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18 novembre 2009

Time to Quit Using China as Our ATM

China and our other major creditors increasingly have the power to literally destroy our economy without destroying their own.


By Elizabeth Factor and Mallory Factor
- FOXNews.com
- November 18, 2009

This week in China, President Obama is practicing a new form of American diplomacy --assurance. With China now America's largest debt holder, the president is reassuring China that their investment in the U.S. economy is secure. In analyzing the president's visit, the American media seems to have suddenly realized that America has lost the upper hand in its relationship with China. But this has been coming for a long time.

President Obama is reassuring China that America is credit-worthy so that China will not dump our debt onto the world markets. But he is also trying to ensure that China will continue to purchase our debt in the future to pay for his elaborate government initiatives like the health care bill, cap-and-trade, and other spending programs. China holds over $1.7 trillion dollars of our currency and debt, which is well over 10% of our gross domestic product--how high can our indebtedness to China go? Hard as it may be to stop going back to our foreign lenders for more support, we are just piling more dirt on a mountain that is about to come down and bury us. America would suffer if it stopped borrowing from abroad, but paying the price later will be much more devastating.

From the U.S. perspective, China's investment in our debt and economy may seem to be just what our credit-starved American businesses and financial industry need. But while creditors may not always exert influence over the debtor nation's foreign policy, they have the power to do so if their holdings of currency or debt of the other nation are sufficiently large. The fact is that by borrowing so extensively from China and other nations, we have already significantly compromised our ability to promote democracy, the rule of law, human and civil rights reforms, and environmental policy--in China and around the world.

And China and our other major creditors increasingly have the power to literally destroy our economy without destroying their own. They can do this simply by refusing to buy our treasuries, agencies and currency, or worse, by dumping what they already own on the world market, which can be likened to a"nuclear option." Without enough demand for our debt, the United States would have to either offer huge interest rates to entice the remaining market into purchasing our debt or print more money leading to a crashing dollar and massive inflation. Although each of our creditors would suffer from the decline in value of our debt and currency, they would suffer less than we would.

The "nuclear option" allows a creditor nation to present its debtor nations with terms under which lending will continue. For example, China could press the United States to buy Chinese goods over the goods of other nations or could require us to open up our markets on terms unfavorable to the United States. China could use its economic influence over the United States to curb our support for Taiwan or other allies.

Anyone who does not believe that China has a far reaching geopolitical agenda should look at their former leader Deng Xiaoping's "24 character" strategy. Deng developed this policy in the 1990s to bring China back to the prominence and power on the global stage which it had enjoyed for over 3,000 years prior to domination by Europe in the 19th century. His policy consists only of 24 Chinese characters, and continues to be quoted--and followed--by the current Chinese leadership. It is as follows: "observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership."

China's influence over its debtors' foreign policy is growing. In 2008, the UK, another profligate Chinese debtor, stopped advocating for a free Tibet and formally recognized the legitimacy of Beijing's direct rule over Tibet. And we are responding to their pressure also. The political reality is very simple -- it is hard to press for "change" in China when we need to be concerned about maintaining Chinese investment in our economy.

The solution to this critical problem is simple and yet extremely difficult to achieve: The United States needs to stop increasing its deficits. We need to bring them down, reduce our foreign borrowing and therefore, improve our global economic standing.

And, if we are not able to change the trajectory we have begun, then what? At some point--not too far in the future, America will have a meltdown. The world will stop lending us capital and investing in our economy, and the value of our debt will crash. Our financial pressures will change our American way of life-- in small ways at first and then, in big ways. Even our current reduced level of consumption--cars, electronics and consumer goods--will no longer be possible. And this crisis will lead to many unforeseeable shifts in our political alliances, domestic policies and business practices.

And it will no longer be the U.S. that will be speaking softly and carrying a "big stick." On his visit to China, the president went through the motions of addressing human rights and environmental issues to appease his base at home, but even he must realize that his remarks will have no impact on Chinese policy.

Soon, American presidents will not even mention human rights violations or other issues for fear of offending China or our other important creditors. We are already learning that we cannot promote democracy, civil rights, environmental policy, and a fair legal system to our creditors. At best, we may be able to preserve and defend these principles at home.

Instead of reassuring China, our president needs to be reassuring the people of our nation that he understands the connection between overspending and our future prosperity. Looming debt has made increases in spending simply impossible to consider and yet, Democrats in Congress and the White House seem to be throwing America "under the bus" with its rampant over-spending. President Obama needs to take steps immediately to halt our reliance on foreign borrowings and to ensure that America and our way of life are preserved.

Elizabeth Factor is an international tax lawyer and former investment banker.

