A Philosopher's Blog

Debt Deal

Posted in Law, Politics by Michael LaBossiere on August 3, 2011
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At almost the last minute, congress meandered into action and voted to raise the debt ceiling. As part of this deal, there will also be spending cuts. As with all compromises, most folks are not happy.

The mainstream Republicans had hoped to get more cuts. However, they are no doubt pleased that they were able to protect their beloved “job creators” from a return to the tax rate that existed before the Bush-era tax cuts. For the most part, the tax loopholes and so forth also were left intact. As such, the Republicans did seem to achieve two key goals: spending cuts and no increase in government revenue.

The Democrats were probably pleased that they got the debt ceiling raised, thus preventing (for now) America going into default. They were probably also pleased that the Republicans refrained themselves from introducing a bill calling for the harvesting of both kidneys from the Democrats in congress (which would have been heroically negotiated to one kidney by the might Democrats). The Democrats were probably less pleased by the fact that they seem to have handed Republicans what they wanted while getting little in return.

The President is probably a bit divided. On the one hand, the country did not default (yet) on his watch. On the other hand, he did not get the revenue increases he had wanted. Whether this situation will help him or hurt him (or neither) in 2012 remains to be seen. Perhaps it will help him by making the Republicans appear willing to wreck the country to score ideological points. Perhaps it will hurt him by making him appear weak. Perhaps it will have no effect. After all, the 2012 elections are a ways off and people have short memories.

The Tea Party folks seem rather upset. As some wits have noted, they would only be happy if there was no government left. Of course, this is not exactly true-Tea Party folks seem to love their entitlements as much as everyone else. The Tea Party does have a good point though: the cuts are not enough.

My take on the matter is that it is a lame compromise that merely buys us a bit more time until the next crisis. While there are cuts, they are (as the Tea Party folks correctly point out) not significant enough to properly address the real problem, namely the debt. What is needed is, as others have argued, more substantial cuts. However, these cuts need to be from our “luxury”spending (subsidies to profitable industries, for example) and our wasteful spending (such as entitlements for those who are not in need) rather than from necessary and useful spending. What is also needed is an increase in revenue by closing loopholes and removing the Bush-era tax cuts.

I also contend that America should take the approach of other over-spenders who are serious about dealing with their debt. We need a clear, coherent and viable debt reduction plan with tangible goals and accountability. I suspect that our current crop of politicians cannot do this for us. In part this is not their fault. First, the current election system (“money talks”) makes it difficult for them to take actions that would dry up special interest money. Second, the voters are (as always) a problem-they tend to not be inclined to vote for people who would, in fact, do what must be done.

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Dropping the 14th

Posted in Philosophy, Politics by Michael LaBossiere on July 29, 2011
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As the debate over the debt ceiling rages on, there has been more talk of Obama using an executive order to raise the debt ceiling. The constitutional basis for this is, of course, the 14th amendment and (presumably) the executive power of the president.

The constitution states that “the validity of the public debt … shall not be questioned”, which would seem to indicate that the debt ceiling would need to be raised on pain of violating the constitution.

However, a case can be made that raising the debt ceiling is distinct from not questioning the validity of the public debt. To use an analogy, consider the matter of personal debt. A person could, it seems, decide that she will not give herself permission to go further into debt while at the same time fulfilling her current financial obligations. Likewise, the congress could decide that the debt ceiling should not be raised while still accepting the validity of the debt. This actually has considerable appeal-after all, going ever more into debt is hardly a wise financial move.

There is, of course, a rather serious problem with that approach: apparently we cannot pay our debts without going more into debt. Going back to the analogy, the nation seems to be like an individual who cannot pay her debts except by taking out more loans. While this is hardly a desirable solution, it might be the only viable solution-at least in the very short term. As a long term solution it is certainly not viable.

 

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The Debt Ceiling

Posted in Law, Philosophy, Politics, Reasoning/Logic by Michael LaBossiere on July 27, 2011
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The United States is currently at risk of hitting and then breaking the debt ceiling. While the general consensus among rational people is that this would be rather bad, congress (as I am writing) has yet to settle the matter.

On the one hand, raising the debt ceiling seems to be a no-brainer. After all, doing so has been business as usual and it has been done most often under Republican presidents. More importantly, the consequences of not doing so are supposed to be rather bad-hence it would seem to make sense t0 simply follow the usual process and raise the ceiling.

