First Clinton-Trump Debate: Dumb Economic Policy and Even Dumber North Korea Policy

The first presidential debate between Trump and Clinton ended a few hours ago and it was one for the history books for all the wrong reasons. For an hour and a half, hundreds of millions of people around the world got to witness sheer cynicism being masked around as political debate such as moments when Hillary Clinton talked about the importance of cyber security without a hint of irony or self-consciousness and when Trump went on an incoherent spiel about Rosie O’Donnell, Sean Hannity, and Howard Stern.

Video Source

The Lincoln-Douglas Debate this was not! Not that anyone ever suspected it would be. Political debates are little more than pomp and pageantry where candidates get to flout their well-rehearsed lines and zingers hoping to spring their gotcha-traps for each other. But even when political candidates for the highest office of the land, and possibly the world, are held to such low expectations, it is amazing how they can still trip over those low bars.

I could honestly think of no other television show in history that was done a greater disservice from an absence of a built-in studio laugh track than that so-called debate.

There are many people who already have and will continue to break down the debates and go through them in excruciating detail until the next debate occurs. I wish them the best of luck. It would be akin to being told to look for gold in the Cheonggyecheon stream.

So instead, I will focus on two small portions of the debate that matter the most to me - economics and North Korea.


Economics

Economics is a complicated field. It has its own set of experts who have studied the topic their entire lives and those experts bitterly argue with one another with as much intensity as you’d find among those who argue about the Israeli-Palestinian conflict. It truly is a specialized field of its own that can also be divided into its own subgroups that are so disparate that an expert in one field could be completely clueless about the issues that deal with another.

But no layperson could ever be convinced of that when they hear politicians spout their bullshit views about economics when they try their best to dumb down the topic into easily consumable soundbites for the TV-watching audience.

Although many can convincingly argue that Clinton may be more knowledgeable about certain subjects than Trump and that Trump may be better versed in other things than Clinton, the first segment of the debate which dealt with economics clearly showed that neither person knew what the hell they were talking about.

Image Source

What Clinton said about the economy:

1. I want us (the government) to invest in the people and their future by promoting infrastructure, advanced manufacturing, innovation and technology, clean, renewable energy, and small business, because most of the new jobs will come from small business.
2. I also want to see more companies do profit-sharing. If you help create the profits, you should be able to share in them, not just the executives at the top.
3. We have to make the economy fairer by raising the national minimum wage and also guarantee, finally, equal pay for women's work.
4. We need paid family leave and earned sick days, affordable child care, and debt-free college.
5. We're going to do it by having the wealthy pay their fair share and close the corporate loopholes.
6. We also, though, need to have a tax system that rewards work and not just financial transactions. And the kind of plan that Donald has put forth would be trickle-down economics all over again. I call it trumped-up trickle-down. Trickle-down did not work. It got us into the mess we were in, in 2008 and 2009. Slashing taxes on the wealthy hasn't worked.
7. We had the worst financial crisis, the Great Recession, the worst since the 1930s. That was in large part because of tax policies that slashed taxes on the wealthy, failed to invest in the middle class, took their eyes off of Wall Street, and created a perfect storm.
8. We can deploy a half a billion more solar panels. We can have enough clean energy to power every home. We can build a new modern electric grid. That's a lot of jobs; that's a lot of new economic activity.
9. When I was secretary of state, we actually increased American exports globally 30 percent.

My rebuttals to Clinton:

1. Classic example of Broken Window Fallacy.
2. The President of the United States does not have the authority to force companies to share their profits “more equitably.”
3. Raising the minimum wage hurts the most vulnerable members of society - the marginal worker. It will exacerbate wealth inequality, not alleviate it. Also, when is this gender pay gap myth ever going to die?
4. Ever heard of unintended consequences?
5. Pray tell, what is fair?
6. Here’s an old challenge. Please name any economist outside a mental institute who has ever defended or called for trickle down economics.
7. Please cite evidence that the 2008 financial crisis was a result of low tax rates. Otherwise, please be prepared to be called a bullshit artist.
8. See rebuttal number 1.
9. Does the Secretary of State oversee trade?