Mallory Factor is the co-chairman and co-founder of the Monday Meeting, an influential meeting of economic conservatives, journalists and corporate leaders in New York City. Mr. Factor is a well-known merchant banker and speaks and writes frequently on economic and fiscal topics for news stations, leading newspapers and other print and online publications. Mr. Factor writes frequently for the Fox Forum and is seen regularly on Fox News Channel. Mr. Factor can be reached at mallory.factor@malloryfactor.com

10 giugno 2009

Are Too Many People Going to College?

Boy, this blog is just chock full of excellent articles lately! This one is great, especially the end.

Are Too Many People Going to College?

By Charles Murray
Monday, September 8, 2008



America’s university system is creating a class-riven nation. There has to be a better way.

To ask whether too many people are going to college requires us to think about the importance and nature of a liberal education. “Universities are not intended to teach the knowledge required to fit men for some special mode of gaining their livelihood,” John Stuart Mill told students at the University of St. Andrews in 1867. “Their object is not to make skillful lawyers, or physicians, or engineers, but capable and cultivated human beings.” If this is true (and I agree that it is), why say that too many people are going to college? Surely a mass democracy should encourage as many people as possible to become “capable and cultivated human beings” in Mill’s sense. We should not restrict the availability of a liberal education to a rarefied intellectual elite. More people should be going to college, not fewer.

Yes and no. More people should be getting the basics of a liberal education. But for most students, the places to provide those basics are elementary and middle school. E. D. Hirsch Jr. is the indispensable thinker on this topic, beginning with his 1987 book Cultural Literacy: What Every American Needs to Know. Part of his argument involves the importance of a body of core knowledge in fostering reading speed and comprehension. With regard to a liberal education, Hirsch makes three points that are germane here:

Full participation in any culture requires familiarity with a body of core knowledge. To live in the United States and not recognize Teddy Roosevelt, Prohibition, the Minutemen, Wall Street, smoke-filled rooms, or Gettysburg is like trying to read without knowing some of the ten thousand most commonly used words in the language. It signifies a degree of cultural illiteracy about America. But the core knowledge transcends one’s own country. Not to recognize Falstaff, Apollo, the Sistine Chapel, the Inquisition, the twenty-third Psalm, or Mozart signifies cultural illiteracy about the West. Not to recognize the solar system, the Big Bang, natural selection, relativity, or the periodic table is to be scientifically illiterate. Not to recognize the Mediterranean, Vienna, the Yangtze River, Mount Everest, or Mecca is to be geographically illiterate.

College is seen as the open sesame to a good job and a desirable way for adolescents to transition to adulthood. Neither reason is as persuasive as it first appears.


This core knowledge is an important part of the glue that holds the culture together. All American children, of whatever ethnic heritage, and whether their families came here 300 years ago or three months ago, need to learn about the Pilgrims, Valley Forge, Duke Ellington, Apollo 11, Susan B. Anthony, George C. Marshall, and the Freedom Riders. All students need to learn the iconic stories. For a society of immigrants such as ours, the core knowledge is our shared identity that makes us Americans together rather than hyphenated Americans.

K–8 are the right years to teach the core knowledge, and the effort should get off to a running start in elementary school. Starting early is partly a matter of necessity: There’s a lot to learn, and it takes time. But another reason is that small children enjoy learning myths and fables, showing off names and dates they have memorized, and hearing about great historical figures and exciting deeds. The educational establishment sees this kind of curriculum as one that forces children to memorize boring facts. That conventional wisdom is wrong on every count. The facts can be fascinating (if taught right); a lot more than memorization is entailed; yet memorizing things is an indispensable part of education, too; and memorizing is something that children do much, much better than adults. The core knowledge is suited to ways that young children naturally learn and enjoy learning. Not all children will be able to do the reading with the same level of comprehension, but the fact-based nature of the core knowledge actually works to the benefit of low ability students—remembering facts is much easier than making inferences and deductions. The core knowledge curriculum lends itself to adaptation for students across a wide range of academic ability.

In the 20 years since Cultural Literacy was published, Hirsch and his colleagues have developed and refined his original formulation into an inventory of more than 6,000 items that approximate the core knowledge broadly shared by literate Americans. Hirsch’s Core Knowledge Foundation has also developed a detailed, grade by-grade curriculum for K–8, complete with lists of books and other teaching materials.

The Core Knowledge approach need not stop with eighth grade. High school is a good place for survey courses in the humanities, social sciences, and sciences taught at a level below the demands of a college course and accessible to most students in the upper two-thirds of the distribution of academic ability. Some students will not want to take these courses, and it can be counterproductive to require them to do so, but high school can put considerable flesh on the liberal education skeleton for students who are still interested.


Liberal Education in College

Saying “too many people are going to college” is not the same as saying that the average student does not need to know about history, science, and great works of art, music, and literature. They do need to know—and to know more than they are currently learning. So let’s teach it to them, but let’s not wait for college to do it.

