Wednesday, April 29, 2020

A too good to be true investment opportunity (from 2018, but still valid)

The US government is about to give away trillions of dollars to the rich. Either by giving tax savings to the rich directly, with removing the estate tax or to rich people who own and manage huge corporations. Either directly or via complex constructs so that no one knows they will. OK, it's just 1.5 trillion dollars. Let me write that out: $1,500,000,000,000. If you stacked that many dollar coins on top of each other, at 2mm (0.079 inches) per coin, the stack would be 700 kilometers short of reaching the Andromeda Galaxy which is 3.7m kilometers away. Which is about 2.5 million miles. They would weigh 12 million tons. That would be about 1.5 trillion Big Macs. Look at that! We are giving away 1.5 trillion Big Macs to the already fat. Sounds like the American Dream.

Anyway,  I have not seen any proof or at least a calculation that I can follow how this monumental expense will actually pay for itself when those rich people create more jobs and maybe even pay employees more. Because, as we all know, that's what rich people like to do US: share their wealth.

I did hear though, that there was not enough money to spend on free college, or to be precise college that everyone can afford, without fees that have to be paid before the students sees any return on this investment. A number I heard, based on a plan by Bernie Sanders (long, sad sigh for the President that got away). It said that $75,100,000,000 (that's Billion) would cover the annual cost for free college. While I don't know all the details I know that no one is going to put that plan into practice. Because, after giving away all those Big Macs, there was no more money left for salad and fruit.

I wondered, if I had that much money, would I invest it into free college? So, I checked some numbers, made some assumptions and did some math. Let's say this money covers all these degrees:
  • Associate (academic)
  • Bachelor
  • Master
  • Professional
  • Doctoral
I looked at the median income for each of those degrees*. And I got to a total annual income before taxes of $143 trillion. What if there was a way to make everyone who finishes any of the above degrees give 1% of their annual gross income back to pay for their education. Of people who completed their degrees. And have a job. 1% of their annual gross income. Which would be $500 at $50,000 (median income) or $10,000 at $1,000,000. So it wouldn’t matter what degree you went for. Even teachers would be able to afford their education and food at the same time. Anyone who is unemployed, would not have to pay anything.

1% of $143 trillion equals $1.43 trillion. That is 20 times as much as Bernie's proposed amount. Granted, given that we took the 1% from gross income, there would be a tax impact. But that will probably more than offset by the additional GDP generated by the increase of a well educated workforce, even if the supply would drive down salaries. We would eliminate a whole industry that provides student loans. From everything I read about that industry, that would not really be a loss.

Think about this for a minute. Or longer. The impact of education everyone can afford. A choice of degrees, not influence by whether or not your education will give you the change to score a job that will allow you to not only repay those tens of thousands of dollars or hundreds of thousands for a some degrees**.

Now, the only explanation I see why this is not put into practice, is because that whoever is in charge, politicians and rich people, do not want the masses to be educated. Because then they would realized how they're being fucked and would learn what to do about it. This somewhat reminds me of aristocracy or dictatorships. But, I must be wrong. This is the greatest 'democracy' of all times.


*Sources:  U.S. Census Bureau, Current Population Survey, 2017 Annual Social and Economic Supplement - Income by degree: https://www.bls.gov/emp/ep_chart_001.htm.
Assumptions: Americans with degrees (I ignored anyone over 68 years old)
*https://www.thebalance.com/average-cost-of-medical-school-4588236

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