Richard J Grant

Published in The Tennessean , Sunday, October 30, 2011 by Richard J. Grant The Obama administration recently nationalized the college loan industry. Then this week the president announced an income-based cap on the repayment rates of student loans. After 20 years, any unpaid portion of the loan would be forgiven, that is, paid by taxpayers. The net effect of this policy will be to encourage disproportionately those students who are least likely to benefit either themselves or taxpayers in the pursuit of higher education. The most heavily subsidized students will be those who enter the lowest value-adding professions. In the world of educational subsidies, higher education has always offered the lowest returns to taxpayers. This effect is merely exacerbated by the involvement of the federal government. But none of this matters to those who know that the real name of the game is No Vote Left Behind. In contrast, some state governments have been moving their educational policies toward gr

Published in The Tennessean , Sunday, October 23, 2011 by Richard J. Grant Decades ago, while riding an overnight train through Italy, a fellow passenger offered a warning. He had heard that organized criminals would wait until passengers fell asleep and then spray anesthetic into the compartment to deepen that sleep. With the passengers now safely oblivious, the thieves could help themselves to unguarded valuables. Although almost certainly untrue, this story does serve as a neat allegory for the real-life relationship between taxpayers and tax legislators. It is much easier to get voters’ support for a tax-rate increase when taxpayers are unaware of their true position in the political food chain. We know that, all else equal, income earners and property owners are happier the more of their income and property that they are allowed to keep. The higher the tax rate on each additional dollar earned, the less likely it is that a worker will put in the extra effort to earn one more dolla

Published in The Tennessean , Sunday, October 16, 2011 by Richard J. Grant Since June 2010 , the Chinese currency has risen in value by about 7 percent compared to the U.S. dollar. This has not stopped accusations of “currency manipulation” from the U.S. and elsewhere. Such accusations are politically useful since not one person in a hundred understands what the charge means and it vaguely sounds as though the accuser has the best interests of U.S. workers at heart. The U.S. Senate has just passed a bill that would require the U.S. to impose tariffs on goods imported from selected countries in order to punish currency manipulators and to counteract perceived underpricing. House Speaker John Boehner has already indicated that the bill will not proceed in the House. He sees punitive tariffs as harmful to trade relations. But few dispute the charges of currency manipulation. This is interesting because, of all the problems that Chinese actions might present us with, currency manipulation

Published in The Tennessean , Sunday, October 9, 2011 by Richard J. Grant There’s an old joke about a senator who, when told that his idea won’t work because of “the law of supply and demand,” retorted, “Then we’ll just repeal that law!” As if to remind us that truth is stranger than fiction, Sen. Dick Durbin, D-Ill., was recently shocked to learn that it really was just a joke. It was Durbin who inserted the amendment into the 2010 Dodd-Frank financial-regulation law that capped the transaction fees that debit-card issuers could charge retailers. He and his colleagues apparently believe that the forced reduction of prices is the same thing as the reduction of costs. He thought he could get something for nothing. To recoup revenues lost from debit-card interchange fees, many banks have announced increased monthly fees on debit-card accounts. Real costs didn’t shrink. What changed was the pricing structure through which we bear those costs. The debit-card interchange fees were invisible

Published in The Tennessean , Sunday, October 2, 2011 Richard J. Grant In the 2003 movie, Master and Commander , a British warship during the Napoleonic Wars is rounding Cape Horn when a severe storm rises. The mizzen-mast breaks and falls into the sea with a square sail and parts of the mast, still held by several lines, dragging behind the ship. A popular midshipman has also been swept overboard, and his only hope is to swim to the trailing rigging. But the wreckage is acting as an anchor that threatens to sink the ship. The storm won’t wait for the unfortunate midshipman; the commander must choose between losing one man or the possibility of losing everyone. Suppose that the commander had waited in hope for the man overboard to swim to the rigging, and in the waiting lost the ship. Other than the loss of a military asset, lost also would be the men and their future descendants, as well as all the experience and survival lessons that might have been passed on to the benefit of future