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Posts Tagged ‘income redistribution’

President Donald Trump is proposing more tax cuts for the rich. He claims there will be no loss of federal revenue with his tax cuts. This is the standard Republican Party Establishment lie.

Given that Trump’s plan is similar to what Trump proposed on the campaign trail, the Committee for a Responsible Federal Budget (CRFB) did a rough cost estimate of his latest ideas and concluded they could cost $5.5 trillion in lost revenue during the first decade.

CRFB estimates the overall cost could go as high as $7 trillion if limits on tax breaks that the plan suggests apply only to high earners. Or the cost could fall to $3 trillion “assuming credits and exclusions are eliminated as well as deductions.”

This means sharp cuts to programs the middle class and poor need, while, no doubt, keeping welfare programs for the rich, such spending more on the military than the next 25 nations combined, 24 of whom are US allies. Corporate subsidies are also welfare for the rich since they help keep corporate profits and the stock market bubble growing, all of which mostly redounds to the rich.

Oh, and we can’t forget the next biggest lie; tax cuts for the rich trickles down the the 99 percent in the form of jobs. There is not one shred of evidence that giving tax cuts to the rich has created a single net job. There is plenty of evidence, on the other hand, that tax cuts for the wealthy have destroyed millions of US jobs.

That’s because the rich usually invest their tax cuts gains in the stock, bond and political markets. They buy up politicians by the barrel full and then have their politicians pass legislation that will keep inflating their stock, bond and housing bubbles, which means exporting millions of jobs overseas and then redistributing the difference between the old higher US pay and the new lower third world slave labor pay to the rich via higher corporate profits, surging stock and bond markets, and rising dividends.

In the meantime, due to the reduced tax revenue, our roads and bridges will continue to crumble, our public schools will continue to be financially gutted, the cost of entering a public park will continue to rise, the unemployment rate will rise, and so on and so forth.

Don’t be fooled by the same lies President Ronald Reagan and Dick Cheney and Arthur Laffer fed us. Tax cuts for the rich will not pay for themselves, nor will they create jobs, but they will corrupt your government more, and it is already the most corrupt in the developed world. Both major political parties are corrupted to the core.

 

This suggests that any working class concerns addressed by Trump during the campaign has been rendered moot. Trump, in other words, is now completely owned and 100 percent influenced by Wall Street and the Republican National Committee and their corporate owners.

By the way, a story in Newsweek puts it a little less scary than I. “‘…while major tax cuts have been enormously beneficial to the wealthy by reducing their taxes and increasing their incomes the most, the distribution of benefit for working people has been comparatively negligible. That is not the argument of some liberal politician—it was the finding of Martin Feldstein, the chief economic adviser to President Ronald Reagan, in his analysis of the Tax Reform Act of 1986.'”

Feldstein, in other words, said the creation of jobs by tax cuts for the rich “has been comparatively negligible.”

Click here for the full Newsweek story.

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Home mortgage applications

To one my stories about how income had finally begun going up in 2016, somebody wrote, “Yes the 80 bucks more a month I’m getting now completely covers the hundreds of dollars my rent has gone up due to rich developers moving in and gouging us all.”

There are a few things to be said about the comment above. As you can tell by the graph above, applications for home mortgages peaked in 2005 and have dropped quite a bit since then. So why are home and rental prices still shooting through the roof?

The big banks in 2007-11 conspired together to keep over 50 percent of vacant houses off the market so as to jack up prices. Home prices have artificially risen since then. The banks have allowed an increasing dribble of these homes back onto the market as prices have artificially and illegally risen.

Rents are artificially high as well, and for the same reason. What the big banks have done is commit a crime called “a conspiracy in restraint of trade.” This collusion redistributes income from home buyers and renter (the 99 percent) to share and bondholders of the 1 percent.

90 to 95 percent of US population growth is due to immigration. When population constantly increases while large amounts of housing units are illegally taken off the market, the result jacks up housing prices and rents. See Shadow Inventory: More Houses Will Soon Be Available for Sale–Rismedia.com. See also The 7-Million Housing Shadow Inventory Could Trigger A Price Avalanche–Business Insider.

