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Student Debt is Crushing the Economic Future of the Young

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If a bad job market wasn’t damaging enough, the cost of paying off student loans does much more harm to the long-term prospects of young people than is commonly realized.

Bill H at Angry Bear has been having a long-running argument over a dubious effort by the CBO to cook the books yet again (we’ve covered past efforts: for a partial list, see here here, here, and here). He’s been criticizing the CBO (correctly) for changing its valuation method for student loans to something called Fair Market Valuation. Bill H contends the new approach is bunk. Currently, because borrowers can’t escape student loans, servicers collect $1.22 on the $1 when a loan goes into default. But perversely, the “Fair Market Valuation” method anticipates that loans going into default result in losses. That’s awfully convenient, since it justifies charging higher interest rates. As Bill H argues by e-mail: :There is no history of government-backed student loans being risky and the cost is $.94 on each dolar loaned. A student loan is 99% inescapable.”

He continues that discussion in a current post, Ripping Off College Students’ Economic Future, and there is an additional part of his analysis that seldom gets much public attention, which namely is the lifetime cost of student loans. It’s much higher than you’d think, since the need to retire the debt means that young people start saving later, which means they buy house later (if ever) and accumulate less in the way of retirement assets. But the amount lost isn’t just the borrowings plus the interest payments. By not having savings early in their working life, they miss the effect of having them compound those extra years. That has a much bigger effect than you’d imagine.

I’ll start with his conclusion:

Are students being ripped off by government entitlement programs? Yes they are being ripped off; but, not by Social Security or Medicare as Stanley Druckenmiller suggests. Nor are student loans costing the federal government and tax payers as much as the recent analysis of student loans done by the CBO’s Douglas Elmendorf. In reality, the risk to the government and taxpayers comes from these students being less successful in accumulating wealth and increasing income which as DEMOS has suggested would cost $4 trillion is wealth alone. Unburdening students from a lifetime of student loan debt would benefit the economy.

Yes, folks, $4 trillion.

Let’s look at how he gets there:

What is threatening the future wealth and income of college students is the increasing debt taken on by students seeking the education necessary to have a chance in a global economy where investments are seeking fewer labor intensive opportunities. The increased funding necessary to go to college is the result of decreased governmental funding of schools, declining or stagnant household incomes, financial strategies delineating the increased risk of student loans (CBO, The New America Foundation, Heritage Foundation, etc.), and the increased cost of attending colleges and universities (which as Alan Collinge of Student Loan Justice Org. states cost increases have outstripped CPI and even Healthcare).

Student Debt has quadrupled from 2003 to 2013 going from ~$240 billion to > $1,000,000,000. Up from 41% in 1989, 66% of all students now have an average debt of ~$27,000. The rise in average student debt can be traced to a sharp decline in state funding of public colleges of 25% since 2000 and a stagnation/decline of household income for the vast majority of US households over a similar time span. As Dr. Elizabeth Warren pointed out in “The Coming Collapse of the Middle Class” . . . where a high school diploma and a sound work ethic were once the ticket to into the middle class, the college education and a two incomes are now the surest way into the middle class….. As reflected in an August 2013 study by Demos “At What Cost” ; the amount of debt carried by student has not only increased, it also varies by amount of family income. 75% of all BA graduates coming from families with incomes < $60,000 have varying degrees of debt as compared to 48% of those coming from families with incomes >$100,000. 14% of all low income students leave with loan debt > $30,000 as compared to 9% of students coming from higher income families.

Yves here. So you can see how skyrocketing higher education costs and the use of student debt to enable it perpetuates income differences. Bill H points out that blacks are the group with the highest frequency of borrowing, Asian-Americans the lowest. Back to his post:

Young college educated students without student loan debt accumulate more retirement funds sooner, purchase homes sooner (more expensive homes at that), put down larger down payments, and paid lower interest rates. “Households with education debt, however, had higher average incomes than those without, which is consistent with other research on the incomes of young college-educated households.”. Much of that difference comes from the preponderance on getting a higher salary to offset the loan….

Burdened with student debt, a student can expect to lose lifetime wealth of ~$208,000 when compared to unburdened students. “’Nearly two-thirds of this loss comes from the lower retirement savings of the indebted household, while more than one-third ($70,000) comes from lower accumulated home equity; because of the two withdrawals from savings later in their lives, the liquid savings gap is just $4,000.’ In general, ‘it can be predicted a $1 trillion in outstanding student loan debt will lead to total lifetime wealth loss of $4 trillion for indebted households.’”

Screen shot 2013-11-08 at 5.37.20 AM

The biggest economic hurdle to young people is the raw deal they are getting with education and in the lousy job market. Bill H argues in the rest of his post that the argument by the CBO and the austerians that students can afford higher interest rates because they are “only a few dollars a month more a month” is inaccurate, since the advocates of squeezing young people harder underestimate how long the loans will be outstanding (in our new normal, new graduates are almost certain to have work interruptions, insuring that it takes them longer to pay off the debt, which in turn magnifies the impact of higher interest rates).

But the powers that be have found turning adults into debt slaves as early as possible to be a brilliant bit of social engineering, forcing the young to stay in line lest they mar their employment prospects. And as long as the powers that be continued to be successful in pitting the young against the old rather than against their common enemies, a predatory and extractive financial services industry and a super-wealthly class that prefers to mine rather than develop the countries in which they hold investments, it’s unlikely that either group will escape the grim future that the neofeudalists are in the process of creating.

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218 comments

  1. Stallworth

    Free market: Markets dominated by the financial and propertied classes whose objective is to secure all discretionary income for themselves, ultimately by asset stripping, leaving the economy without freedom of choice except to pay the rentier class. Hence, a market in which choice is minimized, by stripping away all government protection against monopoly and predatory behavior.

    1. greg

      Exactly. Unfortunately for all concerned, they cannot restrain themselves at that point, but unchecked must plunder the economy until social collapse. They will literally devour the foundations of their own, and our, prosperity, in their competition to gild their plumbing.

      The best analogy is over-fishing, where, at its peak of capitalization, a fishing fleet is idled for a lack of fish. The capitalist can expect the same for his factories and stores, when the median income sinks below the poverty line.
      Only those ships geared for the smallest fish, those factories and stores geared for the poorest customers, will stay in business, and then only temporarily.

