On the second part of the book of “The City of Hay’at” the author manages to be more cohesive. (Ethos) In this part of the book the author’s purpose is to wrap up the apparent non related parts of the book to give them an appropriate thematic finale. Through the writer choice of words in the last 3 chapters we can see how he interconnects the stories of Ms’adam, Zula-Kier and Dr.J Burges leaving room for speculation to whether these 3 characters are the same person. (Logos) The evidence presented by the author was presented through a collection of animals that most characters ( birds, lions, jaguars) met in their respective chapter. The evidence serves to the purpose of the author by connecting the major ideas, and motivations of our 3 main characters. This evidence was presented mostly in testimonies from the characters, especially in chapter 11 in which Ki-Ham serves as the narrator of the chapter. The author often used analogies to prove the point he was trying to get across, in multiple chapters the characters were threatened or hurt by animals however on some point the danger stop having any repercussion and was an endless repetition of their lives. The author also managed to build logically upon each point he was trying to expressed, especially the theme of immortality in which he cleverly managed to get his point across with the date of the journal of Dr. J. Burges in which after day 1146 day 1 is the subsequent day; this analogy represents the physical  death of Dr. J Burges and his acquisition of immortality. Moreover, the main argument of the author, Kasra Fard , is subtlety put on the title of Chapter 11. ( Pathos ) The target audience for the author are people who enjoy thematic explorations about ethics and philosophy. The author’s execution of how evoking emotion on its audience was indeed successful, upon the encounter of Ki-Ham with Zula Kier the author conveys through their dialogue that revenge is not a worthwhile task to complete and we can see how Ki-Ham breaks upon the realization that the friendship he had and now apparently still has with Zula-Kier is more invaluable than any other thing he currently possesses.

In conclusion, it is fair to say that the terminology and depictions that the author used throughout the text were useful for the coherency, logic, and emotional appeal he achieved to transmit to its target audience. The use of analogies also gave the text a layer of subtlety that bolster the literary quality of the text.

The book city of Hayat is a book published in 2017, by Kasra B. Fard, as the title of the book states it strives to interconnect at least on a thematic standpoint the chronicles of very different characters with similar motivations. In Chapter 1 we were told the story of Dr Burgess, in which he strived to get to know better the Amazonian jungles and to understand better the secrets of this unknown place filled by a big river and an infinity of trees. Although we were never revealed the motivations of Dr Burges we can assume that because Scythia was disobeying Zeus and was recently exiled out of Europe to go to South America this is a new place for Scythia and a mystery for the natives in South America.  Dr. Burges never came back from his last travel, and his son Dr J., in his quest for finding his father, ran across his journal. We were never revealed explicitly what was explicitly in his journal, however, upon closer examination we can deduce that what this journal holds in its writings are the laws of the City of Hay’at how the city is suppose to work and the hierarchy intended from Scythia. In this introduction by Fard he uses the logos in repeated moments by establishing that Scythia as the Amazonian jungle and the context through which this stories are going to take place.

Regarding the structure of the book it is clear that Kasra B. Fard did not intended a chronological literary narrative.Its proposal is a deductive narrative in which he goes from general concepts of the chronicles of Dr Burgess and Dr; to go to a more specific description of how the the city works through exposition of the conflict of desires between Nasha’at and his father Msa’adam. In the story of  Nasha’at and his desire to be the chosen one ( an apparent condecoration and honor for anyone in the city) and all the struggles his father had to passed to avoid his son from becoming the chosen one we are revealed that the rules of the game of the city are not clear for younger generations; all the efforts of his father to avoid  Nasha’at from being the chosen one were futile and once he was selected to be the chosen one he was instantly killed. After this incident his father lobbied to create a new law that would divide the city in two and he achieved it. Fard uses the rhetorical device of ethos through the introduction of Zula Kier and Ki-Ham’s conversation and manages to delve into deep discussions about philosophical subjects like freedom of action ( due to their environment ) or if its worth to defend yourself or die for a cause, even if the cause is true.  Pathos was repeatedly used throughout the book especially when Msa’adam was trying to avoid his son from becoming the chosen one; a plethora of emotions were detailed by Fard to increase the emotional moment between the naiveness of Nasha’at and his father’s futile hopes to save him.

The American higher education system has increased its price quite dramatically over the last twenty years. Due to this, there has been a very high amount of critics from prospective students and parents to the current college system. This problem has lead prospective students to take high amounts of loans to cover for their education costs and paying these loans in years. Although the endowments have increased, the price of college has not decreased, and this has been an outrageous problem for both the American and international communities. This problem has to lead to the biggest crisis with college student debt in the history of the United States, with the figure going over one trillion dollars. Thus, the research is going to have two objective target groups. The first group are going to be professors and experts in the field of economics; the professors are going to give their perspective on which have been the major causes of the overall inflation in the higher education of the United States, and the second group are going to be students from UVA which will answer what approximate amount of debt are they going to owe and how this debt is going to affect their lives personally. After collecting the pertinent data of the two groups of study and doing all the pertinent research, I will be able to answer what has lead to the massive increase in college tuition and if it is worth it for students to incur in these high amounts of debt.