The government has changed the way it measures inflation twenty times since 1981 so as to reflect a lower rate of inflation than actually exists. This means real wages are actually higher than they would have been under the old methods of measuring inflation, so that when the government tells us wages have been stagnant for thirty-six years, it really means real wages have gone down significantly.

Meanwhile, increases in home and rental prices are not actually counted in the inflation rate. See How to Fix the Housing Component of CPI–Slate. Food and energy prices are not included either, but they used to be. There’s a reason for this; inflation measured against wage increases would demonstrate real US wages have plummeted over the last three and a half decades, rather than stagnated. Both Republicans and Democrats in public office don’t want you to know the real story, and neither does their corporate news media.

Both major political parties are controlled by big corporations, billionaires, hedge funds and Wall Street investment banks, and most of these benefit from this conspiracy in restraint of trade. So don’t expect the US government to do anything about this illegal manipulation of prices. It isn’t going to happen until we get honest government back to Washington.

Editor’s note;

The big banks have conspired against Federal law and supply and demand to withhold product from the market in order to manipulate prices and profits upward so it is the renters and buyers who are ripped off. Much, if not all, of this conspiracy has to do with mortgage backed bonds, and the profits and losses to be had from them. A loss in value of 8 percent in the housing that backs triple B rated bonds sends the value of those bonds down to zero, according to Michael Lewis in The Big Short. Likewise, he writes, a 20 percent slump in the price of housing sends the value of AAA home mortgage backed bonds to zero. A lot of billionaires and millionaire investors lose in this instance. So the big banks conspired to keep over 50 percent of the vacant housing off the market in order to prop up the value of those bonds. However, there are other significant benefits to those banks to keep houses off the market. Buyers and renters pay the price of this conspiracy because the obvious result of the actions of the big banks is to redistribute hundreds of billions, if not trillions of dollars, every year from the 99 to the 1 percent.

Dear Democrats, please note then President Bill Clinton refused to sign legislation that would’ve regulated derivatives. Home mortgage backed bonds are a derivative, since their value is derived from an underlying asset. That’s why they’re called derivatives.

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Rexnord Corporation is closing its ball bearings plant in Indiana, laying off its 350 workers, and exporting those jobs to Mexico. In addition, as part of its US workers severance package, many of those workers are training their Mexican replacements, who will $3 an hour with no benefits. John Feltner is a machinist earning $25 an hour in the Indianapolis, Indiana plant. He resents having to train his replacement, but he’ll lose his severance package of $5,000 if he refuses.

Most of the difference in pay between US and Mexican workers will go straight into the pockets of wealthy shareholders. Rexnord’s share price peaked at $30.82 in April 2014. It’s been dropping ever since. It hit a low of $14.72 on January 15 2016, rose a tad, and has stayed stagnant since, hovering around $22. No doubt CEO Todd Adams is hoping that exporting jobs to Mexico will increase its bottom line and attract investors to bid up the share price and his compensation. His CEO pay is tied to the share price thanks to legislation signed by then President Bill Clinton.

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Exporting jobs and CEO pay tied to corporate share price are two of the biggest factors in the widening gulf between the 1 percent and everybody else because they redistribute income and wealth from one group to the other. Currently, six individuals own more wealth than the bottom 50 percent of humanity, while the 1000 richest individuals own more wealth than the bottom 70 percent. Currently, in the USA, the 1 percent steal 35 percent of all income every year, compared to 8 percent in 1980, thanks to their ownership of such politicians as the Clinton’s, Wyden, Mitch McConnell and Orrin Hatch.

John Feltner and his 350 fellow workers lost their jobs thanks to Bill Clinton, who signed legislation deregulating Wall Street, as well putting his signature on the North America Free Trade Agreement (NAFTA. NAFTA was negotiated by Clinton’s representatives with an eye to getting US corporations to export US jobs to Mexico in order to boost their bottom lines. After he left the presidency, Wall Street rewarded the Clinton’s for their service to the tune of tens of millions of dollars. The Clinton’s are still faithful servants of Wall Street in their war against the middle class, such as the workers at the Rexnord plant.

