Tax stuff I think is interesting. It is either copied from my primary blog on forbes.com http://www.forbes.com/sites/peterjreilly/ or stuff that I did not put there because being on forbes is a good gig and they have, you know, standards. Also some guest posts.
Tuesday, August 19, 2014
Occupy Wall Street - Let's Have a Student Loan Bailout - But We Need to March on the Colleges
Originally Published on forbes.com on October 7th,2011
I’m probably going to aggravate some friends with this one so I should preface it with the overall philosophy that I have on social issues. My favorite summary of it is this quote by Brendan Beehan:
I have a total irreverence for anything connected with society except that which makes the roads safer, the beer stronger, the food cheaper and the old men and old women warmer in the winter and happier in the summer.
The irreverence extends far and wide and includes many aspects of my own profession and “Wall Street”. For the moment I am going to talk about the education system. What is aggravating me about the education system is some of the things that I am reading in We Are The 99 Percent. We Are The 99 Percent puts a human face on the issues that have people out in the streets. The format is a series of pictures of individuals holding up a hand written note telling their story. Some of them are heart rending:
22 year old divorced single mom with a two year old daughter. Neither of us can go to the doctor, we can’t afford to get sick. Especially mommy. Mommy works full-time and is considered “lucky” to have a full time job. Mommy makes 7.25/hr and right now her bank account is in the hole -12.00 with a week left til payday… Mommy doesn’t feel lucky. Mommy has lost a lot of weight because she can’t afford to eat more than once a day, but she makes sure I have everything I need. I lose a lot of time with her because she is always gone to try to take of me the best she can. I love my Mommy….. WE ARE THE 99%
Now I sometimes consort with a curmudgeonly bunch of agingtax accountants. I probably make up the left wing of that group. (When I am with my human rights activist friends, I’m the right wing). The elderly accountants, including myself, all think there is something out of whack with “Wall Street”. We have clients in hedge funds, which based on the tax reporting headaches they create seem to invest in everything everywhere. We are puzzled as to why it is that traders are feeling constrained by the speed of light. Having worked with actually applying the ever changing tax law for 30 or more years, we have no excpectation of it ever making a lot of sense and recognize that it caters to special interest. I’m the most enthusiastic about Occupy Wall Street but I have to part company with it on one of the major grievances. Student loans. I agree that you have been ripped off, but I don’t think you should be pinning that particular grievance on finance capitalism. I think the blame for that one falls strongly on the education system.
A typical, although on the extreme end, grievance is from someone who went $150,000 in debt to obtain a masters degree in Minority Womens Studies. She received an excellent education and is now extemely frustrated that no one is willing to hire her based on the important things that she has learned. Now some even among the 99ers, who have posted, would put the blame for that squarely on her shoulders:
Nobody has ever held a gun to my head and said “here sign this student loan” nobody has ever told me I would ever be rich once I get my degree. We are responsible for our own actions and the decisions we make.
That particular fellow is 42. In his youth, he decided not to go to collegeand learned a trade instead.
I don’t blame her, because I fell into a similar trap in my youth. It was not nearly as bad back then and actually looking back over my whole life I don’t regret it, but it was still a trap. Here is the trap. If you are a first generation college graduate there is a good chance that you were heavily influenced and inspired by your teachers. I remember being inspired by my English teacher (If you can read this thank a teacher. If it is any good at all, thank Mr. Moroney). So I started out majoring in English. In my sophomore year one professor convinced me I was ill suited for that. There was something about the whole field that I just didn’t get. For example, I thought that Moby Dick was a story about a bunch of guys working in the whaling industry. History suited me much better and I had some really inspiring professors including David O’Brien, one of the leading scholars in the history of American Catholicism. I also had good math skills so I was thinking of a career in the then relatively new field of applying quantitative methods to historical problems. After a year in VISTA, I went to the University of Chicago. I bailed out after a year without completing my master degree for some personal reasons but also from becoming discouraged from meeting too many people in their thirties who were still not quite finished with their dissertations and the discouraging job prospects of those that did finish.
So there I was at the age of 24 with no saleable skills and student debt. I forget how much. Probably around 5 grand, which was worth a lot more in 1976 than it is now. When I was a teenager, my mother and I had been techincally living in poverty. How is it that my circumstances in 1976 were not nearly as desparate and discouraging as today’s debt encumbered graduates ? A couple of things. I had gotten some scholarships, but there was a little bit of bait and switch. As tution and room and board rose, the scholarship didn’t. Nonetheless, three summers I worked a union job in the shipping department of a valve factory. Lots of overtime. One summer I made 2 grand which was nearly a years tuition. I received social security survivors benefits until I was 22. As I understand it social security survivors benefits now cut off at eighteen regardless of whether you go to college. What the hell can a kid do to make say 20 grand in a summer nowadays ? Never mind, I don’t want to know unless it is avatar levelling. My mother thought sending me to an all male high school, with an almost all male faculty would be good since I needed male influence. She was right. There were really inspiring men there. Jesuit priests, Jesuit scholastics, career Catholic high school teachers, retired and active duty Army guys who taught military science and drilled the regiment. I’m glad I went. There was not one of them there though with the sense to tell me that maybe I should consider something like public accounting, which at the time was in my opinion the absolutely best deal for a first generation college graduate. Nobody told me to think about being an actuary – I guess I’m lucky I dodged that bullet. The academic world has an undue influence on first generation college students. It did not abuse my generation that badly, but it has done a serious number on this one. And this is one travesty that you cannot lay at the feet of finance capitalism.
So here is my proposal. Anyone with a student loan should be allowed to have an appraisal done on the monetary economic value of whatever credential they have received. They should have their debt written down to that amount or alternatively be permitted to surrender the credential in exchange for total debt forgiveness. The woman with the degree in Minority Womens studies would still have the education just not the credential and the associated debt. We have laws to protect unsophisticated investors from certain types of investments. In order to invest in them you have to show you have net worth to spare. There should be similar protections for unsophisticated 18 year olds being encouraged to go into debt that they will have no prospect of getting out of. Will this mean that all the degrees in Gender Studies might end up being gobbled up by the children of the wealthy? Maybe. So lets require the professors to publish the reading lists since that’s where most of the real education will come from. Should we stick the banks with this bailout or the taxpayers ? No. It should be funded by an excise tax on university endowments. There is probably a lot to blame “Wall Street” for, but this part of the mess, I don’t think so.