Thursday, August 30, 2012

The Other Reason Not to Pay off Mortgage Early

The impulse to pay off your mortgage more quickly than you need to is understandable, especially these days.

Interest rates are near historic lows, so it's possible to replace a 30-year mortgage with a 15-year loan and still afford the monthly payments. Or, if you've already refinanced at a dirt cheap rate, you can take those savings and pay down your principal faster.

But the allure is more emotional than financial. Mortgage debt provides great financial flexibility, and paying it down fast probably isn't the best way to grow your nest egg.

"Generally speaking, there's no advantage to paying down a mortgage earlier than you need to," says Greg McBride, senior financial analyst at Bankrate.com

That's because the interest on mortgages is low, it helps lower your taxes, and paying less every month gives you chance to reinvest the savings in more productive ways. Among the better options: paying down higher-interest credit cards, or saving for retirement.

The one aspect that this author and most others fail to recognize is inflation; the invisible tax. Inflation is a method by which the Fed enables the Treasury to increase revenues without generating additional liabilities. At least, not for which the government is accountable. 

Inflation relative to financed debt works like this; when you finance a purchase (with fixed interest) over many years like a mortgage, you begin with a fixed monthly payment, say $1,000. Your initial payments are dollars at 100% value. By the end of, say a 30 year loan, you are paying your lender with dollars worth less. You are in effect being given a discount (as long as you are earning more relative to the rate of inflation) by the Fed and Treasury. 

The author goes on to present factors like tax breaks and savings, but inflation is apparently the invisible elephant in the room. You can't see it, but you know it's there. You can smell it. 

Start with rates on 30-year mortgages. The average rate is 3.66 percent, close to the lowest level since the 1950s.

But in reality you pay an even lower rate when factoring in tax breaks. The federal government gives borrowers a break by allowing them to deduct mortgage interest from their income. And if instead of using the extra cash to pay down your mortgage you put it in a tax-advantaged retirement fund like a 401(k), your taxes are reduced even further.

[...]


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Drugstore Education

Nock, Albert Jay

We may now take a rapid glance at the actual state of things which all these influences have combined to bring about. The procedure in the secondary school is perhaps sufficiently open to common observation so that we need say nothing about it here, leaving it for a remark or two later on some special point. Let us speak of the university and the undergraduate college.

Traditionally, the university was an association of scholars, grouped in four faculties: literature, law, theology, and medicine. When I say an association of scholars, I mean that it was not quite precisely what we understand by a teaching institution. The interest of the students was not the first interest of the institution.

Putting it roughly, the scholars were busy about their own affairs, but because the Great Tradition had to be carried on from generation to generation, they allowed certain youngsters to hang about and pick up what they could; they lectured every now and then, and otherwise gave the students a lift when and as they thought fit.

The point is that the whole burden of education lay on the student, not on the institution or on the individual scholar. Traditionally, also, the undergraduate college put the whole burden of education on the student. The curriculum was fixed; he might take it or leave it, but if he wished to proceed bachelor of arts, he had to complete it satisfactorily. Moreover, he had to complete it pretty well on his own; there was no pressure of any kind upon an instructor to get him through it or to assume any responsibility whatever for his progress, or to supply any adventitious interest in his pursuits. The instructor usually did make himself reasonably helpful, especially in the case of those whom he regarded as promising, but it was no part of the institution's intention or purpose that he should transfer any of the actual burden of education from the student's shoulders to his own, or contribute anything from his own fund of interest in his subject by way of making up for any deficiency of interest on the part of the student. I ask you, with your permission, to remark this point particularly.

In speaking now of the present-day university, I shall cite the one of which I am a very humble and unconsidered member. I do this not because of its prominence, or because I can so conveniently lift some references to it from Mr. Flexner's recent book, and thus save trouble. I do it because one may always, as a matter of good taste, use oneself or one's own for purposes of illustration in cases where by any chance that kind of service might be thought disagreeable.

To begin with, then, we have Mr. Butler the other day expounding, and in extremely fine rhetoric attempting to justify what he calls "the newest type of university organization and influence." Well, of course, if one wishes to call that type of organization a university organization, one may do so; and if one can induce others to regard it as a university organization, one may also do that. It must be pointed out, however, that in so doing one acts very arbitrarily, even violently. This type of organization is not a development, but something entirely different from the traditional type of university organization; it is entirely different in structure, entirely different in intention, entirely different in function.