Liberal education in college means taking on the tough stuff. A high-school graduate who has acquired Hirsch’s core knowledge will know, for example, that John Stuart Mill was an important 19th-century English philosopher who was associated with something called Utilitarianism and wrote a famous book called On Liberty. But learning philosophy in college, which is an essential component of a liberal education, means that the student has to be able to read and understand the actual text of On Liberty. That brings us to the limits set by the nature of college-level material. Here is the first sentence of On Liberty: “The subject of this essay is not the so-called liberty of the will, so unfortunately opposed to the misnamed doctrine of philosophical necessity; but civil, or social liberty: the nature and limits of the power which can be legitimately exercised by society over the individual.” I will not burden you with On Liberty’s last sentence. It is 126 words long. And Mill is one of the more accessible philosophers, and On Liberty is one of Mill’s more accessible works. It would be nice if everyone could acquire a fully formed liberal education, but they cannot.

Specifically: When College Board researchers defined “college readiness” as the SAT score thatis associated with a 65 percent chance of getting at least a 2.7 grade point average in college during the freshman year, and then applied those criteria (hardly demanding in an era of soft courses and grade inflation) to the freshmen in a sample of 41 major colleges and universities, the threshold “college readiness” score was found to be 1180 on the combined SAT math and verbal tests. It is a score that only about 10 percent of American 18-year-olds would achieve if they all took the SAT, in an age when more than 30 percent of 18-year-olds go to college.

The income for the top people in a wide variety of occupations that do not require a college degree is higher than the average income for many occupations that require a B.A.


Should all of those who do have the academic ability to absorb a college-level liberal education get one? It depends. Suppose we have before us a young woman who is in the 98th percentile of academic ability and wants to become a lawyer and eventually run for political office. To me, it seems essential that she spend her undergraduate years getting a rigorous liberal education. Apart from a liberal education’s value to her, the nation will benefit. Everything she does as an attorney or as an elected official should be informed by the kind of wisdom that a rigorous liberal education can encourage. It is appropriate to push her into that kind of undergraduate program.

But the only reason we can get away with pushing her is that the odds are high that she will enjoy it. The odds are high because she is good at this sort of thing—it’s no problem for her to read On Liberty or Paradise Lost. It’s no problem for her to come up with an interesting perspective on what she’s read and weave it into a term paper. And because she’s good at it, she is also likely to enjoy it. It is one of Aristotle’s central themes in his discussion of human happiness, a theme that John Rawls later distilled into what he called the Aristotelian Principle: “Other things equal, human beings enjoy the exercise of the irrealized capacities (their innate or trained abilities), and this enjoyment increases the more the capacity is realized, or the greater its complexity.” And so it comes to pass that those who take the hardest majors and who enroll in courses that look most like an old fashioned liberal education are concentrated among the students in the top percentiles of academic ability. Getting a liberal education consists of dealing with complex intellectual material day after day, and dealing with complex intellectual material is what students in the top few percentiles are really good at, in the same way that other people are really good at cooking or making pottery. For these students, doing it well is fun.

Every percentile down the ability ladder—and this applies to all abilities, not just academic—the probability that a person will enjoy the hardest aspects of an activity goes down as well. Students at the 80th percentile of academic ability are still smart kids, but the odds that they will respond to a course that assigns Mill or Milton are considerably lower than the odds that a student in the top few percentiles will respond. Virtue has nothing to do it. Maturity has nothing to do with it. Appreciation of the value of a liberal education has nothing to do with it. The probability that a student will enjoy Paradise Lost goes down as his linguistic ability goes down, but so does the probability that he works on double acrostic puzzles in his spare time or regularly plays online Scrabble, and for the identical reason. The lower down the linguistic ladder he is, the less fun such activities are.

And so we return to the question: Should all of those who have the academic ability to absorb a college-level liberal education get one? If our young woman is at the 80th percentile of linguistic ability, should she be pushed to do so? She has enough intellectual capacity, if she puts her mind to it and works exceptionally hard.

The answer is no. If she wants to, fine. But she probably won’t, and there’s no way to force her. Try to force her (for example, by setting up a demanding core curriculum), and she will transfer to another school, because she is in college for vocational training. She wants to write computer code. Start a business. Get a job in television. She uses college to take vocational courses that pertain to her career interests. A large proportion of people who are theoretically able to absorb a liberal education have no interest in doing so.

And reasonably so. Seen dispassionately, getting a traditional liberal education over four years is an odd way to enjoy spending one’s time. Not many people enjoy reading for hour after hour, day after day, no matter what the material may be. To enjoy reading On Liberty and its ilk—and if you’re going to absorb such material, you must in some sense enjoy the process—is downright peculiar. To be willing to spend many more hours writing papers and answers to exam questions about that material approaches masochism.