Biffl, G., & Issac, J. (2002). Should Higher Education Students Pay Tuition Fees? European Journal of Education, 37(4), 433–455. doi:10.1111/1467-3435.00120

In this article, Renehan strives to address the significant negative consequences of the rise in college tuition how these consequences might affect the student regarding its income in the future, especially with the high amount of debt associated with the rising cost in college tuition. Finally, the author sought to address other viable alternatives instead of college to avoid high amounts of debts.

Regarding the strengths of the peer-reviewed article, we can notice that it has the right amount of supporting evidence to support the central claims; for instance, it uses graphical analysis to illustrate a cost and benefit monetary analysis of the decision of attending to college. Moreover, it also analyzes different economic groups regarding their decision making of attending college. This source is reliable because it acknowledges biases of people with different economic and political ideologies, and furthermore, it includes recent information to support its central claims; the only major limitation that I saw was that it also touched upon the graduate level of education which I will not discuss on the paper. This source helps with the cohesion of ideas in the paper because it covers a variety of topics linked with the costs of college tuition from a substantially unbiased perspective.

Tuition and Fees, Higher Education. (2014). Encyclopedia of Education Economics & Finance. doi:10.4135/9781483346595.n292

This article made by Ronald G. Ehrenberg focuses on the necessary foundations of the cost of college. It sought to explain how fees work and which are some viable options to get financial aid for these institutions of higher education. 

The author gives useful background information to have a broader perspective on how the college system works regarding its tuition and fees; where is the money going? Moreover, it also states the differences between college education in different states of the U.S., it gives specific information about different states that helps the reader understand better the perspective of regular students at the moment of choosing their education options. The major limitation I see with this article is that it might be a bit too broad for the purpose of this study because it touches upon graduate education. Overall, this research provides valuable information for the study due to the fact that it touches on a variety of states, and it will help broaden the perspective of the study in the U.S.

Thelin, J. R. (2015). Why Did College Cost So Little? Affordability and Higher        Education a Century Ago. Society, 52(6), 585–589. doi:10.1007/s12115-015-9953-8

In this article by John R. Thelin, he strives to analyze the context of why did college used to cost so little in the past, and why does it has risen so much in current times. Does this have to do with demand? Or the demand has remained flat, and it is due to operational factors?

The paper does a great job of analyzing the context by considering internal and external factors in the U.S, for instance, war. The paper analyzes the profile of the best universities at the undergraduate level and their cost in the mid 20th century, which is an excellent representation of the costs, prices, and affordability of college. Moreover, this article includes a plethora of statistical information like endowments and teaching salaries in the mid 20th century that helps the audience figure out why education has risen so much. This article is particularly valuable as research for my paper because it provides a considerable amount of background information to my topic of interest, and it is going to help extract some possible ideas to solve the problem from this article on the discussion section of this paper.

Approaches to Managing Costs in American Higher Education

Rahman, M. (2018). Approaches to Managing Costs in American Higher Education. Journal of Knowledge Globalization. doi: 10.1093/oso/9780190863494.003.0003 

This paper, written by Mawdudur Rahman, focuses on the costs of the administrative part of the education sector. In recent years many papers have discussed the issues of cost management in higher education and have come to the conclusion that the American higher education system costs are not well managed. This paper strives to give an analysis of which are the operational costs that colleges incurred and possible ways of how to solve them. This paper provides a plethora of statistical information regarding the sources and distribution of the revenue of colleges; it is an excellent quantitative study. On the other hand, some of the statistics are from the 1970s, and these statistics will not be taken into account in the paper because they are outdated. However, this article does present valuable statistical information regarding the distribution of college revenue and other operational costs that will be useful for the analysis of the paper.

Williamson, T. (2018). An Exploration of Administrative Bloat in American Higher        Education. Planning for Higher Education Journal. doi: 10.1093/oso/878012453494.003.0004      This article delves into how does the structure of American higher education is formed. It analyzes how the structure has grown over time and which extra functions have been attributed to this staff working in the education sector. Moreover, this paper tries to see every extra inch of excess fat or unnecessary expense that is being wasted on taxpayer dollars by the government. This paper holds a valuable amount of qualitative information regarding the funding and expensing dynamic currently hold by the administrative sector of the government in higher education. This article is particularly useful because it will help me look at strategies to mitigate bloat getting and get a better price for students and less money spent of the American taxpayer.

