Thursday, February 6, 2014

The Higher Education Tax


Charles Cooper's recent post, and the discussion that followed, is a tough act to follow.  But I love charts and graphs, so here goes:

"Since only those with significant savings can possibly afford to pay a $200,000 tuition tax, the average-income household is left with one choice: the debt-serfdom of student loans. This is the acme of a morally bankrupt system of higher education: you need a college degree to have any hope of succeeding in America, but the only way to get that degree is to enter debt servitude, with no guarantees of future income needed to pay off the debt."
 
 
The quote above is what Boomer ScamDeans and LawProfs conveniently ignore when bloviating about the long-term value of a law degree.  However, the market is paying attention, as recent LSAC data indicates. 
 
Oh, did I mention that the quote above was talking about undergraduate debt?  Funny how the sticker price for law school tuition looks exactly the same, nowadays.
 
However, as these charts indicate, the truth hits home - higher education has become a tax on the lower and middle classes, make no mistake.  Somewhere around the mid-1980s, total household debt became decoupled from wages and salaries.  If you happen to be from recent prior generations, you were blessed to see some semblance of the two staying in some form of lock-step for a good portion of one's life and career.  But no longer.  Not all of this can be blamed upon people maxing out their credit cards, or buying worthless degrees, or buying more home than one could afford, although some of that certainly did happen.  This has to do with the typical American consumer being slowly priced out of the market for decades.
 
 
 
The next chart needs little explanation.  College tuition and fees inflated at a rate ten times that of a new car, and twice that of medical care, over the same period.  We all know, of course, how rational the cost of medical care has been (that was sarcasm, ScamDeans).  According to Campos, law school tuition increased 160% for private law schools, and 400% at public law schools, over the same time, adjusted for inflation.  Telling younger people today that they just need to "buck up" and "work hard," or be "brave", misses a core fundamental truth, and is the height of dishonesty to boot.
 
 
And let's not forget that wages have stagnated for the majority, another decoupling that also took place in the early 80s.  It is significantly more difficult to pay (1) heightened loans with (2) less real money.  Especially when "clients" are dealing with similar money struggles of their own.  But those who live in the bubble will choose not to understand this.
 
 
 
Friends, we can argue all day about who isn't working hard enough and who is, and who had to walk uphill both ways in the snow every day to school and who didn't, and who wants things handed to them on a silver platter and who doesn't, and many, many other meaningless comparisons that do little more than to justify oneself at the expense of others who are, conveniently, strawmaned as "inferior." 
 
Let's instead talk about something that we can all agree upon: the landscape has changed.  In real, quantifiable terms.  And this post does not even get into the specifics of JD overproduction, law firm consolidation, outsourcing of legal work and the like, which only serve to make a bleak picture even more challenging.
 
Higher education is one of the major players at the heart of the matter, and the quest for sweet, sweet Federal student loan dollars has created a credential-arms-race that has spiraled out of control.  Avoid law school in particular, as the current costs are just not worth the benefits, with the only exceptions being that you have (1) the connections to drum up sufficient mentoring and clientele, and (2) the resources to avoid debt-serfdom.  Listen to the many, many voices, both posters and commenters alike, who will attest to this.
 
In other words, be Simkovic & McIntyre.  One of whom, I note, didn't even go to law school in the first instance.  And nothing says "value" like going after the pre-law students so as to convince them that law school is a grand idea.  One would think the JD would speak for itself and not require so much cheerleading.
 
But it was never about that.  Get 'em while they're young, and Always Be Closing.

51 comments:

  1. Higher ed and lower ed are the same in this way. In my city there are two K-12 school districts considered to be very good. If you buy a home in these areas, you pay between $7,000 and $12,000 property tax every year for houses in the $120,000 to $180,000 price range. These are low-end homes. A more typical home costs at least $200,000 and you pay $10,000 property tax per year. The median household income in this area is about $40,000 a year, so do you think most people can afford upwards of $7,000 in property taxes?