We also can’t forget Democratic Wall Street Senator Ron Wyden has continuously supported redistributing the income of the middle class to billionaires. The Democratic Party is corrupted to the core by big money, though maybe a bit less than the Republican Party. But then again, maybe not.

“The big picture is that American jobs are leaving this country to exploit cheap labor,” Feltner said. “When you start taking away the middle class, what do you have left?”

This is the sentiment that President Donald Trump played to so effectively during the 2016 presidential campaign. It spoke to John Feltner somewhere down deep.”

“He’d been a loyal union man for years, been raised on the notion Democrats were the party of the working man and made calls for Democrats from union phone banks. But after the trade agreements that Bill Clinton and Barack Obama signed, and after Trump spoke to the plight of workers at places such as Carrier, John Feltner broke ranks.

With the layoff fresh on his mind, he cast his November vote for Trump. He says most of his rank-and-file union members did the same.”

And what were those workers supposed to do? Support Hillary Clinton who aspired to export millions of US jobs to China via the Trans Pacific Partnership (TPP), which was being negotiated on behalf of Wall Street by then President Barack Obama?

Feltner and his fellow employees don’t know what they’re going to do once their jobs are gone. Thank you Bill Clinton. Thank you Barack Obama.

For more on this story, click the following link, Rexnord’s Indiana Plant Exported to Mexico–USA Today

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Student Loans
Student loans are a scam intended to redistribute income from college students to wealthy individual and institutional investors. College students today owe more than $1.4 trillion dollars in student loans, and that figure is getting bigger by the day. Total student loans outstanding exceeded total credit card debt when it hit $1.2 trillion in 2014. Only mortgage debt is greater than student loan debt, but with home values going up, mortgage debt is an investment, whereas student loans have become something of a gamble for a large number of students. (Friedman)

Why do the student loans keep piling up?

About twenty-three years ago, somebody on Wall Street discovered student loans could be securitized. That’s a situation in which investment firms buy student loans from issuers, pool them together, and then issue bonds backed by the loans to wealthy investors. The loan originators earn hefty fees with every loan they sell. The investment firms also obtain a large fee with every bond they sell. (Carrillo)

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For example, a private commercial bank might issue $10 million in student loans at 6 percent interest. A student spends four or five years in college, and then spends ten to twenty years paying off a loan. So that $10 million principal can earn another $10 million in interest or more over the lifetime of the loan. An investment bank might pay $2 million or more for the $10 million in loans from the commercial bank. Then the investment bank will turn around and collect millions in fees from investors for the same loans once they’re bundled together and bonds are issued. The investors might experience a growth in the value of their bonds, so they can sell them, in which case, somebody will get a fee for performing the task. There’s money to be had for all involved in this process, except for the borrowers. (Carrillo)

Most student loans are guaranteed by the federal government. So there’s no risk to investors. It’s free money. The federal government pays the interest on the loans to the investment banks even when the students are still in school. Once the students are out of school, they are required to pay on the interest and the principal to the bondholders. This is how your student loan payments mostly go directly into the pockets of the 1 percent via these bonds. Some of the proceeds go to the service providers.

The Wall Street business strategy on this matter has always been simple: Push the federal government to limit federal grants to college students, and expand the student loan program. That’s precisely what has occurred. In 2016, total outstanding student loans represented roughly 7.5 percent of the United States gross domestic product, up from 3.5 percent only ten years earlier. Nearly 43 million Americans are chained to student loan debt, each with an average balance of $30,000. (Wikipedia)

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While the total number of Federal Pell grants has grown in current dollars since 1976, the cost of education has grown faster. In 1976, for example, the average Pell grant paid 72 percent of the maximum expense of attending a public four year college or university. This figure grew to 79 percent in 1979. Nowadays, the average Pell grant is less than half of that, hovering inside the 32 to 34 percent range. (ACE)

This forces many students to borrow money to help finance their higher education, and it also plays straight into the hands of wealthy investors. The interests of those investors seem to coincide with the concerns of many politicians within the federal government and both major political parties. Student loan default rates jumped from 2010 to 2013. Along with other corporate media sources, CNN reported in 2012 that “The percentage of borrowers who defaulted on their federal student loans within two years of their first payment jumped to 9.1% in fiscal year 2011, up from 8.8% the previous year, according to U.S. Department of Education data.” Investors began selling off their bonds, resulting in declining values. Something had to be done to restore investor confidence, and so the federal government doubled student loan interest rates on all new loans from 3.4 to 6.8 percent on July 1, 2013. (Sheehy)