In structure, the four "learned" faculties have been superseded by all manner of "departments" and "schools." In intention, the newest type of university organization and influence is not primarily that of an association of scholars, but that of an association, more or less loose and sprawling, of pedagogues, of persons on whom, as we shall shortly see, the whole burden of education has been shifted.

In function, this type does not contemplate education, in the traditional sense of the word; it contemplates training. In fact, of all our institutions, the university gives perhaps the most conspicuous example of the complete working out of our general theory; it is perhaps the most conspicuous example of what a popular doctrine of equalitarianism and democracy comes to in practice.

The undergraduate college, however, is in this respect no great way behind the university. It has degenerated into a curiously anomalous affair, exhibiting changes in structure, intention, and function that correspond to those exhibited by the university. Its repertory — one is rather put to it to find a name for its schedule of organized pursuits — at one end reaches back far into the secondary school, and at the other reaches forward into the technical and vocational schools, while at the middle, apparently by way of lagniappe, but actually for reasons that we shall look into a little later, it carries on some kind of formal dealings with literature, chiefly English. I never think of an undergraduate college without being reminded of a story that I heard you, Mr. President,[1] tell in public 20 years ago, the story of an overassiduous mother who insisted on her boy's eating some asparagus, on the notion that it was good for him. When asked how he liked it, he said mournfully that it tasted raw at one end and rotten at the other.

In support of this view of the modern undergraduate college, I may cite some observations made by Mr. Flexner. A student in Columbia College (which is an undergraduate college controlled by Columbia University) may complete the requirements for a bachelor's degree by including in his course of study such matters as these: the principles of advertising; the writing of advertising copy; advertising layouts; advertising research; practical poultry raising; business English; elementary stenography; newspaper practice; reporting and copyediting; feature writing; book reviewing; wrestling and self-defense. By availing himself of some sort of traffic arrangement with a sister institution belonging to Columbia, he may also count as leading to a degree, courses in the fundamental processes of cookery; fundamental problems in clothing; clothing decoration; family meals; food etiquette and hospitality; principles of home laundering; social life of the home; gymnastics and dancing for men, including practice in clog dancing; instruction, elementary or advanced, in school orchestras and bands.

Without the least wish to be flippant, one cannot help remarking points of resemblance here between the newest type of institutional organization and the newest type of drugstore. Perhaps the term "drugstore education" is even more closely descriptive than either Mr. Flexner's "bargain-counter education" or the term "grab-bag education," which I proposed a moment ago, for one goes to drugstores nowadays for nearly everything but drugs. Really, this type is so new and so startling that no ready-made term fits it very well. But if one is thus somewhat at a loss in surveying the comprehensive prospectus of Columbia College, one simply throws up one's hands and capitulates before the advertised program of another smaller undergraduate institution that, according to an announcement in the press, proposes to make up a special curriculum for each student, apparently a sort of hand-tailored affair, adapted to individual intentions, aptitudes, and deficiencies.

This strikes me as more than a counsel of despair; it is a counsel of desperation. Yet really, the only thing that differentiates this college from many other colleges, in this respect, is that it has the commendable forthrightness to say plainly what it means to do.


[This article is excerpted from chapter 8 of The Theory of Education in the United States (1931).]

ebook (.epub)

PDF File

Source: http://mises.org/daily/6152/Drugstore-Education

Education Spending Doesn't Deliver

When a presidential candidate decries education cuts he's probably not serious about education. He's serious about winning elections.

The Obama campaign didn't waste time before attacking Rep. Paul Ryan, R-Wisc., on education, stating in its response to Ryan's being named Mitt Romney's running mate that Ryan proposed "deep cuts in education from Head Start to college aid." The campaign hit education even before Medicare, illustrating just how much they must think voters will recoil at any diminution of education spending.

"But hold on," you're thinking, "isn't education vital? And if so, shouldn't we invest as much as possible?"  

Those are reasonable questions for people with jobs, families, and not a whole lot of time to research education policy. After all, with most things, if you pay more you get something better.

But President Obama employs lots of people who assess education policy, and he must know what the statistics reveal: Washington spends huge amounts in the name of education but gets almost no educational improvement in return.