    So, you have to pay double or triple price to live in an area with a decent school, and most people don't have the income to do so. People who can't afford the above costs and taxes (rents are also much more expensive) have to live in other school districts, which have much worse outcomes. Recently, one of this area's school districts got a "worst in the state" rating. It has a 40% dropout rate. Mostly minorities and low income people live there. They'd have to save up a good chunk of change to ever have a hope of moving into one of the "good" districts in the area.

    Is public school "free"? Does it provide equality of opportunity? Maybe it helps people move into the middle class? Well, in my area, what it does is it creates 2 tiers of people -- one tier is poorer people who are going to not get much of an education and who are highly likely to drop out, and the other tier is richer people who do OK. It pretty much crystalizes class differences.

    Maybe this seems off-topic, but I think the lower education "tracking" feeds the higher education tracking. People who have the money, test scores, and connections go to the better schools, whereas people with less money and fewer accomplishments get put into the system so that the people who work in the system get their money. It starts early and goes right up until the end. When schools are paid "per student" regardless of outcome, they just go through the motions.

    A lower-tier K-12 student will go to a lower-track college and then a lower-tier law school. A higher-track student gets into a higher-prestige college, and has the educational background to get better test scores, and gets into a better law school. The first student will pay full price for college and law school. The latter student will have family help and/or get scholarships. At the end of the day, one student has a career and the other just has debt.

    And the law graduates who don't get jobs will be priced out of the higher-income school districts, so the cycle begins again for their children. The law profs and graduates of top-tier schools will live in the better school districts. This tracking system pretty much insures less competition for the best jobs for the children and grandchildren of law profs and other privileged people. After all, when 40% of your potential competition doesn't even get to graduate high school, it becomes that much easier to get into Yale.

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    1. Great comment, 6:07 AM, and not off-topic and is deserving of a separate "big picture" post, IMO. I rue my law school loans every day, as they have a direct impact on my own daughter in the way you described above. Public School is not "free" by any stretch, especially when people get priced out of the "good" districts due to home prices and property taxes. Those who say "just rent!!111!!1eleven!!" haven't considered the fact that the rental properties are not in the desireable school districts, and likely don't have kids in the first instance so it's easy to say.

      The two-tier system starts early from day one, and the dishonest Law School Cartel tries to recruit URMs as if that will magically solve the problem of inequality by dumping even more JDs into a saturated market. In reality, it lines their pockets and accentuates the birfurcation long-term, while Charles Everson Winchester III reaps the economic benefits of a subsidized law degree at the same time.

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    2. If you wanted to design an educational system to maximize the chances that children from poor families will stay poor, it would look a lot like the current system, where schools is wealthy neighborhoods get more funding due to more property taxes. It is true that more money spent on schools is not always the answer, but there is a funding floor below which it is impossible to provide quality services. Parents should be able to choose which school their child attends, and should not have to move into prohibitively expensive neighborhoods in order to have that choice.

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    3. Great post. I have two children approaching college (10th grade and 7th grade). I started saving 16 years ago and have accumulated about 70K in college savings. When I started saving, undergraduate resident tuition at the flagship state university was $1,715 plus fees. Today tuition and fees total $10,530. Add in room and board and I am looking at about 25K+ per year per child to start. I thought we were doing pretty well with the savings. Now it looks like I will end up about 150K short for the two kids. Grad school? Little chance of that.

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    4. @BamBam - you are right. I live in Boulder, Colorado. We have an excellent, well funded, school district. In addition to the local funding, many of the projects in our school district are paid for through direct parent funding. The schools raise substantial sums every year – money that is less likely to be available in less wealthy districts.

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    5. Funds and other resources for public schools should be allocated on the basis of need, not on the basis of address (which is of course linked to wealth). Disadvantaged people should get better schools than privileged people.