Introduction and Literature Review

Many former college students struggle financially for years after their graduation because they carry the significant burden of student-loan debt. Nationwide, student loan debt exceeds credit card debt. About 35,000,000 students make up this group of debtors, and each debtor owes roughly $23,000 (Brewer, 2014). Unfortunately, this kind of debt can take years to pay off. If students were able to enter the workforce debt free, they might find themselves more financially independent and successful, but as college tuition rises over the years, this becomes less and less likely. According to two studies, the increase in college tuition is not justified, and colleges purposefully take advantage of students by raising prices. Students need a college education to get a job, so colleges exploit this need and squeeze as much money out of them as they can. However, other studies argue that the necessity of a college education justifies its increase in price. There is a causal relationship between the increase in costs and increase in price; economically, this makes sense (Rahman, 2018). Still others argue that the price of tuition only increases as much as the price of maintenance of universities and colleges increases (Biffle, 2002; Thelin 2015 ; Williamson, 2018 ). Materials such as school supplies, desks, technology, and even the salaries of the professors are expensive, and the money to pay for these things must come from somewhere. Yet perhaps if the money to pay for such expenses was more carefully audited, the tuition price would not rise so dramatically over time. Few studies have addressed better money management as a possible solution to this problem; in fact, few solutions have been proposed at all. In my study, I plan to suggest some myself. In this study, I aim to collect data regarding the way debt affects students in college and will continue to affect students in their future. Then I will work to suggest some new policies that might serve as solutions to the problem of crippling student debt. This study is politically non-partisan; I will not advocate for any policy based on its political affiliation, but rather because of its merit as a viable financial solution. This kind of research is valuable because it will encourage policymakers to reduce the cost of college and keep the public informed on all available financial options.

Methodology

Participants and Context of the Study

This study takes a qualitative approach, capitalizing on the opinions of different experts in Tegucigalpa, Honduras, and Charlottesville, Virginia. A total of eight people, both male and female, ranging in age from 21 to 65 years, participated by providing their respective expert opinions in their fields of either economics, management, or public policy. In the study, each participant provided insight about what might be the most significant factor influencing the inflation of college tuition in the U.S. If they had any ideas about solutions, they were welcome to speak on this as well. This study focused only on the opinions of experts in their field; the study did not address students or people without sufficient experience with economics or public policy. Subjects included faculty members of the University of Virginia and highly capable workers in Tegucigalpa.

Materials

Every participant received the same questionnaire consisting of eight questions. The first three questions concerned the participant and their area of expertise, but the remaining five questioned their opinions about the student debt problem. The questions included: What is the cause of the rise of the price of college tuition? Are there viable alternative options to a college education? What are some ways to reduce student debt? Is there any real solution to this problem? Because each participant received the same questions, the answers from those well-versed in economics may be distinguished from the answers of those well-versed in public policy and management.

Procedure

I called each participant, gave them the questions to answer, and offered to clear up any doubt they might have about the study. Then the participants gave their verbal consent and agreed to allow me to publish their answers.

Data Analysis

            Because this study focused on qualitative data, analyzing the results of the interviews meant comparing and contrasting them. To understand this data, I entered the participants’ answers into Excel and calculated percentages illustrating the statistics of the answers given. By interacting at length with the results from each participant, the study resulted in a more complete illustration of the inner workings of the student debt problem. The responses from each participant were so different despite their similar educational backgrounds. Some leaned towards a supply-and-demand perspective, and some towards a revenue-and-expense perspective. Regardless of their perspective, however, each agreed that college tuition is bloated and that student debt has become a serious problem.

Results

The clearest result of the study seemed to be that college debt has become a problem, and the constant increase of college tuition only exacerbates this problem. According to Elio Alvarenga, who has a masters in economics from the Pontifical Catholic University of Honduras, the increase in tuition stems from the surge of demand for college education. Alvarenga says the public fears that if they do not attend a traditional college they will not get a well-paying job, and colleges capitalize on this fear. According to Luis Sucre, college tuition tends to be very high because universities have increased their own maintenance expenses. About 62% of participants, however, said that the student debt problem was an economic one and not an accounting one. While understanding this as an accounting problem would mean only considering the numbers regarding expense and revenue, understanding it as an economic problem allows for consideration of the societal atmosphere. This kind of economic understanding allows current culture to influence the solutions given just as the actual numbers of expenses and revenue might. It creates an awareness that current culture can influence the societal importance placed on a specific good or service– in this case, a college education.

Most participants see student debt as an economic problem; this illustrates the importance they place on cultural climate as an element that affects the situation. As Elio Alvarenga said in one of his responses, “the student debt problem is due to a surge in demand, and if there is taking place a sudden increase in demand this means that more people are believing that without a college degree it would be impossible for them to have success in the labor market”. In other words, without the cultural understanding that people need a college education to get jobs, the demand would not be as high, and consequently neither would the price.