This increased the return on investment while doubling the burden on the 99 percent who take out new loans to finance what is called the American dream, but it’s really becoming the American nightmare. This is rightly called income redistribution. The doubling of student loan interest rates benefited smaller Wall Street investment banks, as well as such Wall Street heavyweights as JP Morgan/Chase and Goldman Sachs. Loan originators and investment companies receive billions of dollars in fees every year from new student loans. Both JP Morgan/Chase and Goldman Sachs are publicly traded corporations. Both corporations are listed among the Dow Jones Industrials, and both keep their stock prices rising, in part, to the securitization of student loans, which benefits their affluent shareholders.

The more interest students are forced to pay, the higher the bonds can sell for, and the more attractive they are to investors, especially since the government guarantees them. (Carrillo) In this way, America’s higher education policies have been legislatively constructed so as to redistribute the income of the 99 to the 1 percent via higher student loan debt.

Wall Street banks also rigged the game even more against student loan borrowers by having the government make it almost impossible to discharge student loan debt through bankruptcy. Students are tied to the debt until it’s paid, or they die. This leaves less money for students to spend when they graduate, forcing them to curtail their purchases, and weakening the economy in the process.

When the US congress and President Obama allowed the interest rate of new student loans to double to 6.8 percent in 2013, the public outcry was so heavily against it that politicians had to reduce student loan interest rates within a year. The burden for students and their families had been too great. The rate was dropped to 4.9 percent in 2014, which was still 50 percent higher than in 2012. (Lobosco)

Bernie Sanders was right when he declared the government could provide free public education to its people. The money is there, and always has been. During the economic crisis of 2008-2009, the federal government and the Federal Reserve gave out tens of trillions of dollars to rich investors, investment banks and hedge funds. Politicians called these actions “quantitative easing” and “bailouts.” (Irvin) See The $26 Trillion Bailout to Save Incompetent but Rich Investors-JohnHively.wordpress.com. If trillions of dollars to bail out the rich are there whenever they need it, why isn’t that money also available when the rest of us need it?

The answer, of course, is simple.

Like many other issues, student loans are a corrupt, financially rigged game that shows how the government acts as a conduit in redistributing income from the 99 to the 1 percent when it doesn’t have to. Just follow the money and you will know who is corrupting your government.

Works Cited
Friedman, D. (May 17, 2014). Americans Owe $1.2 Trillion Dollars In Student Loans. New York Daily News. http://www.nydailynews.com/news/national/americans-owe-1-2-trillion-student-loans-article-1.1796606

American Council on Education, (ACE) http://www.acenet.edu/news-room/Documents/FactSheet-Pell-Grant-Funding-History-1976-2010.pdf

Merganser Capital Management, Investment Memo http://www.merganser.com/PDF/Memo/2015-Q3.pdf
http://money.cnn.com/2012/09/28/pf/college/student-loan-defaults/

Carrillo, R. (April 14, 2016). How Wall Street Profits From Student Debt, Rolling Stone. http://www.rollingstone.com/politics/news/how-wall-street-profits-from-student-debt-20160414

Irvin, N. (October 29, 2014). Quantitative Easing is Ending, Here’s what it did, in Charts. New York Times. October 29, 2014. https://www.nytimes.com/2014/10/30/upshot/quantitative-easing-is-about-to-end-heres-what-it-did-in-seven-charts.html?_r=0

Sheehy, K. (July 3, 2013). What the Stafford Loan Rate Hike Means for Students. US News and World Report. http://www.usnews.com/education/best-colleges/paying-for-college/articles/2013/07/03/what-the-stafford-loan-interest-rate-hike-means-for-students

Lobosco, K. (June 30, 2016). Student Loan Intereest Rates Are Going Down. CNN Money. http://money.cnn.com/2016/06/30/pf/college/student-loan-interest-rates/

Wikipedia, Student Loans in the United States. https://en.wikipedia.org/wiki/Student_loans_in_the_United_States

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On February 17 2017, the US senate will resume its duties; one of which will be to confirm or reject Neil Gorsuch as President Donald Trump’s choice to be the next US Supreme Court Justice.

