School's out! For the summer... and maybe for good. It's clear that there's a bubble in education... from student loans, political correctness, and flawed science. How much bigger is this bubble going to get? And when will it pop? More in this issue of American Consequences...
Saving Education
Not Social, Not Science, Not True
Un-Teaching Personal Responsibility
I D E A S T H A T M A T T E R E D I T E D B Y P . J . O ’ R O U R K E AMERICAN CONSEQUENCES APARTAT THE SEAMS?
THE STATE OF EDUCATION IN AMERICA MAY 2 0 1 8
F R OM T H E D E S K O F P. J . O ’ ROURKE
Dear Reader, The room was completely silent. Over 500 people, but you could hear a pin drop. I remember it well… Dr. Steve Sjuggerud took the stage and made one of the boldest predictions of his career. (A career that sure hasn’t lacked boldness!) He said that one little-known company would become the largest company in the world by 2021. I thought it was a joke. But today, just two years later, his prediction is on its way to coming true. This company is now one of the 10-largest in the world – along with Facebook, Apple, and Warren Buffett’s Berkshire Hathaway. But despite its size, I’ll bet you don’t know this company’s name... The people in that room in Las Vegas were the first to hear Steve’s prediction. And if they acted on it, they scored a triple-digit gain in less than two years. That is the magic of the annual Stansberry Conference. Exciting, actionable investing ideas you’ll hear in real time – often before anyone else. Don’t miss out on the biggest – and most profitable – (and most enjoyable!) investing event of the year. It pays to be in the room. As of today, 80% of the tickets are already sold out. Click here for the details – and how to get a $500 Stansberry Credit.
Sincerely,
P.J. O’Rourke Editor in Chief American Consequences
CONTENTS
MAY 2018 : ISSUE 11
LOST? CLICK HERE
84
18
80
48
34
44
AMERICAN CONSEQUENCES
4 Inside This Issue
48 The Unexpected Upside of a Religious Education BY CHRISTINE ROSEN
BY STEVEN LONGENECKER
6 Letter From the Editor BY P.J. O’ROURKE
Editor in Chief: P.J. O’Rourke Editorial Director: Carli Flippen Managing Editor: Steven Longenecker Contributing Editors: Doug Casey, Turney Duff, Dr. David Eifrig, Andrew Ferguson, David Labaree, Alice B. Lloyd, Hannah Long, “Horace Mann,” Christine Rosen, Buck Sexton, Porter Stansberry Newswire Editors: Scott Garliss, John Gillin, Greg Diamond Assistant Editors: Chris Gaarde, Laura Greaver Creative Director: Erica Wood Cartoon Director: Frank Stansberry Contributing Cartoonists: Hank Blaustein General Manager: Jamison Miller Advertising: Sam DeCroes, Jared Kelly, Jill Peterson Editorial feedback: feedback@ americanconsequences.com
52 An Unlikely Triumph BY DAVID LABAREE
10 What Moved the Market
64 Un-Teaching Personal Responsibility BY ALICE B. LLOYD
12 What Could Possibly Go Wrong?
14 From Our Inbox
70 The Social Sciences
BY ANDREW FERGUSON
18 The Smart Way to Save BY DR. DAVID EIFRIG 22 Betsy and the Blob BY “HORACE MANN”
80 My Lousy Education BY P.J. O’ROURKE
84 Why College Is a Waste of Money BY DOUG CASEY 88 ... And Schools Like to Make Dumb Decisions, Too 90 Lessons About Adventure Nerds BY P.J. O’ROURKE
26 Saving Education
BY MITCH DANIELS
34 The Only Stocks I’ll Teach My Kids To Buy BY PORTER STANSBERRY 40 The Unexpected Upside of a Homeschooled Education BY HANNAH LONG 44 The Unexpected Upside of a Wall Street Education BY TURNEY DUFF
96 Read This
98 The Final Word
BY BUCK SEXTON
102 Featured Contributors
American Consequences 3
INSIDE THIS ISSUE
S chool’s out! For the summer... and maybe for good. It’s clear that there’s a bubble in education... from student loans, political correctness, and flawed science. How much bigger is this bubble going to get? And when will it pop? Editor in Chief P.J. O’Rourke gets our “Education Issue” started with some advice he’s giving to his kids... while Dr. David Eifrig details the smart way to save and shelter assets for your family. We have a high-level Department of Education mole who tells us the real story behind Betsy DeVos, the most controversial member of President Trump’s cabinet for her “crime” of allowing parents to send their children to the school of their preference. And if one man can save education, it’s the former governor of Indiana and current president of Purdue University – Mitch Daniels . He shares an “open letter” to Purdue about a few bold steps he’s taking. Financial analyst Porter Stansberry shares the best way to grow rich – wildly rich . It’s an investment secret he plans to teach his children, titled: “The Only Stocks I’ll Teach My Children to Buy.” Then, we have three folks sharing their very different education experiences... 1. Hannah Long shares the unexpected upside of a homeschooled education.
