Creating Quality Jobs vs. Creating Quality Workers

File this one under:  Speaking out for a dying breed – The American Middle Class

August 29, 2012

Having completed the task of dropping my child off at college, I’m reminded of the challenge that faces our chief elected officials, whether in Washington, or here at home in Connecticut.

In particular, as the effects of the Great Recession continue to take its toll on the nation; those of us in the trenches are left to ponder about what is the proper balance when it comes to using public resources to create quality jobs versus creating quality workers.

In one of my old college economic textbooks, I found a definition of a public subsidy as, “the provision of economic value by a public entity to a private entity for purposes beneficial to the public…”

That is, government, on behalf of the people, spends money, not to purchase goods and services, but to induce actions that have a longer-term benefit for society.

It might be providing grants, loans, or tax benefits to businesses to get them to maintain or expand the number of quality jobs they provide.

On the other hand, it might be providing grants, loans, or tax benefits to individuals, so they can go to college and have better, more productive lives and become part of a quality workforce that allows our economy to be successful.

Like many middle-class families, paying for college has eclipsed the challenge of buying and maintaining a home.  Earlier this summer, I once again signed the federal government’s Parent Plus Loan promissory note to borrow $30,000 (at 5.9 percent); an amount the government formula said was my “share” of the bill.  Grants and subsidized loans covered the rest.

At this point, it looks like I’ll need to borrow about $120,000 for the undergraduate degree.  With interest, the total cost over ten years will be $159,000,000, just over $39,000 of which will be interest on the loan.

At about the same time, Connecticut’s governor signed a “promissory note” on behalf of Connecticut’s taxpayers to pay the world’s largest hedge fund, Bridgewater, $115,000,000.  Although Bridgewater had enough money to pay its CEO $3.9 billion last year, making him the highest paid employee in the world, apparently the public funds were needed to persuade Bridgewater to stay in Connecticut, build a new headquarters and add 800 new jobs over the next ten years.

The public subsidy included a ten-year, $25 million forgivable loan, with an interest rate of one percent, $5 million in grant funds for job training, $5 million for an alternative energy system, and $80 million in Tax Credits.

If Bridgewater fails to create the 800 new jobs over the next decade, it will have to repay the $25 million dollar loan, but will be allowed to keep the other $90 million in public subsidies. The one percent interest rate on that $25 million loan means the company would have to pay about $1.3 million dollars in interest.

In the end, when you calculate the numbers, it really means that as a middle class family, I pay a carrying cost of 26 percent to get the funds I need while the world’s biggest hedge fund pays a carrying cost of 5 percent.

Or put a different way, to create that quality job, Connecticut’s taxpayers are giving Bridgewater about $150,000 per job, while I’m paying (after the various public subsidies) about $160,000 to help “create” a quality worker.

Truth be told, I’ve given up trying to figure out the fairness in all this, but as part of the ever-shrinking middle class, the modern phrase, “I’m just saying,” seems particularly appropriate.

I’m just saying…

  • buygoldandprosper

    For me,two in college and one more going next year,I feel very much like you.Buried by the system that I find very hard to believe in.And buried financially. The worst part is that the kids may not be able to find a job or a job that pays anything above the poverty level after college. And companies “can’t find skilled workers” is the mantra. They sure never seem to find them in third world countries,or China.
    Dan and his NEXT FIVE JIVE is the biggest scam to ever hit this state,and that says a lot. Bridgewater is the sweetest scam of all for Ray and BLT and Dan Malloy. Extending incentives to hedge funds is like giving Dracula the keys to the local blood bank. Hedge funds add ZERO value to the economy.NONE! Bridgewater just happens to be the company with the most zeros and the only winner,outside the firm,is Dan Malloy who will be getting SuperPac donations down the road from these clowns. Creating jobs by moving them within the state and down the road. Some coup for Dan!