  2. MikeNY

    Speaking of broken paradigms: “a college degree is the ticket to success”.

    Many colleges are simply remedial highschools. And not everyone can be a doctor, lawyer, software designer or banker.

    We need a liveable wage imperative. We need wealth redistribution.

    1. Walter Map

      The U.S. economy is being liquidated, so there really is no ‘ticket to success’ left anymore. All employments and professions are getting systematically crippled by the predatory domination of the financial industry. Formerly well-paying positions in manufacturing, teaching, legal services, information technology, engineering, construction have all been severely compromised and are heavily subject to pay reduction, benefits elimination, and rent extraction. Family farms and family businesses which had been properous for generations are becoming extinct. Even physicians are being replaced by cheap foreign imports and converted to wage slaves.

      Increasingly, the only hope a young Amerikan has of someday earning a decent living is to be able to rise like scum high enough in a corporate racketeering operation to profit from the liquidation. All others will sooner or later be consigned to the barrios. Most will be sooner. Many are already there, and their numbers are mounting every day.

      1. Banger

        The problem is that a college degree is the entrance ticket to many jobs–there are many reasons for this–for one thing finishing a degree shows you have accomplished something measurable and HR departments are, increasingly, about metrics.

        1. ambrit

          Banger;
          “..increasingly about metrics.” This ties in nicely with Mr. Pilkingtons piece today about R&D. As universities trend toward narrowly defined and increasingly metricized research programs, Human Resource departments, (which I elsewhere remarked is a term worthy of the Todt Organization,) are eschewing more nebulous human interactional skills for straight quantification. These practitioners of the New Priesthood should rather be called Cyborg Resources directors.
          As usual, the Quality of something is being subsumed in the Quantity of it.
          Do you want to p— off your HR next time you meet? Just mention to them that; “People are not numbers.”

          1. washunate

            One of the ironies I enjoy about our contemporary approach to paid employment in the US is that many of the economic solutions from the ‘left’ assume that our existing philosophy/approach to formal work is working fine and we just need more of it.

            But then when talk turns to specifics of exactly how our leaders in politics, business, academia, medicine, law, and so forth function and think, then the HR/OB discipline and management in general is widely mocked.

            I want to make one of those cheesy motivational posters with the caption: Work Sux – Moar Please!

            1. Lambert Strether

              The more I think about this, the more I agree with you. Best alternative I am seeing is co-ops a la Mondragon/Alperowitz. We should favor them and disfavor the rentiers….

              1. washunate

                Thanks for the follow-up comment; sorry I just noticed it now. Over the longer term, I think this is where discussion is headed in the US. What are other forms of organizing and deploying resources?

                But in order to really explore that question, one has to first accept how morally and practically bankrupt our institutions have become, how predatory the entire system is, not just the ‘safe’ villains like Walmart or McDonalds, but the ones actually enabling the system, like the leadership of our major universities, hospitals, urban cities, and the Democratic party.

          2. Bran

            HR gets a very bad rap because of this. I almost don’t want to tell people what I do because I get the exact same cringe and facial expression every time. Yes, sometimes HR has to track metrics…but not all of us are about numbers. We’re about people. HR is getting outsourced by more business-minded types who wants numbers, numbers, numbers. We’re just trying to stay relevant in a time where caring about people no longer seems to have a place unless we can quantify interaction.

      2. from Mexico

        Walter Map says:

        The U.S. economy is being liquidated….

        Not just the U.S. economy, but the world economy.

        Yves hits the nail squarely on the head when she speaks of “a predatory and extractive financial services industry and a super-wealthly class that prefers to mine rather than develop the countries in which they hold investments.”

        If you think U.S. workers have suffered under neoliberalism, then come to Mexico. You ain’t seen nothing if you haven’t looked beyond the borders of the U.S.

        There was a wonderful metaphor on CNN just yesterday for the way in which the world economy is being liquidated:

        http://www.cnn.com/video/?/video/world/2013/11/06/nr-mckenzie-china-halloween-sos.cnn&iref=allsearch&video_referrer=http%3A%2F%2Fwww.cnn.com%2Fsearch%2F%3Fquery%3Dhalloween%2B%26primaryType%3Dmixed%26sortBy%3Drelevance%26intl%3Dfalse%26x%3D29%26y%3D10#/video/world/2013/11/06/nr-mckenzie-china-halloween-sos.cnn

        It treats of a religious prisoner who was sent to one of China’s labor prisons. “China is a big labor camp,” he says. “It is monitored everywhere in this country.”

        Which brings us to the biggest of a number of very big lies told by the neoliberals: The assertion we hear so often from the austerians that workers in the U.S. must do with less so that workers in the “developing” world can have more.

        The only people who benefit from neolbieralism are those who belong to a transnational “predatory and extractive financial services industry and a super-wealthly class that prefers to mine rather than develop the countries in which they hold investments.”

        1. Walter Map

          You very strangely insist on referring to neoconservatism as ‘neoliberalism’, even though it should be perfectly evident, even to you, that there is nothing ‘liberal’ about it in the least.

          It was, after all, liberals who introduced, and still protect, so far as they can, the national programs of the social safety net and the interests of the general population.

          Liberals. Get it?

          Assuming you really do oppose neoconservatism, you do yourself no favors by persisting in using terminology that was designed by Koch-funded Libertarian think tanks for the purpose of discrediting proper liberalism to advance the destructive predations of corporatists.

          But that’s an assumption on my part and may not be valid. Neocon trojan horses have proven themselves clever in their depravity, and you may yet prove your membership in that club.

          Otherwise, you might like to look up the word ‘liberal’ in a dictionary, and refer to it frequently until you internalize the meaning of the word.

            1. craazyboy

              It does take a bit of research to learn that in poly-sci/econ speak, liberalism = libertarian back in the old days.

                1. from Mexico

                  F*ck the liberals.

                  Every new day, circumstances force me farther and farther into the socialist camp.

                  1. Walter Map

                    F*ck the liberals.

                    Exactly. It’s what every neocon propagandist used to say.