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    6. @8:30,

      Give the money to your kids (put it in a trust). Tell them to join the military, learn VA trade, or get municipal employment. Forget college. They are better off with the money and a protected job than 99 percent of college degrees. Unless your kids get into MIT or Harvard, it's not worth it

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    7. I am the 6:07 commentor. I wanted to clarify something about the prices -- a lot of the money taken in from property taxes in the 2 elite districts I spoke of goes to subsidize the lower-performing districts. The worst district in the state spends almost twice as much per pupil as the best district in the state (which is just a few miles away). Yet, despite the increased spending in the poorer districts, those schools get worse and worse each year.

      Some of this is because of social problems money can't fix (or, maybe, that you'd need a lot more money to fix). I also think that the higher taxes in the elite districts keep them exclusive, which has obvious advantages to those living there, and helps to keep the 2-tier system in place. The extra money also silences the "have-nots" and maybe buys the politicians. I don't know that the politicians are bought, but I seems to me that don't have so much incentive to improve when the rich districts pay them not to improve every year.

      So, high property taxes make neighborhoods exclusive, which has to cause other neighborhoods to become less exclusive unless you have constant population influx, which this area does not. Increasing taxes in a good area just makes it harder for low-income people to move there to take advantage. The (very large amounts of) money transferred from the rich areas to the poorer areas seems to make no difference here. Either it isn't enough money, or the money is getting diverted, or the problems are not solvable by money.

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    8. Even MIT or Harvard may not be worth it. I went to one of HYP more than twenty years ago, but I'm unemployed and feel unemployable. I regret ever having set foot in a fucking university.

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    9. Sorry, I have to amend my comment. The worst school district gets about $1,000 more per pupil than the #1 district. Definitely, it should be more. Still, it gets more money per student, so it's not just pure spending.

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    10. Amen to 9:25. At my high school, students didn't get textbooks. Sometimes the teacher would copy pages from a textbook and distribute them to the class. My cousin grew up in a different zip code in the same city, and she used to complain to me about how her textbooks made her backpack so heavy.

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    11. At my high school, 4:37, we didn't have textbooks in every course; we used a lot of illegible mimeographed pages, or just made do with nothing. When we did have textbooks, they were often so antiquated as to be almost irrelevant. My geography textbook, for example, was older than I was. I still remember maps marked with Upper Volta, Rhodesia, British Honduras, East Pakistan…

      Someone at my law school said that the lockers in the basement reminded her of high school. Not me: my high school had no lockers.

      When I started university, a classmate asked me whether I had been on the debating team in high school. I didn't even know what a debating team was.

      Read Jonathan Kozol's Savage Inequalities. Rich school districts with courses in jazz dance and eighteen biology electives and and field trips to France in the summer abut poor—usually racialized—school districts with broken windows and insufficient heat and not enough desks or even teachers. The book is dated but still relevant.

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    12. 4:37 here. Thanks, 7:43, I will look for that book.

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  2. Looking at the second graph the most obvious question becomes: "What would have happened to automobile prices and medical fees if the feds loaned anyone who asked the money to pay for those things if they could not otherwise afford them?" There was (at least before Obama) no federal interference in the automobile market. The feds pumped a lot of money into medicine through things like Medicare and Medicaid but retained authority to restrict how much could be charged. Only in higher education did the feds pump money in without keeping the reins on the costs. The roughly equal spacing of the three lines is incredible witness to the three different approaches.

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    1. ^^ this ^^

      And the preening, sanctimonious, self-righteous, hate America first higher education bandits took full advantage of the absence of (and I'm sure campaigned against) cost controls.

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    2. A couple of other obvious questions:

      1. What would have happened to medical fees and automobile prices if the fed. government loaned consumers as much money as the health care providers and car dealers wanted to charge?

      2. What would have happened to medical fees and automobile prices if consumers knew that their required monthly payments had nothing to do with the amount they borrowed, and instead were simply a set percentage of their income?