On the other hand, there are some legitimate concerns about simply raising the debt ceiling. First, the mere fact that it has been done repeatedly in the past is hardly a good reason to do it now. To believe that what is commonly done is right because it is commonly done is, of course, the classic fallacy of appeal to common practice.  To believe that something should be done because it has been done in the past and is thus something of a tradition is, of course, the fallacy of appeal to tradition. That said, it is still reasonable to ask (as a legitimate use of burden of proof) why the established policy should be changed now. This leads to the second point.

Second, think of the national debt as being analogous to a bar tab and Americans as heavy drinkers. Like a regular at a bar, we have simply raised our tab over and over again. However, there seems to come a time (perhaps now) when the barkeep should insist that the tab not increase again and that it be paid off. To insist on just raising the tab and continuing to drink the future is to act, obviously enough, like a selfish and thoughtless drunk. The responsible and correct thing to do is not ask for a bigger tab limit and to pay off the existing debt. Likewise, America needs to sober up, set a reasonable debt ceiling and pay off that debt. After all, we want to be a great nation and not that pathetic drunk in the corner, begging for booze and money.

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14th & Debt

Posted in Business, Law, Philosophy, Politics by Michael LaBossiere on July 10, 2011
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The United States might be on its way to being a deadbeat nation. In addition to being shameful, this would also be rather damaging for our economy and our reputation. It would be nice to think that congress would not make something so serious into a political game, but such is the way of politicians these days: the only good greater than the good of their party is their own good. The debt ceiling provides an excellent cow to milk for political points, so it is being milked away.

Given that not addressing the debt ceiling would be a disaster, it is no surprise that there have been various proposals to deal with the matter. So far these have been what amount to political spackling paste and what is needed is something a bit more solid.

While Obama seems interested in reaching an agreement of some sort, Tim Geithner seems considering playing some constitutional hard ball. He recently made note of a key part of the 14th Amendment: the validity of the public debt of the United States, authorized by law, including debts incurred for the payments of pension and bounties for services in suppressing insurrection or rebellion shall not be questioned.”

While I am not a Constitutional scholar, this does seem to clearly state that the debt must be paid. As such, it would seem that Congress cannot pass any law that would forbid the paying of the public debt. This would, it seems, entail that a Republican maneuver that would result in a failure to pay said debt would be unconstitutional.

The Republicans have already anticipated that this card might be played.  Tim Scott has made it clear that such a move on Obama’s part could trigger the Republicans to launch an impeachment attempt. It is not clear at this point how that would play out and what sort of impact it might have. On the one hand, this move might seem to be absurd, given that Obama would seem to have the Constitution on his side (assuming he played it correctly). On the other hand, this sort of move by Obama could be reasonably regarded as an attempt to usurp the constitutionally specified powers of congress. From a purely practical standpoint, such a move is not without its risks and possible rewards. On the reward side, going after Obama might enable the Republicans to score political points for 2012. On the risk side, going after the president so as to prevent America from paying her debts might not play out favorably for the Republicans.

The Republicans can, of course, argue against an attempt to use the amendment against them. While it does that the debt “shall not be questioned” it also refers to the debt being “authorized by law.” This part would certainly give the Republicans room to argue. For example, they could contend that the debt in question was not authorized by law and hence can be questioned.

In any case, Congress needs to spend wiser, lower spending and increase revenue to address the debt problem. Unfortunately, while they seem to have the will to play the usual political games, they lack the will to do what must be done. To be fair, stepping up and cutting entitlements while increasing taxes would be political suicide. As a whole, Americans seem to generally want to run the country like we run our personal finances: on credit.

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College

Posted in Business, Philosophy, Politics, Universities & Colleges by Michael LaBossiere on June 13, 2011
Academic

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I started my college career as an undergraduate in 1984. After graduating in 1987, I went on the graduate school and then ended up as a professor. As such, I know a bit about college then and now.

College enrollment has increased significantly since then (the 1980s). Naturally, part of this is due to the increase in population: if there are more people, there will be more people in college even if the percentage of college students remains the same. Another factor is that colleges are seen as being more open to minorities, women and low income people than in the past. It is also true that people have a greater need for the college degree, thanks to degree inflation. Jobs that once required just a high school degree now require college degrees.