                    Until they mutated into ‘libertarians’, ‘neoliberals’, and ‘liberals’ through deliberate propaganda campaigns. And then the neoconservative propagandists quiety disappeared, along with the ‘neoconservative’ brand. That was expected, because the word ‘neocon’ had become definitively associated with corporate evil. That’s why the word ‘neocon’ has fallen out of the lexicon, as expected.

                    The ruse was noted by several observers on the old NYT forums even before the end of the Dubya administration. Certain economics bloggers seem to have missed it.

                  2. Christopher Rogers

                    @ from Mexico,

                    The “socialist” or communitarian camp is the only one that offers real hope for the global dispossessed – so I congratulate you on your wisdom and solidarity with those who wish to change the world for the better.

                    1. different clue

                      I remember reading once about Confucius telling some of his students that the most important thing at times was “rectification of language”. Labels can be useful if they are reliably and accurately defined and correctly applied.

                      This disquisition on how neolibism and neoconism are the same thing under sneaky bait and switch lables deeply underwhelms me. It feels like tinfoil applied to the wrong subject. I always understood the two terms to apply to two groups of people. The DLC Democrats are neolib. The PNAC-ers are neocon. Is that the general understanding?

            1. Walter Map

              You’re just annoyed because you’ve been exposed as a corporatist troll pretending to be a socialist. We got them all the time on the old NYT forums.

              Did you look up ‘liberal’ in your dictionary? Do you need a fourth-grader to explain it to you?

              1. from Mexico

                Walter Map, the ad hominems don’t improve your argument in the slightest.

                But hey, if you want to cling to your ignorance and be proud of it, go for it!

                1. Walter Map

                  Whining does not constitute a refutation. And a neocon posing as a socialist still smells like a neocon.

              2. Yves Smith Post author

                Neoliberal is a well established term. You don’t have the right to reject standard usage because it annoys you. And From Mexico is right, haranguing other readers about your desire to roll usage back is uninformed and rude. And you get righteous to compound your error?

                1. Walter Map

                  The term ‘neoliberal’ was introduced specifically to replace the term ‘neoconservative’, which had become toxic, in order to falsely associate corporatism with the social and political liberal tradition that opposes corporatism.

                  You’ve bought into Koch-funded propaganda terminology. You just haven’t figured that out yet.

                  Fine, don’t believe me. Check it out yourself. They’re laughing at you. And that is not an opinion. That is a fact.

                  1. AbyNormal

                    “In the United States […] the two main business-dominated parties, with the support of the corporate community, have refused to reform laws that make it virtually impossible to create new political parties (that might appeal to non-business interests) and let them be effective. Although there is marked and frequently observed dissatisfaction with the Republicans and Democrats, electoral politics is one area where notions of competitions and free choice have little meaning. In some respects the caliber of debate and choice in neoliberal elections tends to be closer to that of the one-party communist state than that of a genuine democracy.”
                    ― Robert W. McChesney, Profit Over People: Neoliberalism and Global Order

                    *

                    “Neoliberalization has not been very effective in revitalizing global capital accumulation, but it has succeeded remarkably well in restoring, or in some instances (as in Russia and China) creating, the power of an economic elite. The theoretical utopianism of neoliberal argument has, I conclude, primarily worked as a system of justification and legitimation for whatever needed to be done to achieve this goal.”
                    ― David Harvey, A Brief History of Neoliberalism

                  2. nobody

                    Walter Map,

                    The term ‘liberalism’ has long had a different meaning in Europe than it does in the US, and the term ‘neoliberalism’ as used here at NC and, rather widely, in the social sciences, is in the sense that is captured in the pictures on the cover of David Harvey’s A Brief History of Neoliberalism (Ronald Reagan, Deng Xiaoping, Augusto Pinochet, and Margaret Thatcher). See this article:

                    http://s-usih.org/2011/01/strange-transatlantic-career-of.html

                    The wikipedia entry (which notes that the term was coined in the 1930′s):

                    http://en.wikipedia.org/wiki/Neoliberalism

                    And David Harvey’s book:

                    http://www.amazon.com/Brief-History-Neoliberalism-David-Harvey/dp/0199283273

              3. AbyNormal

                your off the reservation here Walter…FM is far from a corporatist and its unmistakable in his many post.

                “Examine what is said, not who speaks”
                Arabian Proverb

                1. Walter Map

                  Not possible. We have studied corporatist propaganda and psy-ops tactics and strategies for a very long time. They are very well-funded, they are very clever and inventive, and the evidence shows that they have been extremely successful.

                  And they are not the least concerned that some of us will not be deceived.

                  1. AbyNormal

                    are you seriously suggesting Obama is a liberal?

                    “This is the permanent tension that lies at the heart of a capitalist democracy and is exacerbated in times of crisis. In order to ensure the survival of the richest, it is democracy that has to be heavily regulated rather than capitalism.”
                    Tariq Ali, The Obama Syndrome: Surrender at Home, War Abroad

          1. Klassy!

            I just don’t understand this comment at all. Words do not get their meaning from the dictionary. They get it from common usage. From what I understand, neoliberals see themselves as the heir of classical liberalism and they speak of “liberalising markets” and this has nothing to do with protecting workers.

            1. Walter Map

              Words do not get their meaning from the dictionary.

              Typical slimy neocon obfuscation. Naturally you burned your dictionary, if indeed you ever had one, so you could twist the meaning of words to fit your corporatist propaganda.

              It becomes clear why there do not appear to be any right-wingers posting comments on this blog. You guys are very careful to give yourselves a leftist cover.

            2. Walter Map

              they speak of “liberalising markets” and this has nothing to do with protecting workers.

              You don’t ‘liberalise’ markets by enabling corporatists to lock them down in monopolies and oligopolies.

              But the word usage is perfectly typical of the corporatist propaganda practice of perverting the terminology of liberalism to serve the purposes of wealthy right-wing predators. That way, they get to enrich themselves to the destruction of the public – and discredit their liberal enemies at the same time.

              You’ve bought into it either because you’re a leftist Useful Idiot or a troll who’s paid to support the scam.

              Either way, you’re really not doing yourself any favors.

              You need to look up the word ‘liberal’. Clue: it doesn’t mean ‘corporatist’.

              1. Klassy!

                What’s with the personal attacks?
                I’m sorry but you’re the one not doing yourself any favors.
                That’s all.