Well, that was easy. So much for a smart and experienced Hillary Clinton.
Image Source

What Trump said about the economy:

1. American jobs are fleeing the country.
2. China is devaluing its currency, and there’s nobody in our government to fight them.
3. I'll be reducing taxes tremendously, from 35 percent to 15 percent for companies, small and big businesses.
4. We have to renegotiate our trade deals. Other countries are giving incentives, they're doing things that, frankly, we don't do.
5. Impose a tax on American companies that manufacture their goods overseas and then sell them in the US.
6. Bill Clinton approved NAFTA, which is the single worst trade deal ever approved in this country.
7. I built an unbelievable company. But we’re opening the Old Post Office. Under budget, ahead of schedule, saved tremendous money. I’m a year ahead of schedule. And that's what this country should be doing.

My rebuttals to Trump:

1. Trump spoke a few times about the employment situation in Ohio and Michigan. So in other words, he is talking about manufacturing jobs. But the reality is that the American manufacturing sector is still robust.
2. If China is devaluing its currency, then what do people call what the Federal Reserve is doing?
3. That’s actually a pretty nifty idea. Inversions are one of the most visible signs that the U.S. corporate-tax code is broken. One of the reasons Ireland is a popular destination for corporations looking to move their headquarters out of the United States is the fact its corporate tax rate of 12.5 percent - about one-third of America’s rate. Cutting corporate tax rates could potentially help to create hundreds of thousands of new jobs and it could also lead to a significant increase in real wage. The question is how Trump intends to do that. As per usual, he doesn’t offer any concrete plans.
4. (i) This will come as a surprise to the TPP’s 12 signatory countries that agreed they would not renegotiate the trade deals that have already been made. Seeing how the US is the major partner in the TPP, reneging on that promise would destroy the TPP and would destroy the Asia Pivot.
   
   (ii) Trade means increased jobs, but trade also means increased security. Reneging on its trade deals would be comparable to the Ming Dynasty suddenly choosing to become an isolationist hermit kingdom in the mid-15th century, after pursuing oceangoing exploration in the early part of the century. China could have been a superpower hundreds of years before the rise of the West. Is the US willing to become the new Ming China of the 21st century?
   
   (iii) In regards to complaints about “unfair” subsidies foreign governments grant their corporations, once again, Milton Friedman already provided the best rebuttal to that decades ago.
5. Is Trump talking about companies with captive offshore operations (the practice of completing work at a non-domestic location, whether by workers at a company’s own offshore subsidiary - often called a “captive” center - or by a third-party or companies that outsource to third-parties based overseas) or is he talking about companies that outsource (the practice of contracting out of goods or services to a third party)? Does he even know the difference?
   
   This is an important distinction because targeting companies that operate subsidiaries overseas would include, for example, IBM and a good number of non-vendor Fortune 500 companies who maintain a presence abroad, such as GE and Proctor & Gamble, some of which provide their parent companies with IT services.
   
   On the other hand, if it does not affect US companies that “ship jobs overseas” by hiring an offshore company, then the only offshore outsourcing customers this plan could have any bearing on are those who work with US-based IT services companies like IBM, which then deliver those services offshore. If that is the case, it's unlikely the the average American would have much to benefit.
   
   Also, how would increasing taxes on those companies persuade businesses to relocate to the US? Taxes are not the only reason companies outsource. There are also lower wages in overseas markets. The likely outcome of increasing taxes on such businesses could be more offshoring, not less, as those corporations use labor arbitrage to offset the bigger tax bill.
6. NAFTA is NOT the worst trade deal the US has ever had.
7. The idea that it would be better for the government to be run like a finely operated corporation has always been fancied by those on the political right. For good or for ill, however, a government cannot be run like the way a business is run. See here, here, here, here, here, and here.

Image Source

North Korea

Very little was said about North Korea. So my response will be short, too. Trump said, “China should go into North Korea. You look at North Korea; we are doing nothing there. China should solve that problem for us. China should go into North Korea. China is totally powerful as it relates to North Korea.”

My rebuttal:

Assuming that the US even has the leverage to “let” China do anything, allowing China to install a pro-Chinese regime in Pyongyang would infuriate not only Seoul, but also Tokyo, Moscow, and Hanoi. It would most likely be the best way for the US to actually become what Chinese nationalists have called it for decades - a paper tiger.