2. Turney Duff details the unexpected upside of a Wall Street education. 3. And Christine Rosen shares the unexpected upside of a religious education. Professor David Labaree writes about how the American college went from pitiful to powerful with a deep, historical look at the education system in the U.S. And Alice B. Lloyd travels to Broward County to report on the Parkland shooting... and discovers the biggest national scandal you’ve never heard about. Andrew Ferguson details the reproducibility crisis in social science. Thousands of studies are worse than useless... and you’ll never guess who’s to blame. As one of the most prestigious scientific journals admits... “ Much of the scientific literature, perhaps half, may simply be untrue .” P.J. talks about his lousy education... Doug Casey delivers why college is a waste of money... and we round up a list of dumb decisions made recently by schools. Plus, don’t miss P.J.’s essay on “Adventure Nerds” – what he learned taking his son Cliff to the 34th Space Symposium. Finally, former CIA analyst Buck Sexton tells us how to be the next generation’s greatest spy. (Think memos, not karate chops.) Enjoy the issue. And tell us what you think at feedback@americanconsequences.com. Regards, Steven Longenecker Managing Editor, American Consequences
4 May 2018
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From Editor in Chief P.J. O’Rourke
6 May 2018
LETTER FROM THE EDITOR
I want my kids to believe in getting a good education, but I’m not sure where they’ll get it. In the classroom? At home? In the gutter, where I got it? I have a friend who sends his kids to Catholic school, partly because he’s Catholic, but mostly because he lives in a big American city where – as in all big American cities – the public schools stink. I asked my friend, “Are the Catholic schools any good?” “No,” he said. “But the kids aren’t taught anything that I have to un -teach them when they come home.” And that’s pretty much all I’ve asked from the schools where I’ve sent my three kids. I’ve been lucky. They haven’t come home needing to be un-taught much. There was one occasion, at the kids’ sort-of- but-not-too-Montessori-ish grade school, when a teacher answered a second-grader’s
Fortunately for my police record, another parent blew her top before I had a chance to blow mine. The teacher was called to the dean’s office where her ears were pinned back and her hair was scorched off by an angry mom yelling, “Democrats care about ‘The People’! Democrats hate people ! Republicans care about people and hate ‘The People’! Especially you!” Fortunately for my police record, another parent blew her top before I had a chance to blow mine. “ And a few weeks ago the prep school where my middle daughter goes had “Unconscious Bias Day” – all classes were excused in favor of required attendance at six or eight hours of lectures, assemblies, workshops, and discussion groups devoted to the above- named topic. This is a traditional New England prep school – which is to say it is resolutely multicultural in curriculum, diversity-sensitive, and inclusivity oriented. Meanwhile, of course, preserving the age-old customs and mores of rich WASPs.
CLICK HERE TO READ THEWEB VERSION
question about the difference between Democrats and Republicans by saying, “Democrats care about people.”
American Consequences 7
LETTER FROM THE EDITOR
I gather. I haven’t heard any direct reports. While I enjoy embarrassing my kids as much as the next dad, I’ve never gone so far as to ask them, “What did you learn in Sex Ed Class today?”) The students have absorbed endless lessons about the horrors of war but would be baffled if they encountered the quotation, “make a desolation and call it peace.” Not that they’re likely to be assigned to read Tacitus. “ Instead they are assigned to read about the detrimental effects of Eurocentric patriarchal imperialism. What they read is true enough, no doubt. But if an instructor dared to assign “The White Man’s Burden,” in which Rudyard Kipling writes about the detrimental effects of Eurocentric patriarchal imperialism on Eurocentric patriarchal imperialists, the instructor would be fired. And, come to think of it, I don’t believe any of my children have ever been assigned to read a poem that rhymed. Furthermore – while I’m at it with my rant – today’s students know all about climate change but spend too much time indoors staring at screens to know anything about the weather. They have reversed Charles Dudley Warner’s famous quip, “Everybody complains about the weather but nobody does anything about it.” They’re all doing something about the I give them two rules: Mind your own business and keep your hands to yourself.
A young man can appear in the classroom dressed like Princess Di and no one will say a word, but he will be sent back to his dorm if he wears jeans and a collarless shirt. I asked my daughter, “Is there bias at your school?” She said, “Oh, gosh no. Nobody’s prejudiced or bigoted or anything like that.” “In that case,” I said, “why not just have ‘Unconscious Day’?” Schools haven’t taught my kids many bad things. On the other hand, there are many good things schools haven’t taught my kids either. Today’s students can list every injustice in America but can’t name a Justice of the Supreme Court. They know all about Martin Luther King Jr. but have no idea who Martin Luther was. They are fully conversant with Title IX of the Education Amendments Act of 1972, but are fuzzy on the details of Articles I through VII of the U.S. Constitution... not to mention Amendments I through X, and II in particular. (Furthermore, Title IX aside, they don’t know their Roman numerals and they can’t write – or read – longhand.) They are cognizant of the origins of poverty but ignorant of the origins of wealth. Their instruction has been in “dark Satanic Mills,” not John Stuart Mill. And they wouldn’t know Adam Smith from Adam. (And even knowing Adam from Eve is a pedagogical conundrum these days. Or so
8 May 2018
weather – with their climate activism, climate advocacy, heightening of climate awareness, etc. – but they’ve curled up with Netflix and are too cozy to complain. Thus, today’s students are graduating from school literally too stupid to come in out of the rain. But so did we. So did everyone. That’s the way it’s always been. We don’t get much of our education in school. This leaves me in charge of the education my kids get outside school... OK, I’m lying... My wife is in charge of that. And my kids can be damn thankful for it. But I try to do my little bit. I give them two rules: Mind your own business and keep your hands to yourself. I call these “The Bill and Hillary Clinton Rules” because... Mind your own business, Hillary. And, Bill, keep your hands to yourself. Then I invoke the “Fairness Precept,” which began with my eldest daughter, a child much given to exclamations of “That’s not fair!” One day when she was about eight or nine and had worked herself up into a huge snit about the unfairness of something or other I lost my patience and snapped at her... “Not fair?” I said. “You’re cute. That’s not fair. Your parents are pretty well off. That’s not fair. You were born in America . THAT’S not fair. Honey, you’d better get down on your knees and pray to God that things don’t start getting ‘ fair ’ for you!”