              2. Kurt Sperry

                Indeed, a simple disagreement on terminology turns into an excuse to full on flame other commenters? Yeah, no.

              3. Another Gordon

                The essence of ‘liberalism’, is the freedom of the individual. (See Wikipedia on ‘classical liberalism’). So far so good but the corporatists have managed to confuse whose freedom is involved. For them it is not citizens that should be free but corporations – hence the ‘neo’ prefix. The greatest evil is accomplished by twisted versions of the good.

                It’s a neat bit of footwork that has confused the hell out of lots of basically well-meaning folk. Here in Britain the Liberal Democrat Party thinks it’s treading in the great liberal tradition of advancing freedoms but since it’s been in coalition with the Conservatives its leadership has reliably supported the neoliberal line – more freedoms for corporations.

          2. Banger

            Society, language, political terms are all changing very rapidly. The liberals of a prior era (1932-1980) were actually social democrats. Today’s liberals are have moved from the center-left to the center-right–I think Hedges offers us the best critique of that class of people. Liberals today want to preserve elements of the social safety net to avoid social chaos–they are on the right now because their goal is stability not social justice. They believe we have come close to achieving the goals of the broader civil rights movement. In many ways traditional liberals have given up on economic justice.

            Neo-liberals, in contrast are also on the right but they actively oppose economic egalitarianism and put their trust in globalism, global corporations, international organizations and so on–they support what the right likes to call “world government” and some of us call the “The Empire.” They differ from traditional liberals in that they don’t seek stability but favor the elimination of nation states and have no interest in preserving safety nets or anything else. Liberals, in contrast believe in principles of social justice they just don’t care to do much about it, at least not in economic terms.

          3. Anon Doe

            Most people fail to see the end of the third political paradigm we had in the Modern Age, Liberalism. (The other two being the defeated Fascism and Communism.) Having being the victor of both WWII and the Cold War, it has transformed in the ultra predatory Neoliberalism variant (aka Thacherism).

            The result of this great success of Liberalism over its adverseries has led everybody to believe that this political philosophy and system, being the most successful one, having survived for over 400 years, is actually a reality, a fact of life like the sun rising every day, not a system. Money has succeded God and Greed has succeded Freedom as two of the bigest values that Mankind keeps close to its black heart.

            Now, this third system is collapsing before our very eyes and what we see is this event. There is nothing new, something that could replace it, that has been born yet. The result is an Age of Wolves and Broken Shields, as the Modern Age of Man is slowly crumbling down to a more sustainable and simpler level, akeen to 16th Century.

            1. Roland

              According to Marx, Communism only happens AFTER the liberal capitalists win.

              Bourgeois victory is the necessary precondition of the bourgeois liquidation at the hands of the proletariat.

        2. Klassy!

          Yeah, I really hate hearing that justification– workers lives in the developing world are improving.
          They are never going to “catch up” with the US or EU because these friggin trade pacts do not allow them to use the same methods by which the US or EU or got ahead.
          It’s like that stupid pro TPP op ed in the NYT– talking about “leveling the playing field” by discouraging (or penalizing) nations that have state supported industries. God forbid Vietnam be allowed to have any state industries.

          1. PaulArt

            Globalization has been good to India for sure. Socialism created squat for several decades in India from 1947-80. The economy ran on a 5-year plan and everything was centralized. There were only two auto manufacturers. Imagine that, only two for a nation that size. When globalization came knocking the Indian politicians were ready and they went on a grand reform agenda. Education was liberalized, private money came flooding into Engineering and Medical school startups. It happened because all the foreign MNCs were screaming for educated engineers and Doctors and Ph.Ds. There was the usual ‘servant problem’ in the cities. It became hard to find a good cook, maid or chauffeur because they were all being snapped up by the droves of expats who were heading back to India from USA and England with their hoards of dollars and plum jobs in TI, Intel, Price Waterhouse and other MNCs. Inflation has been rampant in India due to the break neck growth. So, globalization did bring a rising tide to India and yes it did lift all the boarts excepting maybe the ones in the rural areas.

      3. Massinissa

        Walter, truth is, the term Liberal was stolen from Classical Liberal/Libertarian types, before those Classical Liberal/Libertarian types stole it back with neoliberalism.

        Youre a thief trying to take back something that was stolen from you that you stole in the first place (albeit a hundred years ago).

        Switch to progressivism. If the Neocons/Neolibs create NeoProgressivism, then feel free to take that back, but dude, liberalism is just a goddamn word. Get over it.

        1. Klassy!

          There was a delightful (sarcasm alert) editorial in the WSJ today about the opponents of fracking in the southern tier of NY. They were painted as wealthy out of touch meddlers not allowing the poors to have their economic opportunity. They described the Duncan Hines heiress as a Tory living the life of the landed gentry in upstate NY.
          maybe I’m imagining that they used the word Tory, but I don’t think so.

    2. Jim Haygood

      ‘We need a liveable wage imperative. We need wealth redistribution.’

      An excellent way to ensure that the best and brightest strike out to seek their fortunes in Asia, Africa or LatAm, instead of being forced to subsidize others not only through Obamacare but through confiscatory taxation as well.

      Nevertheless, it probably will happen, as an important symbolic milestone on America’s long descending highway of imperial decline.

      1. fajensen

        Well – You can redistribute wealth via wages or via taxes.

        Historically, the periods with high distribution through wages taking executive pay down to about 4x workers, have been periods of high growth, whereas unequal periods where executive compensation goes to 300x workers salaries have negative growth. When one cannot live on wages, then the government will step in and provide income support through taxes so low wages, that “the elite” for everyone else, will eventually lead to high taxation – which falls mainly on wages – killing demand even more than the menial pay that “the elites” though was good for us.

        1. Banger

          We should have gotten the message by now–growth, in the sense of lifting all boats sort of growth is no longer a goal of the elites. Now that they have achieved domination of the world (essentially) they want to freeze society into a steady-state system while they fight it out for supremacy or something like that–they are, sadly, incapable of thinking beyond power and domination–even riches are not very interesting to most of them except as it indicates status.

      2. from Mexico

        Jim, you are completely ignorant of what’s going on outside the borders of the Untied States.

        If you think recent grads in countries in Asia, Africa or LatAm are faring better than those in the U.S., you are sadly, sadly mistaken.