Ironically, as enrollment has increases, budgets for state schools have been cut. For example, my own university has been hit with massive cuts as our enrollment shoots ever upward.  One impact is that class sizes have been getting ever larger. For example, my Introduction to Philosophy class used to cap at 30. When I taught it in the fall, it had 63 students. Thanks to inflation and increases in insurance costs, I am actually making less money and teaching larger classes. There is currently talk of cutting salaries, reducing benefits, increasing class sizes and adding more classes to the faculty teaching load (I teach four classes per semester). As in the private sector, the people who do the actual nuts and bolts work are expected to do more with less.

Also somewhat ironically, as enrollment has increased and as most faculty are expected to do more for less, the cost of college has increased significantly. Back when I went to college, the average price was $2,119 per year. In 2009 the average price was $7,605. This is about twice what would be expected from inflation alone.  Some of the increase can be accounted for in terms of new technology (the cost of computer labs and smart classrooms) and energy costs. However, one large factor is the same one that occurs in business and government: administration and bureaucracy. As such, a significant slice of tuition dollars does not go to paying for the actual process of education.

What is needed is, obviously enough, efforts to control costs. The place to begin is, of course, with administrative costs. Naturally, budget cuts are currently inflicted primarily on faculty (who teach) and staff (who actually do things). In this regard, education functions exactly like business and government.

Because of the greater cost, it is no shock that students need to turn to loans to pay for school. In 1993 about 45% of students took out loans. When I was an undergraduate, I took out loans-I finally paid them off during my first year as a professor. This year about 66% of students will take out loans for school. In 1995 the typical student graduated with about $10,000 in debt. This year’s students ended up with an average of $27,000. This means that a greater percentage of students will start out with school debt and that they will have more debt, which means they will have less to spend on other things, things that would help the general economy.

To make matters worse, unemployment  is over 9%. When I was in school, it was about 6%. Salaries have improved a bit ($46,600 in 1995 and $50,034 for college graduates today), but clearly not that much relative to the increase in debt.

As such, today’s students can expect to take out loans to pay a lot  to be in larger classes taught by underpaid and overworked professors. Once they graduate, they can expect to have a lot of debt and a decent salary-if they can find a job.  Of course, with the budget cuts hitting many state schools, tomorrow’s graduates might be competing with yesterday’s faculty for jobs.

You can see some spiffy graphics of all the data here.

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Money & Marriage

Posted in Miscellaneous by Michael LaBossiere on January 26, 2011
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A short while ago I saw a filler piece on CNN about finances and marriage. One of the main points was that financial matters can spell doom for a marriage. This, of course, matches what I have consistently heard over the years: sex and money are supposed to be the major points of problems in marriages.

In the case of money, two main concerns are debt and honesty. Obviously enough, debt can be the source of marriage tension.  Worry about debt can cause a person stress and people who are stressed are generally not at their best. This can then lead to other problems or serve to acerbate them. For example, a person who is stressed out over debt might over-react to relative small incidents, such as her/his spouse getting home a little late or forgetting to pick up the milk. The debt can also cause various problems by eating up resources. To be specific, a couple that is in debt would be less likely to take vacations, get each other gifts, or do other activities that cost money. This can stress the relationship by making it less enjoyable. For example, a one spouse might come to resent having to do without going out to dinner or on vacation so as to pay off the credit card debt the other brought into the marriage.

As such, it is hardly a shock that it is a good idea to minimize the debt one has when entering into that most holy of economic contracts, marriage.

Interestingly, debt need not be a marriage killer and, in some cases, it can result in a stronger relationship. If, for example, a couple works together to reduce their debt, then this can give then a strong sense of being a cooperative team. Also, there are “good” (or at least generally unavoidable) debts that can help cement a relationship. For example, if a couple buys a house or car together and work as a team on the debt, this can help build feelings of trust and confidence.

Of course, if the people in the relationship do not work together or one partner did not want the debt, then these debts can turn into points of contention and resentment, thus serving as dividers rather than a source of unity.

There is also the obvious concern that if the relationship fails, then the debt situation can be a serious problem. To use an example from my own life, when my (now ex) wife and I bought a house, it actually brought us closer together as we worked on it. However, it soon turned out that I would be the one making the mortgage payments. This, of course, caused me some stress. When we got divorced (and money was one factor), I had to buy her share of the house that I had paid for and then re-finance it (so I now call it the “thrice bought house”). I am, in fact, still paying off these debts.