Finally, I teach them about hypocrisy. My mentor on the subject was my old friend (and American Consequences contributor) Andy Ferguson. Andy’s children are older than mine. When his were in junior high and mine were still little, I asked Andy what he was going to say when he was asked – as he inevitably would be – “Dad, did you take drugs?” Andy, a fellow survivor of the “Better Living Through Chemistry” era, replied, “I’ll say I never took any drugs, ever.” “Andy,” I said, “what about that 1970s photo of you on the mantle with your hair down to your butt and a guitar?” “But Andy,” I said, “you’ve published books where you’ve written about being stoned out of your gourd.” “Reading is part of a good education,” Andy said, “but when it comes to reading there’s one thing you can count on with your kids – they will never read anything written by their fathers.” Presumably, that includes what I’m writing here. Therefore, I have told my children that I never took drugs, never had sex until I was married to their mom, and that when I was a kid I made my bed every morning before I left for school. If the kids believe that, they’ll believe anything. They might even believe in getting a good education. “I’ll say I was playing in a band that performed ‘folk mass’ at church.”
American Consequences 9
WHAT MOVED THE MARKET THE BIGGEST STORIES THAT MATTERED FOR THE MARKET LAST MONTH...
“bang for their buck” in value stocks, which typically outperform when profits and interest rates raise. Two market bellwethers that did not fare well were Caterpillar and 3M. Caterpillar management thinks first-quarter results could be the highwater mark for the year, and 3M flat-out missed all estimates and guided 2018 lower. 3M’s struggles are not a surprise given that the bulk of consumer-staples stocks are in a bear market. Oil prices held and are up over 18% year to date. OPEC production cuts were extended and the inventory levels have consistently shown a weekly drawdown. Many oil bulls believe the summer driving season could push prices above $80 a barrel. U.S. withdrawal from the Iran nuclear accord and increased tensions in the region have acted as support for oil prices. Gold bugs tried to push the metal higher when equities sold off, but prices quickly fell back $1,300 an ounce. There are many reasons for gold apathy, the most salient of which are the ratcheting down of Korean tensions and a strong U.S. dollar. Bitcoin recovered after February’s lows, and there is some talk about Wall Street banks building out crypto trading desks. Markets are stuck. The battle between investors who embrace earnings growth, buybacks, and dividends are stymied by sellers focused on higher inflation and interest rates, which negatively impact future cash flows and force fund managers to reduce stock holdings in favor of bonds.
‘MARKETS ARE STUCK’ AS VOLATILITY AND INTEREST RATES RISE... The trade tensions that raged in March simmered down in April and May. The driving factors were the U.S. trade team’s trip to Beijing, and the return favor by China’s delegation to Washington, D.C. But investors are conditioned to be wary of the next China headline or Trump tweet and are quick to “sell first, ask questions later.” As for rates, the 10-year yield breached 3.1% and the spread between the 2- and 10-year yields was the tightest it’s been in five years, stoking fears of the dreaded inverted yield curve. When short-term rates are higher than long-term rates, the chances of an impending recession are elevated. The S&P 500 traded down to the 200-day moving average and held firm. Earnings have been all over the map, but, taken in aggregate, better than expected. Dow Jones Industrial leader Boeing delivered stellar results and guided higher. Facebook did the same and rallied, showing investors are beginning to get past the Cambridge Analytica debacle. Intel and Microsoft delivered beats across the board but then sold off quickly over concern that growth stocks have peaked. Investors saw more
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10 May 2018
May 22 The House of Representatives votes on the Senate’s Dodd-Frank reform bill. This is expected to raise the threshold for the systemically important financial institution designation from $50 billion to $250 billion, benefitting community and regional banks. May 23 FOMC minutes from the most recent meeting. Investors will be looking for more inflation talk. Markit releases its preliminary manufacturing, services, and composite Purchasing Managers’ Index (PMI) data in the U.S. and the eurozone. This is a vital gauge for judging the state of global growth. June 12-13 The FOMC meeting in Washington, D.C. It will announce its latest policy update, and investors will be listening to the follow-up press conference and surveying the dot plot release for rate-hike clues. rates unless there is a press conference after the meeting. For the rest of this year, there are press conferences after the June, September, and December meetings... which is an opportunity for three more rate hikes in 2018. The market has already priced-in a June hike, so it’s a matter of September and December. Granted, this doesn’t necessarily mean the Fed will hike rates four times this year. But the bears are saying there’s nothing in the most recent statement to make you think it won’t. We’re going to know very soon.
