A Reprint Of My 2010 Post, "Regulators Increase Systemic Risk" In Response To Janet Yellen

In response to Janet Yellen, a reprint of my April 28, 2010, blog post, "Regulators Increase Systemic Risk" on why we need to reverse some of the discretionary powers over banks given to the Fed after the 2008 financial crisis

A comment I wrote to the Wall Street Journal article, "Great Moments in Financial Regulation: Apple IPO deemed too risky" by Paul Atkins:

"Markets froze in the fall of 2008 because no one could be sure of the financial condition of financial institutions and their counterparties. For all the government's extraordinary intervention, the markets showed their greatest improvement after the Fed's imperfect stress tests were made public in early 2009."

It was not uncertainty about the condition of the financial institutions that caused the markets to crash. It was the uncertainty about government intervention that created the mess. The Government arbitrarily backstopped Bear but not Lehman. Unlike with the investment banks, the government can step in and takeover commercial banks at anytime by declaring them unsound.

Investors did not know or understand the government's game plan (if there was any at all) for dealing with the housing crisis effects on bank asset values and whether the banks were going concerns or going out of business concerns. Was the government going to close large banks or keep them open? What was the status of uninsured creditors and collateralized lenders? The private sector did not know or understand what contractual rights it had with troubled banks and companies, or whether the government would shut them down or allow them to continue.

Passing the stress test, even though it was a charade for the most part, meant the government was going to leave those banks alone. The markets began to breathe again because investors understood the government was backing away.

The markets froze in response to the government's action, not because the government was inactive, did too little or was ineffectual. Once the stress tests clarified that the government was done meddling in the banks, the markets began to clam calm down. The stress tests revealed more about the likelihood of future government action than it did about the condition of the banks. The stress tests added clarity to future government action; not clarity to the banks' balance sheets.

The Dodd bill will increase systemic risks and market failures because it will give more power and discretion to the regulators to act against financial institutions. Powers that allow government intervention in markets and financial institutions increase systemic risks exactly because regulators do not act as investors or perceive risk the same way investors and other market participants perceive risk. Government and regulators are an additional, unpredictable, non-diversifiable risk that restricts investors' options during a financial crisis.

When regulators intervene, investors lose the value of their investments in the financial institution. Since the financial crisis, all corporate bondholders, not just GM's and Chrysler's, mortgage lenders, and collateralized lenders face more systemic risk than before the crisis.

Giving more financial regulatory power to government will spread and increase the systemic risk in the financial sector. It will not lower systemic risk.

[See my previous post, "Obama's New Bank Restrictions Increase Systemic Risk: The VIX Rose 19 Percent"]

CBO’s Budget and Economic Outlook: 2017 to 2027

From Congressional Budget Office, "CBO’s Budget and Economic Outlook: 2017 to 2027," August 15, 2017, Presentation by Sam Papenfuss, Deputy Assistant Director for CBO’s Budget Analysis Division, at the National Association of State Auditors, Comptrollers and Treasurers annual conference:

CBO’s Budget and Economic Outlook: 2017 to 2027 from Congressional Budget Office

NY And Other Large Metropolitan Areas Have Highest Wage Inequality: Map

From MarketWatch, "Why there’s so much inequality in big U.S. cities" by Jillian Berman:

Run through a list of some of the most populated metropolitan areas in the country — New York City, San Francisco, Houston, Chicago — and they all have something in common besides their size. They’re extremely unequal.

In all of these cities, wages for workers in the top 10% of earners are six to seven times those of workers in the bottom 10%, according to a report published Thursday by the Federal Reserve Bank of New York. While income inequality has been ticking up nationally since the 1980s, it’s now particularly pronounced in large metropolitan areas, according to the New York Fed.

“Larger metropolitan areas tend to be more unequal than smaller metropolitan areas and that was not always true,” Jaison Abel, a research officer at the New York Fed, told reporters Thursday.

Source: MarketWatch

Consumption Inequality Much Lower Than Income Inequality

From MarketWatch, "Is inequality getting worse? That depends how you measure it" by Steve Goldstein:

Consumption inequality hasn’t grown as much as income inequality

Source: MarketWatch

Bruce Meyer of the University of Chicago and James Sullivan of the University of Notre Dame argue that consumption, rather than income, should be examined. Using income to measure inequality is a problem for a few reasons. For one, it’s measured before tax, it’s not person weighted (a family with one person is measured the same as one with six people) and it may underrepresent the impact of government transfers. Income measures also don’t capture consumption out of financial wealth as well as durables such as housing and cars.