        In China, for instance, as this video documents, recent graduates face a far tougher uphill battle than they do in the U.S.:

        Education Education – Why Poverty?
        http://www.youtube.com/watch?v=BP61LwODTnY

        There may indeed be a handful of the US’s “best and brightest” who “strike out to seek their fortunes in Asia, Africa or LatAm,” but their success will be as mandarins and paladins of a supranational “predatory and extractive financial services industry and a super-wealthly class that prefers to mine rather than develop the countries in which they hold investments.”

      3. Lambert Strether

        Right now the best and the brightest are all going into finance anyhow. Better they leave than do that.

        Note also that the “best and brightest” as a notion is pretty skewed. What does it mean? Harvard men? Yalies?

        Personally, I think that if the bankster yoke were removed from the necks of American debt slaves, the explosion of productivity and creativity would be unparalleled, whether the “best and the brightest” stayed here or left. Fuck ‘em if they can’t take a joke.

        1. Ben Johannson

          In the last five years I’ve concluded “best and brightest” is a horseshit category. For every one of these self-locking fools there are a hundred people who can do a better job and never got the opportunity. They were trapped in a small town or a regimented work role or were told they were worthless so many times they finally came to believe it.

          It’s just another method of enforcing differences in social status. The talent that is lost because it is never identified vastly exceeds what we get out of shit-heads graduating from prestigious universities and politically well-connected families. It’s what the upper crust truly fears, that the rubes will eventually figure out they don’t need their “betters”.

          1. anon y'mouse

            and THAT right there is the real truth, folks.

            not any social Darwinist ‘better bred’ stuff.

            its all in the opportunities. even if ‘capitalism’ were to be construed as the goal, we are wasting human capital by the megaton-ful.

    3. Lexington

      I tend to agree. A college education no longer provides any assurance of stable middle class life. A while ago I attended a lecture by Richard Arum, who co authored “Academically Adrift: Limited Learning on College Campuses”, which presents a very sobering analysis of how American schools are failing undergraduates. Their data shows that undergraduates demonstrate almost no learning in their first two years of school, for example. Beyond learning outcomes the system is obviously failing in other ways as well. Less that half of Americans who start college obtain a degree (in many cases because they are crushed by debt before accumulating enough credits to graduate), and even among those who graduate a shocking 24% are still living at home two years after graduation.

      Making education more affodable is laudable in itself, but the forces that are undermining the quality of undergraduate learning and limiting job prospects for graduates are far more complex and intractable.

      1. Kokuanani

        One additional effect that I never see mentioned in discussions of the “cost” of student debt is what it does to the PARENTS of these student/debtors.

        Parents are pulling money out of their own retirement savings [if they have any] to either support their kid living in the basement, or contribute to the kid’s living expenses and debt repayment.

        So it’s not just the kids that the predatory lenders are making poorer; it’s their parents as well.

      2. anon y'mouse

        bear with a poor memory here, but this book was reviewed by the graduate students in my Sociology of Higher Ed. class, and they found many problems with how it construed “learning” itself and the assessments used to gauge whether it was occurring.

        from what I remember (I gave you fair warning), their findings were that the conception of the authors about what learning is consists of was reading a lot of books alone in your room (classical ‘study time’), writing reports on those books, and then passing a set of learning ‘measures’ that they found just about as questionable as the typical IQ or SAT test (SAT clearly measures at least one thing—preparation for the SAT. if you have special preparation, which many aspirational future ivy-league attenders do, and the money to pay for special preparation, you can expand your earnings up above anyone without it quite easily).

        in other words, you should beware whether this represents “learning” at all, or if it does, does it represent the proper way of instruction for the kinds of skills and abilities that people need to use regularly today. also, even if a student is ‘learning’ such things, ask them a few years later a detailed question about what they learned and see if they actually remember it. chances are, unless they are doing some related studies (I call this “guildsmanship”, which is what we should probably be doing—a long series of related studying combined with working hands-on in the environment in the typical ‘lackey’ position to get from-the-ground-up skills. why work for a pizza delivery joint for four years? they should be working in the environment and obtaining the implicit instruction that comes of being in the location. at any rate…)it is doubtful that they will be able to easily respond to your question unless it is sufficiently vague. this happens for almost anyone, especially with exclusively intellectually-based learning.

        if you aren’t using what you know, then it will probably eventually come to resemble mental background noise. even still, going through the process itself (learning to learn) is useful.

        so, unless you are planning to be an academic, or someone who reads and writes a great deal and must sum up and use such skills (management, writers, journalists, professors, etc.) it is questionable that this book makes much of an argument at all about what people are really doing, or supposed to be doing, in school.

        1. anon y'mouse

          another related point, which I believe you make later on this same page, is that the first two years are spent ‘socializing’.

          consider the age of the people that you are talking about, and the typical ‘college experience’ that they are expected to be engaged in. most of their ‘learning’ at this point (the first two years, you say?) consists of becoming independent from parents, self-regulation and scheduling, possibly juggling work and school for the first time, money management, roommate issues, doing their own laundry/cooking/etc possibly for the first time (yikes! stop spoilin’ tha chillun, folks) and on and on.

          this, while the brain is still maturing. if anything, expecting strict focus on ‘academics’ during these two ‘first years’ for a typical college student is either expecting a miracle, or displays a desire that your kid will become a machine adept at doing the only task laid in front of him/her and becoming a tool. college has been portrayed as the first chance or experience of independence (not for some of us. ghetto children run their own and siblng’s lives at 6-7, previous generations worked after school and had chores and so on, so…) and it would be expected that strict focus on ‘academia’ would necessarily take a backseat during this time.

          if you really must worry about your children goofing off too much, start making them a bit more independent and self-managing before they leave. my landlord has a kid enrolling for the first time this year in the same Uni I go to (it’s NOT his first child in college, btw). guess what? the kid couldn’t even be trusted to go and buy his own textbooks a few days prior. needed dad to hold the hand, and probably the checkbook as well. some of us had parents who made us in charge of the ‘back to school’ shopping for ourselves as soon as we could manage money. there are ways of improving the focus of the ‘first two years’, but I’ve known quite a few kids of parents within my social circle who had to come back home due to being totally overwhelmed, lost, unfocused and losing sight of why they were there. and it wasn’t because they were spending all their time in the dorm, smokin’ herb as the stereotypes portray. just typical ‘growing up’ business.

