Who Can Keep Up With The Scandals?

I was planning to post something about the quinfecta Dan Pfeiffer pulled off yesterday on the Sunday talk shows. (Spoiler alert: when a relatively unknown member of the Administration appears on all five Sunday talk shows, it is to peddle a lie and/or obscure the truth. CF. Susan Rice.)

But no. Instead, I have to take note of this morning’s obamination: the charging of a reporter with being “an aider, abettor and/or co-conspirator” in espionage, because the reporter broadcast leaked information.

Pull quote from the Washington Post:

…it remains an open question whether it’s ever illegal, given the First Amendment’s protection of press freedom, for a reporter to solicit information. No reporter, including Rosen, has been prosecuted for doing so.

Is there some as yet unread paragraph in the Affordable Care Act that revives the Alien & Sedition Acts of 1798?

(A tip o’ the hat to Instapundit.)


The Mad Hatter at the Tea Party

Many stories in the news about the IRS targeting Tea Party organizations which applied for tax-exempt status. Defenders of the IRS have attempted to explain away its actions, claiming that there was an explosion in applications for tax-exempt status.

There were other organizations seeking tax-exempt status during that time, notably the “Occupy” groups. They got tax-exempt treatment PDQ. How did this happen? It turns out that an existing tax-exempt organization can rent out its status to other groups. This is called “fiscal sponsorship“. The “Occupy”groups gathered under the umbrella of the Alliance For Global Justice (one-star rated by Charity Navigator, for its lack of transparency), paying them 7% of receipts.

Perhaps the GOP should be looking into the (ab)use of fiscal sponsorship. In the meantime, Tea Party groups may want to avail themselves of this means of securing tax-exempt status without the bother of IRS review.

Fact checking Jay Carney

In a press conference today, Carney has repeatedly starred that Ambassador Susan Rice mentioned Ansar Al Sharia in the Sunday talk shows.

Not true for her appearance on ABC’s This Week. Read the transcript here.

Not true for her appearance on CBS’s Face The Nation. Transcript here.

On Fox News Sunday, Ansar Al Sharia was mentioned — by Chris Wallace. Speaking to GOP Congressman Mike Rogers. Transcript here.

Not on NBC ‘s Meet The Press. Transcript here.

Not true on CNN ‘s State Of The Union. Transcript here.

So: reviewing the transcripts of all five Sunday talk shows on which Ambassador Rice appeared, Anbar Al Sharia is mentioned once and only once, by the anchor, and not to Ambassador Rice. In a burst of caution, I also searched for news stories with the terms “Susan Rice” and “Ansar”, between September 16 and 23 of 2012. Not one. Not. One.

Jay Carney has been lying all afternoon.

The Mystery of College Tuition

Many stories lately about college tuition rising faster than inflation. See, for instance, here. Quite often, the blame is laid on “administrative bloat”. I suggest that the increase in administrative costs at colleges is a symptom, not a cause, of the problem.

The cause of the problem can be found in the subsidies provided to students to attend college: financial aid, subsidized loans. Here’s how it works.

First, realize that when a tax is imposed, the burden of the tax is shared between the buyer and the seller, regardless of which party appears to pay the tax. The tax inserts a wedge between the price paid by the buyer and the amount that the seller actually receives. It moves both prices away from the equilibrium price that the market would determine in the absence of taxes. The party that is least able to escape the tax is the one who ends up carrying most of the burden. So, for instance, if the tax is on, say, cheddar cheese aged 12 years, the producers have little flexibility to increase or decrease supply. They have a pipeline of cheeses of various ages, and can neither speed up nor slow down the aging. Buyers, on the other hand, are free to switch their purchases to other kinds of cheese. So, this tax would hit the suppliers more heavily.

Now, think of the subsidy as being a “negative tax”. Here, the benefit of the subsidy will fall most heavily on the party that is least able to “escape” the transaction; that is to say, on the party that is least price-sensitive. It is much easier for potential students to respond to a subsidy, by demanding more education, than it is for the schools to respond by supplying more education. (After all, one has to build classrooms and dorms; and hire professors. This takes a while to accomplish.) This inelasticity of supply means that most of the benefit of the subsidy will flow to the supplier.

Perhaps a picture will help:

Subsidy Wedge

Notice how the price the buyer pays (Pb) is a bit lower than the original equilibrium price; but the price the supplier receives (Ps) is considerably higher than the original price. Hence, the increase in tuition, and the increase in money flowing to colleges.

Now, the colleges can’t, in the short run, increase the number of professors. Remember, they’d have to build classrooms; and it takes a few years to “make” a professor. So, what are they to do with all this extra money? Well, administrators are thicker on the ground than professors, and so can be hired more quickly. One can probably erect a building more quickly than creating a professor, so buildings are put up. Not classrooms, though: fancy “wellness centers” and cafeterias, and such.

If I am right, the solution to tuition inflation is not to attack the spending by the colleges. It is, rather, to reduce or eliminate the subsidy.

This would mean fewer people going to college. This is potentially a good thing: more people will be acquiring a skill, making America more competitive for manufacturing jobs. Colleges will lose the flow of the subsidy money, forcing them to make more prudent choices in how they spend what money they have left. We should see a drop in wellness center construction, and a pullback in the size of the administration.