Consumption, they say, may be a better way to measure well being, since it better reflects disparities in access to credit or accumulation of assets. Consumption also is more closely associated with other measures of poverty than income is.

Research paper abstract:

"Consumption and Income Inequality in the U.S. Since the 1960s" by Bruce D. Meyer, James X. Sullivan, NBER Working Paper No. 23655, Issued in August 2017:

Official income inequality statistics indicate a sharp rise in inequality over the past five decades. These statistics do not accurately reflect inequality because income is poorly measured, particularly in the tails of the distribution, and current income differs from permanent income, failing to capture the consumption paid for through borrowing and dissaving and the consumption of durables such as houses and cars. We examine income inequality between 1963 and 2014 using the Current Population Survey and consumption inequality between 1960 and 2014 using the Consumer Expenditure Survey. We construct improved measures of consumption, focusing on its well-measured components that are reported at a high and stable rate relative to national accounts. While overall income inequality (as measured by the 90/10 ratio) rose over the past five decades, the rise in overall consumption inequality was small. The patterns for the two measures differ by decade, and they moved in opposite directions after 2006. Income inequality rose in both the top and bottom halves of the distribution, but increases in consumption inequality are only evident in the top half. The differences are also concentrated in single parent families and single individuals. Although changing demographics can account for some of the changes in consumption inequality, they account for little of the changes in income inequality. Consumption smoothing cannot explain the differences between income and consumption at the very bottom, but the declining quality of income data can. Asset price changes likely account for some of the differences between the measures in recent years for the top half of the distribution.

Charitable Deductions Are Disincentives To Social Responsibility.

My published comment to The Wall Street Journal, "Charities Coax Lawmakers to Rethink Tax Plan: Nonprofits pitch idea of ‘universal’ tax deduction for charitable contributions, which would likely decline if Congress were to double standard deduction" by Richard Rubin:

Charitable deductions are disincentives to community and social responsibility.

Charitable deductions focus on organizational structure and not compassionate actions. If I invite and feed a poor person in my house on Thanksgiving, the tax deduction is not available. If I donate food or money to a food bank or church that feeds the same person, I get a deduction.

If I grocery shop or cook a meal for a needy, ill senior in my neighborhood, no deduction. If I donate to an organization that has volunteers who do the same thing, I get a deduction.

The required organizational structures add a middle layer of inefficiency and bureaucracy, which reduces the effectiveness, timeliness, and value of charitable giving.

When there is suffering, such as an earthquake, we do not need tax deductions to motivate us to send money, food, etc.

Eliminate charitable deductions. If the government takes too much money so we cannot donate as much as we like to charities, fight for lower taxes.

See my very similar, earlier post on this blog, "The Problem With Charitable Tax Deductions."

Ten Countries Use Merit-Based (Points-Based) Immigration Systems

From Federation for American Immigration Reform, "Merit-Based Immigration Systems", Fact Sheet | March 2017:

Merit-based immigration systems are in use in the following countries:

• Australia[4]
  
• Austria[5]
  
• Canada[6]
  
• Denmark[7]
  
• Germany[8]
  
• Hong Kong[9]
  
• Japan[10]
  
• New Zealand[11]
  
• South Korea[12]
  
• United Kingdom[13]

***[Footnotes:]

[4] Australian Skilled Migration Program https://www.border.gov.au/Trav/Work/Skil

[5] Criteria-Based Immigration to Austria, http://www.migration.gv.at/en/types-of-immigration/permanent-immigration-red-white-red-card.html  Quebec-Selected Skilled Worker Program http://www.cic.gc.ca/EnGlish/immigrate/quebec/index.asp

[6] Canadian Federal Skilled Worker Program http://www.cic.gc.ca/english/immigrate/skilled/apply-factors.asp  Quebec

[7] Danish Fast Track and Positive List Migration Schemes https://www.nyidanmark.dk/en-us/coming_to_dk/work/work.htm

[8] Germany recently implemented a limited, merit-based immigration scheme for “Highly-Qualified Workers” http://www.bamf.de/EN/Migration/Arbeiten/BuergerDrittstaat/Hochqualifizierte/hochqualifizierte-node.html

