Ignorance Is Not Bliss

Hat tip to Terry Headley for passing this gem along from the director of the AFL-CIO's  West Virginia Center for Budget and Policy:

Ted Boettner @WVpolicywonk
It's amazing how many people say America is "broke" and have little clue that since we issue our own currency that we can't go broke.

Ted needs to go back to the drawing board on his economic thinking.  History is chock full of examples of states that have deluded themselves in this way.  Thinking that one can simply print money to pay bills assumes way too much.

Paper currency based upon "full faith and credit" of the government relies on the understanding that the state will work to maintain its artificial value.  It assumes that people will use it in place of commodities that have tangible value.

Some states have abused the trust and faith of the people in their money and government by printing money to pay its bills.  This produces the classical definition of inflation, which is "too many dollars chasing too few goods."

Liberals like a moderate amount of inflation because it redistributes wealth from creditors to debtors.  If debt is repaied at fixed amounts with a fixed interest rate, its real value will fall during periods of inflation.  The debtor has to pay back less value than he or she originally borrowed.  This will harm an economy in the long run because lenders will adjust their policies to protect themselves against this kind of loss.

Taking Boettner's idea to its logical end produces disaster.  The Confederate States, Weimar Germany, and countless Latin American countries fell to this temptation.  Weimar Germany obtained loans from the United States to shore up its system after the world saw the spectacle of people wheelbarrowing in bills to pay for bread.  Those in the Confederacy relied on barter toward the end of the Civil War because the central government simply printed to pay.

There is no easy way out of paying debt, even for nations.  To think otherwise is either delusion or ignorance.

That being said, America does not need to be broke.  If federal and state regulators pare down burdens to those which are necessary.  If the federal government gets out of the way of energy production.  If Obamacare is reformed and put on a free market basis.  If, if, if the competitive free market can be restored, then the United States can prosper and pay its bills.  We have wealth locked not in our power to print money, but in our resources and potential production.

Unleash it, pay off the debt, secure the future.

The Risky Bet On Higher Education As An Economic Development Powerhouse

States have relied more and more on higher education to fuel economic development.  Recent trends, however, should force policymakers to rethink.

Ted Boettner, the executive director of the West Virginia Center for Budget and Policy told West Virginia Metro News that the state economy in 30 years needed to diversify.  He included higher education as an important part of moving toward a knowledge and technology based workforce.

Others note that colleges and universities have done a poor job remaining relevant to an ever changing and more competitive workforce.

For example, Poynter.org's study on the State of Journalism Education found that only 28 percent of journalism professionals found a college degree in their field to be very important.  Over 3/4 of journalism professors thought it was "very important."  Increasingly the media field regards experience based internships as more important than traditional journalism school.

And journalism is not the only field undergoing this shift.

Former Secretary of Education William Bennett questioned whether the modern college offered much at all to many young people looking to acquire work skills.

Enrollment numbers show that young people are examining the costs and benefits of college much more closely.  A half a million fewer individuals enrolled in college last year than the year before.  Tuition hikes, student loan debt, and missing out on paid skills development during those years have changed minds.  Young people no longer see college as an automatic necessity for success.

Employers have slowly moved toward assessing potential hires based upon knowledge rather than earned degrees.  People can obtain knowledge through webinars, massive open online courses (MOOCs), internships, or other ways.

Conversely, colleges and universities have not been able to provide educations that prepare students for real world employment.  Liberal arts schools, in all fairness, are not meant for that purpose.  Land grant universities, however, have moved away from their original purpose.  They were originally supposed to prepare students for work in agriculture, mining, or industrial work.  Many have moved far afield from the original purpose of preparing students to work and lead in a technologically advancing world.

Colleges and universities have been seen in the past 20 years as economic engines.  Federal and private sector money concentrates into cities like Morgantown and Huntington.  Ever increasing student populations help to spur the local service industry.

In the meantime, corporations have scaled back management and employee training programs that tailored employees for the particular needs of the company.  Private sector research has declined in terms of money spent compared to higher education.  But is higher education research more economically productive than that done by companies?

For the foreseeable future, debt ridden federal government will have less to spend on research grants.  Students are finding alternatives to college educations.  With such trends developing, relying on higher education to spur the local or state economy is a risky proposition.