Tag Archives: economics

Government and Student Debt

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In an article on the possibility of the Federal government extending its current moratorium on student debt repayment, The Wall Street Journal posed a question to its readers.

How should Congress address the backlog of student-loan payments borrowers will owe after Sept 30?

I say, mostly by leaving it alone. The loans are strictly business arrangements between the borrower and the lender.

In a free market economy, government has no role here, other than to allow student debt to be discharged through bankruptcy like most other debt. Such bankruptcies then must flow with all the ramifications they entail for both the lenders and the borrowers.

Government also should stop guaranteeing student loans. If there needs to be a guarantor in order to have a student debt market at all, let the colleges and universities be the guarantors, either individually or via a consortium. It is, after all, the colleges’ and universities’ high prices and non-marketable or low-income-producing majors that drive the difficulties graduates have with their student debts.

Internet Security

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There is a move afoot—and it’s making significant progress—to develop and deploy a quantum computing Internet.

A group led by the US Department of Energy and the University of Chicago plans to develop a nationwide quantum internet that could be functional in about a decade and with the potential to securely transmit sensitive information related to national security and financial services.
“What we’re moving forward on is building out quantum networks [to] someday…turn into a full second internet, a parallel internet to the digital internet,” said Paul Dabbar, the Energy Department’s Under Secretary for Science.

That would be terrific if it actually comes to fruition. Especially this part:

“Literally anything that would be transmitted encrypted today would be suitable for the quantum internet in the future,” Mr [JPMorgan Chase & Co’s Managing Director, Head of Research and Engineering, Marco] Pistoia said in an email.

Of course, that includes the personal and business correspondence of US citizens.

A problem I have with such a development, though, is this:

“A quantum network, because of physics, is by definition completely secure,” Mr Dabbar said.

No. A quantum network is not the network to end all networks. Such a network is not because of physics…by definition completely secure.

A quantum network is completely secure because of physics as we understand physics today. Security is, and always will be, an arms race between the cryptographers and their evolutions on the one hand, and the hackers and their evolutions on the other.

The biggest threat to security is just this sort of complacency.

There are other problems, and they are not unique to quantum networks, either. One such is a basic denial of service attack, where the hacker doesn’t care a single bit about encryption—at least not directly—but only in denying user access to the network or any node on it. The motive for that denial may be petty vandalism, “protest,” extortion—give me that document you’ve got encrypted on your quantum subnet (so much for quantum encryption)—to any number of other not yet imagined reasons.

Another is the phishing expedition wherein an employee is suckered into taking some action that grants the hacker access to the network.

Then there’s that personal communication secrecy—a citizen’s wish to keep his private communications private, including from the prying eyes of Government. Quantum network use would extend the tension between a citizen’s right to keep private things private and Government’s often entirely legitimate, even urgent, need to know. That, though, is just part of the noise of republican democracy.

By all means, develop and deploy the quantum Internet; it would be a huge step forward in data protection. Sooner is better.

But don’t be complacent about its security. And don’t let up on the need to protect against other forms of attack.

The Biden Fed

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Progressive-Democratic Party Presidential candidate Joe Biden has a plan for the Federal Reserve system of banks. This bit jumped out at me in the article at the link that describes his plan.

[T]he policy blueprint Team Biden cooked up with Bernie Sanders’s economic advisers argues, “the Black unemployment rate is persistently higher than the national average, which is why Democrats support making racial equity part of the mandate of the Federal Reserve.”

Because blacks are fundamentally incapable of competing in America without special treatment. This is the soft bigotry of low expectations.

This is the overt bigotry of the Progressive-Democratic Party and of Joe Biden—If you have a problem figuring out whether you’re for me or Trump, then you ain’t black—made manifest.

Opening Schools—Two Schools of Thought

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California Governor Gavin Newsom (D) has ordered all schools—private and public—not to open until his Omnipotent State declares it safe to do so. This seems at the behest of California’s teachers unions, which fear competition from private schools—and which are losing that competition, as they’ve been doing for some years.

Catholic school tuition, for instance, costs $1,000-$4,000 per student less than the union public schools, and they provide better education—academic, discipline, moral values. And they’re ready, willing, and anxious to open on schedule.

In contrast, Oklahoma Governor Kevin Stitt (D) has sprung some of his discretionary education funds to cover school costs for families whose kids went to private schools last year, but for whom the Wuhan Virus situation has hammered their finances this year.

What’s really at stake? The virus risk to the kids in K-12 is vanishingly small: they’re simply unlikely to get infected, and among those who do, the severity of their infection very usually is slight.

The science is uncertain on how infectious the kids are when they are infected but asymptomatic. They appear not to be mutually infectious; the uncertainty is how infectious they are to the adults around them, the teachers, teacher aides (a relatively recent, and seeming featherbedding, addition to staff), administrators and staff, janitors. The data, though, are leaning increasingly in the direction of not very infectious.

There are occasional moves to stagger in-person schooling with half the students present some days, the other half the other days, at socially distanced desks, and with virtual schooling (a disastrous failure last spring, but maybe practice teaches) for the kids at home on those alternate days.

This is unnecessary. The kids are as safe from each other with the Wuhan Virus as they are with colds and flu. Bring them back.  All of them.

While the risks remain uncertain, it would be cumbersome but easily and straightforwardly doable to socially distance the teachers from the students in their classrooms. They spend a fair amount of their class time on the chalkboards at the front of the rooms, anyway. Or could easily go back to that.

Teachers unions holding out for deus ex cashina (I wish I’d thought of the term, but it’s the WSJ editors’) State and Federal interventions are acting in their petty interests rather than the interests of our children. Easier said than done, but these unions need to be decertified. Their selfish greed borders on child abuse.

Tax Misallocation

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The misallocation, this time, is not in the way our tax monies are being spent.

It’s in what our money is not being spent on in lieu of paying those taxes in the first place.

According to a 2018 Bureau of Labor Statistics survey—before the 2017 tax reform bill had been able to percolate into our economy in any serious way—we Americans spent more on the taxes Government exacts from us than we did on food, clothing, and health care combined.

That survey found the average American unit, which consists of both shared and single households, spent an average of $9,000 on federal income taxes last year. Americans also spent an average of $5,000 on social security, more than $2,000 on state and local taxes, and another $2,000 for property taxes.

That’s $3,000 more than we spent on those aggregated necessities.

Aside from a low, flat personal income tax without the exceptions froo-froo currently present, as suggested for corporate taxes (see nearby),  the next tax reform target needs to be on Social Security—whose Trust Fund will be exhausted in a few years, leaving the stark choice of raising payroll taxes (or increasing taxation from other sources) to cover the shortfall, or lowering the payouts to fit within the existing (payroll) tax structure—a roughly 30% reduction in payout for each recipient.

That reform, as I’ve written before, needs to be an elimination of the payroll tax altogether—more wage money left in the hands of the earner, which is especially important for those earning the lowest wages—and privatizing both Social Security and Medicare, and making the payouts for the future benefit of the saver and his family rather than immediate payout to utter strangers. That will leave the saver responsible for his own money and, with his skin on the line, he’ll do a far better job of managing those monies than even the most well-intentioned collection of government bureaucrats ever can.

Oh, yeah: privatization also would eliminate the employer’s payroll tax bite, leaving him more money for R&D, marketing,…