Thus, while some shared debts can unify a couple, big debts are not a decision to enter into lightly. Also, I suspect that entering into such big debts will be more likely to intensify what it already there (or even create new problems) rather than simply creating greater unity.

My take on debt is that it is best avoided. If it cannot avoided, then it must be well-managed with shared effort and a cooperate strategy.

Honesty is, not surprisingly, a rather important factor in marriage. Not surprisingly, partners sometimes lie to each other about financial matters. In some cases, the lies are small and mostly harmless. For example, a husband might tell his wife that the new laptop he got cost a bit less than it actually did. In other cases, the lies are big and harmful. For example, a husband might have told his wife-to-be that he only had a small amount of credit card debt when, in reality, he was being crushed under $40,000 spread over several cards.

While the debt or other financial problems (like a horrific credit rating) will create problems, lies (once exposed) will also damage the foundation of trust that relationships require to remain solid. The partner who was lied to will almost certainly trust the liar less and might be inclined to check up on other possible lies, thus leading to even greater stress in the relationship.

Obviously, honesty is (as always) the best policy. Of course, people are not always inclined to be honest and hence it does make sense to inquire into a potential spouses finances. While this might seem nosy or improper, it is important to recognize that marriage is fundamentally an economic relationship. In most cases, your spouse will own half of whatever you acquire in the marriage (with some exceptions) and you will almost certainly be affected by whatever financial baggage or problems they bring into the marriage. As such, it makes sense to approach marriage like the financial merger that it, in fact, is.

This concern about honesty needs to, obviously enough, extend into the marriage itself. I learned this the hard way. For example, after some extensive spending, my (ex) wife agreed to stop using my credit cards and returned them to me. Shortly thereafter charges appeared on my card and I thought someone had gotten my numbers. However, I eventually found out my (ex) wife had been able to buy things in person by giving my credit card number even without having the card. Out of anger, I ended up getting the account numbers changed and this, of course, led to even more conflict between us.

But, one might ask, what about love and all that? Should people look at marriage like they look at corporate mergers or investments?

Love is, of course, great and important. However, the legal aspects of marriage have nothing to do with love but rather are almost entirely about finances and property. As such, it does make sense to look at a marriage in the same way you would consider a corporate merger or an investment. After all, if you had a successful and profitably business, you would not want to merge with a business that was horribly managed and floundering in debt (unless you needed a big tax write off, of course).

Naturally, it can make sense to marry someone even if they come with considerable debt. The person might, as they say, be well worth it (that is, the person is so great that the financial stress is worth it). Also, if you are sure the person will be able to handle the debt responsibly and be able to carry his/her fair share in the marriage, then it can be well worth it. After all, most people have debt these days, especially when they are graduating from college.

So, my main advice is to try to minimize debt, shop smart for a spouse, and be honest.

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Debt Ceiling

Posted in Business, Philosophy, Politics by Michael LaBossiere on January 5, 2011
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One sign of just how big the deficit is the fact that we are just about at the debt ceiling of $14.3 trillion.  This has become a matter of considerable controversy.

Certain conservatives contend that the cap should not be raised. The reason given is sensible enough: raising the cap enables us to keep on borrowing rather than actually seriously addressing the matter of debt. While there are some important differences, this situation can be seen as being somewhat like dealing with credit card overspending by raising the credit limit rather than spending less and doing more to pay down the debt.

However, there is a real risk is not raising the ceiling. If the ceiling is left in place and the government cannot borrow more to fund its obligations, then  this could lead to serious problems. For example, the United States might be forced to default on loans. If leaving the cap in place will do serious damage to the country, then it should be lifted.

On the one hand, I can see the need to lift the cap. To use an analogy, when I was going through my divorce (my own personal recession), I had to take out loans and go into debt to pay off the settlement. If I had stuck with a “debt ceiling”, then I would have been worse off in the long run (I would  have, for example, lost my house). Perhaps the situation we are in now as a country is comparable and we need to go into debt now to avoid something even worse.

On the other hand, I do think that the critics of raising the ceiling do have some good points. Going back to my divorce analogy, while going into debt was a cruel necessity, I followed it up with financial austerity by cutting my spending and focusing on debt reduction. This has involved giving up things and doing without certain things, but that is what must be done to deal with debts. It is, of course, tempting to simply keep living as if the ceiling can always be raised as needed. However, that is a path to ruin.