[9] Hong Kong Quality Migrant Admission Scheme http://www.immd.gov.hk/eng/services/visas/quality_migrant_admission_scheme.html

[10] Japanese Points-Based Preferential Immigration Treatment for Highly Skilled Foreign Professionals http://www.immi-moj.go.jp/newimmiact_3/en/

[11] New Zealand Migrant Category Resident Visa Program https://www.immigration.govt.nz/new-zealand-visas/apply-for-a-visa/about-visa/skilled-migrant-category-resident-visa

[12] South Korea F-2 Point System http://koreanconsulting.typepad.com/files/pointsystem.pdf

[13] U.K. Work Visas https://www.gov.uk/browse/visas-immigration/work-visas

Eight US Cities Account For 40 Percent Of High Paying Tech Job Openings

From The Wall Street Journal, Real Time Economics, "The Best $100,000+ Tech Jobs Are Increasingly Concentrated in Just 8 Cities: High prices aren't enough to stop the momentum of the leading tech cities" by Josh Zumbrun:

The eight leading U.S. tech hubs account for slightly less than 10% of U.S. jobs and about 13% of overall job postings. But the cities — Seattle, San Francisco, San Jose, Austin, Raleigh, Washington, Baltimore and Boston [Highlight added] — account for more than 27% of the listings for U.S. tech jobs, research from Jed Kolko, the chief economist of the job-search website Indeed, shows.

That’s already a striking concentration, but tech jobs with the highest salaries are even more centralized. Among jobs that typically pay over $100,000, nearly 40% of openings are in those eight cities.

Charter Schools Alumni Earn Four-Year College Degrees At Five Times The Rate At Public Schools

From The Wall Street Journal, "Charter Grads Get a Leg Up in College: The NAACP and NEA have chosen the wrong time to double down on failing traditional schools." by Richard Whitmire:

The data [source] comes from the first cohort of charter students, who are beginning to graduate from college. Here’s what we know now that the NEA and NAACP didn’t know when they adopted their anticharter positions: Graduates from the top charter networks—those with enough high school alumni to measure college success accurately—earn four-year degrees at rates that range up to five times as high as their counterparts in traditional public schools. These are low-income, minority students from cities such as Los Angeles, Chicago and Newark, N.J. Their college success is going to make bashing charter schools far more challenging for the NEA and the NAACP.***Roughly half the graduates of Uncommon, YES Prep and the KIPP New York schools—among the biggest and best known charter networks in the country—earn bachelor’s degrees within six years. About a quarter of the graduates of the lower-performing charter networks earn degrees within six years. That may not strike wealthy parents as something to brag about. Eighty percent of children from America’s wealthiest families earn four-year degrees within six years. But charters primarily serve low-income families, where only 9% of students earn such degrees. Charters make a difference for poor families.

Inflation Chart Since The Founding of the US

From The Wall Street Journal, Real Time Economics, "Gold Standard Didn’t Really Tame Inflation, New Research Says" by Michael S Derby:

St. Louis Fed economist Fernando Martin says inflation in the pre-Fed period was highly volatile as elected leaders periodic took the dollar off the gold standard and then re-established it. That created surges of inflation that were then followed by deflation.

“The postwar period exhibits the same recurrence of high inflation episodes as the preceding period,” Mr. Martin wrote. But without a gold standard forcing prices and wages lower at times, there was no deflation to pull the overall price level back down toward its historical average.
***

Source: The Wall Street Journal

Highest Percentage Of Renters In 50 Years

From MarketWatch, "More Americans are renters now than at any time in the last 50 years" by Quentin Fottrell:

More U.S. households are headed by renters than at any point since at least 1965, according to new analysis of Census Bureau data by the Pew Research Center, a nonprofit think tank in Washington, D.C. “The total number of households in the United States grew by 7.6 million between 2006 and 2016,” it found. “But over the same period, the number of households headed by owners remained relatively flat, in part because of the lingering effects of the housing crisis.” And the rise in renters is significant, even accounting for the growth in the population over the last half-century.***

MarketWatch

Adults younger than 35 continue to be the most likely of all age groups to rent. In 2016, 65% of all households headed by people younger than 35 were renting, up from 57% a decade earlier. Last year, 41% of households headed by someone aged 35 to 44 were renting, up from 31% of all households in 2006.

