Tag Archives: Mr. Econ

Ask Mr. Econ: Whatever Happened to the American Dream of a College Education?

Dear Mr. Econ,

What happened to the American Dream of a college education and home ownership?

–      Anonymous Iguana Reader

This is the third part of a three-part series addressing the reader’s question about the American Dream. In this installment, Mr. Econ tackles college education.

Now let’s look at the specific factors, in addition to the general ones, that place a college education beyond the grasp of many middle class people.

The basic factor here is price.  The price of a 4-year college education has skyrocketed. From 1980 to 2010, the estimated cost of earning a 4-year degree has risen from  $ 2,550 per year at a 4-year public college/university, or $ 15,014 at a private school, to $ 5,594 and $ 32,800 in 2010.  Increases of around 490%.  At the same time, middle class wages and their purchasing power are stagnant or falling.  Further, during this period, the consumer price index role only 165%.

So we need to take a look at the components that contributed to this astronomical cost increase of a 4-year college degree.

One of the main factors is the decrease in government support for higher education.  At major state colleges and universities, state legislatures have drastically cut back the support they have provided to 4 year state institutions.  We can see this locally in the more than $ 38 million that was recently cut from the University of Florida’s budget by the state legislature.  UF is not alone.

In addition, Federal spending on higher education has been stagnant, with the exception of the increases from 2009 through 2011 due to the American Recovery and Reinvestment Act.  According to the National Center for Education Statistics, federal funding has fallen from a high of about 18% of a college or university’s revenue to below 10%.

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Dear Mr. Econ… What Happened to the American Dream? Part II

What happened to the American Dream of a college education and home ownership?

–   Anonymous Iguana Reader

This is the second part of a three-part series addressing the reader’s question about the American Dream. In this installment, Mr. Econ tackles home ownership.

Dear Reader, 

Home ownership was viewed as critical to America and its communities because it provided a stable place to live and raise a family, thereby producing stable communities. Home ownership was also the basic component of “wealth” for a family.

Starting in the 1970s, the U.S. housing market changed dramatically. A home was no longer viewed as a stable place to live; instead, it became an investment.

Prior to the 1970s, homes, home prices and home mortgage loans were the bedrock of the U.S. economy in many ways. Banks were mainly local and did a majority of their lending in the local housing market. In fact, many banking institutions were only allowed to make home loans, and those had to be in the local market.

Banks got the money to make home loans from “Passbook Savings Accounts.” Many economic calculations were historically judged based on what was called the “Passbook Rate,” which was around 5 percent. This is the rate banks paid depositors on passbook savings accounts. Banks lent out this money at somewhere between 5 and 10 percent, depending on the type of loan and the creditworthiness of the borrower.

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Dear Mr. Econ… What’s up with gas prices?

Hi Mr. Econ,

Why are our gas prices at a gas station tied to the speculative stock market? When did that happen and why?

 Judy Etzler


Dear Reader,

This is a great question, especially in light of current circumstances here in the U.S. Gasoline consumption is down; at the same time, gasoline production in the U.S. is reaching record levels. Classical economics tells us gas prices should be falling. However, with gas prices at the pump reaching $4 per gallon and presidential candidates spouting all sorts of nonsense, who knows what to believe?

Mr. Econ decided to call on a long-time friend and expert in this field to help him answer this question. Dr. Cyrus Bina of the University of Minnesota-Morris is a recognized expert on the economics and geo-politics of oil, and is the author of “The Economics of the Oil Crisis, and most recently, “Oil: A Time Machine—Journey Beyond Fanciful Economics and Frightful Politics.” Dr. Bina has helped us all understand this very intricate subject. However, Mr. Econ takes full responsibility for his answers.

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Dear Mr. Econ… Tackling the Federal Reserve

Illustration by Karrie Lyons-Munkittrick

I am glad to see a column dealing with economics started in the Iguana.

Sometimes people accuse the Federal Reserve of printing money, but I believe it is the Treasury that actually prints money, while the Federal Reserve influences interest rates and money supply by setting reserve requirements for banks.

I would be interested in hearing an explanation about how the U.S. government creates money as a general topic. But my specific question is where did the Federal Reserve get the money to go into the market and buy mortgage-backed securities that it probably is still holding? I never knew that the Federal Reserve had its own money to use.

–  Goldie Schwartz

Dear GS:

What a great question! Especially in this election year, there have been so many misrepresentations about the role of the Federal Reserve System of the U.S. (the Fed). Your question provides a great opportunity for Mr. Econ to present the facts to all Gainesville Iguana readers.

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