We should look at the kind of work that goes into acquiring a liberal education at the college level in the same way that we look at the grueling apprenticeship that goes into becoming a master chef: something that understandably attracts only a few people. Most students at today’s colleges choose not to take the courses that go into a liberal education because the capabilities they want to develop lie elsewhere. These students are not lazy, any more than students who don’t want to spend hours learning how to chop carrots into a perfect eighth-inch dice are lazy. A liberal education just doesn’t make sense for them.

For Learning How to Make a Living, the Four-Year Brick-and-Mortar Residential College is Increasingly Obsolete

We now go from one extreme to the other, from the ideal of liberal education to the utilitarian process of acquiring the knowledge that most students go to college to acquire—practical and vocational. The question here is not whether the traditional four-year residential college is fun or valuable as a place to grow up, but when it makes sense as a place to learn how to make a living. The answer is: in a sensible world, hardly ever.

Start with the time it takes—four years. Assuming a semester system with four courses per semester, four years of class work means 32 semester-long courses. The occupations for which “knowing enough” requires 32 courses are exceedingly rare. For some professions—medicine and law are the obvious examples—a rationale for four years of course work can be concocted (combining pre-med and pre-law undergraduate courses with three years of medical school and law school), but for every other occupation, the body of knowledge taught in classrooms can be learned more quickly. Even Ph.D.s don’t require four years of course work. The Ph.D. is supposed to signify expertise, but that expertise comes from burrowing deep in to a specialty, not from dozens of courses.

As long as it’s taboo to say that college is intellectually too demanding for most young people, we will continue to create unrealistic expectations among the next generation.


Those are the jobs with the most stringent academic requirements. For the student who wants to become a good hotel manager, software designer, accountant, hospital administrator, farmer, high-school teacher, social worker, journalist, optometrist, interior designer, or football coach, four years of class work is ridiculous. Actually becoming good in those occupations will take longer than four years, but most of the competence is acquired on the job. The two year community college and online courses offer more flexible options for tailoring course work to the real needs of the job.

A brick-and-mortar campus is increasingly obsolete. The physical infrastructure of the college used to make sense for three reasons. First, a good library was essential to higher learning, and only a college faculty and student body provided the economies of scale that made good libraries affordable. Second, scholarship flourishes through colleagueships, and the college campus made it possible to put scholars in physical proximity to each other. Third, the best teaching requires interaction between teachers and students, and physical proximity was the only way to get it. All three rationales for the brick-and-mortar campus are fading fast.

The rationale for a physical library is within a few years of extinction. Even now, the Internet provides access, for a price, to all the world’s significant technical journals. The books are about to follow. Google is scanning the entire text of every book in the libraries of Harvard, Princeton, Stanford, Oxford, the New York Public Library, the Bavarian State Library, Ghent University Library, Keio Library (Tokyo), the National Library of Catalonia, University of Lausanne, and an expanding list of others. Collectively, this project will encompass close to the sum total of human knowledge. It will be completely searchable. Everything out of copyright will be free. Everything still under copyright will be accessible for a fee. Libraries will still be a selling point for colleges, but as a place for students to study in pleasant surroundings—an amenity in the same way that an attractive student union is an amenity. Colleges and universities will not need to exist because they provide libraries.

The rationale for colleges based on colleagueships has eroded. Until a few decades ago, physical proximity was important because correspondence and phone calls just weren’t as good. As email began to spread during the1980s, physical proximity became less important. As the capacity of the Internet expanded in the 1990s, other mechanisms made those interactions richer. Now, regular emails from professional groups inform scholars of the latest publications in their field of interest. Specialized chat groups enable scholars to bounce new ideas off other people working on the same problems. Drafts are exchanged effortlessly and comments attached electronically. Whether physical proximity still has any advantages depends mostly on the personality of the scholar. Some people like being around other people during the workday and prefer face-to-face conversations to emails. For those who don’t, the value of being on a college campus instead of on a mountaintop in Montana is nil. Their electronic access to other scholars is incomparably greater than any scholar enjoyed even within the world’s premier universities before the advent of the Internet. Like the library, face-to-face colleagueships will be an amenity that colleges continue to provide. But colleges and universities will not need to exist because they provide a community of scholars.

The third rationale for the brick-and-mortar college is that it brings teachers together with students. Working against that rationale is the explosion in the breadth and realism of what is known as distance learning. The idea of distance learning is surprisingly old—Isaac Pitman was teaching his shorthand system to British students through the postal service in the 1840s, and the University of London began offering degrees for correspondence students in 1858—but the technology of distance learning changed little for the next century. The advent of inexpensive videocassettes in the 1980s opened up a way for students to hear and see lectures without being in the classroom. By the early 1990s, it was possible to buy college-level courses on audio- or videotape, taught by first-rate teaching professors, on a wide range of topics, for a few hundred dollars. But without easy interaction between teacher and student, distance learning remained a poor second-best to a good college seminar.