THE FED’S INFLATION DEBATE IS FRONT AND CENTER... To raise rates quicker than expected or not raise rates quicker than expected, that is the question... The Federal Open Market Committee (FOMC) met once again May 1 and 2 before announcing their latest policy decision... it left rates unchanged but changed the language in the conversation. The key phrase was, “Inflation on a 12-month basis is expected to run near the Committee’s symmetric 2% objective over the medium term.” “Symmetric” was the word of focus. The thinking is “symmetric” implies the Fed is willing to let inflation run hot. In other words, inflation has undershot the 2% target for so long, it may be time to let it run over 2% for a commensurate amount of time. But, bear in mind, the Fed must be careful not to let the economy overheat. As May wore on, and Fed speakers hit the road, “symmetric” was a popular topic of conversation. Investors were interested in understanding exactly what the FOMC meant in its statement. Regional presidents Raphael Bostic of Atlanta, John Williams of San Francisco, Loretta Mester of Cleveland, Robert Kaplan of Dallas, and Charles Evans of Chicago all went to great lengths to elaborate. They confirmed exactly what the market thought. They discussed the inflation picture and yield curve at length and are willing to let the economy run hot to make up for inflation undershooting for so long. The hope is that there’s less need to quicken the pace of rate hikes. As we approach the next policy decision in June, remember that the Fed has not raised
EDITORS
Scott Garliss
John Gillin Greg Diamond
WATCH THESE DATES
American Consequences 11
WHAT COULD POSSIBLY GO WRONG?
Financial follies and disaster in the making
member of the bank’s international division. In short, these sanctions have the potential to target any agreements signed by either of the two men, creating a strong disincentive for governments or businesses considering deals involving the country. The sanctions are also “secondary” – they apply to both American and non-U.S. companies and individuals – with more expected in the coming weeks. withdrawal leaves the door open for Iran to scrap the agreement and renew some nuclear programs. And many political analysts believe the action would be symbolic rather than provocative... a bargaining chip for future negotiations. A removal of Iran’s self-imposed enrichment limitations would be a breach of the agreement, but would still leave the country unable to produce weapons-grade uranium without further redevelopment of nuclear facilities... many of which are currently under satellite surveillance. So, what could possibly go wrong? Proponents of the deal claim that U.S.
U.S. withdraws from Iran nuclear deal...
This month President Donald Trump fulfilled his campaign promise to withdraw from the Iran nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA). Calling the JCPOA “defective at its core,” he promised to impose the “highest level of economic sanctions” on the country. The decision upset key allies in Europe, some of whom had been urging Trump to reconsider. Russia and China even issued a joint statement declaring their “unwavering support” for the agreement. President Trump and critics of the deal say that Iran has continued to develop its nuclear program despite sanctions and inspections. And Israel’s prime minister, Benjamin Netanyahu, held a press conference where he presented a cache of documents he said prove Iran lied to the world about its nuclear enrichment and development programs. And days ago, U.S. Treasury Secretary Steven Mnuchin announced anti-terror sanctions against the governor of Iran’s central bank, as well as a
12 May 2018
As we go to press, the remaining JCPOA parties are still committed to the agreement, but more U.S. sanctions are expected.
countries had dropped back to five-year average levels due to OPEC production cuts. But it also expects this drop in surplus oil to correct over the next six months. The EIA estimates that the U.S. will produce an average of 10.5 million barrels per day in 2018. And while the U.S. consumes more than it produces (about 20 million barrels per day in 2017), it’s unlikely that even the hypothetical one million-barrel global loss would hurt oil prices in the long term without further cuts from OPEC or manipulation by futures traders. In the short term, a rise in gasoline prices is possible, with diesel likely taking the brunt of it. But analysts and the EIA don’t expect prices to bounce much higher than $3 for a gallon of regular unleaded. The ‘buyback boom’ has resumed... According to Goldman Sachs, S&P 500 companies are on track to announce $650 billion worth of share repurchases this year. This would trounce the previous all-time record of $589 billion set in 2007. But share buybacks are a “double- edged sword”... When shares are trading at a relatively cheap valuation and the company has the cash to fund them, buybacks can be great for investors. But today, we’re seeing many firms buying back shares at historically high valuations. Worse, most are borrowing heavily to do so. These companies are likely to regret these decisions
What about Iran’s oil?
With the disruption of the JCPOA comes the potential loss of Iranian oil on the global market – estimated at about 500,000 barrels per day – and its effect on oil prices. European benchmark Brent crude has already seen its price rise to more than $75 a barrel, the highest in more than three years. But this was on the expectation that Trump would reject the deal and the market would see less Iranian oil... In other words, futures traders had “priced in” the expected withdrawal. When sanctions on Iran lifted two years ago, it was able to double its oil exports to about 2.2 million barrels a day – roughly 3% of global output. Europe quickly became a major buyer, and that’s where the 500,000-barrel- per-day loss comes in. European buyers and businesses that deal with both Iran and the U.S. will likely withdraw business from the country before putting their U.S. dealings at risk. So what does this mean for oil in the United States? Not much so far. Even the most extreme long-term estimates – about a million barrels a day – only account for 1% of global demand. And Venezuela’s oil production has already fallen by a similar amount, also about 500,000 barrels per day, with little disruption to the global oil market. That said, on May 16 the U.S. Energy Information Administration (EIA) announced that oil stockpiles in the U.S. and cooperating
when the next downturn arrives. What could possibly go wrong?
American Consequences 13
FROM OUR INBOX
Re: Our Newest Readers Weigh In
published reports that the company paid ZERO federal income taxes last year. If that is true, why is it true? That kind of cash could go toward closing the deficit or paying down the national debt. If Bezos is getting away with it, how many others in or near his bracket are also skirting their “share” of the taxes? – Al E. P.J. O’Rourke comment: Al, I don’t have that Obama Administration kind of access to IRS secrets that would let me give you the dirt on Amazon’s tax status. But I can tell you that corporate taxes generate only about 9% of federal revenue. Trying to close the deficit gap with corporate taxes is like trying to close a church door with a chicken feather. I would take an issue with the comment [that folks making under $70,000] only pay 6% of the total taxes. I assume you’re only talking about income tax. What about property taxes, sales taxes, tolls, car taxes, and all those little fees here and there that are distractions from the costs of living people in or below this income level pay? – John C. P.J. O’Rourke comment: John, I would snatch that issue back from you. I was only talking about income tax and also only talking about federal revenue.
