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I completely agree, and I find it an interesting contrast of the current political feelings of protecting the middle/lower classes (I don't know what the accept

I completely agree, and I find it an interesting contrast of the current political feelings of protecting the middle/lower classes (I don't know what the acceptable term for "lower class" is). College cost Problem: college needs to be more affordable for lower-class kids Solution: give them cheap loans to go. End result: college prices rise because there's no downward pressure, kids graduate with enormous loans, and we're having this same conversation ("how can we stimulate spending?"). Housing Problem: the poor can't afford housing. Solution: Legislate it such that the poor can get access to loans to buy housing, with the government (really, society at large) subsidizing the cost. End Result: Housing prices rise because loans are cheap, people get loans they can't afford, eventually people default on loans, pushing costs of loans up, the poor can't afford to buy housing. Cycle repeats. This is where the conservative side of me thinks that government intervention really pushes this cycle along faster and faster, and makes things worse and worse (with the best of intentions). I think it was in the 90s that suddenly it became politically smart to think that "everyone should be able to own their own home", which sounds great on the surface, but there's so much more to it than a simple quote.

eldavido 11y ago
I very much believe that housing and education are necessities, and that builders and colleges, if the screws were turned to them more, would find ways to cut costs and make things more broadly affordable. I don't think throwing tons of debt at the problem fixes anything long-term. Right or not, you'll get killed expressing that thought (no matter how well-intentioned) as a politician.
- JonFish85 11y ago
  Who is going to hold the screws to them? As it's set up currently, costs have been rising for 30 years at insane rates. I know I'm biased because I've been in Boston for quite some time (it's probably different elsewhere), but all of the colleges in the area have been spending money on completely non-academic things. Building elaborate new dorms & cafeterias, immaculate landscaping, bringing in various pop stars for campus events. None of it moves the needle on "education", but it for damn sure enriches the colleges. Speaking for my own alma mater, they spent $8m/year to lure the president away from a California school, because he's apparently very good at luring in sponsorships/donations from alumni (I never really understood WTF that meant). Then the college paid ~$10m for him to have a house in the "hip" part of the city. On top of that, the university spent many millions building new dorms with sushi bars and excellent views. The costs rose a steady 4-5% a year while I was there, and I believe it's been at that clip for decades now. Sure, you can make the argument that it's to pay for their investments, but remember that the university also received in the neighborhood of $100m to rename an existing building on campus. And of course don't forget the monthly phone calls to solicit donations "for the students of tomorrow". Unfortunately I think that the idea of everyone feeling that they are "above average" feeds into this--kids who can't afford it really, really want to go to this school. And subsidized loans make it very possible for people to borrow $65k a year to do it. It's a vicious cycle, because as prices rise, the more it seems that politicians want to make it easier for kids to go to any college they want to. Unfortunately I don't really know of a good way to stop people from making dumb decisions. There aren't many careers that can pay off $150-$200k in loans in any reasonable amount of time, and I'm not sure that it would work out well for the government to step in and say that you can't borrow more than $X for college from any source.
  - logfromblammo 11y ago
    Building a new university is difficult. Buying investment paper from Sallie Mae is easier. Building a traditional bricks-and-mortarboards university with actual tenured professors and students seeking valuable skills and knowledge is difficult. Making a half-assed university that gets all its revenue from government grant and loan programs while its graduates can't find jobs decent enough to pay off their loans is easier. As long as there are ways for people to invest and reap the benefits rather than spend money and do the actual work, there will be investment bubbles, because there will never be any shortage of humans who would prefer to sit on ass and cash fat checks than to sweat all day for little visible return. You alma mater pisses me off. It could have hired 80 non-adjunct employees, and built a new building with 40 classrooms and 100 offices in it. Instead, it hired one guy, whose job is apparently to beg people to give the school more of their money. And specifically, beg from alumni, many of whom will now be debt-encumbered and underemployed because they spent too much in tuition, learning things that don't help them to create beneficial economic activity, from people who are essentially underpaid temps with no future career path within the school. The availability of the loans just makes it easier for schools to raise tuition without providing better service. If you take away the loans, it's true that people who want degrees will have fewer opportunities, but one of those opportunities will likely be to attend school in a strip mall cubicle, learning from robot-assisted professors, for $500 a semester, plus $50 per credit-hour. That dude is going to learn just as much as the guy in the swanky dorm with theater-quality lecture halls and famous professors, but it'll cost him $10k instead of $200k. Throwing money at a problem does not help, unless you are throwing it specifically at those people who are capable of fixing it.
danmaz74 11y ago
AFAIK the solution to make it easier to get access to credit was the one favored by the conservatives, leaving the market to settle pricing and allocation of resources, and thus (hopefully) remove the need to have public universities and social housing.
- AnimalMuppet 11y ago
  Credit cards? That may have been on conservatives. Housing? That was largely liberals.
digikata 11y ago
The flip side of that argument is that the top xx% people and organizations have accumulated so much wealth that they really don't know how to allocate it sanely. As soon as some channel opens to receive it (government or private), money starts flooding in, eroding the integrity of that investment channel - and stupid investments inevitably get made. Meanwhile, people can't afford houses or pay for college because the price of their labor is being systematically minimized to increase shareholder value, and the world and national economy as a whole are showing a low-growth stagnation. The question is often asked, what intrinsic reason is there to worry about income inequality? One reason is that when wealth is more evenly spread, the millions of micro-allocation decisions by many people help power a very efficient engine of capitalism. However, if the wealth is unevenly spread, then we have much fewer parties making very heavyweight allocation decisions, and many much smaller allocations being made by everyone else. Under that scenario, the engine of capitalism starts to drop in efficiency because it's choking on too high a amount of misrouted investments in some areas, and not enough in others.
- JonFish85 11y ago
  >The flip side of that argument is that the top xx% people and organizations have accumulated so much wealth that they really don't know how to allocate it sanely. As soon as some channel opens to receive it (government or private), money starts flooding in, eroding the integrity of that investment channel - and stupid investments inevitably get made. How does this work, generally? Sure, there are people with "so much wealth they don't really know how to allocate it sanely," as you say. But ultimately what happens with it? The "super wealthy" don't have it sitting under their mattresses--it's in all kinds of investments: stocks, property, etc. I don't really get the point in your words, other than "some people have more money than others". What counts as a valid use of money, to you? Paying for other people's college? Paying other people's mortgages? What makes one use of money/property more valuable than other uses? As seen on HN recently, mutual funds are investing in startups, some of which essentially pays our salaries. Is paying $10m for a yacht a less sane use of money than a million people paying $10 for gas? For the 2nd time in as many days, I'll use Bill Gates as an example. He's apparently worth something like $80B. Apparently ~$15B is in Microsoft stocks, and the rest is in Cascade Investment LLC. That's all being invested in a variety of ways, certainly: some public companies, some bonds, some private company, etc. It's all being used in various ways, ultimately paying salaries, paying taxes on properties, investing in capital. If it were to be liquidated (assuming that you could do so without losing value), and given to everyone in the USA equally at $80B / 330 million people => $242/person in the US, why would that necessarily be allocated "better"? My naive guess would be that a significant chunk of it would end up at Walmart, Apple and Samsung--how is that more sanely allocated? Or is your point that the government could better allocate that money? If the government were given $80B to use "on behalf of the people", do you think it would be better spent?
huherto 11y ago
I agree with you on both examples. Education and housing. But I wouldn't conclude it is government intervention that causes the problem. It is the wrong type of intervention. IMHO.
- AnimalMuppet 11y ago
  Well, that's the general problem with intervention. The law of unintended consequences is a real thing, but politicians think they're smarter than that. They aren't, but they think they are. So their interventions often are the "wrong type". I agree with you that intervention could be done well. But it very often isn't. I think we need to become more skeptical of politics as a source of solutions, because much too often, the solutions sound good but don't work out very well.
dsr_ 11y ago
In each of these cases, you are pushing at the demand side. Try increasing supply, instead. College needs to be more affordable? Build more colleges. Results: more kids go to college, more professors have middle-class jobs, more construction companies build buildings... Don't increase the costs by enabling people to pay more; increase the supply relative to demand so that the prices fall.