Once again, the Internet is revolutionizing everything. As personal computers acquired the processing power to show high-definition video and the storage capacity to handle big video files, the possibilities for distance learning expanded by orders of magnitude. We are now watching the early expression of those possibilities: podcasts and streaming videos in real time of professors’ lectures, online discussions among students scattered around the country, online interaction between students and professors, online exams, and tutorials augmented by computer-aided instruction software.

Even today, the quality of student-teacher interactions in a virtual classroom competes with the interactions in a brick-and-mortar classroom. But the technology is still in its early stages of development and the rate of improvement is breathtaking. Compare video games such as Myst and SimCity in the 1990s to their descendants today; the Walkman you used in the 1990s to the iPod you use today; the cell phone you used in the 1990s to the BlackBerry or iPhone you use today. Whatever technical limitations might lead you to say, “Yes, but it’s still not the same as being there in the classroom,” are probably within a few years of being outdated.

College Isn’t All It’s Cracked Up to Be

College looms so large in the thinking of both parents and students because it is seen as the open sesame to a good job. Reaping the economic payoff for college that shows up in econometric analyses is a long shot for large numbers of young people.

When high-school graduates think that obtaining a B.A. will help them get a higher- paying job, they are only narrowly correct. Economists have established beyond doubt that people with B.A.s earn more on average than people without them. But why does the B.A. produce that result? For whom does the B.A. produce that result? For some jobs, the economic premium for a degree is produced by the actual education that has gone into getting the degree. Lawyers, physicians, and engineers can earn their high incomes only by deploying knowledge and skills that take years to acquire, and degrees in law, medicine, and engineering still signify competence in those knowledges and skills. But for many other jobs, the economic premium for the B.A. is created by a brutal fact of life about the American job market: Employers do not even interview applicants who do not hold a B.A. Even more brutal, the advantage conferred by the B.A. often has nothing to do with the content of the education. Employers do not value what the student learned, just that the student has a degree.

Employers value the B.A. because it is a no-cost (for them) screening device for academic ability and perseverance. The more people who go to college, the more sense it makes for employers to require a B.A. When only a small percentage of people got college degrees, employers who required a B.A. would have been shutting themselves off from access to most of the talent. With more than a third of 23-year-olds now getting a B.A., many employers can reasonably limit their hiring pool to college graduates because bright and ambitious high-school graduates who can go to college usually do go to college. An employer can believe that exceptions exist but rationally choose not to expend time and money to identify them. Knowing this, large numbers of students are in college to buy their admission ticket—the B.A.

Employers do not value what the student learned, just that he has a degree. They value the B.A. as a no-cost (for them) screening device for academic ability and perseverance.


But while it is true that the average person with a B.A. makes more than the average person without a B.A., getting a B.A. is still going to be the wrong economic decision for many high-school graduates. Wages within occupations form a distribution. Young people with okay-but-not-great academic ability who are thinking about whether to go after a B.A. need to consider the competition they will face after they graduate. Let me put these calculations in terms of a specific example, a young man who has just graduated from high school and is trying to decide whether to become an electrician or go to college and major in business, hoping to become a white-collar manager. He is at the 70th percentile in linguistic ability and logical mathematical ability—someone who shouldn’t go to college by my standards, but who can, in today’s world, easily find a college that will give him a degree. He is exactly average in interpersonal and intrapersonal ability. He is at the 95th percentile in the small-motor skills and spatial abilities that are helpful in being a good electrician.

He begins by looking up the average income of electricians and managers on the Bureau of Labor Statistics website, and finds that the mean annual income for electricians in 2005 was$45,630, only about half of the $88,450 mean for management occupations. It looks as if getting a B.A. will buy him a huge wage premium. Should he try to get the B.A. on economic grounds?

To make his decision correctly, our young man must start by throwing out the averages. He has the ability to become an excellent electrician and can reasonably expect to be near the top of the electricians’ income distribution. He does not have it in him to be an excellent manager, because he is only average in interpersonal and intrapersonal ability and only modestly above average in academic ability, all of which are important for becoming a good manager, while his competitors for those slots will include many who are high in all of those abilities. Realistically, he should be looking at the incomes toward the bottom of the distribution of managers. With that in mind, he goes back to the Bureau of Labor Statistics website and discovers that an electrician at the 90th percentile of electricians’ incomes made $70,480 in 2005, almost twice the income of a manager at the 10th percentile of managers’ incomes ($37,800). Even if our young man successfully completes college and gets a B.A. (which is far from certain), he is likely to make less money than if he becomes an electrician.