It is obvious except to the most deluded that the only place where Trump is a brilliant strategist or a deep thinker of any type whatsoever is in the deep recesses of his own twisted fantasies where he ought to crawl back into.

Image Source

Conclusion

I know that I've said this about politicians many times but I will say it again. A plague o' both their houses!

Why Is Going To College So Expensive?

Author's Note: This blog post was originally published in my previous (and less successful, and now defunct) blog in 2010 while I was still living in the United States.  Though the data, where applicable, might be a little dated and the references are US-based, the main points are still relevant today not just in the United States, but in Korea, too.

A college education seems to be one of those things that most everyone wants. Parents want it for their kids, employers want to hire those who have had it, a lot of college students think that it ought to be a right, and politicians extol its virtues.

Getting a college education is indeed a good thing. In my own experience, I can tell you that it has helped me to understand complex ideas and philosophies and especially because I studied the social sciences, going to college has helped me to reaffirm some of my own beliefs, changed some of my opinions and has also helped me to understand ideas that I do not agree with. My college life, with everything else that came along with it, was a wonderful journey and it’s a memory that I will forever cherish, even if I do not remember some of those nights.

This might have had something to do with it.
Image Source

Now there are several government aid programs that allow students to pursue higher education.

As for the GI Bill, it allows enlisted men and women in the armed forces to pursue an undergraduate or graduate degree at a college or university, a cooperative training program, or an accredited independent study program leading to a degree. It is the least that the men and women of uniform who have fought for their country deserve. On the other hand, the Free Application for Federal Student Aid (FAFSA) ensures that all eligible individuals can benefit from federally funded financial assistance for education beyond high school. The stated intentions of those two services are difficult, if not impossible, to argue against.

Now that I have gotten all the niceties out of the way, it’s time to rip them a new one.

The GI Bill was established in 1944 and it was the first of the federal government’s many forays into higher education. It wasn’t until 1958 that the National Defense Education Act, which was the precursor to the Federal Perkins Loan program, the very first federal student aid program for low-income students, was passed by Congress. Before 1944, politicians in the federal government did nothing to subsidize or regulate education.

Conventional wisdom dictates that the GI Bill and FAFSA (and all of its successors) allowed countless students to afford a college education; and had those services not been enacted by Congress, the United States would be lagging far behind other industrialized nations and could not have achieved the rate of economic growth that it has experienced since the end of the Second World War. What we have to ask ourselves is whether or not that conventional wisdom is actually correct.

The philosophical argument that is given in support of getting a college education is education itself. Education is indeed a journey that begins at birth and ends with death and the more educated people are, the better off everyone’s lives is.

But what is the practical argument that is given in support of getting a college education? I can think of only one – to be eligible for a better paying job. For that reason, many people who support the subsidization of education claim that the GI Bill and FAFSA have allowed for many people to escape from the drudgery of manual labor to become doctors, engineers, accountants, lawyers, etc.

Image Source

Don’t get me wrong; I’m certainly not against higher education. However, the problem is that many people seem to make the mistake of judging the GI Bill and FAFSA to be good because of their stated intentions rather than their results.

If the only argument in support of the GI Bill or FAFSA is the philosophical one, then my argument would be merely philosophical as well – as much as I agree that having an educated populace is a desirable thing, I do not think that the government subsidizing education is the best way to approach that goal. The thing about philosophy, however, is that it is something that people are free to, and do, disagree with ad infinitum. However, once people try to make the practical argument in support of the GI Bill or FAFSA, then my argument becomes more fundamental – has it worked?

Case in point, how many new college graduates do you know who deliver pizzas or bag groceries or sell insurance over the phone or bartend or work entry-level jobs of one kind or another? In other words, how many new college graduates do you know who work jobs that really do not need 4-year degrees to accomplish? How many college graduates do you know who absolutely needed the on-the-job training that they received from their employers because the four years that they took to major in English or Music Education or Communication or Political Science did not teach them anything about escrow?  Or how many times have you personally not been able to apply for a job because one of the job requirements is work experience and that seems to be the same requirement that all other businesses require?  I know many such people and considering my readership, chances are that you are one of them.