While the first questions in the questionnaire discussed the price level of tuition, the later questions discussed the viability of other options. Many students feel they have to go to college and incur debt in order to get a job, but this may not be true. According to Daniel Nakasone, TA of macroeconomics, going to a traditional college is practically paramount to have a good future in the labor market, therefore he advocates for students going for two years to a community college and then transferring to a traditional college (public or private) to take the highest amount of value from both worlds. Nakasone points out that the degree at the end of the day is going to be the same value, and the amount of debt incurred by the student would be lower than that incurred from a traditional four-year college. On the other hand, Carlos Fortín, masters in Economics from Navarra University, points out that although he went to college he does not consider it absolutely paramount to have success in the labor market; he highlights the importance of considering the option of attending a technical institution. A substantial number of college graduates are unemployed after graduation; people who attend technical institutions ten to avoid unemployment because of the large market for technical workers. Abraham Arita, an economist from the Foundation for Progress, also recognizes the usefulness of technical degrees. He views the trend of mandatory college and consequent unemployment as an unfortunate but repetitive trend; it repeats in both industrialized economies like Switzerland, Australia or the U.S but also in underdeveloped economies like Honduras, Bolivia or Perú. In spite of the viability of technical institutions, 75% of participants answered that going to college (even if the first two years are spent at a less expensive community college) is of paramount importance in order to be successful in the labor market.

Discussion

After analyzing the obtained data, it is possible to better understand the student debt problem and suggest solutions from a public policy perspective. No matter their background, all experts interviewed agreed that the student debt in the United States is a problem. Even if tuition increases because of the demand for a college education with the expectation that college graduates will find jobs to help them pay off their debt, college graduates cannot always find a well-paying job in reality. According to the U.S Bureau of Labor Statistics, over 50% of recent college graduates are unemployed. Therefore, I think it would be a good idea to advertise technical institutions as a viable step in a career plan. Attending a technical institution may provide a bigger return when applying to enter the labor market. Community college may also be a more valuable investment. Assuming that jobs are not readily available for recent graduates, student debt from a less expensive community college will be more easily paid off than a university debt, just as Nakasone said. Moreover, the degree at a community college only takes two years to complete. This means that if after graduating from college the person does not find a job immediately he could decide to enter a traditional college or begin a business. It is important to mention that even in the worst-case scenario- assuming the person does not get a job, he is in a much better place because he has only spent around $3,500 per semester (assuming the person does not pay a single dollar of the community college) instead of $31,000 which is around the national average . The average debt at a traditional college is more than 10 times greater than if someone decides to attend a community college. Assuming neither graduate finds a job, the person that attended a four-year university will have much more student debt than a person that attended a community college. The community college graduate finds themselves in a much better position because their amount of debt will be substantially less.

In the study, all the participants agreed that college tuition is overpriced. The average cost of college for the 2017–2018 school year was $20,770 for public schools (in-state) and $46,950 for nonprofit private schools, only including tuition, fees, and room and board. Each year, school costs have continued to increase, even after accounting for inflation. The following facts provide an illustration of the bigger picture of the student debt problem:

• Average Total Cost of Public Colleges: $25,290 (in-state) $40,940 (out-of-state)
• Average Total Cost of Private Colleges: $50,900
• More than 19.9 million students are projected to attend American colleges and universities in fall 2018, with around 6.7 million going to two-year institutions and 13.3 million going to four-year institutions.
• The majority of students pay between $6,000 and $15,000 in tuition for both public and private schools in the United States.

The average student debt is around $31,000 at face value. The average of $31,000 in student debt can then increase to $42,000 because the average interest on student loans is 4.53%  if the student takes more than seven years to pay the entirety of its debt.  As previously noted, participants attributed the high cost of tuition to two main accounting issues: increased demand from students and increased maintenance costs. However, the cultural climate also affects the cost of college. Understanding the problem as an economic one means taking into account the cultural habit of feeling a college education to be imperative to job success. This study suggests and advocates for not only a decrease in the price of college tuition, but also the destigmatization of technical schools and vocations. However, there have also been costs to college which have not been that justified such as heavy marketing campaign to attract more students and gain a bigger profit or charging students excessive amounts to live on campus; according to College Board room and board fees can go from $3,540 to $11,580, and moving off-campus and having roommates can cut those costs in half. As seen with the previous information we can see that there are accounting problems that lead colleges to bloat.

It is important to note that this study has only analyzed the perspective of eight different people. Though it is true that these eight are experts in their respective fields, at the end of the day, they make up only a small sample. This might have led to some overlooked possible solutions to address how the cost of college could be reduced. I personally think that it is important to analyze the previous information given by this study and to do further studies that look at the future from the perspective of people that earned a degree at a technical institution; in this way the myth of college as indispensable could be debunked. Finally the second solution proposed is to encourage the universities to make audits as often as possible to ensure that their expenses are justified. This would finally lead colleges to decrease expenses because they would have more competition from cheaper alternatives and would try to be more frugal with their expenses.

References

Biffl, G., & Issac, J. (2002). Should Higher Education Students Pay Tuition Fees? European Journal of Education, 37(4), 433–455. doi:10.1111/1467-3435.00120

Dominic J. Brewer, (2014) Tuition and Fees, Higher Education. (2014). Encyclopedia of Education Economics & Finance. doi:10.4135/9781483346595

Rahman, M. (2018). Approaches to Managing Costs in American Higher Education. Journal of Knowledge Globalization. doi: 10.1093/oso/9780190863494.003.0003

Thelin, J. R. (2015). Why Did College Cost So Little? Affordability and Higher Education a Century Ago. Society, 52(6), 585–589. doi:10.1007/s12115-015-9953-8

Williamson, T. (2018). An Exploration of Administrative Bloat in American Higher        Education. Planning for Higher Education Journal. doi: 10.1093/oso/878012453494.003.0004

Narrative Essay

09/26/19

Carlos Cerna Reichmann

Prompt 3: Choose a particular memorable event from your life and relate the series of events associated with it and discuss the impact on your life. Try to choose an event that lead you to an awareness of a culture other than your own.