Then there is job security to consider. A good way to make sure you always can find work is to be among the best at what you do. It also helps to have a job that does not require you to compete with people around the globe. When corporations downsize, they lay off mediocre managers before they lay off top electricians. When the economy gets soft, top electricians can find work when mediocre managers cannot. Low-level management jobs can often be outsourced to India, whereas electricians’ jobs cannot.

What I have said of electricians is true throughout the American job market. The income for the top people in a wide variety of occupations that do not require a college degree is higher than the average income for many occupations that require a B.A. Furthermore, the range and number of such jobs are expanding rapidly. The need for assembly-line workers in factories (one of the most boring jobs ever invented) is falling, but the demand for skilled technicians of every kind—in healthcare, information technology, transportation networks, and every other industry that relies on high-tech equipment—is expanding. The service sector includes many low-skill, low-paying jobs, but it also includes growing numbers of specialized jobs that pay well (for example, in healthcare and the entertainment and leisure industries). Construction offers an array of high-paying jobs for people who are good at what they do. It’s not just skilled labor in the standard construction trades that is in high demand. The increase in wealth in American society has increased the demand for all sorts of craftsmanship. Today’s high-end homes and office buildings may entail the work of specialized skills in stonework, masonry, glazing, painting, cabinetmaking, machining, landscaping, and a dozen other crafts. The increase in wealth is also driving an increased demand for the custom-made and the exquisitely wrought, meaning demand for artisans in everything from pottery to jewelry to metalworking. There has never been a time in history when people with skills not taught in college have been in so much demand at such high pay as today, nor a time when the range of such jobs has been so wide. In today’s America, finding a first-rate lawyer or physician is easy. Finding first-rate skilled labor is hard.



Intrinsic Rewards


The topic is no longer money but job satisfaction—intrinsic rewards. We return to our high-school graduate trying to decide between going to college and becoming an electrician. He knows that he enjoys working with his hands and likes the idea of not being stuck in the same place all day, but he also likes the idea of being a manager sitting behind a desk in a big office, telling people what to do and getting the status that goes with it.

However, he should face facts that he is unlikely to know on his own, but that a guidance counselor could help him face. His chances of getting the big office and the status are slim. He is more likely to remain in a cubicle, under the thumb of the boss in the big office. He is unlikely to have a job in which he produces something tangible during the course of the day.

There has never been a time in history when people with skills not taught in college have been in so much demand at such high pay as today.


If he becomes a top electrician instead, he will have an expertise that he exercises at a high level. At the end of a workday, he will often be able to see that his work made a difference in the lives of people whose problems he has solved. He will not be confined to a cubicle and, after his apprenticeship, will be his own supervisor in the field. Top electricians often become independent contractors who have no boss at all.

The intrinsic rewards of being a top manager can be just as great as those of a top electrician (though I would not claim they are greater), but the intrinsic rewards of being a mediocre manager are not. Even as people in white-collar jobs lament the soullessness of their work, the intrinsic rewards of exercising technical skills remain undiminished.

Finally, there is an overarching consideration so important it is hard to express adequately: the satisfaction of being good at what one does for a living (and knowing it), compared to the melancholy of being mediocre at what one does for a living (and knowing it). This is another truth about living a human life that a 17-year-old might not yet understand on his own, but that a guidance counselor can bring to his attention. Guidance counselors and parents who automatically encourage young people to go to college straight out of high school regardless of their skills and interests are being thoughtless about the best interests of young people in their charge.


The Dark Side of the B.A. as Norm

It is possible to accept all that I have presented as fact and still disagree with the proposition that too many people are going to college. The argument goes something like this:

The meaning of a college education has evolved since the 19th century. The traditional liberal education is still available for students who want it, but the curriculum is appropriately broader now, and includes many courses for vocational preparation that today’s students want. Furthermore, intellectual requirements vary across majors. It may be true that few students can complete a major in economics or biology, but larger proportions can handle the easier majors. A narrow focus on curriculum also misses the important nonacademic functions of college. The lifestyle on today’s campuses may leave something to be desired, but four years of college still give youngsters in late adolescence a chance to encounter different kinds of people, to discover new interests, and to decide what they want to make of their lives. And if it is true that some students spend too much of their college years partying, that was also true of many Oxford students in the 18th century. Lighten up.

About a third of all those who enter college hoping for a B.A. leave without one.


If the only people we had to worry about were those who are on college campuses and doing reasonably well, this position would have something to be said for it. It does not address the issues of whether four years makes sense or whether a residential facility makes sense; nevertheless, college as it exists is not an intrinsically evil place for the students who are there and are coping academically. But there is the broader American society to worry about as well. However unintentionally, we have made something that is still inaccessible to a majority of the population—the B.A.—into a symbol of first-class citizenship. We have done so at the same time that other class divisions are becoming more powerful. Today’s college system is implicated in the emergence of class-riven America.