US Drinkers Prefer Beer As Their Alcoholic Beverage

From Gallup, "Beer Remains the Preferred Alcoholic Beverage in the U.S." by Justin McCarthy:

Americans who drink alcohol continue to say they most often choose beer (40%) over wine (30%) and liquor (26%). Beer has typically been the preferred alcoholic beverage in Gallup's trend.

Source: Gallup

The latest results are from a July 5-9 update of Gallup's annual Consumption Habits poll. Gallup has found that beer is most popular among men; this year, 62% of male drinkers say they prefer beer, compared with 19% of female drinkers. Less-educated and middle-income Americans also tend to choose beer.

For the past two decades, at least three in 10 drinkers have said they prefer wine, peaking at 39% in 2005. Wine was slightly less popular in the early to mid-1990s. Women are significantly more likely than men to prefer wine, at 50% vs. 11%, respectively. This beverage is also preferred more among college-educated adults.
***

Source: Gallup

Medicaid Enrollees Have Worse Health Outcomes Than People Without Medical Insurance: Obamacare Expansion Of Medicaid Eligibility To The Uninsured Was A Cruel Sham Of Fewer Doctors And Poorer Results: Replace Obamacare Medicaid Expansion With Private Insurance And Improve Health Outcomes

From The Wall Street Journal, "How to Say Goodbye to ObamaCare: First, Republicans must abandon Democrats’ definition of success." by James Freeman:

Perhaps radical surgery will be needed, because the other awkward fact is that enrolling people in Medicaid means they will have fewer doctors available to treat them and worse health outcomes than people with private insurance—and often even worse than people without any insurance at all. Long before he became the head of the Food and Drug Administration, Dr. Scott Gottlieb wrote on this subject for the Journal in 2011. He described some of the relevant research:

• Major surgical procedures: A 2010 study of 893,658 major surgical operations performed between 2003 to 2007, published in the Annals of Surgery, found that being on Medicaid was associated with the longest length of stay, the most total hospital costs, and the highest risk of death. Medicaid patients were almost twice as likely to die in the hospital than those with private insurance. By comparison, uninsured patients were about 25% less likely than those with Medicaid to have an “in-hospital death.” Another recent study found similar outcomes for Medicaid patients undergoing trauma surgery.

• Poor outcomes after heart procedures: A 2011 study of 13,573 patients, published in the American Journal of Cardiology, found that people with Medicaid who underwent coronary angioplasty (a procedure to open clogged heart arteries) were 59% more likely to have “major adverse cardiac events,” such as strokes and heart attacks, compared with privately insured patients. Medicaid patients were also more than twice as likely to have a major, subsequent heart attack after angioplasty as were patients who didn’t have any health insurance at all.

Henry David Thoreau 200th Birthday: The Limits Of Government

Henry David Thoreau: Born: July 12, 1817, Concord, MA: Died: May 6, 1862, Concord, MA:

From "Civil Disobedience" By Henry David Thoreau, 1849:

I heartily accept the motto, "That government is best which governs least"; and I should like to see it acted up to more rapidly and systematically. Carried out, it finally amounts to this, which also I believe- "That government is best which governs not at all"; and when men are prepared for it, that will be the kind of government which they will have. Government is at best but an expedient; but most governments are usually, and all governments are sometimes, inexpedient.***Governments show thus how successfully men can be imposed on, even impose on themselves, for their own advantage. It is excellent, we must all allow. Yet this government never of itself furthered any enterprise, but by the alacrity with which it got out of its way. It does not keep the country free. It does not settle the West. It does not educate. The character inherent in the American people has done all that has been accomplished; and it would have done somewhat more, if the government had not sometimes got in its way. For government is an expedient by which men would fain succeed in letting one another alone; and, as has been said, when it is most expedient, the governed are most let alone by it. Trade and commerce, if they were not made of india-rubber, would never manage to bounce over the obstacles which legislators are continually putting in their way; and, if one were to judge these men wholly by the effects of their actions and not partly by their intentions, they would deserve to be classed and punished with those mischievous persons who put obstructions on the railroads.***After all, the practical reason why, when the power is once in the hands of the people, a majority are permitted, and for a long period continue, to rule is not because they are most likely to be in the right, nor because this seems fairest to the minority, but because they are physically the strongest. But a government in which the majority rule in all cases cannot be based on justice, even as far as men understand it. Can there not be a government in which majorities do not virtually decide right and wrong, but conscience?- in which majorities decide only those questions to which the rule of expediency is applicable? Must the citizen ever for a moment, or in the least degree, resign his conscience to the legislation? Why has every man a conscience, then? I think that we should be men first, and subjects afterward. It is not desirable to cultivate a respect for the law, so much as for the right. The only obligation which I have a right to assume is to do at any time what I think right. It is truly enough said that a corporation has no conscience; but a corporation of conscientious men is a corporation with a conscience. Law never made men a whit more just; and, by means of their respect for it, even the well-disposed are daily made the agents of injustice.***The authority of government, even such as I am willing to submit to- for I will cheerfully obey those who know and can do better than I, and in many things even those who neither know nor can do so well- is still an impure one: to be strictly just, it must have the sanction and consent of the governed. It can have no pure right over my person and property but what I concede to it. The progress from an absolute to a limited monarchy, from a limited monarchy to a democracy, is a progress toward a true respect for the individual. Even the Chinese philosopher was wise enough to regard the individual as the basis of the empire. Is a democracy, such as we know it, the last improvement possible in government? Is it not possible to take a step further towards recognizing and organizing the rights of man? There will never be a really free and enlightened State until the State comes to recognize the individual as a higher and independent power, from which all its own power and authority are derived, and treats him accordingly. I please myself with imagining a State at least which can afford to be just to all men, and to treat the individual with respect as a neighbor; which even would not think it inconsistent with its own repose if a few were to live aloof from it, not meddling with it, nor embraced by it, who fulfilled all the duties of neighbors and fellow-men. A State which bore this kind of fruit, and suffered it to drop off as fast as it ripened, would prepare the way for a still more perfect and glorious State, which also I have imagined, but not yet anywhere seen.

THE END

New IRS Data Shows Largest Tax Deductions Of High Income Households

From Tax Foundation, "The Largest Deductions Taken by High-Income Households" by Scott Greenberg:

[W]hat are the largest [tax] deductions that high-income Americans currently claim?

We can answer this question with a new set of data, released by the IRS last week, on households with over $200,000 in income in 2014. [Footnote omitted.]

***

Source: Tax Foundation

The deduction for state and local taxes is the single largest deduction claimed by households making over $200,000. These households deducted $243 billion in state and local taxes in 2014 – accounting for 47 percent of all state and local taxes deducted by U.S. households that year. In recent years, several lawmakers have proposed eliminating the state and local tax deduction altogether; this data shows that doing so would mainly impact high-income households.

Top Ten States With Most Inbound And Outbound Movers: United Van Lines Ranking

From United Van Lines, 2016 National Movers Study, "Retirees Moving to Mountain and Pacific West:"

United has tracked migration patterns annually on a state-by-state basis since 1977. For 2016, the study is based on household moves handled by United within the 48 contiguous states and Washington, D.C. This study ranks states based off the inbound and outbound percentages of total moves in each state. United classifies states as “high inbound” if 55 percent or more of the moves are going into a state, “high outbound” if 55 percent or more moves were coming out of a state or “balanced” if the difference between inbound and outbound is negligible.

Moving In: The top inbound states of 2016 were:

1. South Dakota
2. Vermont
3. Oregon
4. Idaho
5. South Carolina
6. Washington
7. District of Columbia
8. North Carolina
9. Nevada
10. Arizona

South Dakota is the most popular moving destination of 2016 with nearly 68 percent of moves to and from the state being inbound. The state has continued to climb the ranks, increasing inbound migration by 23 percent over the past five years. New to the 2016 top inbound list are South Dakota at No. 1 and Arizona at No. 10 with 68 and 57 percent inbound moves, respectively.

Moving Out: The top outbound states for 2016 were:

1. New Jersey
2. Illinois
3. New York
4. Connecticut
5. Kansas
6. Kentucky
7. West Virginia
8. Ohio
9. Utah
10. Pennsylvania

In addition to the Northeast, Illinois (63 percent) moved up one spot on the outbound list, to no. 2, ranking in the top five for the last eight years.

New additions to the 2016 top outbound list include Kentucky (58 percent), Utah (56 percent) and Pennsylvania (56 percent).