Begin with Head Start, a nearly $8 billion program that's politically untouchable, not only because it deals with education, but it's for preschool kids. It's almost tailor-made for demagoguery, with anyone who'd dare trim — much less eliminate — the program practically begging to be declared a rotten so-and-so who hates even the littlest of children.

But the fact is there's no meaningful evidence the program does any good. In fact, the most recent federal evaluation found that Head Start produces almost no lasting cognitive benefits, and its few lasting social-emotional effects include negative ones. Only the people employed by Head Start money — and the politicians who appear to "care" — are really benefiting.

This is repeated in elementary and secondary education, only with a bigger bill. In 2011 Washington spent almost $79 billion on K-12 education, and the latest federal data show inflation-adjusted federal outlays per pupil ballooning from $446 in 1970-71 to $1,185 in 2008-09. Meanwhile, scores for 17-year-olds on the National Assessment of Educational Progress — the "Nation's Report Card" — have been stagnant.

Oodles "invested," no return.

Lastly there's higher education. Once again, someone who hasn't had much time to study policy might reasonably think the key to improving and expanding higher education would be for the federal government to spend more on it. But again, reality differs: federal aid fuels tuition inflation and encourages massive waste.

The connection between aid and prices is somewhat intuitive if you think about it. Basically, if you give people $100 more to buy something, sellers will raise their prices $100. The buyers are no worse off, the sellers are better off, and the only losers are the people who furnished the money. With college aid, we call these losers "taxpayers."

Of course there's more to college pricing than aid, but the effect remains.

Studies have found that private colleges raise their prices a dollar for every extra buck students get in Pell Grants, and schools often reduce their own aid when government assistance rises.

Then there are the dismal outcomes that go with giving away college money.

First, only about 58 percent of first-time, full-time students finish a four-year degree within six years at the school where they started, and most who don't finish by then likely never will.

Next, a third of people with bachelor's degrees are in jobs that don't require them.

Finally, the National Assessment of Adult Literacy suggests serious watering down of a college degree. In 1992 about 40 percent of adults whose highest degree was a bachelor's were proficient in reading prose. In 2003 — the only other year the NAAL was administered — only 31 percent were. Among people with advanced degrees, prose proficiency dropped from 51 percent to 41 percent.

Again, spending hasn't translated into better education.

To someone who doesn't know about these sorry results spending federal money on education probably seems rational. But President Obama must know the facts, which means when he decries cuts in education spending, it can't be about what's educationally best. It must be about what's politically best for him.


Education Spending Doesn't Deliver | Neal McCluskey | Cato Institute

Wednesday, August 29, 2012

The Impact of Charter Schools on Public and Private School Enrollments

Charter schools are publicly funded schools that have considerable independence from public school districts in their curriculum development and staffing decisions, and their enrollments have increased substantially over the past two decades.
Charter schools are changing public and private school enrollment patterns across the United States. This study analyzes district-level enrollment patterns for all states with charter schools, isolating how charter schools affect traditional public and private school enrollments after controlling for changes for the socioeconomic, demographic, and economic conditions in each district.
While most students are drawn from traditional public schools, charter schools are pulling large numbers of students from the private education market and present a potentially devastating impact on the private education market, as well as a serious increase in the financial burden on taxpayers.
Private school enrollments are much more sensitive to charters in urban districts than in non-urban districts. Overall, about 8 percent of charter elementary students and 11 percent of middle and high school students are drawn from private schools. In highly urban districts, private schools contribute 32, 23, and 15 percent of charter elementary, middle, and high school enrollments, respectively. Catholic schools seem particularly vulnerable, especially for elementary students in large metropolitan areas.
The flow of private-school students into charters has important fiscal implications for districts and states. When charters draw students from private schools, demands for tax revenue increase. If governments increase educational spending, tax revenues must be increased or spending in other areas reduced, or else districts may face pressures to reduce educational services. The shift of students from private to public schools represents a significant shift in the financial burdens for education from the private to the public sector.


Download the PDF of Policy Analysis no. 707 (1 MB)

The Impact of Charter Schools on Public and Private School Enrollments | Richard Buddin | Cato Institute: Policy Analysis

The Charter School Paradox

Is it possible for charter schools to increase educational options and diversity in the public school system but decrease it overall; to spend less money than regular public schools but cost taxpayers more overall; and to outperform regular public schools but decrease achievement overall?