The problem begins with the message sent to young people that they should aspire to college no matter what. Some politicians are among the most visible offenders, treating every failure to go to college as an injustice that can be remedied by increasing government help. American educational administrators reinforce the message by instructing guidance counselors to steer as many students as possible toward a college-prep track (more than 90 percent of high-school students report that their guidance counselors encouraged them to go to college). But politicians and educators are only following the lead of the larger culture. As long as it remains taboo to acknowledge that college is intellectually too demanding for most young people, we will continue to create crazily unrealistic expectations among the next generation. If “crazily unrealistic” sounds too strong, consider that more than 90 percent of high school seniors expect to go to college, and more than 70 percent of them expect to work in professional jobs.

Today’s college system is implicated in the emergence of class-riven America.


One aspect of this phenomenon has been labeled misaligned ambitions, meaning that adolescents have career ambitions that are inconsistent with their educational plans. Data from the Sloan Study of Youth and Social Development conducted during the 1990s indicate that misaligned ambitions characterized more than half of all adolescents. Almost always, the misalignment is in the optimistic direction, as adolescents aspire to be attorneys or physicians without understanding the educational hurdles they must surmount to achieve their goals. They end up at a four-year institution not because that is where they can take the courses they need to meet their career goals, but because college is the place where B.A.s are handed out, and everyone knows that these days you’ve got to have a B.A. Many of them drop out. Of those who entered a four-year college in 1995, only 58 percent had gotten their B.A. five academic years later. Another 14 percent were still enrolled. If we assume that half of that 14 percent eventually get their B.A.s, about a third of all those who entered college hoping for a B.A. leave without one.

If these numbers had been produced in a culture where the B.A. was a nice thing to have but not a big deal, they could be interpreted as the result of young adults deciding that they didn’t really want a B.A. after all. Instead, these numbers were produced by a system in which having a B.A. is a very big deal indeed, and that brings us to the increasingly worrisome role of the B.A. as a source of class division. The United States has always had symbols of class, and the college degree has always been one of them. But through the first half of the 20th century, there were all sorts of respectable reasons a person might not go to college—not enough money to pay for college; needing to work right out of high school to support a wife, parents, or younger siblings; or the commonly held belief that going straight to work was better preparation for a business career than going to college. As long as the percentage of college graduates remained small, it also remained true, and everybody knew it, that the majority of America’s intellectually most able people did not have B.A.s.

Over the course of the 20th century, three trends gathered strength. The first was the increasing proportion of jobs screened for high academic ability due to the advanced level of education they require—engineers, physicians, attorneys, college teachers, scientists, and the like. The second was the increasing market value of those jobs. The third was the opening up of college to more of those who had the academic ability to go to college, partly because the increase in American wealth meant that more parents could afford college for their children, and partly because the proliferation of scholarships and loans made it possible for most students with enough academic ability to go.

The combined effect of these trends has been to overturn the state of affairs that prevailed through World War II. Now the great majority of America’s intellectually most able people do have a B.A. Along with that transformation has come a downside that few anticipated. The acceptable excuses for not going to college have dried up. The more people who go to college, the more stigmatizing the failure to complete college becomes. Today, if you do not get a B.A., many people assume it is because you are too dumb or too lazy. And all this because of a degree that seldom has an interpretable substantive meaning.

Let’s approach the situation from a different angle. Imagine that America had no system of postsecondary education and you were made a member of a task force assigned to create one from scratch. Ask yourself what you would think if one of your colleagues submitted this proposal:

First, we will set up a common goal for every young person that represents educational success. We will call it a B.A. We will then make it difficult or impossible for most people to achieve this goal. For those who can, achieving the goal will take four years no matter what is being taught. We will attach an economic reward for reaching the goal that often has little to do with the content of what has been learned. We will lure large numbers of people who do not possess adequate ability or motivation to try to achieve the goal and then fail. We will then stigmatize everyone who fails to achieve it.

What I have just described is the system that we have in place. There must be a better way.

Charles Murray is the W. H. Brady scholar at the American Enterprise Institute. This article is adapted from “Real Education: Four Simple Truths for Bringing America’s Schools Back to Reality.” Copyright © 2008 by Cox & Murray, Inc. Published by Crown Forum, a division of Random House, Inc.

Book Review of "The Student Loan Scam"

Lenders of First Resort
More and more, student lending is becoming a rigged game.

By Robert VerBruggen

Modern American college students are some of the most fortunate people ever to inhabit the earth. Why should we feel sorry for them?

Because they’re saddled with “the most oppressive debt in U.S. history,” argues Alan Michael Collinge in his new book, The Student Loan Scam. This is, of course, quite false: The most oppressive debts in U.S. history probably occurred when this country had debtors’ prisons.

Unfortunately, Collinge is filled with such unjustified indignation. He makes a big deal about high interest rates on private (non-federally guaranteed) loans, as if students aren’t given that information when they sign up. He seems offended by the mathematical fact that when you don’t pay your debts, interest and fees accumulate, and you can end up owing several times what you borrowed.