Latin America is one of the regions in which the culture is most unified. The region, is known to have a lot of rivalries. For instance, Colombia has a rivalry with Venezuela, Brazil with Argentina, and both Argentina and Peru rivalry both in terms of a football rivalry and in territorial terms with Chile. Although everything of this is true, we share a lot of cultural background, in a lot of things like food, architecture, music , and even political development.

I think that Latin America has a very unified culture, howver in terms of development Chile is the exception. One day I woke up and decided to take a major life decision in my life. I decided to make the decision to apply to the most important seminar of Latin America. I chose it because Chile is the most developed country in Latin America and I wanted to know what made Chile to be known as the best country in Latin America in economic and political terms by most hispanics.

Chile has had a very diverse history, from a very stable but undeveloped economic situation, to a troubled communist democracy with Allende to the free market dictatorship of Pinochet, and finally to the democratic transition in 1990.  How can a country with so many changes can be so developed today? Why a country with the Latin American culture can be so ahead of Colombia or my country Honduras? All, of these questions made me apply for the seminar of politics and economics in Chile.

Around five 550 people from 18 to 28 years old from all of Latin America applied to the seminar, and I was one of the 60 lucky ones that was selected for the seminar. When I was selected for the program I was extremely excited for the opportunity. I was screaming when I read the email, telling my close friends and familyabout it. However, a new email arrived saying that I was on the waitlist. It all seemed like a dream, after an extreme burst of happiness , a sudden extreme anger and impotence of my situation occured. This was actually a good transition to a comic relief at that moment of my life, because five minutes later, another email entered saying that the previous email was a mistake of the foundation, and was sent on accident to some users that shouldn’t have had received that email. After knowing that I was definitely accepted to the seminar in Chile I told my dad and we bought the plane tickets to Santiago as soon as possible to prove the foundation in Chile that I was going to assist to the seminar.

The flight to Santiago was about 13 hours from Honduras because there is no direct flight from Honduras to Chile. I had a stop in Miami and in the next flight I sat next to a german girl who was going to study at Chile in the south, in a place called Temuco.In that conversation I learned that Chile had a lot of relationships with Germany.

Upon setting foot in Santiago I could see the way it looked in terms of infrastructure and saw what I wanted for Honduras. I saw the development that we should aspire as Latinos, and had the hope more than ever that it was possible. The fact that there is a country with a culture really similar to ours could achieve a great amount of development. This was a really big shock for me at the time; it was a big shock for the positive.

I spent some days in Santiago, and then later went to a small city in the outsides of Santiago called Santa Cruz. When we arrived we had our first talk about a movie of Will Smith called ‘The Pursuit of Happyness’.  We discussed political ideas associated with the film and learnt more about the main differences between the Latin American mentality and the American mentality of limited government.

The lecturer, Axel Kaiser, concluded that Chile would be a more developed country if it grasped the American mentality. I spent a lot of time with chileans at that moment of my life and got to know more their general mentality about their country and their general mentality. I learned also talked to the average chilean in the streets of Santiago and learned that they don’t have a good view of their country. They think that the problems are extremely big, and that Chile is doomed to fail. I learned that chileans don’t see how bad economic shape is in the rest of countries of Latin America.

Now, I get more the perspective of chileans, although as I stated previously Chile is indeed the most adavnce country of Latin America and we can strive to be like them if we have the right attitude and policies. Chileansview to strive for the best disregarding your surrounding context has proven success. If we have the mentality of Chileans I am sure that at least most countries would be in a better economic situation.

ENWR 1507

                                                                                                                   Reflective Journal 3

                                                                                                                                         09/06/2018

                                                                                                      Carlos Cerna Reichmann

“Good News for Trump: Private Sector Added More Jobs than Expected in August.”

            The article begins by quoting a report by the ADP Research Institute (ADP) that showed that American economic projections for the month of July were surpassed by a substantial amount, approximately 55,000 more jobs than expected. The ADP expected 140,000 new jobs to be created, but the final output was 195,000. Bloomberg reported that payrolls also increased, by 195,000, and that filings for unemployment benefits are now at their lowest point since 1969. One final report by the Wall Street Journal concerning the month of August was added, stating that the U.S. Department of Labor’s Bureau of Labor Statistics would release its August nonfarm jobs data on the following Friday. Economists polled by the Wall Street Journal are expecting the creation of 150,000 more jobs, reducing the unemployment rate to 3.7%.