          1. anon y'mouse

            and finally, for the record:

            these comments are not to be construed as meaning that I have no problem with the learning environment of college as it is currently done, or that I believe that college ‘teaching’ is just fine or doing its job or is adequate or anything like that.

        2. Lexington

          so, unless you are planning to be an academic, or someone who reads and writes a great deal and must sum up and use such skills (management, writers, journalists, professors, etc.) it is questionable that this book makes much of an argument at all about what people are really doing, or supposed to be doing, in school.

          I find this a rather shocking statement from someone studying graduate sociology. Traditionally the purpose of university education was exactly to impart critical thinking, communication, and research skills, not to learn how to make pizza. That’s what technical vocational schools are for. Granted today the two concepts have become largely confused, but we’re in even worse shape than I suspected if even academics can no longer tell the difference.

          All of which has nothing to do with Arun and Rocksa, whose work was based on the widely used Collegiate Learning Assessment studies. Yes, the CLA is probably biased toward the kind of learning that occurs from, like, reading stuff and then remembering it. All terribly old school. But if you reject that kind of learning then your quarrel isn’t really with Arun and Rocksa or the CLA but with the whole enterprise of higher education as traditionally conceived.

          Though if I can give you some free advice if you don’t want to end up like the Kingdom of Jerusalem at the battle of Hattin before you set off on your crusade to liberate academia from its mouldy learning superstitions you might want to get some better preparation than half remembered criticisms overheard in a graduate seminar.

          1. anon y'mouse

            reading and writing and critiquing and so on are valuable. I didn’t say there were not. but do they represent ‘learning’ the material at hand?

            a lot of what I encounter as ‘learning’ is getting the jargon down, ingraining the outlook of the particular discipline and learning its tenets. or about how to use that stored knowledge ‘fluidly’ enough to make new connections, critiques and so on.

            you can ‘fake’ papers as well as ‘faking’ knowledge on a standardized test (rote memorization and then quickly forgetting is not ‘learning’, is it?). is someone who reads a paper, analyzes the argument and chooses one of the propositions to critique, and then writes a paper about that doing ‘learning’ or are they doing critical thinking? this is where it gets all fuzzy. if you are testing ‘learning’ subject material as ‘critical thinking’ ability, are you testing learning or simply a facet of it?

            the thing that you are mostly learning by doing a lot of this kind of writing is either argument and counterargument, or you are learning to write in the style that the subject demands (each subject seems to have their own style and guidelines, so it is not simply standard essay-English). i’m not saying this is not valuable and is not ‘learning’ but it is not the only kind of ‘learning’ going on.

            if they focused exclusively on one style over another, then I can see problems with using a one-size-fits-all assessment. I also see problems with using the first two years, because of the social reasons and because the first two years are usually non-major general knowledge courses. if it is true that they said in this book that no learning was going on in the first two years, did they examine why?

            you are correct, I did not read the book myself. I was taking at face value fellow class members’ critiques of it. I think their critiques raise interesting questions about what learning really is and how to measure it properly.

          2. anon y'mouse

            oh, and I am not a graduate student.

            the kind of ‘learning’ that they measured IS incredibly useful in graduate school. but is it useful in the first two years of undergrad? is it useful in the latter two years, when one is usually focused on absorbing the subject material of the major chosen?

            I never said the skills were use-less. just a different kind of ‘learning’ than the test measures. perhaps a less completely relevant kind of learning than that most used or needed at that time in a student’s life.

  3. Martin Finnucane

    Anecdote time: I am an attorney about 6 years out of a very expensive, very uselessly prestigious law school. I make a top quartile income (for my part of the country) and live a comfortable life, but my monthly tithe to the rentier class prevents me from doing what I want to do professionally, and my retirement savings are zero. I’m on the hook for a long long time. If I wish to marry and have children, which I do, it will inevitably be a matter of jumping in feet first and hoping for the best.

    Now, I admit to certain self-loathing in this regard. I took on this enormous debt as an adult, and now I feel like I should have known better. My indebtedness is a matter of shame. Is that a common experience?

    1. Walter Map

      Welcome to the new normal.

      The next generation will not even get that far, and that will become normal also.

    2. sleepy

      Yes, the requirement that you make the most money possible rather than doing things you like or find interesting is, I think, one of the secondary negatives of student debt. It’s not the most important I know, but still.

      I got out of law school in the late 70s, at a private school, and my tuition when I graduated was $1,050/semester. I had no debt. That allowed a graduate to do public interest work or hang out his/her shingle and work independently. There was both career satisfaction and social good that came from that.

    3. Clive

      Hi Martin

      Respect due to you my friend !

      All I can add to the wise words from fellow commentators is, embrace your inner sell out self. It’s just the way of the world and your choices are understandable. I, daily, have to make the same choice. In many ways, it’s not a choice at all. So don’t beat yourself up.

      But 1) don’t lose your inner authenticity; they own you in the daytime but after that, they don’t get to live in your head rent free. 2) plan your eventual escape. That might not be in 5 years or 10 years or even 20 years. But it will happen one day. Figure out what you want to do then and keep planning for it until that day comes.

      Best wishes, Clive.

      1. Mark P.

        ‘In many ways, it’s not a choice at all.’

        Don’t fool yourself. It’s a choice — though an understandable one.

        When enough people step away, are excluded, or at least exercise the utmost discretion in limiting their interactions with the current extractionary system, that system will collapse.

    4. Lexington

      One of my first jobs after graduation involved supervising a contract staff of about 16 for a real estate management firm. It was a nightmare. Several times a week the client’s operations supervisor would be in my office complaining that my staff didn’t know how to do this, or didn’t do that right. Turnover was through the roof, morale was low, and on a good day performance was lackadaisical.

      Being young and naïve, I blamed myself.

      Then one day I had an epiphany: I was the one who was actually being screwed over here. I had been placed in a situation in which the client was paying near minimum wage with few benefits and no recognition and they were shocked – *SHOCKED* – that turnover was high and performance was low. They wanted a $15 an hour worker for half that, and were blaming me when they didn’t get it.