eldavido 11y ago

I very much believe that housing and education are necessities, and that builders and colleges, if the screws were turned to them more, would find ways to cut costs and make things more broadly affordable. I don't think throwing tons of debt at the problem fixes anything long-term. Right or not, you'll get killed expressing that thought (no matter how well-intentioned) as a politician.

JonFish85 11y ago
Who is going to hold the screws to them? As it's set up currently, costs have been rising for 30 years at insane rates. I know I'm biased because I've been in Boston for quite some time (it's probably different elsewhere), but all of the colleges in the area have been spending money on completely non-academic things. Building elaborate new dorms & cafeterias, immaculate landscaping, bringing in various pop stars for campus events. None of it moves the needle on "education", but it for damn sure enriches the colleges. Speaking for my own alma mater, they spent $8m/year to lure the president away from a California school, because he's apparently very good at luring in sponsorships/donations from alumni (I never really understood WTF that meant). Then the college paid ~$10m for him to have a house in the "hip" part of the city. On top of that, the university spent many millions building new dorms with sushi bars and excellent views. The costs rose a steady 4-5% a year while I was there, and I believe it's been at that clip for decades now. Sure, you can make the argument that it's to pay for their investments, but remember that the university also received in the neighborhood of $100m to rename an existing building on campus. And of course don't forget the monthly phone calls to solicit donations "for the students of tomorrow". Unfortunately I think that the idea of everyone feeling that they are "above average" feeds into this--kids who can't afford it really, really want to go to this school. And subsidized loans make it very possible for people to borrow $65k a year to do it. It's a vicious cycle, because as prices rise, the more it seems that politicians want to make it easier for kids to go to any college they want to. Unfortunately I don't really know of a good way to stop people from making dumb decisions. There aren't many careers that can pay off $150-$200k in loans in any reasonable amount of time, and I'm not sure that it would work out well for the government to step in and say that you can't borrow more than $X for college from any source.
- logfromblammo 11y ago
  Building a new university is difficult. Buying investment paper from Sallie Mae is easier. Building a traditional bricks-and-mortarboards university with actual tenured professors and students seeking valuable skills and knowledge is difficult. Making a half-assed university that gets all its revenue from government grant and loan programs while its graduates can't find jobs decent enough to pay off their loans is easier. As long as there are ways for people to invest and reap the benefits rather than spend money and do the actual work, there will be investment bubbles, because there will never be any shortage of humans who would prefer to sit on ass and cash fat checks than to sweat all day for little visible return. You alma mater pisses me off. It could have hired 80 non-adjunct employees, and built a new building with 40 classrooms and 100 offices in it. Instead, it hired one guy, whose job is apparently to beg people to give the school more of their money. And specifically, beg from alumni, many of whom will now be debt-encumbered and underemployed because they spent too much in tuition, learning things that don't help them to create beneficial economic activity, from people who are essentially underpaid temps with no future career path within the school. The availability of the loans just makes it easier for schools to raise tuition without providing better service. If you take away the loans, it's true that people who want degrees will have fewer opportunities, but one of those opportunities will likely be to attend school in a strip mall cubicle, learning from robot-assisted professors, for $500 a semester, plus $50 per credit-hour. That dude is going to learn just as much as the guy in the swanky dorm with theater-quality lecture halls and famous professors, but it'll cost him $10k instead of $200k. Throwing money at a problem does not help, unless you are throwing it specifically at those people who are capable of fixing it.