Got to admit I thought when I saw it that you were O’Rourke-ing financial shibboleths. I always felt you were warped but fair. I liked that. Looking forward to help in this mess. – Rick J. P.J. O’Rourke comment: That’s us, Rick! Warped but fair. Tipsy but balanced. However, I don’t know how much assistance I personally am going to be with the mess we’re in. About all I can do is figure out a funny way to yell for help. Is it possible to receive the magazine as it is in my Kindle or PDF format? – Mike R. Steven Longenecker comment: Absolutely! We’ve uploaded all our archived issues in a PDF format right here: https:// americanconsequences.com/archive/. It should open great on a Kindle Fire or other tablet. It’s a little rougher (but workable) on a Kindle e-reader. Re: What’s ‘Fair’ About Taxes? April 25, 2018 issue American Weekly Consequences Regarding fairness in taxation, have you read about Jeff Bezos and Amazon? Namely, the
Send us a message, question, or criticism at feedback@americanconsequences.com
14 May 2018
ADVERTORIAL
MAY 2018
Senate Bill C-45 Could Trigger Last Marijuana Boom This June
It’s finally happening… As soon as next week, a story on the cover of The Wall Street Journal is going to turn some American investors into newly minted marijuana millionaires. Thanks to new legislation proposed by Chuck Schumer on April 20th, it looks like marijuana is finally going mainstream here in America. And if you know what to do, it could make you one of the highest investment gains in 2018. Politico magazine calls it “Legal Marijuana’s Big Moment”. The Washington Post reports, “President Trump has promised… that he will support congressional efforts to protect states that have legalized marijuana.” Former speaker of the House, John Boehner, who once said he was “unalterably opposed” to decriminalizing marijuana, recently joined the board of a marijuana company and now says marijuana is critically needed to fight the opioid epidemic. If you read between the lines, it’s clear that a major legislative change is at hand — and that’s good news for investors who know how to play it.
According to the author, in many cases you can make a fortune without ever leaving your house… starting a business… or touching a single gram of marijuana along the way. Even better, there’s a new resource called the Marijuana Playbook that details dozens of clever ways anyone can take advantage of the situation right now. Better yet, you can learn everything you need to know about this resource here, for a brief time only, free of charge.
American Consequences 15
FROM OUR INBOX
I agree that almost all forms of American taxation other than income tax are regressive and unfair to people of modest means. But I wasn’t talking about fairness... I was talking about math. And math, as those of us who flunked it in high school know, isn’t fair. And note that individual income tax provides the largest share of federal revenue. You wrote: “And folks who make less than $47,300?... they don’t pay any federal income tax at all. In fact, on average, they receive money back from the feds.” Not so! I made about $45,000 (gross) and paid over $2,000 in federal income tax last year. – C.A.S. P.J. O’Rourke comment: Dear C.A.S., let’s go C.P.A. Are you sure you’re balancing your accounts – subtracting all direct and indirect government benefits you receive from the income tax you pay? If you’re still getting nicked for two grand I suggest being more aggressive on your IRS Form 1040 – better to get audited than to go broke! And, if even that fails, at least you can console yourself with the thought that your income tax rate is only 4.4% ($2,000 divided by $45,000). Which is more than nothing, but less than a poke in the eye with a sharp stick. Live within your means, raise your kids, reach retirement and the government is right there to take some of the extra money you thought you would have. Oh yes, they tax your Social Security also if you happen to have a little too much coming in from your IRA...
been rich. But every time “only the rich” will be affected by a tax, it seems to hit me. No such thing as fair when it comes to taxes. – Alan S. P.J. O’Rourke comment: Amen, Alan. No such thing as fair and no such thing as a tax that affects “only the rich.” All tax money is money taken away from productive purposes (which the free market will always find for money) and used for unproductive purposes (which the government will almost always find for money). Re: Tax Strike! April 18, 2018 issue of American Weekly Consequences You are the first I have seen to advocate something. Of course it is tongue in cheek but the underlying idea is correct. I thought that a tax delay would actually accomplish some upset. If the rich would not pay for two years and just handle the interest and penalty it would be legal and something would have to change quickly. – Jim T. P.J. O’Rourke comment: But you know how it is, tangling with the IRS. You first, Jim. Re: A Few Political E-Mails I am an environment voter. If you cannot drink clean water, breathe clean air and till clean soil, then this game here is over. Mars is not ready for us, though other beings may not let us escape from this planet that we are destroying. Would serve us right. – Patty D.