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    3. This. A million times this. Imagine if everyone could get an auto loan guaranteed by the federal government (and ineligible for bankruptcy protections) and the only limit was the dealer's self-reported "cost of driving" (like the "cost of attendance" the schools report). Car prices would skyrocket! Uninformed consumers would be saddled with huge debt loads luxury/sports cars they had no business buying in the first place.

      Of course, a huge difference is that a car has inherent value and can be sold or repossessed to cover at least some of the debt, while a JD that didn't lead to a job has no value whatsoever.

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  3. I wouldn't call this a tax. Taxes are used for the public good. The nice term would be income redistribution from the lower and middle classes to law school deans. An apter term would be fraud. Theft would also be proper. Racial exploitation by the liberal deans of disadvantaged groups would also be accurate.

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  4. Law professors seem fairly untroubled by the moral dilemma of advocating against income disparity and the associated lack of economic opportunities while working on the assembly line of a debt creation factory which mainly serves to erode economic opportunity for a significant number of the lower and middle class students (and many practicing lawyers whose income is adversely affected by the attorney surplus) while enriching the the members of the educational-industrial complex including the law professors.

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    1. I think they deal with the inherent cognative dissonance by not looking too far outside their own circumstances. It's easy to believe everything is "fine" when you surround yourself with historically-equally-privilged people on a daily basis.

      Ignorance is bliss, as they say.

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    2. Law profe$$ors hire people of their own kind. Except at the Indiana Techs, the profe$$ors come overwhelmingly from Yale, Harvard, and a handful of other aristocratic institutions. Most law schools would not even consider hiring one of their own graduates as a profe$$or.

      Faculties thus tend to be made up of people who come from great privilege.

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    3. 9:20, you are too generous. They are not ignorant, they know the score.

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    4. Oh, I (9:20) agree wholeheartedly, 11:00 AM. I should have said "ignorance" is bliss. They most certianly know better, but who wants to upset the apple cart?

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    5. Even ignorance would be no excuse: it would only point up their let-them-eat-cake detachment from real people's concerns.

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    6. Excellent comments from everyone.

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  5. Folks, the scam rests on people believing education is the key to success, it isnt. If you aren't rich or are going to the elitest of elite schools, college isn't worth it. Kids have to get used to the fact that unless they are from rich families or uber elite, They are going to have to get their hands dirty and vote to rise the socioeconomic ladder.

    What kills me the most is when I see people having saved significant money for their children to go to school like one of the posters above. Do you know how much better off your kids would be with the cash in hand rather than the useless degree on the wall? If kids with college funds learned trades and skills and used that money for a business or a house, they would be infinitely better off than having a useless degree.

    Law school is just the most extreme form of this diseased higher education condition because it's not merely useless, It's downright life ruining.

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    1. If I were young today, I'd learn a trade: plumbing, HVAC, electrical work.

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    2. "Saving for the kids college fund" is a staple of old TV shows. But yeah it seems kind of pointless when college costs have inflated far faster than wages, meaning whatever paltry amount working or middle class people could save would be inadequate. And meanwhile the value of your average degree, both in what is taught and employment prospects, is going down all the time.

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    3. To clarify my thoughts, most colleges and universities waste tremendous amounts of money on stupid crap which doesn't improve the education of their students. This has gotten much worse over the past couple of decades of course. They are wasteful, inefficient and often outright corrupt.

      It just seems extremely unjust for working class and middle class to send their hard earned money to prop up such waste and inefficiency. But having the students put themselves into serious debt is no better... Perhaps we just need to convince people its okay for many (most?) not to go to college straight after high school. Which will be difficult.

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    4. Two words. Computer programming. My siblings and dad do it and make tons. Look at how much high school dropout Edward snowden was making. +100,000.

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    5. Saving for the kids' college fund? Good luck! How will you ever accumulate enough money?