Furthermore, the article addresses the vice-president and co-head of the ADP, Ahu Yildirmaz, stating that job growth has been balanced amongst large-, medium- and small-size companies. Finally, the article talks about Jim Cramer and his views on the trade war with China, noting his surprise at the mentality of the US consumer, who keeps buying Chinese goods despite the tariffs, and that the claims of a manufacturing recession are overblown.

            The organization of the article by Hank Bernstein is helpful. The first tasks he addressed, in the first paragraphs, were studies and data from organizations such as the ADP, Bloomberg, and the U.S. Department of Labor’s Bureau of Labor Statistics. This is useful, because it helps the reader form a clearer view of the statistical figures and data from the recent months of the US economy.

Finally, the author provides quotes from recognized experts from the economic and reporting areas; this provides more credibility and formality to the article. The sense of believability and objective analysis which the author sustains in this article helps advance a fruitful discussion contrasting data about important events occurring in the U.S economy, and helps make implications regarding them.

Berrien, Hank. “Good News for Trump: Private Sector Added More Jobs than Expected in August.” The Daily Wire, 5 Sep. 2019. Retrieved from dailywire.com/article/news. Accessed 9 September 2019.

Carlos Cerna Reichmann

Reflective Journal 2

08/18/19

The Trade Uncertainty Principle

         According to the Editorial of the Wall Street Journal, “policies from the left or from the right can create uncertainty on markets”.

Although Trump has done a good job in overall terms, specially in 2017 due to the new tax deduction and heavy deregulation on the markets, he continues to brag about how good is still going in 2019.Trump has created a plethora of uncertainty in the markets and this has created a slower growth than in his previous year of administration, making liberals point out the bad economic news. However, Trump is right pointing out the fact that progressives exhibit a double standard when they defend Obama’s hyper regulation and the uncertainty that it created on the markets.

The Fed has shown evidence that the protectionist measures of the current administration have shown a declining pace in business investment and economists have found that the trade uncertainty policy or TPU has increased. Consequently, the article points out that there have been a decreased of 0.8% on GDP growth in the first half of 2019.

The cohesion and structure of the text is really neatly done. Although it is an opinion article recognized by the editorial, they make a fantastic job by avoiding bias and relying on statistics to prove the point they want to express to their readers.

In fact, the level of care in terms of unbiasedness of the article is impressive because throughout the examples of even the negative economic policies of Trump, it sets a moment to give him credit for the good things the economy is experiencing although the normative discrepancies the editorial has with his administration policies.

Finally, the article makes a projection of how the economy is going to go if the Trump administration maintains the tariffs and continues with this trade war, and at the same time stating that bad policies are bad policies and have no political party names.

Editorial Board. The Trade Uncertainty Principle. Wall Street Journal, 6. Sep 2019. Retrieved from https://www.wsj.com/articles/the-trade-uncertainty-principle-11567810888

A Deeper Insight into Taxation: An Economic Approach

The issue of tax cuts is an incredibly controversial topic in the US today. The Trump tax deduction that was put in place recently has caused even more controversy than usual because people worry that it will create a larger deficit and that the rich will not have to pay their fair share. In the past, however, tax deductions have proven to be economically successful. For example, Reagan decreased taxes because a 70% tax bracket was destroying innovation and jobs, and accelerating inflation in the US. The tax cut was meant to reduce unemployment and inflation and stimulate the economic growth of the US. The data shows that the tax cuts caused the unemployment rate to reduce from 11% in 1982 to 5% in 1989, and inflation from 10% in 1980 to 4% in 1988. The opposing side supports the plan of increasing taxes, which is the mainstream view held by the Democratic party and practiced during the recent Obama administration. Obama levied a 2.3% surtax on investment income, capital gains and dividends, owed by households making at least $250,000 or individuals earning $200,000. He also increased the payroll tax from 4.2% to 6.2% in 2013. This was the first time the payroll tax had increased since 1990. The notion that current taxes in the US were low in 2016 at the end of the Obama administration, and that the tax cuts from the Trump administration were not needed could not be further from the truth. This is clear when taking into consideration that the US corporate tax rate was 11 points higher than the average of the countries in the OECD (Organisation for Economic Co-operation and Development). The Trump tax reform was designed to act as a counter policy to the negative consequences that the Obama administration generated in terms of wage stagnation and foreign investment. Under the Trump reform, there has been less wage stagnation and more foreign investment. This topic is controversial and probably the most divisive topic in American society regarding economics. According to the main sources that argue for tax cuts, articles by David Boaz and Justin Wolfers, low taxes are an essential requirement for the country to progress because wealth does not just happen but has to be produced. On the other hand, Ehrenfreud and Nicole Lewis, demonstrate the appeal of decreasing the amount of revenue that could be used for public benefit. They claim that inequality would increase and this would lead to big social catastrophes. I will argue that there is substantial evidence that can prove that when economic liberty is increased in a country in the form of a tax deduction, there is usually more economic progress in that area. This trend of economic progress in the US will continue with the recent tax reform by Trump.