Several days ago, the Guardian reported Trump had urged Wall Street Senate Majority Leader Mitch McConnell to eliminate Democrats potential use of the filibuster to stop Gorsuch, which is the so-called nuclear option. The story provided no analysis, and for a good reason, which I’ll get to below.

Anyway, Gorsuch needs sixty out of 100 possible senate votes in order to be confirmed to the post. The nuclear option would eliminate the sixty vote threshold, by instituting a fifty-one vote threshold. The Republicans hold fifty-two seats in the US senate, while the Democrats hold forty-eight. That means eight Democrats must vote to sustain Gorsuch’s nomination, or the candidate will fail. If Gorsuch fails to get sixty votes, the Democrats can filibuster his nomination, putting an end to it, unless the so-called nuclear option is used by Republicans. That’s not going to happen.

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The nuclear option would mean the end of the filibuster in the US senate. The filibuster has been used to ensure a sixty vote majority is always needed to pass any legislation. The result has been years of gridlock. Politicians of both major political parties have abused the filibuster over the years, so as to ensure they can fail to solve the problems that have perplexed the nation, and have a ready made excuse for the folks back home.

Once the sixty vote threshold is eliminated, however temporarily, a simple up and down vote for Gorsuch can take place. However, Republican voters might get a bit angry the nuclear option isn’t being used for their issues. The Republican Party establishment, with control over the white house and both houses of congress, could easily end legalized abortion. That’s what their base wants them to do.

However, doing so would eliminate abortion rights as a wedge issue with which to manipulate the emotions of grassroots Republicans, and divert their attention from other things, such as passing trade treaties that make it easy for US corporations to export US jobs overseas, and redistribute the difference between the older higher US pay and the new lower foreign wages to the 1 percent via higher corporate profits, share prices and surging dividends.

Likewise, the Democratic establishment will not want the nuclear option used. Then they’d need to please the grassroots of their base for a simple up and down vote can occur over numerous issues that conveniently cannot reach the sixty vote threshold. This includes a vote for amnesty of undocumented immigrants. A vote for the Dream Act can occur. A vote for a renegotiated NAFTA can take place. A vote to raise tariffs on US goods manufactured overseas and exported to the United States can occur. A vote to raise the minimum wage would be a great opportunity. A vote to rein in the excesses of Wall Street can be had. A vote to tie CEO compensation to corporate crimes can take place, such as corporate money laundering of Mexican drug cartel money.

The Republican and Democratic establishments, which are the major corporations, Wall Street executives, and billionaire investors who control the politicians of both political parties, will not want to see an aroused Republican base demanding simple majority votes on issues dear to their hearts, and which have been carefully cultivated by the corporate media. That would be against the financial interests of the establishment members. So, too, would the nuclear option be against their interests.

Like the conservative news media outlets, these issues are things the Guardian editors dare not mention. The Guardian is regarded as a liberal newspaper, and so the aim of the story is to raise the interest of liberal readers. However, the first duty of any editor is to edit and omit all news stories with a view to what the news ought to be, and that is closely related to the second duty of an editor, which is to never offend advertisers. The advertisers in major media news outlets are largely politically and financially powerful corporations. The loss of their advertising dollars would be a sharp blow to any news media outlet, such as the Guardian. The Guardian editors must walk a tightrope; keep liberals reading, while pleasing major corporate advertisers.

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So expect the Democratic establishment to come up with at least eight Wall Street senators willing to vote for Gorsuch to avoid the nuclear option. Expect Wall Street Senator Ron Wyden to be the first to cross the aisle on behalf of Gorsuch to avoid raising the hopes of Democratic and Republican voters everywhere should the nuclear option be used.

 

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President Donald Trump has attacked the H1B Visa program, and high tech executives are after his hide for it.