      They had a partner in crime, though. In order to get the contract my employer had promised the moon and then some, knowing full well they could never deliver on those promises. They justified this by saying, in effect, “everyone else is overpromising as well, so if we tell it like it is we’re taking ourselves out of contention from the start”. And they were right. The highly paid management experts who were doling out the contracts were doing so to the supplicants who told them exactly what they wanted to hear –that you can get good people for crap wages. Then I would actually hear the same Einsteins say things like “we’re really not happy with our contractor, but what are you going to do, they’re all the same”.

      Let me emphasize again that these people made their living by selling their putative management expertise.

      And people wonder why we went from an economy that offered decent prospects to a large section of the workforce in the 1950s and 1960s to one which offers only economic peonage to most now.

      All of which is a very long winded way of saying that shame is only stage 1. After comes anger, when you stop blaming yourself and realize who is really responsible for this mess.

    5. from Mexico

      @ Martin Finnucane

      It’s a real mind f*ck, no?

      This is where the structural critique is important.

      Your feelings are part of 1) your hardware, and 2) your software. As Leonidas K. Cheliotis explains:

      on the one hand, the instrumental and moral motives people consciously evoke to explain their attitudes and actions are in significant measure the justificatory
      expression of their unconscious instincts, and that, on the other hand, both the instinctual ‘substructure’ and its justificatory expression are moulded under the influence of socio-political factors and the overarching economic ‘superstructure’(Fromm, 1970).

      http://www2.law.ed.ac.uk/file_download/publications/0_1899_neoliberalcapitalismandmiddleclasspuniti.pdf

      As Cheliotis goes on to explain:

      Any account which predicates political domination and the maintenance of social order upon the manipulation of public anxieties needs to elucidate the constitutive content and inner psychic resonance of the anxieties at issue. The goal of this section is thus to argue that the problem of order for governing elites in the USA and Britain today consists in managing the corporeal and ontological insecurities their neoliberal socio-economic policies have generated among the public and the middle classes in particular. [emphasis added] Attention is focused on the middle classes because, on the one hand, the intensity and even the nature of their insecurities have in recent years come closer to lower-class experiences, and because, on the other hand, middle-class individuals are generally more likely to seek to influence their life conditions by making use of the readily available democratic means of political participation, notably voting.

      And then, as Cheliotis continues, governing elites

      manage to twist yet another complication of
      neoliberalism to their own advantage, here laying responsibility squarely on the backs of people whom neoliberal socio-economic policies have kept or pushed into
      the most disadvantaged positions in society (Reiner, 2002; Wacquant, 2009).

      [....]

      In so doing, they also conflate the disadvantages their very policies have done so much to produce with a constructed succession of taints, from irresponsibility and laziness, to criminal propensity, to reduced morality…. [This allows] the reconstruction of middle-class socio-economic insecurities as such, treating them as a signifier of responsible citizenship and thereby unconsciously enhancing their public acceptability.

      ….Among the middle classes, stubborn socio-economic insecurities may thus come to be regarded as indicators of righteousness and responsibility, both in terms of entrepreneurship and approach to the rule of law…. But the irony goes further still, insofar as the dichotomous discourse of responsibilization as applied to the public reflects, and ultimately serves, the interests of neoliberal
      rulers who thereby try to evade nothing less than responsibility for their own civic failings and misdeeds.
      [emphasis added]

    6. Jim in SC

      Certainly many people feel shame at owing money, though in our time, it is nearly impossible to avoid debt. Who doesn’t need debt to fund an education, or to buy a house? I am interested that you call your law school ‘uselessly prestigious’. It seems to me that many top law firms only hire from such uselessly prestigious places, even if most their graduates end up in solo practice in their hometowns, as is the case with graduates of Harvard, according to an Esquire magazine article I read years ago.

      It seems to me that the prestigious school is advantageous in getting the first job. After that, maybe not so much.

    7. Kokuanani

      Please accept my condolences.

      You might find of interest a web site called Mr. Money Mustache. It’s actually about becoming financially independent ["retiring"] as early in life as possible, but it contains a lot of inspiring ideas about how to cut current spending and retire debt so you can be “free.”

      There are also a couple of blogs out there by lawyers who retired $90,000 of student debt via extreme frugality — but they did it.

      Not for everyone, but the freedom it gives you may provide inspiration.

  4. taunger

    The cost of higher education creates huge problems, and as a recent law grad, I am at the top of the indebtedness scale. However, my central problem is my inability to get a good job to implement my pre-enrollment plan. I enrolled after congress and Obama instituted debt forgiveness for public sector work. Coming from the non-profit world, I expected to regain a job in non-profit or government, thereby securing debt forgiveness in 10 years and paying less than the sticker price of 3 yr tuition.

    But a year and a half out and I still cant get that job. I’ve had to settle for temp/contract work in the private sector. I can’t tell you how depressing it is to feel like such a mark.

  5. Moneta

    Are students being ripped off by government entitlement programs? Yes they are being ripped off; but, not by Social Security or Medicare as Stanley Druckenmiller suggests. Nor are student loans costing the federal government and tax payers as much as the recent analysis of student loans done
    —————-
    What I find the mot annoying is the total lack of forward thinking. Yes, it’s important to use scientific methods to prove something but people don’t seem to understand that our scientific models pertaining to complex social matters are quite deficient. So all the research we get is based on past data when it is clear, in my mind anyway, that we are about to live something that we have not witnessed before.

    This pas data is important in assessing the future but obviously everyone interprets it in their own special way and this is colored by their own ideology.

    For me it is obvious that the kids are getting squeezed by student debt now. SS and health care might not be an issue right now but it is clear to me that it will be an issue soon enough. Taxes have not been so low in a long time but if they increase to redistribute, the kids will get hit for SS and health care. Probably soon enough.

    Furthermore, universal health care depends on the healthy and young. That’s how insurance pools work. So if you did not have it before, it means the young will get hit on healthcare soon enough. And it sure looks like you will end up with some kind of universal health care.

    The system is set to crush the young in so many ways, I don’t even know where to begin. For example, let’s say you are a young doctor graduating with 100-200K in debt because this whole structure was based on a past system offering you a revenue potential of 300-500K but the new health care system squeezes this down to 150-300k, then your financial situation will not be easy an easy one.

