College cost

The cost of higher education is rising faster than other cost and the reason is the number of staff people and the availability of federal student loans. Forty years ago, America’s colleges employed more professors than administrators. The efforts of 446,830 professors were supported by 268,952 administrators and staffers. Over the past four decades, though, the number of full-time professors or “full-time equivalents”—that is, slots filled by two or more part-time faculty members whose combined hours equal those of a full-timer—increased slightly more than 50 percent. That percentage is comparable to the growth in student enrollments during the same time period. But the number of administrators and administrative staffers employed by those schools increased by an astonishing 85 percent and 240 percent, respectively. Today, administrators and staffers safely outnumber full-time faculty members on campus. In addition the kind of courses offered has increased dramatically. Today at the University of Minnesota there are 765 degree programs. What ever happened to the three R’s. 90% of the population lives within short driving distances from a college or university so students can live at home and go to college. This cuts the cost by half or more. Going to school this way would reduce the need for student loans and provide the structure that many young people need.

Income inequality

A number of politicians running for president are now talking about income inequality. Most everyday citizens agree that CEO’s making over $10 million including bonus is too much. Many CEO’s make up words of $100 million. Others such as Floyd Mayweather earning $150 million for a one hour fight. There are soccer players and basketball players who make over $50 million per year. Movie stars like Robert Downey Jr who made $75 million last year and some hip-hop guy named Dr. Dre earned $620 million last year selling his company. There are many young dot com wizzes who make billions. What all of these rich people have in common is that they can only do three things with the money. The can save it, spend it or give it away. If they save it they do not put in under the mattress but they bank it or invest it. When they spend it, say on a house, they put tradesmen to work and they purchase lots of household items which provides jobs in the homebuilding business. If they save it, banks loan it out to help other businesses and if they invest in stocks and bonds they provide capital for other companies to grow. And finally if they give it away which many do they help the various charities. If the public agrees that these people have too much money and tax laws are changed to take some away, what will happen to it? Today there are 150 million people working and 90 million who are of working age but not working. The total income in the United States is 15 trillion and the top one percent gets 3.3 trillion. If the government takes one half of what these rich folks earn and gives that to those 150 million who are working they will each get $11,000. If the beneficiaries include the 90 million who are not working, each will received $7,000. While this will be a nice bonus many of these people would rather have a job that paid them a little more and those not working might prefer just having a job period. Is concentrating on inequality causing the country to take its eye off job creation?

Tesla Motors

Tesla Motor Company started in 2003 with the idea of selling some high end electric cars. The plan was to get wealthy people, mostly from Silicon Valley to buy cars at over $100,000 each and then build a less expensive model for the average guy. As they got underway they caught the eye of politicians who believed in global warming and wanted to do something about it. This led in 2009 to a 465 million dollar loan from the US Dept of Energy. They started producing a model that cost $35,000 but the federal government would offer $7,500 tax credit and some states offered as much so the consumer could purchase this car for $20,000. The company was losing money and needed a boost which they got from a California program called, “ZEV” or zero emissions vehicle. This was to encourage the development of electric cars and companies that did not receive a set percent of their income from such cars had to purchase these ZEV credits from companies who had an excess. Since Tesla produced only electric they had excess credits. Typically a company like Ford Motors had to pay Tesla $35,000 for each car that Tesla sold. In the first quarter of 2013 Tesla announced its first profit. This was done by turning a 57 million dollar loss into an 11 million dollar profit by receiving 68 million dollars in ZEV credits from their competitors. In 2010 Tesla went public and their stock has gone from $10 to $235 and the company has a market value of $30 billion. They have sold a total of 70,000 cars meaning that each car added $450,000 to the company’s worth. Is this a great country, or what!

Legal cost

As part of the news regarding the situation in Baltimore a poll released showing that young people do not trust the legal system and this is not new. In the early 70’s I attended a lecture by famous attorney F. Lee Baily. I don’t remember the details of his speech but I will not forget his closing statement when he said and I paraphrase, just remember when you go to court that whether you are innocent or guilty has very little to do with the verdict. We see this on a regular basis and most prominently in the O.J. Simpson case where when you have the, “dream team” you get a different kind of justice. If O.J. had been some young man in north Minneapolis the verdict would likely have been different. Most people know that if you have the money you get better representation and in that regard the system is flawed. Regardless of your economic status you get a lawyer but it won’t be the dream team. It is the nature of the world that money brings advantages.

Class not race

Back in the 50’s there was a best-selling book entitled, “Raison in the Sun”. I read this book with great interest because it was about me. The book was about a black family that moved into a white neighborhood. It was a housing development like many after the war where two and three bedroom houses were built all in a row and sold mostly to young families, many of whom were vets from WWII. In 1959 I bought one of these homes for $10,000. These homes represented a major investment on the way to the American dream of home ownership. The story told of how the value of the home decreased by 20% when the black family moved in and the conclusion was that this was racism. I won’t argue with the book but I will present another possibility. Suppose the value of the homes increased when the black family moved in. Would there have been a different reaction. I say yes. It is possible that the negative reaction toward the black family might have been based on economics as opposed to race. I bring this up at this time because I see something similar in the riots in Baltimore. I believe much of the problem is based on class rather than race or is an economic problem. The leadership in Baltimore is racially balanced based on the community but the riots occurred anyway. It is a clash between the poor and uneducated and the middle class and educated. I believe that race has clouded the issue in many places throughout the country when in fact it all comes down to income differences. Once again the answer is good paying jobs. The government has been handing out money to these people for years but they have not improved their economic status.

Champaign

The political news this week was a study in contrast. A dozen Republican candidates for president gathered in New Hampshire and each presented his views on the economy and foreign affairs along with specifics as to how they would handle things if they were president. They were then subjected to critical questioning by the press and were required to defend their positions. On the democratic side the news was what Hilary Clinton ordered when she stopped at a restaurant. It appears that Clinton supporters are satisfied with this.

Gray Money

The term, “Gray Money”, applies to cash based businesses. An example is the coin operated business like arcades and juke boxes. They collect the coins, count them and then decide how much they should report as income. Since everyone is reporting about half you cannot compete in the business if you report all your income. You must either cheat or find another business. In the news today it was reported that taxes collected from the pot businesses in Colorado were coming in at about half the estimates. Since this is a cash business, I wonder where the people who collect taxes have been living. Did they account for the gray money when they put out their estimates or did they over estimate on purpose to get the law passed?