The H1-B visa is supposed to allow US companies to import foreign workers for up to three years if there are insufficient US workers to fill positions. However, that’s not how it has worked.

US corporations regularly import guest workers via the H1-B program to replace their US workers, and they pay their foreign workers less than their US workers. In effect, the US government is allowing the H1-B program to lower US wages, which increases profits and share prices. We all know Wall Street and several billionaires call the shots of both major political parties.

The US high tech workers at Southern Edison, Toys R Us, Disneyland, Intel, the University of California and hundreds of other companies have seen their jobs vanish as foreigners have taken their place. Click Computerworld for another article on this. In many cases, the US workers have been forced to train their replacements.

Once Trump declared his opposition to the H1-B Visa program, high tech spokespeople all over the US declared there was a shortage of US high tech workers. This, of course, was a lie. But the US news media, both conservative and liberal, gleefully went along with the lie.

According to the Economic Policy Institute,

1 “The flow of U.S. students (citizens and permanent residents) into STEM fields has been strong over the past decade, and the number of U.S. graduates with STEM majors appears to be responsive to changes in employment levels and wages.
2 For every two students that U.S. colleges graduate with STEM degrees, only one is hired into a STEM job.
3. In computer and information science and in engineering, U.S. colleges graduate 50 percent more students than are hired into those fields each year; of the computer science graduates not entering the IT workforce, 32 percent say it is because IT jobs are unavailable, and 53 percent say they found better job opportunities outside of IT occupations. These responses suggest that the supply of graduates is substantially larger than the demand for them in industry.” Economic Policy Institute–Guest Workers high skill labor market analysis

The H1-B visa program has been used to keep US high tech workers unemployed and high tech wages down. They’ve been kept down since the “inception of the program.” The program is likely why wages for US high tech workers have been stagnant in real terms since 1990.

Even if you don’t side with President Trump on any other issue, even if you absolutely hate his guts, side with him on this issue.

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Finland is several heads above the United States in public education. They used to be about the same in terms of student testing. Then in the early 1970s, the Finns decided to undergo a massive reconstruction of their educational system. They took off, leaving the US in the dust.

Finland has the highest test scores in the Western world. How’d they do that?

Finland’s students have the western world’s shortest school days and shortest school years. That’s to give kids time to be kids. They’re in school no more than 20 hours a week, and that includes lunch. They’re also among the least tested students in the world. Finland provides a vast social safety net for all families.  Finnish students get almost three times as much recess as US students. All of this is because Finland has a student centered education system. The success of students is the most important thing in the Finnish system.

In the United States, increasing the corporate profits of the publishing industry is the most important thing the US educational system is supposed to do. So most everything in the US K-12 educational system is geared toward testing.

Corporate profits are had with every test a child takes. This is precisely why US students are the most tested in the world, and by a wide margin. However, it gets worse than that. Standards are continuously raised, even if most of the students, or a significant segment of them, fail the current standards. That’s because the higher the standards, the more students fail and need to retake the tests, over and over again, until they pass the tests, or they move up in grade. Every test students are forced to take provides the testing industry with greater profits. But when a sufficient number of students begin to pass the tests, the standards are raised, or the tests are changed, to make them more difficult to pass.

The movement to tie teacher pay to the success of student testing forces teachers to teach to the test. Recess has been massively cut at many public schools. Recess has been eliminated in some. US education is about massive test preparation, and much of the preparation materials comes from the US publishing industry, which increases their profits.

The last thing the people behind US educational reforms want, as well as the corrupt politicians behind them, is an educational system that prepares students to be better citizens and gives them enhanced job skills, although many educators try to do this in what spare time they have to teach this stuff.

The testing industry keeps this farce going by giving campaign contributions and other perks to US politicians, which is precisely why the US educational system typically ranks about thirtieth in the world, and never moves up, and why Finland typically rates in the top five, and is often number one in the world.

In the US, educational reform means redistributing local and state tax dollars to the rich shareholders of the testing industry. Local control of public education means the testing industry might not be able to get away with this theft throughout the US, and this is why the Feds have become more involved in K-12 public education.

In other words, financial corruption guides US government K-12 educational reform, while the needs of students guide educational reforms in Finland.

 

 

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