It is just going to get worse. I’ve never
16 May 2018
P.J. O’Rourke comment: Patty, I’m with you about the water, the air, and the soil. But the danger of being an “environment voter” is in the politicians who claim to favor “the environment.” Too often what they really favor is more power for the political system and hence for themselves. One way to “cast a vote” for the environment is to assert property rights. I live in rural New England and want to preserve its fields and forests. So I’ve bought as much of them as I can afford and have put 200 acres into permanent conservation easement. It’s a small effort, but I think it’s worthwhile. Private property is less likely to be abused than public property. Compare the average private bathroom to the average public restroom. The last two administrations had no idea of what business is all about and it shows. At least Mr. Trump is familiar with business. – Richard W. P.J. O’Rourke comment: Well, the last one administration had no idea. (W. made about $14 million from the Texas Rangers sale.) And Trump has always seemed a bit sketchy as a businessman to me. But you’re right, Richard, so far, so good. At least President Trump has a favorable attitude toward business people and doesn’t hate their guts like whoever is going to run against him in 2020 probably will. Not that the Republicans aren’t pretty good at income redistribution as well but the Democrats excel at it. I’m so damn tired of
paying for all the do-nothing slobs in this country I can’t even put the level of wrath and disgust in words. – Derrell H. P.J. O’Rourke comment: Don’t try to, Derrell! This is a family-friendly publication. I think every decent person in the country is tired of the same thing. But, as you point out, it’s not just the Democrats. There is an old railroad saying, “There are bums on the rods and bums on the plush.” Meaning that there are bums hopping a ride, holding on to the truss rods under the boxcars, and there are bums sitting in private rail cars drinking champagne and smoking cigars.
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American Consequences 17
18 May 2018
deduct your 529 plan contributions on your state income tax return, up to your state’s limit. Let’s take a look at the most important things to know about 529 plans... Who should contribute to a 529 account? Anyone... If you want your children or grandchildren (or nieces, nephews, other family members... or even yourself ) to attend college, this is one of the best ways of ensuring that they’ll do so. A 2011 study from the University of Pittsburgh found that kids who expect to attend college and have a designated college savings account were four times more likely to attend a four-year college than children with similar expectations but no savings. And anyone can contribute... 529 plans have no income limits, age limits, or annual contribution limits. There are lifetime contribution limits, but they’re in the six-figure range.
This is one of the easiest ways to shelter assets for your children or grandchildren... and save a bundle on taxes while doing so. It varies from state to state, but it – generally – allows you to... • Contribute money to a special account to invest in stocks, bonds, or money-market funds (and often get a break on your state taxes)... • Grow your investments tax-free... • And withdraw the earnings tax-free to pay for qualified higher-education expenses – like tuition, fees, books, computer equipment, and room and board. It’s called a 529 plan ... created by Congress in 1996 as a way for families to invest for college expenses. All 529 plans are sheltered from federal capital gains taxes... And many states let you
By Dr. David Eifrig
American Consequences 19
THE SMART WAY TO SAVE
Ultimately, you should weigh the tax breaks available to invest in your state’s 529 plan against the investments offered and expense fees. You can view plans state by state by clicking here. Will it hurt eligibility for financial aid? Somewhat... Yes, at least a little bit. Any 529 plans owned by college students or their parents will reduce need-based aid by a maximum of 5.64% of the account value. So if you have $10,000 in a 529 plan, withdrawn by $2,500 each year, it will reduce aid by roughly $560 the first year, $420 the second year, $280 the third year, and $140 the fourth year – for a total of $1,400. If you’re a grandparent, your 529 plan isn’t included on your grandchild’s Free Application for Federal Student Aid (FAFSA). However, distributions from the plan are reported as untaxed income to the beneficiary on the FAFSA. In this case, a $10,000 account balance withdrawn by $2,500 per year would result in about a $500 annual reduction of need-based aid for the second, third, and fourth years – a total of $1,500. The numbers can get tricky, but there are solutions... For example, you could simply wait for a student’s senior year of college to take a distribution, because it does not affect aid eligibility for the current award year, only for the subsequent award year. And sometimes it might be worthwhile to take the 10% non-
Who is in control of the money? You are...
When you contribute to a 529 plan for a family member, you remain in charge of the money. That allows you to use the money solely for its intended purpose... and you can change beneficiaries at any time, for any reason – just as long as the funds are used for education. Do you have to use the plan from the state you live in? Nope... You can open and contribute to any state’s plan. And this competition is a good thing... States continually improve their fund offerings and lower their expense ratios. Here are the four “gold” plans that Morningstar ranked the highest for 2017: Illinois’ Bright Start College Savings Program, the Virginia Invest529 plan, Nevada’s Vanguard 529 College Savings Plan, and the Utah Educational Savings Plan. All these plans offer super-low-fee, passive index funds, and also have age-targeted asset- allocation funds that gradually reduce their stock stakes each quarter, so that your risk goes down as you get closer to your goal. In addition, several state 529 plans offer grants to win your business... like dollar-for- dollar matching or even free money (if you’re born in Maine) just for opening an account. So compare the details before choosing a plan. And there’s nothing stopping you from having plans in multiple states... You can be a resident of Maryland, invest in a Nevada 529 plan, and send your grandchild to the University of Minnesota (go Golden Gophers!).
You can be a resident of Maryland, invest in a Nevada 529 plan, and send your grandchild to the University of Minnesota (go Golden Gophers!).