      If you're rich, you can pay four years of tuition right now so as to lock today's rate in, even if your precious little child won't be matriculating for eighteen years or more. The gains on these funds are not taxed.

      But if you're an ordinary fuck like me, you end up resorting to borrowing at high interest, none of which was deductible in my day.

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    6. 5:22, I used to be a computer programmer. I lost my job in the last big wave of outsourcing, and I couldn't get back into the field. Expect even more outsourcing of this type of work in the future.

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  6. Am I reading that chart correctly? The non-inflation adjusted price of a car has not increased in roughly the last 17 years? That means the inflation-adjusted price of a car has gone down roughly 31% in that time.

    I am not sure how they priced the medical vs. college numbers. For medical prices, there are list prices, and then the prices people actually pay after the insurance sets its allowable. I think the spread between those numbers has gone up over time. Similarly, with college prices, there is the list price and what the average person actually pays, and the spread between these two numbers has gotten much bigger over time.

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    1. You are not reading it correctly. Adjusted for inflation cars still now cost 95% more than they did in 1978. But they are now far more reliable, have better FWD or AWD drive trains rather than RWD, anti-lock brakes, intermittent wipers, sensors that can tell you your tire needs air, built-in GPS, etc., etc., etc. A J.D. of today is, at best, exactly the same as what it was in 1978. As for medicine, cancer survival rates have soared, life expectancy has surged, face transplants are possible, we're making huge strides in bionic limbs, etc., etc., etc. But that darned old J.D. . . .

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    2. I was comparing the autos not to 1978, when it has indeed gone up, but to 17 years ago in 1997, when it seems to be at the same level on the chart.

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    3. That's probably correct. Auto prices have stagnated in the last 20 years. MSRP on a 2014 Corolla is 16,800 starting. Mid-90s Corollas started at 11-12k MSRP. With standard CPI/inflation, the current price should be around 18k. On the higher end, BMW 3-series based at 31-35k in the mid-90s, and today the MSRP is around 40 when inflation would put it in the 50s.

      There's a lot of factors involved, but it's been a buyer's market relative to other things the last two decades.

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  7. I agree with @8:54. This isn't really a tax, unless your line of thinking is in the same vein as the lottery is a tax on people who aren't good at math.

    Everybody has been told from the day they're born that "you need a college degree to have any hope of succeeding in America" (direct quote from zerohedge). Unfortunately, you need critical thinking skills to see how ridiculous that belief is, and those skills just aren't taught in public schools.

    At some point, common sense should override social programming about the value of education. Right now, it's already pretty clear that a college degree isn't worth the cost, but people are still going to college (ditto for law school). At what pricing point will it become so obvious that even the most dim-witted can see that the costs don't justify the benefits (assuming there are even any benefits)?

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  8. Look at this on Brian Leiter's Law School Reports. "Yale Law School faculty urge ABA not to impose an "experiential" learning requirement."

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    1. Brian Leiter is a parasite. He knows next to nothing about legal practice. As a consequence of this, he should not be teaching at a law school. At best, he should be making half his current salary teaching philosophy, the only thing he could possibly know. At worst, he shouldn't be allowed anywhere near any students of any age.

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  9. One of the front page articles in the Wall Street Journal today discussed the epidemic of unemployed men in their working prime (25-53). In the US, it's currently 1 out of 6 and many are not counted because they have given up looking for work. And, as has been repeated in this blog several times, if you lose your job as an attorney, it is very difficult to recalibrate and find other work as an attorney. It is difficult and very expensive to move to another area because of bar exams and licensing requirements. With CLE requirements, bar costs and other practicing costs (and not mentioning student loan debt servicing costs), these are really an additional guild tax on attorneys, making it all the more difficult to rejoin the tournament if you've been unseated. Most other professions do not have these additional expenditure requirements and therefore the labor within those professions are much more mobile. And probably much happier.