As I see it, it makes sense to lift the debt ceiling provided that doing so is, in fact necessary to buy more time. Of course, this time should be used wisely to reign in spending. There is, however, the risk that comes with raising any credit limit-the great temptation to spend up to and then beyond that limit.

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Debt Collection

Posted in Business by Michael LaBossiere on November 29, 2010
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Friday night I received a call from the Takhar Group saying that I needed to call them immediately or visit their web site. However, the call did not identify the purpose of the call nor did it specify who was being called, so I assumed it was some sort of scam.  I did decide to check the site and found out that it is a collection agency. Since I only owe money on my mortgage and one credit card (and my payments are up to date), I knew the call was not for me (or should not be for me).

I have gotten many calls in the past for people with my last name as well as for people with totally different names. I assume that the collection agencies just call anyone with the same (or similar) last name in the rough area or that the people who are in debt used my number in place of their own. Either that, or they had the number 18 years ago, before it was mine, and used that when getting into debt.

While I am not actually being badly harassed by such mistaken calls, it is annoying. For a while it was extremely bad-I would get a call or two everyday on my answering machine. In some cases I was able to call the company and convince them that I was not the person they were looking for. In other cases, the calls just stopped.

Because of these experiences, I think that collection agencies should be required to confirm phone numbers before calling. When calling, they should be required to identify themselves as collection agencies, state who they are collecting for, and state the name of the intended target. They should also provide a clear means by which the wrongly called can stop receiving these calls. Leaving a vague message to call is simply not adequate.

I do understand that collection agencies can be engaged in legitimate operations and that they need to use various means to find people and collect. However, I am tired of being annoyed by agencies trying to collect debts from people who are not me.

Of course, my annoyance pales beside the horror stories of people who have been subject to far more serious misdeeds and outright illegal activity at the claws of unscrupulous (or incompetent) collection agencies.

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Debt Collection Abuses

Posted in Business, Ethics by Michael LaBossiere on September 23, 2009
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Debt collectors generally have a bad reputation, but it has gotten even worse in the past year. Because of the economic mess, more folks are unable to pay their debts and the folks who are owed money need it even more badly. This has, not surprisingly, caused a surge in the intensity of debt collection tactics.

While abusive tactics are illegal and there have been recent crack downs, the problem of abusive tactics remains. Recently I saw a segment on CNN about a pending case in which it is being claimed that debt collectors literally hounded a man to death. The individual in question was out of work due to a heart condition and the collectors made mention of this in their calls, thus showing that they were quite aware of it.

While it seems somewhat unlikely that the needed causal connection between the collectors’ actions and the death will be established, it does seem likely that the collectors will be in some legal trouble in regards to their tactics.

While I am not in debt, I can attest to how annoying and harassing debt collectors can be. For the past week I have been getting a call each day from a collection agency looking for someone who just happens to have my last name. While the automated calls are not particularly rude, they are certainly annoying. This has also happened before, so I assume that debt collectors often do not believe they have an obligation to determine who they are calling. Since I find the calls I get rather annoying, I can imagine just how unpleasant it can be for folks who actually owe money.

While I do believe that folks who owe money are obligated to pay it back, debt collection agencies are also obligated to act within the law (obviously) and they are also not exempt from morality. As such, they should stay within the boundaries of the law or be properly punished.

If you do owe money and are dealing with debt collectors, it is important that you know your rights and the laws that debt collectors must follow. Obviously, you should not simply assume that they are following the law, especially if they are acting in ways that you find threatening, insulting, or harassing. While they do have a legal right to collect the debt, they must also operate within the law. If you believe that a debt collector is acting in a way that violate your rights or the law, then contact your state Attorney General’s office (www.naag.org) and the Federal Trade Commission (www.ftc.gov).

While some folks think that the government is inefficient and good for nothing, the folks in the AG and FTC can actually help you.

Speaking of the government, while there are laws limiting the actions of debt collection agencies, it seems likely that the state and private sector should address this problem. After all, there seem to be many folks who are in debt and cannot pay. This harms them as well as the folks they owe money. While I do not think that the state should bail people out, this problem does need to be addressed. Naturally, I’d like to put in a request that debt collectors cannot just call people who happen to have the last name of someone they are looking for.

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