Synthesis

The health and growth of a national economy depends on the driving force of tax reductions for several reasons. First, tax reductions increase the incentive to invest. A lower corporate tax rate gives investors in a new factory a larger share of the income that factory generates. In turn, more investment project to pass the cost-benefit test that informs a company whether the project is a worthy investment in the first place. A company will not invest in building a factory if the benefit does not outweigh the cost. Tax reductions increase the benefits companies can gain from investing, so they are much more likely to invest in the first place. This incentive effect drives most economic models of investment, and few economists debate its underlying logic. Lewis explains, “The positive effect that the tax cut is going to have can be more easily observed with what occurred when Reagan signed the Economic Recovery Tax Act in 1981” (Lewis, 2017). He says that Reagan’s tax reductions created “14 million jobs, incomes grew by over 22 percent, and gross domestic product, the broadest measure of the economy, grew by more than 3.5 percent on average” (Lewis, 2017). The economic growth following the tax reduction generated more profit for businesses and finally led to a decrease in unemployment because businesses had more capital to invest in both their companies and their employees’ wages. Reagan was successful because he recognized the necessity of removing barriers to investment. He reduced tax rates and eliminated useless and needless government taxes on productivity, which encouraged companies to invest and therefore generate more capital to stimulate the economy. Trump’s tax reduction is based on this exact logic.

The Trump economic team’s main was motivated to cut taxes because the effective corporate tax rate was 35%. This was more negative than positive for the economy due to a lack of incentives to make the US appealing for foreign investment. Foreign businesses invested 15% less in the United States just from 2015 to 2016, falling to 374.3 billion 2016 from 439.6 in the prior year. The new Trump tax bill has just been one year in effect, however its effects are already visible. “The foreign direct investment in the United States position increased $319.1 billion to $4.34 trillion at the end of 2018 from $4.03 trillion at the end of 2017. The increase mainly reflected a $226.1 billion increase. By industry, affiliates in manufacturing, retail trade, and real estate accounted for the largest increases” (Bureau of Economic Analysis, 2019). This has caused an overall 3% GDP growth for 2018 and wages have increased in some multinational companies like Amazon because they could afford more money devoted for wages.

Although I have stated that the corporate taxes have been reduced and directly and positively affected the economic wellbeing of US citizens, it is also important to notice that personal taxes were also reduced. As a result of the tax deductions we can see that about 69% of people with household income of $30,000 to $50,000 got a tax cut, nearly 82% of those in the $50,000 to $75,000 got a tax cut, 86.6% of households making $75,000 to $100,000 saw a tax cut, and 89.5 percent of those in the $100,000 or more bracket saw a tax cut. Tax cuts have been among all the socioeconomic spectrums; this has greatly increased the acquisitive power of the average American. It is important to empathize with every economic group because a tax cut can be really beneficial to a $30,000 to 50,000 household income. For them, it can help with important payments like rent or electricity bills. For the two middle brackets ( $50,000-$75,000 and $75,000 to $100,000) those extra dollars in their pockets will be of more use to create a small business. They will start with a higher capital to compete in the market and be able to incur less debt if the start-up does not do as well as they would like. It could also allow them to provide a better education for their kids, helping their posterity prospectively secure a more financially stable future. For the final bracket, the money they save because of the tax cut will be of utility by being able to hire more people for their businesses, donate more money for charity or creating new projects that will do a common good for society, like a hospital or a recreational green space in a community.

High taxes cause a frustration in the individual who may feel that the social mobility ladder is just a myth. There was a clear stagnation in wages during the Obama administration. There was a clear stagnation of middle-class wages and in some cases even a decline in middle-class wealth. Even though the tax increase created more public services, like Obamacare and other noble and charitable governmental causes, there was a clear dissatisfaction expressed by the average American. Democrats might have hoped that their charitability, the expansion of health insurance coverage and affordable health care, would tug on the heartstrings of Americans and win them over. However, in reality, Americans were frustrated because many of these movements did not directly affect them other than diminishing their own pocketbooks. This was one of the main reasons that in the 2016 election the electoral college voted Republican more than Democrat. High taxes discourage work and investment. Taxes create a “wedge” between what the employer pays and what the employee receives, so some jobs do not get created and tend to do more harm than good in the long run. The people’s votes in 2016 illustrate this public sentiment well.

Tax cuts are also good for the people for deep moral reasons. Boaz explains, “In a free country, money belongs to the people who earn it” (Boaz, 2001). The government has no moral right to rob its citizens of the money they rightfully earned for themselves. If people are continually forced to relinquish the hard-earned fruits of their labor to the government who seemingly gives it away for nothing, they will only grow more and more frustrated and bitter. Boaz continues, “The most fundamental reason to cut taxes is an understanding that wealth doesn’t just happen, it has to be produced. And those who produce it have a right to keep it” (Boaz, 2011). It is important to understand that the economy is not a pie that needs to be divided equally among society, rather it is a pie that can get bigger and bigger as the economy of a country becomes more advanced and healthier. Boaz qualifies the uses that citizen money may have when given to the government: “We may agree to give up a portion of the wealth we create in order to pay for such public goods as national defense and a system of justice. But we don’t give the government an unlimited claim on our money to use as it sees fit” (Boaz, 2001). Giving the government more money equates to giving them more power. There has to be a limit on the power that the state has over us, and this includes the power of taxation over its citizens; government should be minimal to provide basic services in a more efficient form. Lower taxes are the only real check on the expanding size and scope of the federal government. If we want smaller government, our best strategy is to reduce the amount of money Congress has to play with.