  • Charlie Puffers

    I find this issue terribly upsetting. Most 18 year olds don’t understand the
    tremendous challenge of paying back $100,000.
    No one at the college counsels students to be cautious when taking out
    loans. With first-generation college going
    students there may not be anyone at home to provide financial advice or
    support. Banks will let anyone co-sign
    because the bank knows the money is guaranteed as student loan debt can never
    be forgiven. Reformers put pressure on high
    school staff to increase the number of students attending college. Some Hartford students are graduating without the skills needed to succeed
    in college. They drop out after a semester
    or two of college and then have to pay back the money while working a minimum
    wage job. Or they graduate from college, have difficulty finding a job, take a job where they are underemployed and have to pay back even more money.

    • buygoldandprosper

      Can you say…one TRILLION dollars in student loans out there.Another time bomb waiting to go off. The hedge-fund backed “knowledge industry” is neck deep in this business,shackling students to debt that we will have to absorb one day. And the tuitions just keep going up,like health care,with waaaay more than inflation.Pegged to nothing but greed,and that is in no short supply in this country.

      • Wilton Businessman

        We’re talking about PLUS loans, not student loans. Two different things.

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  • Wilton Businessman

    I can’t believe a mind as brilliant as Jon Pelto is taking out a PLUS loan. Part of the problem with college education is that people are willing to pay anything to get it. The demand is so great that the providers of that education keep increasing the cost every year.

    Regardless of what the Federal Government says you can afford, you are the master of your own finances. If you can’t afford $30K a year for college, you can’t afford it. What about community college? What about commuting? Sure, everybody wants to go away to school, but if you can’t afford to go away, don’t.

    There are values out there. Sure, it might be a “second tier” school, but there are dozens of schools ready to throw scholarship money to your Connecticut educated children. These schools know that they are getting quality students from families that can probably afford to lay down $15K a year without too much difficulty.

    More power to you for taking on that kind of debt. I can’t say it’s the financially smart thing to do and I hope your student realizes what a sacrifice you made for them. Imagine how many kids you could send to community college with $160K,,,, Just saying….

    • jonpelto

      The kid is taking out some loans, but taking the Parent Plus because I don’t the kid to come out of school looking at the need for an advanced degree and a debt burden that will ruin their ability to live a fulfilling life.

      Wilton Businessman my friend, from what I know of you, I’m guessing that the college you went to now charges $42,690.

      Since a college degree is the lynch pin to everything else, and what college matters, especially when it comes to getting into graduate education programs or being competitive in the marketplace, I will do whatever is needed to give my child a fighting chance. Even if that means reducing my quality of life for what time remains.

      I think community colleges are great, as are many lower costing colleges and universities, but as we know…. That piece of paper will determine what options exist at the end of the next four years.

      • Wilton Businessman

        but as we know…. That piece of paper will determine what options exist at the end of the next four years”

        Depends on the field of study. If you’re talking the next step is law school, then you are probably right. But everything else, it’s more a factor of you have that piece of paper than what it says on it. In fact, I would argue that a higher GPA from a “second tier” school is better than a lower GPA from a “first tier” school.

        I did follow my own advice. it’s just that when I went to school my choice was a “second tier” and my friends and I like to joke that we probably wouldn’t even get in today. I got student loans for about 25% of it, I got scholarships for about 25% of it, I worked my tail off during the summer and while I was in school for 25% of it, and Mom & Dad picked up the rest…about the cost of a car payment (other than the occasional infusion of beer money or winter semester tuition because of said beer money, but I digress…). Then again, I was selfish and could have gone to a state school and Mom & Dad wouldn’t have had to pickup anything. But if they didn’t have it, I would be SUNYPotsdam89. Would I make the same choice to spend $42,690 now (although we know nobody pays full retail)? I can tell you that I recommended my niece NOT go there because they weren’t offering her enough scholarship money in comparison to their competitors.

        The point was not to pick on you and your choice. I think it’s admirable that YOU made the CHOICE on how to fund YOUR child’s education. The point was that there are other affordable options to people with less means. Not everybody has to go to an almost-ivy (lawyers excluded) to get a good start on life.