danmaz74 11y ago

AFAIK the solution to make it easier to get access to credit was the one favored by the conservatives, leaving the market to settle pricing and allocation of resources, and thus (hopefully) remove the need to have public universities and social housing.

AnimalMuppet 11y ago
Credit cards? That may have been on conservatives. Housing? That was largely liberals.

digikata 11y ago

The flip side of that argument is that the top xx% people and organizations have accumulated so much wealth that they really don't know how to allocate it sanely. As soon as some channel opens to receive it (government or private), money starts flooding in, eroding the integrity of that investment channel - and stupid investments inevitably get made. Meanwhile, people can't afford houses or pay for college because the price of their labor is being systematically minimized to increase shareholder value, and the world and national economy as a whole are showing a low-growth stagnation. The question is often asked, what intrinsic reason is there to worry about income inequality? One reason is that when wealth is more evenly spread, the millions of micro-allocation decisions by many people help power a very efficient engine of capitalism. However, if the wealth is unevenly spread, then we have much fewer parties making very heavyweight allocation decisions, and many much smaller allocations being made by everyone else. Under that scenario, the engine of capitalism starts to drop in efficiency because it's choking on too high a amount of misrouted investments in some areas, and not enough in others.

JonFish85 11y ago
>The flip side of that argument is that the top xx% people and organizations have accumulated so much wealth that they really don't know how to allocate it sanely. As soon as some channel opens to receive it (government or private), money starts flooding in, eroding the integrity of that investment channel - and stupid investments inevitably get made. How does this work, generally? Sure, there are people with "so much wealth they don't really know how to allocate it sanely," as you say. But ultimately what happens with it? The "super wealthy" don't have it sitting under their mattresses--it's in all kinds of investments: stocks, property, etc. I don't really get the point in your words, other than "some people have more money than others". What counts as a valid use of money, to you? Paying for other people's college? Paying other people's mortgages? What makes one use of money/property more valuable than other uses? As seen on HN recently, mutual funds are investing in startups, some of which essentially pays our salaries. Is paying $10m for a yacht a less sane use of money than a million people paying $10 for gas? For the 2nd time in as many days, I'll use Bill Gates as an example. He's apparently worth something like $80B. Apparently ~$15B is in Microsoft stocks, and the rest is in Cascade Investment LLC. That's all being invested in a variety of ways, certainly: some public companies, some bonds, some private company, etc. It's all being used in various ways, ultimately paying salaries, paying taxes on properties, investing in capital. If it were to be liquidated (assuming that you could do so without losing value), and given to everyone in the USA equally at $80B / 330 million people => $242/person in the US, why would that necessarily be allocated "better"? My naive guess would be that a significant chunk of it would end up at Walmart, Apple and Samsung--how is that more sanely allocated? Or is your point that the government could better allocate that money? If the government were given $80B to use "on behalf of the people", do you think it would be better spent?

huherto 11y ago

I agree with you on both examples. Education and housing. But I wouldn't conclude it is government intervention that causes the problem. It is the wrong type of intervention. IMHO.

AnimalMuppet 11y ago
Well, that's the general problem with intervention. The law of unintended consequences is a real thing, but politicians think they're smarter than that. They aren't, but they think they are. So their interventions often are the "wrong type". I agree with you that intervention could be done well. But it very often isn't. I think we need to become more skeptical of politics as a source of solutions, because much too often, the solutions sound good but don't work out very well.

dsr_ 11y ago

In each of these cases, you are pushing at the demand side. Try increasing supply, instead. College needs to be more affordable? Build more colleges. Results: more kids go to college, more professors have middle-class jobs, more construction companies build buildings... Don't increase the costs by enabling people to pay more; increase the supply relative to demand so that the prices fall.