Unfortunately, it is possible, and this mix of intended and unintended outcomes is the "Charter School Paradox." But it is only a paradox if we take a narrow view of charter school effects. Rigorous new research concludes that public charter schools are seriously damaging the private education market, adding to the taxpayer burden, and undermining private options for families and healthy competition in the education sector.

Fortunately, we have a solution in education tax credits . . .

Take a look at the full paper by Richard Buddin, my short companion piece, and our brief video on the findings and implications of this path-breaking new research.

The Charter School Paradox is a post from Cato @ Liberty - Cato Institute Blog


Original Page: http://feeds.cato.org/~r/Cato-at-liberty/~3/ncO39-vJNaY/

Monday, August 27, 2012

The New Yorker Lampoons Romney-Ryan Bromance On Latest Cover

The New Yorker presumably enjoyed mailing this latest cover to its presumably overwhelmingly Democratic reader base.

Romney Ryan New Yorker

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Apple Wants To Ban Sales Of 8 Samsung Devices (AAPL, GOOG)

samsung galaxy s iii customized home screen

Word just hit our Bloomberg terminal.

Apple has listed the eight Samsung devices it wants to ban as a result of its victory in court last week.

Developing...Refresh this post for updates.

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Here's Google's Latest Apple TV Killer (GOOG)

highsense pulse google TV

Google and Highsense announced a new set top box powered by Google TV today called the Highsense Pulse.

The Highsense Pulse is similar in size and shape to popular streaming boxes like the Roku and Apple TV, but will run Google's Android-based Google TV software. The Pulse will also have a USB port so you can load your own digital music, movie, and photo files.

It'll be available in November for less than $99, which is the same price as the Apple TV.

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$750 Million Enterprise Startup GitHub Has Wild Offices Full Of Bikes, Booze, And … Octocats?!?

GitHub office tour

Social-coding startup GitHub's San Francisco headquarters looks less like an office and more like your favorite hangout bar.

That may be because the company got its start at Zeke's, a San Francisco sports bar, according to cofounder and CEO Tom Preston-Werner, who gave us a tour.

GitHub just raised $100 million from Andreessen Horowitz—the largest investment by the legendary VC firm to date, and one that valued the four-year-old startup at $750 million.

GitHub offers its customers, largely programmers, a place to jointly work on and store their code. Open-source projects can use GitHub for free. It makes money by selling private code-repository services and software to enterprises (and also by selling 3,000 GitHub T-shirts, mugs, and other goodies a month).

For years, GitHub made do without an office, meeting in bars or coffee shops. So they wanted the same atmosphere for their first office—fun, not "soul-deadening." When San Francisco's legendary Eddie Rickenbacker's bar shut down, Preston-Werner snapped up a vintage red Indian motorcycle from the watering hole's collection.

The front third of the office is an employee lounge, bar, and party area filled with funky furniture.



The company logo, the Octocat, is everywhere. The Octocat takes all kinds of forms, like this oil painting.



Dogs, video games, and a motorcycle are part of the decor.



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VMware Kills Off A Pricing Scheme Customers Hated (VMW)

Pat Gelsinger VMware

Customers should love new VMware CEO Pat Gelsinger's first big move.

He's killing off an unpopular pricing scheme that had really ticked off customers.

Called "vRAM," it was a complex way of figuring out how much VMware would charge for its software licenses. It was introduced a year ago, when VMware launched the latest version of its flagship product, vSphere 5. The company started  calculating pricing based on how much memory each server used with VMware software instead of more conventional pricing measures, like counting the number of server CPUs.

Suddenly customers were being charged a lot more money for VMware software running on the same machines.

The company surveyed 13,000 customers, Gelsinger said during his keynote speech today at the company's VMworld customer conference in San Francisco.

The top feedback they gave—"very loudly"—was "change your pricing," he said.

"'vRAM' is a four-letter dirty word. We are striking this word [out]," he said to loud cheers from attendees.

VMware is the market leader in what it does, a technology called "server virtualization." It's not the only game in town, though. Customers can use low-cost technology available from Microsoft, Red Hat, Citrix, and others. Microsoft specifically called vRAM a "vTax."

So VMware will go back to its original pricing schemes and try to increase per-customer revenue by selling them bundles of software for doing cloud computing.

This was a smart move. Customers are already interested in VMware's cloud products, which allows them to get more use out of their servers and data centers. If they opt for other server-virtualization products, VMware loses a shot at selling them additional software.

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