20 May 2018
qualified withdrawal penalty if it’s lower than the amount of aid reduced. What if your family member doesn’t go to college? No problem... You can use a 529 plan for a lot more than just a regular four-year college... Your beneficiary could attend a trade or vocational school or participate in a career- training program. And you can also name yourself as the beneficiary and take cooking classes at Le Cordon Bleu or any other interesting school... For example, Joseph Hurley, founder of the Savingforcollege website, named himself as the beneficiary of his 529 plan at 57 years old to study horticulture at his local community college. As long as a school offers postsecondary education and its students can apply for federal financial aid, you can use 529 funds for tuition, fees, and qualified expenses. To find out if a specific school or program is eligible, check the FAFSA school search here... It includes 400-plus schools that are outside the U.S. if you wanted to take an educational retirement trip. It can even be a backdoor estate plan... Because you can switch beneficiaries at any time, you can start the plan by naming yourself or your child as the beneficiary... then switch generations to your grandchild. But make sure that you don’t move more than $15,000 per year between beneficiaries – that can trigger gift and estate taxes. And 529 plans can be a great place to put
“extra” required minimum distributions that the IRS requires you to take out from your Individual Retirement Account (“IRA”) or 401(k). If you don’t need the money for your retirement, 529 plans can let you pass it to the next generation. What about the worst-case scenario? If there is no one in your family that can use the 529 funds... and you have no interest in continued postsecondary education yourself... you can still get access to that money. It always belongs to you. However, you’ll have to pay federal and state taxes on earnings – plus a 10% federal penalty. Keep in mind that it is more beneficial to you to max out your 401(k) and IRA before contributing to a 529 plan. Remember... your kids and grandkids can take out a loan for college – but you won’t find any banks willing to give you a loan for retirement. Dr. David Eifrig worked in arbitrage and trading groups with major Wall Street investment banks, including Goldman Sachs, Chase Manhattan, and Yamaichi in Japan. In 1995, Dr. Eifrig retired from Wall Street, went to UNC-Chapel Hill medical school, and became an ophthalmologist. Today, he publishes a free daily letter on health and wealth that shows readers how to live a millionaire lifestyle. If you’re interested in more ideas like this essay, you can sign up by clicking here.
American Consequences 21
BATTLING THE BEAST THAT ATE SCHOOL CHOICE
22 May 2018
The rage and hostility and contempt had been percolating since last spring, and then, when Secretary of Education Betsy DeVos gave an interview to 60 Minutes’ Lesley Stahl, the percolator erupted into a tsunami. “Betsy DeVos’s disastrous interview shows the limitations of being rich,” read the headline in the Washington Post . “Betsy DeVos Teaches the Value of Ignorance,” said the New York Times . A congressman from North Carolina, in a tweet, accused DeVos of being “rich, white and dumber than a bag of hammers.” The interview even prompted the Post to sic its two house “humorists” on the secretary. “Betsy DeVos has definitely seen a school once,” one of them wrote cleverly. The other used this headline: “The unappreciated genius of Betsy DeVos.” He was being sarcastic. Sarcasm never fails to kill. It’s comedy gold. (I’m being sarcastic.) DeVos – also known to her more sophisticated critics as Ditzy DeVos, Betsy DeVille, and Cruella DeVos – has become the most controversial member of President Donald Trump’s cabinet. This is saying something. For liberals and Democrats, Trump’s cabinet is the most target-rich environment since Sgt. York lowered his sights on that trenchful of German soldiers at the Battle of Meuse-Argonne. Aside from its singular intensity, there was nothing new in this expression of DeVos Hate. A philanthropist, businesswoman, and Republican activist, she has long been reviled by the teachers’ unions in her home state of Michigan. Her particular crime has been
to throw a fairly large chunk of her billion- dollar inherited fortune behind the cause of school choice – a system of taxpayer-funded vouchers that would allow poor parents to send their children to the private, public, or charter school of their own preference. DeVos’ enemies see school choice as a raid on the public purse – a sly way to undermine the public-school system by redistributing tax money to schools beyond the grasp of government administrators and their union allies. When Trump chose DeVos to be his secretary of education, the fear that she would nationalize her school-choice crusade sent shivers up every progressive spine. The Blob’s great ambition, in the view of outsiders like DeVos, is to block school reform. After a rocky confirmation hearing, DeVos took her seat in the education department’s hideous headquarters off the National Mall and began behaving just as her enemies feared: She started getting things done. We can assume that DeVos, like other conservatives and libertarians, thinks the Department of Education is a waste of time and a misbegotten federal intrusion into a sphere that properly belongs to the states. For 40 years, its most obvious function has been to bolster the vast, parasitic education establishment – that unsightly agglomeration of teachers’ unions,
By “Horace Mann“
CLICK HERE TO READ THEWEB VERSION
American Consequences 23
education schools, trade associations, and government planners that an earlier secretary of education aptly called “The Blob.” The Blob’s great ambition, in the view of outsiders like DeVos, is to block school reform. This isn’t completely true, however. Every couple years, a new fad is incubated in the ed schools, passed through the unions, and imposed on teachers who scramble to catch up with hours of after-class training. They learn freshly minted techniques and jargon of dubious validity that will be replaced in a few years by the new techniques and new jargon of yet another fad. Meanwhile, as DeVos points out, the United States stagnates in international rankings: 23rd in reading, 25th in science, 40th in math. Two-thirds of American fourth-graders can’t read at their grade level. One of DeVos’s salutary achievements has been to repeat these sorry statistics at every opportunity. She has resisted all efforts to further centralize power in Washington, and adamantly refused to concede that The Blob’s preferred solution – spend more money – is necessary or wise. The U.S. already spends more money per pupil than most developed countries. If DeVos’ achievements were merely rhetorical, she might not have provoked the DeVos Hate. But she is still an activist and agitator. She has dismantled earlier fads The Blob has concocted – most recently, the infamous Common Core Standards imposed nationwide during the Obama years at bottomless expense.
