a doorstop for giant banks that assume you're too lazy to fire them. Search for "fire your bank" for more info and to get started on finding a better bank near you.

Acceptable Fiscal Stimulus?

A proposal we're not hearing very much any more is state and local pension buyouts. The federal government should offer to buy out state and local pension obligations (short term stimulus because more teachers and fire fighters will keep their jobs) in exchange for all new employees being put on defined contribution retirement plans (long term budget fix). It's bipartisan and it will work.

The Focus Need Not Be on Fiscal Policy or Lack Thereof

Ken Rogoff explains what the real problem is here.

It is a big mistake to say the Fed is out of ammunition when short term rates are 0. The Fed can purchase anything it wants. QE1 and QE2 were simply the purchase of longer term U.S. government bonds. What Bernanke really should do is commit to QE3 for an indefinite period until we've returned prices to trend. This means, and yes I know this is scary for bond holders (but so is default), higher than 2% inflation in the short term.