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GI billed paid for itself?

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Wheylous posted on Tue, Oct 23 2012 9:00 PM

Jill Stein just claimed that for every dollar invested in college education in the GI bill the government got 7 dollars back. Is this true?

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Suggested by No2statism

If it is true, then so what?

What if the market would have returned 7.1 instead?

 

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The biggest reason the "Fiscal Multiplier" doesn't work is because it ignores the Opportunity Costs, and the collecting the tax itself (losses in shifting money from the tax payers to the tax consumers).  What would everyone have purchased otherwise? What would have been produced had those GIs never been in government approved higher education? What is the Unseen?

Here is similar nonsense about food stamp spending:

http://archive.mises.org/10006/multiplying-by-zero/

Chapters 4, 5, and 22 of Economics In One Lesson cover some of this, it is pretty much the Broken Window Fallacy:

http://www.fee.org/library/books/economics-in-one-lesson/

Chapter 11.17.C in Man, Economy, and State covers the absurdity of the multiplier.  And this video covers the "spending multiplier" specifically:

https://www.youtube.com/watch?v=VoxDyC7y7PM

My long term project to get every PDF into EPUB: Mises Books

EPUB requests/News: (Semi-)Official Mises.org EPUB Release Topic

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Answered (Not Verified) Bogart replied on Wed, Oct 24 2012 9:26 AM
Suggested by No2statism

My opinion is that the GI Bill is unfortunately a huge plus financially for the US Federal Government and a huge loss financially for the veterans themselves. 

Only about half the money in earned GI Bill "Benefits", really burdens, is ever used by the GIs.  So in real terms the US Federal Government is never having to pay the full salary of hundreds of thousands of veterans.  But this isn't the half of it (Pun intended).

In reality the multiplier of 7 is completely arbitrary, it could be -77 just as easily as it is +700.  Unfortunately there is no way to know the value as there is no way to account for these effects that would help the individual veteran and hurt the US Federal Government.

1. Super-Short Term-Kind of mentioned in lost opportunity, The veteran could have received this money in cash when they "earned it".  We have no ideal what they would do with it nor do we know how much having money in their hands would compare to having money in some college fund.  How about the Federal Government disburse the money not only for college but just to the veteran.  Then the veteran would be better off.  (This is obviously a worse scenario for the veteran than receiving it as untaxable income as the sooner they get the money the better.)

2. Short Term.  Like any program that steals money from the populace and gives it to colleges, the GI Bill, will only have colleges increasing prices given the prospect that a large number of students have cash that can ONLY be used by them.

3. Longer Term, mentioned in lost opportunity. No one knows the value of a college education versus working.  This is especially true for entrepreneurs.  So all the statistics around this determined by professors almost always side with the college graduate are really just lies.

4. Super Long to Long Term, not mentioned, the GI Bill like any other govenrment forced redistribution of wealth from tax payers, especially the veterans themselves mucks up the whole pricing system and thus hinders Economic Calculation.

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Bogart replied on Wed, Oct 24 2012 12:33 PM

And to make matters worse, the Economic Calculation that is disrupted is when the GI signs onto this crappy deal.

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We have no ideal what they would do with it
tattoos, liquor, snuff, overpriced stereo for the '96 mustang, ipod, entire discography of "avenged sevenfold" on itunes, and 5 speeding tickets. Edited to add: tapout clothing/stickers, t-shirts with skulls on them, thousands of dollars in oakleys.
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Groucho replied on Wed, Oct 24 2012 11:07 PM

Sounds like that would stimulate the economy a lot more than earmarking all the money for a university!

An idealist is one who, on noticing that roses smell better than a cabbage, concludes that it will also make better soup. -H.L. Mencken
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Well, the sunglasses, stereo, and clothing would. Tattoos, liquor, and smokeless tobacco already effectively enjoy a subsidy in military towns.
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Bogart replied on Thu, Oct 25 2012 9:57 AM

You are playing parent with these folks.  How do you know anything about how they will use their property?

But your logic is also faulty.  If a person uses their property in the manners you describe and has nothing left for college later then it may be good for that person to have used their property as I doubt college will be that good for them.

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Answered (Not Verified) Malachi replied on Thu, Oct 25 2012 11:05 AM
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Not playing parent. Playing snco. I know they will buy these things because of prior demonstrated preference. College might be good for them because then they would learn about why not to make poor life decisions like getting forearm tattoos and dipping tobacco. Surely you concede that these individuals wouldnt learn those lessons in the service....
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I don't think they are talking about the fiscal multiplier for this I think they are referring to the increase in productivity from the education veterans recieved.

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hashem replied on Fri, Nov 23 2012 9:05 PM

Confusing cause and effect? Who's to say that the 7 dollars are a necessary and direct result of the 1 dollar invested? Someone could use the GI bill and end up paying taxes that have no dependency on their education.

Whenever you find yourself on the side of the majority, it's time to pause and reflect. —Mark Twain
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Could point it would be revealling to see how they calucated this. But then again if their calculations are sound what then?

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It wouldn't obviate any of the flaws Bogart pointed out. Additionally, it just keeps pouring funds into the educational bubble. This isn't necessarily to say that these vets will walk out better educated, at all, or indeed more "productive".

Freedom of markets is positively correlated with the degree of evolution in any society...

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