Women Get About 25 Minutes More Sleep Per Night Than Men According To Fitbit Data

From Fitbit, Fitbit News, "How Much Sleep Do Fitbit Users Really Get? A New Study Finds Out" by Danielle Kosecki:

The Gender Sleep Gap

For the second year in a row Fitbit data scientists found women get about 25 minutes more sleep on average each night compared to men. The percentage of time spent in each sleep stage was also similar—until you factor in age.

The Poor, The Middle Income, And The Wealthy Spend A Large Share Of Income On Luxuries

From MarketWatch, "Low-income families spend 40% of their money on luxuries" by Leslie Albrecht:

The wealthiest families (the top fifth of earners) spend around 65% of their incomes on luxury goods and 35% on necessities, according to the study, which looked at spending habits between 1984 and 2014. Middle-income households weren’t far behind: They spend 50% on luxuries and 50% on necessities.

Even the lowest income families (the bottom fifth of earners) spend 40% on luxuries and 60% on necessities, according to the study’s author, Torsten Slok, chief international economist for Deutsche Bank Securities.

Source: 

The median household income in the U.S. recently rose to $59,361.

The bottom two fifths of earners made $47,300 or less in 2014, according the Tax Policy Center. The middle two fifths made between $47,300 and $134,300 and the top fifth made more than $134,300.

18 States Plus DC Still Have Estate Or Inheritance Taxes Or Both As Other States Eliminate Death Taxes

From The Wall Street Journal, "Why More States Are Killing Estate Taxes: Competition between states for wealthy taxpayers is fueling tax cuts" by Laura Saunders:

In the last three years, nine states have eliminated or lowered their estate taxes, mostly by raising exemptions.

***

Source: The Wall Street Journal

Canada's Universal Health Care Has Poorer Serious Illness Outcomes And Longer Wait Times For Medical Procedures Than US Health System: US Medicare Coverage Is More Comprehensive Than Canada’s Medicare

From Wharton, Knowledge@Wharton, "Is Canada the Right Model for a Better U.S. Health Care System?":

Still, “there are some things we can learn” by studying the Canadian system, [Mark] Pauly [Wharton professor of health care management] argues. “Number one, although in many ways the system looks like ours, the system has a much greater emphasis on primary care and less emphasis on specialist care and hospitalization, and on complex and costly procedures. And that probably contributes a lot to the lower spending [in Canada], because while primary care can be good for you, expensive procedures such as for cancer may add only a few months of life but cost hundreds of thousands of dollars.”

Pauly adds, “Ordinary people in Canada are healthier than in the U.S., but outcomes for cancer and very serious illnesses are less good there. It’s a great place to live as long as you don’t get too sick, as one critic put it.”

Another fact that might dissuade Americans from duplicating the Canadian model, Pauly adds, is that “Canadians have a longer waiting list for things like joint replacement, so if your hips are killing you in Canada, you may wait months for that [surgery] to happen. In the U.S., the orthopedic surgeons are calling you every day, wondering when you are going to come in for your joint replacement procedure. We probably do too many; they probably do too few. But the safety valve for Canada is that they can always come across the border, and have a procedure done here.”’***[Michael] Decter [a former deputy minister of health for Ontario] says. “Medicare [in the U.S.], which clicks in at 65, is more comprehensive than Canadian Medicare; it pays for a lot of services that we don’t pay for.

Despite Politicians Claims, State Funding Levels Have Little Effect On Public College Tuition

From The Wall Street Journal, "What Causes High Tuition? Don’t Trust Your Intuition: When states cut spending by $100, students at public colleges do pay more—but the increase is only $5." by Preston Cooper:

Tuition goes up no matter what state legislators do. Public colleges, with state boundaries insulating them from competition, and generous federal student aid programs at their disposal, charge as much as they can get away with. Changes in state funding are largely irrelevant.

In a new study, I compare tuition and direct state funding changes at four-year public colleges between 2004 and 2015. This covers both a boom in state funding (2004-08) and a bust (2008-12). Sure enough, the relationship is quite weak. Less than 5% of changes in state funding pass through to higher tuition. In other words, if funding falls by $100 per student, tuition will rise by less than $5.

Colleges do tend to cut spending when state funding goes down. But the expenditures they cut are usually in areas unrelated to instruction, such as research and administration. When funding goes up, colleges largely plow that money into higher spending rather than return it to students through lower tuition.