January 28, 2015

The Boilermakers

This week, the men of the Ricochet Podcast travel to America's heartland to interview a beloved figure from the country's recent political past. Former Indiana governor and current Purdue University president Mitch Daniels joins us to discuss his WSJ Op-Ed piece How Student Debt Harms The Economy. We also chat about making college more affordable and the President's proposal “to lower the cost of community college — to zero.” Also, a boots-on-the-ground report from NYC on the alleged Snowcopalypse, what liberals get wrong when they demonize the Koch bothers, Apple's stunning quarterly report and the lessons for the economy as a whole, Putting to Rest the Idea that the National GOP Is Conservative (thanks to Ricochet member Robert McReynolds) and finally, Why do so many Hollywood liberals and Western lefties have a beef with American Sniper? We attempt to answer Ricochet member Paddy Siochain's question while correctly pronouncing his user name. We pretty much fail at the latter.

Music from this week’s episode:

Hail Purdue by Purdue University

The opening sequence for the Ricochet Podcast was composed and produced by James Lileks.

What's a boilermaker, EJHill?

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AIG@AIG11y

The WSJ piece by Daniels doesn't make particularly strong points.

1) $33,000 in debt is hardly a large amount. Its actually rather small, given the time periods associated with paying it back.

2) Evidence suggests that this debt is more heavily concentrated at the top income households: i.e. those people who can afford to pay them back much more easily.

3) The evidence suggests that the "burden" pf paying the loans back has decreased considerably over the past years...i.e. the amount of monthly payments. In fact, they have decreased by more than 100% sine 1992. Mainly due to increased terms for borrowing and more flexible terms and interest rates.

4) It's not particularly "troubling" or even "interesting" that those with more debt don't start businesses as often. Those with more debt are usually pursuing better educational opportunities, or higher degrees...which afford them better opportunities than starting their own business.

5) Starting a business is not only an extremely risky and highly unlikely to succeed, but it also means foregoing tremendous amount of opportunity costs.

Spending the first 5 years of your time after college on a "business" that is...very...likely to go bust, will have rather large impact on your future earning potential if you decide to go back into the "corporate world", then spending those first 5 years actually getting experience.

6) The last thing that would be a good idea...is to have young people with no experience or knowledge go open "businesses". You open a business when you have something to open, i.e., you have an idea worth pursuing.

7) Money is hardly ever the impediment to opening a new business. Good business ideas...are.

8) The returns to college education, and particularly to higher level degrees (which would also be highly associated with higher levels of debt), are extremely attractive. So why would it be a good idea for a "young person" to forego these rates of return...for a "new business" which on average is much more likely to fail then ever make any money?

Dang! A 21% yearly return on an engineering BS? And we're "worried" that people aren't starting their own businesses? What rates of return are those likely to give the "entrepreneur"? Likely...zero.

So I disagree. Overall, this is not only not a problem, it's very rational and a good idea.

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AIG@AIG11y
The WSJ piece by Daniels doesn't make particularly strong points.
1) $33,000 in debt is hardly a large amount. Its actually rather small, given the time periods associated with paying it back.
2) Evidence suggests that this debt is more heavily concentrated at the top income households: i.e. those people who can afford to pay them back much more easily.
3) The evidence suggests that the "burden" pf paying the loans back has decreased considerably over the past years...i.e. the amount of monthly payments. In fact, they have decreased by more than 100% sine 1992. Mainly due to increased terms for borrowing and more flexible terms and interest rates.
4) It's not particularly "troubling" or even "interesting" that those with more debt don't start businesses as often. Those with more debt are usually pursuing better educational opportunities, or higher degrees...which afford them better opportunities than starting their own business.
5) Starting a business is not only an extremely risky and highly unlikely to succeed, but it also means foregoing tremendous amount of opportunity costs.
Spending the first 5 years of your time after college on a "business" that is...very...likely to go bust, will have rather large impact on your future earning potential if you decide to go back into the "corporate world", then spending those first 5 years actually getting experience.
6) The last thing that would be a good idea...is to have young people with no experience or knowledge go open "businesses". You open a business when you have something to open, i.e., you have an idea worth pursuing.
7) Money is hardly ever the impediment to opening a new business. Good business ideas...are.
8) The returns to college education, and particularly to higher level degrees (which would also be highly associated with higher levels of debt), are extremely attractive. So why would it be a good idea for a "young person" to forego these rates of return...for a "new business" which on average is much more likely to fail then ever make any money?

Dang! A 21% yearly return on an engineering BS? And we're "worried" that people aren't starting their own businesses? What rates of return are those likely to give the "entrepreneur"? Likely...zero.
So I disagree. Overall, this is not only not a problem, it's very rational and a good idea.
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EJHill@EJHill11y
Purdue - First on the moon (Neil Armstrong) and the last to leave (Gene Cernan).
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Nick Stuart@NickStuart11y
Student loans should be dischargeable in bankruptcy, and the college(s) who got the money made the primary guarantor(s) of the debt. If the student defaults, the college is on the hook.
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Nick Stuart@NickStuart11y
Ancient wisdom:

The most important men in town would come to fawn on me! They would ask me to advise them, Like a Solomon the Wise. "If you please, Reb Robinson..." "Pardon me, Reb Long..." Posing problems that would cross a rabbi's eyes!
And it won't make one bit of difference if I answer right or wrong. When you're rich, they think you really know!
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user_1100855@PaddySiochain11y
Hey whoever is managing this podcast make sure to tell Peter and Rob they were close but no cigar:
Paddy Siochain is in english Paddy Sheehan. (I have to disguise my name as I am a secondary teacher)
Thanks for the compliments on the piece Rob and Peter.

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The Boilermakers

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