The answer sounds right, if a bit . . . icky.
My advice: never ignore "fundamental laws of finance".
Surely, many are wondering: How could Pay It Forward be so expensive if students would be paying for their own educations, perhaps even more than they do now? The answer is that it costs money to move money through time. Pay It Forward enthusiasts often ignored this fundamental law of finance.
But this California history shows once again that in times of boom, people were too busy to fall into the hole of zero-sum hatreds. Its the old story. Prosperous people or people who take seriously the prospect of prosperity are nicer and more tolerant.
The story ends with the predictable "give us more money." More money has been going to employee pension funding -- and even then there is a reported unfunded pension fund gap. We get the gap, high prices, floods, and questionable service. There is never enough money when there is a politically influential and unionized workforce.
At the margin, the who-owns-U.S.-debt figures seem to be suspect.
Cross-sectional differences in the cost of living very graphically illustrated.
Daron Acemoglu and James Robinson weigh in on Piketty. Abstract:
Thomas Piketty's recent book, Capital in the Twenty First Century, follows in the tradition of the great classical economists, Malthus, Ricardo and Marx, in formulating "general laws" to diagnose and predict the dynamics of inequality. We argue that all of these general laws are unhelpful as a guide to understand the past or predict the future, because they ignore the central role of political and economic institutions in shaping the evolution of technology and the distribution of resources in a society. Using the economic and political histories of South Africa and Sweden, we illustrate not only that the focus on the share of top incomes gives a misleading characterization of the key determinants of societal inequality, but also that inequality dynamics are closely linked to institutional factors and their endogenous evolution, much more than the forces emphasized in Piketty's book, such as the gap between the interest rate and the growth rate.
As I've noted before, macro is hard.
Now Loungani, with a colleague, Hites Ahir, has returned to the topic in the wake of the economic crisis. The record of failure remains impressive. There were 77 countries under consideration, and 49 of them were in recession in 2009. Economists – as reflected in the averages published in a report called Consensus Forecasts – had not called a single one of these recessions by April 2008. . . .
More astonishing still, when Loungani extends the deadline for forecasting a recession to September 2008, the consensus remained that not a single economy would fall into recession in 2009.
Many people are tempted to resist this insight, because they hope that we can elect better and more virtuous political leaders. But politicians who prioritize principle over staying in power are not likely to stay in power for long – or even get there in the first place. For that reason, most successful political leaders are people who are willing to sacrifice the public interest when it conflicts with their own interesting in seeking power.