She has rescinded more than 600 “guidance documents” the department routinely issues to bully schools into operating the way the feds want them to. She withdrew the Obama administration’s sinister “Dear Colleague” letter to colleges and universities dictating standards for adjudicating claims of sexual assault. She asked Congress (unsuccessfully) to drastically cut the department’s budget even as she sought (successfully) large increases in school-choice funds. Any one of these would have been enough to draw the disapproving eye of Lesley Stahl and 60 Minutes. DeVos appeared desperately uneasy during her interview. She stuttered and stammered. In one sense it’s hard to blame her. With her wide-eyed insincerity and censorious stare, Lesley Stahl is one of the scariest looking newscasters in America. Her specialty is the not-really-a-question. “Why have you become, people say, the most hated Cabinet secretary?” Stahl asked. What’s the proper answer to such a question? “Because I’m a monster, Lesley. I’m easy to hate”? But DeVos rallied and her answer – “I think there are a lot of powerful forces allied against change” – was pretty good, and had the added benefit of being true. (The “people say” in Stahl’s question was a nice touch, by the way – the reporter’s equivalent of “I’m asking this question for a friend.”) It’s hard to know how to answer a not-really- a-question whose premise is nakedly untrue, as when Stahl flatly told DeVos that “things are getting better” in America’s schools. For
24 May 2018
AND
THE BLOB
a moment DeVos looked nonplussed at this ignorant assertion, which in turn gave her detractors the chance to say she looked ill- informed and clueless. They particularly pounced on her answer to another non-question: “Have you seen the really bad schools?” “I have not,” DeVos said haltingly, “I have not intentionally visited schools that are underperforming.” The question was cleverly posed. Of course the secretary of education has seen bad schools! It’s a doubly pointless question in the case of someone like DeVos, who has spent two decades promoting school choice in inner cities. Stahl knows as much. Devos' good manners, according to a hostile and hyperpartisan press, are a sign of weakness. But again, what would be a proper answer? Maybe Stahl felt the cause of improving schools would be better served if the secretary of education answered like this: “Oh hell yes, Les. Rufus T. Firefly Middle School in Slippery Rock is a cesspool. And Wolf J. Flywheel High in Potterville – I’d rather watch an autopsy than set foot in that dump again...” No answer would have satisfied Stahl or anyone else gripped by the fever of DeVos Hate. Singling out as “really bad,” on national television no less, any of the schools that hosted visits by DeVos would have been demoralizing and insulting to her hosts. And of course DeVos would have been reviled for saying it. But more: It would have been impolite.
And here we get to an essential element of DeVos’s dilemma. Betsy DeVos is a supremely rich Midwesterner, born and bred. But no amount of money can squeeze that Midwestern twang out of her voice. The customary diffidence of the Midwesterner, which DeVos has in huge helpings, often looks to the sophisticated eye, trained in Manhattan and the Northwest quadrant of Washington, D.C., like sheer dopiness. Midwesterners are raised with the idea that to talk about oneself too much, or to argue fervently about politics, are plain bad manners. And good manners, according to the inversions of a hostile and hyperpartisan press, are taken as a sign of weakness. And so they pounce. But even this isn’t the whole story. Perhaps the wellspring of DeVos Hate can be found in the first line of another New York Times editorial alerting its readers to the evil she embodies. It was a quote from one of DeVos’ speeches, a line that elegantly summarizes her own philosophy (even if it does overstep the bounds of Midwestern propriety) and irreversibly brands her as an enemy: “Government sucks.” “Horace Mann” is a pseudonym for someone who works in the executive branch and is what we journalists call “a highly-place source who requests anonymity because he or she is no damn fool.”
American Consequences 25
2018 OPEN LETTER TO THE PEOPLE OF PURDUE
One of these years, maybe I’ll be able to begin this letter by reporting that it was a placid, relaxed year across the higher education landscape. Not yet. Again, total enrollments nationwide dropped, by another 1%. This makes a 1 million, or more than a 5%, loss in five years. If it weren’t for the growth in nonresidential online education, the plunge would look even steeper. It’s not yet clear that this is the “tsunami” that Stanford President John Hennessy predicted for traditional residential education a few years back. But it might be, in which case our duty at your university is to identify higher ground and strive to gain safety by reaching it. All the new projects and goals we set for ourselves these days have this basic purpose.
By Mitch Daniels
26 May 2018
EDITOR’S INTRO
Mitch Daniels , the Harley Davidson- riding, state-touring, cost-focused former governor of Indiana has hung up his political boots (for now) and embraced his role as the Harley Davidson-riding, state-touring, cost-focused president of Purdue University... He’s also one of a very few Republicans who are actually liked by the media... always the subject of “what if” scenarios around the runup to presidential elections. Politico called him the most important governor who didn’t run in 2016... and the Washington Post said similar in an article headlined “Purdue has the president America needs.” As governor, he turned a $200 million deficit into a $2 billion post- recession surplus, lowered taxes, and kept debt low. Now, he hopes to pull the same sort of trick with higher education. Mitch has graciously given us permission to run an edited and condensed version of his 2018 Annual Open Letter to Purdue University. Read on for how one man is changing education... and taking bold steps to do so.
Our affordability policy, which we see as simply a matter of duty and common
sense, is regularly
described as some kind of breakthrough.
INNOVATIONWITHIN ANDWITHOUT
As a sector, American higher education is home to a number of ironies. Perhaps the most discussed in recent years is the sad extent to which the places where free inquiry and the clash of ideas should be most revered have often become bastions of conformity and groupthink. But another paradox is that so many of these hothouses of scientific and technical innovation, which give birth to so
CLICK HERE TO READ THEWEB VERSION
Steven Longenecker, Managing Editor and Purdue Class of 2009
American Consequences 27
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