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    1. Yes, the reported unemployment rate is kept artificially low by the expedient of presuming (irrebuttably) that a person who has been out of work for six months or more is not trying to find work.

      Well, I couldn't get a fucking interview for a job in law, and I've been applying every day for whatever semi-skilled work might be on offer. Yet I'm deemed not to be looking for work. I'm just a goddamn lazy bum, everyone.

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    2. ^ They don't actually assume that. And you aren't fooling anyone.

      Nobody likes to spend year aftrr year hustling for work, but if you are stubbornly REFUSING to do that, then yes, you are a lazy bum.

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    3. Yes, and don't forget the rest of us who are severely underemployed and trying desperately to find full-time legal work that pays. That was me for three years. The government bean counters said I was employed but that's hardly the truth.

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    4. And 8:30 must be the law professor who thinks that a few applications to federal judges, and then a year later a few applications for tenured positions, entitle him to a guaranteed lifetime income.

      The guy at 7:25 says he's applying every day. That's not lazy. He's not a lazy bum.

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    5. CLE requirements are very funny. You never learn how to practice in school, then once you're practicing they periodically make you stop to go back to school, so that you keep up your skills to practice?

      To me, this continued education requirement is likely an extension of the same higher ed tentacles as everything else.

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  10. Check out ATL. A big Canadian firm is folding and VT law school is 'partnering' with hbcu in hopes of filling seats.

    The ship be sinking. If you're going to law school now you're delusional. It's Wednesday. You can be free by Friday. Quit now. The ailing profession can't absorb the thousands of displaced lawyers with experience.

    Higher education tax? Stop levying it on yourself. Show up in Con Law tomorrow, moon the lecturer, and walk out. Keep walking. You're right to despise boomers, so why try to follow in their footsteps?

    Cut your taxes. Cut your losses. Cut class and cut free from a bad dream.

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  11. When you discuss education funding's impact on quality - there is a point - but then there is that mystery called Washington DC - which spends between $29,000 and $31,000 per pupil, about 40% more than the next highest spending district which is in New York and well over twice the national average. Despite this,mist teachers earn only about 15% more than the national average (and DC is an expensive place to live), subjects like music are being cut in the schools and it has some of the worst educational outcomes in the US. As someone who pays DC taxes - I ask the question, where the flaming **** does the money go? The teachers evidently are not getting it, the buildings are wrecks.... Where the **** is the money going

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    1. When I lived in Chicago nearly 30 years ago the Catholic schools had one third of the enrollment of the public schools. But while the central office for the Catholic schools had about 50 employees the central office for the public schools had over 1,500. Might be a good place to start looking for that missing money.

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  12. What's the magnitude of the harm to society from a single, premeditated and deliberated murder? We know the penalty is life or execution almost everywhere.

    What's the magnitude of the harm to society from this price-fixed, cartelized, intentionally exploitative, fascist agreement between the federal government and law schools? The magnitude of the harm to society greatly exceeds that of a single, premeditated and deliberated murder. SO, why the fuck aren't we standing up as a society to imprison and execute the principals and beneficiaries of this huge harm to society? If the idea of doing so makes you uncomfortable, but you're not opposed to life in prison or the death penalty for murder, you're being irrational.

    We don't punish financial crime despite the destruction it wreaks on whole countries, and in fact, right now, the entire globe. Unless of course the crime is being committed solely by private and politically unconnected persons. Then we'll punish it.

    Until the streets of San Francisco and New York and Chicago and Dallas look like the streets of Kiev, we will continue to get a worse deal than the deal that made our forefathers go to war and found a country.

    Your life will continue to be devoid of the things that make life worth living: marriage, kids, rewards for incredibly hard work. Get mad, or this gets worse.

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  13. Professors promise bright futures, but just impose massive debt loads while propagandizing kids with left wing garbage. The morally superior progressive profs are destroying a generation of Americans with their skyrocketing tuition charges.

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