But there is a very important story in this book: Collinge, who is himself buried in defaulted debt, explores the alliances that student-loan companies have established with universities and the government. By sharing profits with schools in exchange for preferential treatment, the industry’s biggest players have shielded themselves from free-market competition; and through intense government lobbying, the industry has secured exemptions from laws that apply to other forms of lending. No matter how wrongheaded his analysis, Collinge’s facts should evoke cringes from Americans of all political stripes.

Schools’ relationships with the major lenders will come as a shock to many — especially those who’ve taken advice from purportedly neutral university employees. Through “school as lender” programs, lenders can essentially give schools a cut of the profits in return for financial-aid officials’ steering borrowers their way. (Technically, the school makes the loan, and then the lender buys the debt at a premium.) Lenders often sweeten the deal by offering officials lavish parties and trips. Sometimes, lenders have even run financial-aid call centers on universities’ behalf, with lenders’ employees claiming to represent the schools.

Lender-state ties are no more innocent. The problems began in the 1970s, when the federal government created Sallie Mae as a “government-sponsored enterprise” that would buy student loans (much like Fannie Mae and Freddie Mac did for mortgages). Sallie grew through the 1980s, took a hit when the federal government began issuing loans directly in 1993, and began privatizing in 1997.

Today it’s a fully private entity, but Sallie and other big lenders have used their size and sway on Capitol Hill to their great benefit. For example, while there have long been limits on bankruptcy protection for student loans (some worry that it’s tempting to file for bankruptcy right after graduating), the student-loan industry managed to eliminate bankruptcy protection in 2005. No matter how long it’s been since you took out the loan, and no matter the size to which the debt has ballooned, you typically cannot discharge a student loan in bankruptcy. One can argue that bankruptcy laws in general should be stronger than they are, but it’s hard to make the case that student loans should be treated so differently from every other form of debt.

Also, Sallie has been able to work around laws that prevent it from outright buying guarantors — the companies that are supposed to oversee it, and that are required to purchase loans that go into default. Basically, lenders can own the collection agencies with which the guarantors contract, a situation that gives lenders the perverse incentive to let loans go into default rather than trying to collect them. When a borrower defaults, the lender can get repayment from the federal government, and stands to make more money on the collection agency’s work for the guarantor. Once, Sallie was found to have pushed loans into default without even attempting to collect them first, and had to pay $3.4 million. It’s also worth noting that in the student-loan industry, where bankruptcy is not a threat and collection powers include wage garnishment, defaulted loans are actually profitable on balance.

Many other foolish ideas have been adopted. According to federal law, a borrower can only consolidate his student loans once; then he’s stuck with that lender, even if a different lender is willing to pay off the loan and accept a lower interest rate. Also, to punish those who don’t pay their debts fast enough, collectors can have borrowers’ professional licenses taken away. Obviously, without being able to practice in the field for which they borrowed money to train, there’s little hope of these folks’ digging their way out of debt.

Collinge provides some good suggestions for dealing with these problems. He says kickbacks to schools should end, and he would like to see bankruptcy protection restored to student-loan debt.

His most ambitious solution, however, would probably be counterproductive. Collinge says the government should stop subsidizing loans, and instead dramatically increase direct aid to schools and students. In doing so, he says, the government would not only reduce the burdens on students but also stop college costs from rising. He does manage to cite an academic study to this effect, but he doesn’t consider that many economists think such a policy would have the exact opposite result.

Their theory (which John Hood has explained in NR) goes like this: College aid increases the demand for college, and it makes students less price-sensitive. Therefore, when the government increases aid, colleges can simply take that aid by raising tuition, putting students pretty much back where they started.

There are plenty of better ideas for rejiggering the way we pay for college. One is for students to give up a percentage of their income after graduation, instead of making traditional tuition and loan payments. Not only would this go easy on folks who have money troubles (no income, no payments due), it would take the burden off parents and the government. It would also provide schools with a very explicit way to compete on price: With loans, grants, and parental dollars out of the way, a student would have to ask himself if it was really worth X percent of his income to go with college A instead of college B.

Better yet, this could be done through private lenders, who’d have an incentive to pick the students who would stick with college and benefit from it. Such lenders would pass over the many students who shouldn’t be going to college and often drop out.

The Student Loan Scam is an eye-opening work of investigative journalism, despite its frequent hyperbole. Students are indeed fortunate people, even when they have to borrow money, and there’s every reason to support lenders’ right to collect the debt they’re owed. But Collinge demonstrates convincingly that lenders have gotten in bed with universities and the government, with predictably bad results.


— Robert VerBruggen, an NR associate editor, edits the Phi Beta Cons blog.

Source: National Review