Image Source

Considering the fact that less than 30% of college graduates get into professions that are related to their college majors, basically, by subsidizing college education as heavily as it has done for the last several decades, the federal government has turned the college degree from a mark of important personal accomplishment into just another credential that doesn’t necessarily mean anything except that the student managed to accumulate enough college credits.

It’s true that many employers now require a college degree as a job qualification. But how many of those jobs actually require particular skills or knowledge that an applicant could have acquired only in college? The vast majority of the time, the college degree requirement is generally used by an employer as a screening device to keep from having to interview applicants with only a high school diploma or less even for the most mundane jobs because of the perception that those with only high school diplomas are less reliable than those with college degrees. Then the question that arises is that if a college degree for the most part acts as merely a screening device rather than a sign of acquired knowledge that is in need, is that expensive college degree worth it?

Image Source

But what does the cost matter to the recipient of government aid to go to school? He/She is not paying for his/her education; not directly out-of-pocket anyway. It matters for two reasons.

Firstly, nothing is for free. Just because the recipient of the GI Bill is not paying for his/her education doesn’t mean that taxpayers aren’t paying for it. And is it right for taxpayers to be forced to pay for an education whose value is not worth the price tag?

Secondly, it matters because after the government began meddling in education, it has arguably cheapened education. The GI Bill was signed into law in 1944 in order to reward the millions of soldiers who were forcibly drafted into the Second World War. Originally, it was not meant to go on after all of the military personnel who participated in the Second World War who could take advantage of the program had chosen to do so. It was supposed to be a temporary thing but then came the Korean War, the Vietnam War and so on and so forth and so not only did the GI Bill remain, it also got a post-9/11 makeover.

As Dr. Milton Friedman once said, it just goes to show you that there really is nothing as permanent as a temporary government program.

Image Source

However, people do argue that government needs to subsidize education because it is so incredibly expensive. “Think of the poor,” they say. But they are not asking the important question – why is college education so expensive?

Since 1985, overall inflation in the US has been about 107.05% whereas the inflation rate for college during the same timeline has been around 466.8%.

When something makes no mathematical sense, it’s usually because government is involved. If you are a recipient of the GI Bill’s benefits or that of FAFSA loans, think of how readily the bursar at whatever university or college or accredited school you attended accepted those checks without ever asking you a lot of questions. And why wouldn’t they? Those checks are never going to bounce. After all, it is guaranteed money by the government – it’s free money, money that has either been taxed or practically freshly printed, or in some cases, yet to be printed.

When there is subsidization and guaranteed money involved, two things happen.

Firstly, subsidization inevitably always leads to overproduction. Just ask the Iowa corn farmers.

Secondly, guaranteed money inevitably always leads to higher prices. If I can charge any price I want for the product that I am selling and I am guaranteed to be paid no matter what, what reason would I have to not increase my price? The same logic applies to colleges. If the GI Bill allows you to go college for up to $100,000 or if FAFSA allows you to borrow up to $100,000 in student loans, then like magic, the cost of going to college goes up to $100,000. Never mind the fact that the value of your education might not be worth $100,000.

By subsidizing education, the government has transformed the college experience from being one of expanding the mind to becoming a mere credential to get an entry-level job for which people are mostly over-educated. It has raised the cost of going to college so much so that very few people can now go to college without the GI Bill or FAFSA thus creating a vicious never-ending cycle. And it has allowed the marketplace to be so saturated with college degree holders that despite the fact that so many young people are in serious debt, many young people can only find work in entry-level jobs that pay peanuts, which in turn compels people to support higher minimum wage rates, which in turn exacerbates things even further.  It's a vicious cycle.

Image Source

So the next time you hear someone say that education ought to be a right that the government ought to help pay partially for or fund outright, people ought to be reminded to think of one very important thing – that famous road to hell that has been paved with the purest of good intentions.

As for that future bubble burst, the Education Bubble, that is the direct result of more and more students not being able to repay their student loans that is going to pummel the economy yet again, well, that’s a nightmare scenario that I don’t even want to think of right now.

Image Source