On the other hand, there are a series of sound arguments in favor of increasing taxes. The main argument posed by the left is that a better redistribution of wealth will enhance its relationship with economic prosperity. Growing inequality, paired with labor automation, could put a quarter of the U.S workforce out of a job by the end of the next decade, according to management consulting firm Bain&Co. This argument is backed by a circular logic. Rich people presumably hold most of the capital in a society, but they do not spend it. They hold onto it so that they can maintain their status as the upper class. Unfortunately for the lower class, however, when the rich do not spend their money, companies that hire members of the lower classes do not make as much money. This leads to the lowering of wages of lower class people, and even to firing them. By redistributing the wealth, the rich will still have some money with which to live, but the poorer classes will also have money to keep them from living in complete poverty. They argue that inequality prohibits growth in the economy.

  They also claim that the distribution of wealth is equal to distribution of justice. The fact that the difference in wealth is not so big generates a healthier, more solid, and more peaceful society. Inequality generates a bigger social disintegration and more conflict between different economic classes. Social cohesion is also a means that enables citizens to live in societies where they enjoy a sense of belonging and trust. Due to this analysis of social and economic reasons the logical policy to do would be to implement a high tax on wealthy individuals and corporations, and distribute that revenue among the lower and middle lower social classes. Ehrenfreud explains, “The main point of the Obama administration through the tax increases was to finance the Affordable Care Act and in that manner reduced inequality, and with that all the problems that inequality causes. Because of the policy 20 million more Americans have health insurance, gains that have reduced the uninsured rate to the lowest level on record” (Ehrenfreud, 2016). The law sharply reduced inequality by age, race, and income. The financial assistance that made this coverage expansion possible also reduced inequality in after tax incomes . The distribution of income before taxes also matters the 2009 Recovery Act and other fiscal stimulus measures, along with a forceful response to stabilize financial and housing markets, prevented a deep recession from turning into another Great Depression. The most important lesson to grasp from this is that without the stronger social safety net enforced by the Obama administration the US would have been in a total social and economic chaos.

The final argument for increasing taxation is that the government is going to raise more revenue. Raising more revenue is good because with the extra revenue that the government raises they can distribute more to each area in change of government (i.e education, infrastructure, security etc.) or focalize more revenue in a particular area in which that country has the most problems. For instance, a way in which most of European countries that have more egalitarian policies than the US  (like Denmark) spend around 19% in social safety to guarantee a minimum living standard even from the less fortunate people in their society.

Closing remarks

On this account, it is fair to say that according to the economic analysis lower taxes will guarantee a better standard of living for a country. The empirical and scientific evidence available for us tends to show higher GDP growth rates. The moral part of taxation is also essential to reaffirm that taxes should be as low as possible. At first glance the arguments of the left of reducing inequality and raising more revenue can be appealing, however, it is better to have a better functioning society with higher inequality but greater prosperity because in the long run, although there is going to be more inequality, everyone is going to be better off than in the first model of society. Comparing the US and Cuba, it is simple to confirm this. The US a society that has a decent amount of inequality but overall their citizens are better off economically and in every other sense. Cuba, on the other hand, is a very equal society but with appalling economic conditions of life for its citizens.  Therefore we can argue that every bill that implies taxes on different socioeconomic brackets is ultimately the most beneficial option for society, and we should focus on shifting the political spectrum in that direction, making every tax increase an unacceptable policy to impose on a country.  

References

Foreign direct investment in the United States (FDIUS). Bureau of Economic Analysis. (2018). BEA 19-34. Retrieved from https://www.bea.gov/international/di1fdiop

Nicole Lewis. (2017, November 8). Did Ronald Reagan tax cuts supercharge the economy. The Washington Post. Retrieved from https://www.washingtonpost.com/news/fact-checker/wp/2017/11/08/did-ronald-reagans-1981-tax-cut-supercharge-the-economy/

David Boaz. (2001, February 28). One bad and eight good reasons to cut taxes. The Cato Institute. Retrived from https://www.cato.org/publications/commentary/one-bad-eight-good-reasons-cut-taxes

Max Ehrenfreud. (2016, June 9.) Here’s the proof president Obama really did reduce inequality. The Washington Post. Retrieved  from https://www.washingtonpost.com/news/wonk/wp/2016/06/09/obama-really-did-sock-it-to-the-rich-bad/

Justin Wolfers. (2018, March 15 ). How to think about corporate tax cuts. The New York Times. Retrieved from https://www.nytimes.com/2018/03/30/business/how-to-think-about-corporate-tax-cuts.html