    The whole pension situation is a disaster and heartbreaking but I am amazed at the number of older people who are essentially pretending that the younger generation will be fine and not need to worry about SS and other benefits. And when people protest, they are instantly called heartless.

    There are a lot of boomers out there living a life that is bigger than they can afford and in the current pension structure does not give them any incentive to adjust their lives. Why should a young graduate live in a dump until age 35 while his income is skimmed to pay for the SS and healthcare of someone who is living in a leveraged Mcmansion?

    I know there are a lot of very poor Americans who don’t deserve to suffer but that does not change the fact that your entire system is totally broken. The reality is that every single one of your social institutions is broken and needs a total overhaul. And just “topping up” is not going to fix anything.

    Finally, until your banks get cleaned up, nothing will improve because they currently have no incentive to stop malinvestment.

    1. Sara K.

      Well, as a young person, I would love to see a true universal health care – i.e. single payer – because, among other reasons, single-payer is a lot more efficient, which means that they cost a lot less, and puts a lot smaller financial burden on us young people (as well as everyone else).

      1. Moneta

        Here in Canada, we have universal health care. It does not necessarily lower the financial burden because we have very high taxes to pay for it but there are so many amazing benefits:

        -When you don’t have a job, you are still covered and don’t have to pay until you have a job and pay taxes again.
        -Health care is not the ultimate criteria when choosing a job
        -My health history is not in my employer’s hands.
        -I don’t worry that I could lose everything if I get sick.
        -When I am sick, I don’t have to spend my time arguing with the insurer to know what is covered or not. And then argue to cut the final bill when I am back on my feet.
        -When the doctor gives an opinion, I don’t worry whether he/she is only thinking about his/her bottom line.

        1. curlydan

          Good points, Moneta. Although the taxes are high to institute single payer, the benefits are big for the economy. The U.S. is literally throwing away 5% to 8% of it’s GDP on inefficient health care rentier economics.

          If we had single payer in the U.S., entrepreneurship could skyrocket and innovation could follow. Instead, workers continue to plod along in corporate jobs for fear of having no good health insurance options if they were to strike out on their own.

          What a waste!

        2. jeff fisher

          Maybe it doesn’t “necessarily” lower the financial burden, but it does just so happen that every single wealthy country spends far less than the US on healthcare and they all do it by having much heavier government control of their health provision and insurance systems and universal or very near universal coverage.

          Empirically it will lower the financial burden, quite significantly.

          Given the massive weight of evidence any thinking person should be extraordinarily skeptical of any theoretical or ideological claims that costs would not be reduced.

        3. HotFlash

          May I add to Monets’s ppints that in Canada, one can run a small business without having to worry about healthcare, either for oneself or for employees. That is a huge incentive for small businesses, not to mention a solace to those of us who found ourselves freelancing not entirely of our own accord. Thank you, Tommy Douglas!

    2. Pokey

      “Taxes have not been so low in a long time but if they increase to redistribute, the kids will get hit for SS and health care. Probably soon enough.”

      Think that over for a minute. Does it make sense on any level? Distinguish income tax from SS tax. It is income tax, including capital gains tax, on high income that is too low. The only method of redistribution that is even conceptually possible is to require the rich to carry more of the load, a part that is commensurate with ability. That needed process will not hurt any youth except possibly a few trust fund douchebags.

      “Furthermore, universal health care depends on the healthy and young. That’s how insurance pools work.”

      Wrong again. The ACA is not a universal health plan, but a scam devised insurance companies and Republicans to detract from the push for health care reform in the 90s. Medicare for all would be a universal health plan that would benefit young and old alike.

      1. Moneta

        Do you really believe the US could have gone from private to universal in 1 shot???? With the percentage of the population that is still tied to a strict father ideology there is no way yu are going to get universal in a clear sweep.

        It will get to universal but in many steps.

        1. ambrit

          Dear Moneta;
          I will quibble here and suggest that the way this type of problem has been equitably, (a significant caveat I’ll agree,) been resolved is to spread the risks and rewards widely, not just age wise, but especially income and wealth wise. Take the cap off of wages subject to the Social Security tax and you start resolving the problem. Am I living in Magonia? Probably so, but look at the alternatives.

      2. Sneaky Pete

        >The ACA is not a universal health plan, but a scam devised insurance
        > companies and Republicans

        Republicans sure hate the plan they devised.

        1. Lambert Strether

          Proving it’s all kayfabe, no? That plan was going in no matter what. If McCain had been elected in 2008, the Democrats would be rallying against McCainCare, for much the same reasons (and not for single payer (that’s off the table)).

          1. Benjamin

            I often wonder; how many congresscritters and senators know they’re tools and sheep? It’s obvious the leaders like Boehner know exactly what is going on and what game is being played, but what about the scores and hundreds who vote as they’re told to vote? How many of the GOP fully understand their own hypocrisy in opposing what is essentially their own health insurance legislation because it’s politically advantageous and how many honestly believe it’s evil socialism being pushed by the evil black liberal?

        2. different clue

          They only pretend to. It serves their social class masters quite well. (Maybe teapeople really hate it).

          The Catfood Obamacrats passed it. It is theirs now and foreever, or unless it self-destructs or gets repealed in the face of multi-million health riots.

    3. run75441

      Moneta:

      I believe Dale Coberly sums up the argument on SS and the impact if has on everyone going into the future.

      “‘Try to imagine you have to buy a medicine that will save your life. You need 100 pills, and the doctor firmly said, ‘Finish the Medicine… if you stop too soon the infection will come back worse and you will die.’

      So you go to the pharmacy and the pharmacist tells you the price of the medicine has gone up and your insurance will only pay for 98 pills. You say, “Okay, I’ll pay for the last two pills myself.”

      But the pharmacist tells you, ‘I can’t let you do that. I can only give you the number of pills your insurance will pay for.’

      This is what the “debate” about Social Security amounts to: You are going to need Social Security when you get old. The cost is going to go up by then about two percent. Washington has decided they can’t let you pay the extra cost. The only solution they are willing to consider is cutting the amount you will get… to less than it will take to keep you alive.

      Those who would say, “Well, let them cut Social Security, and I will just pay for the difference out of my own pocket,” are missing the point that Social Security is insurance that will… if it isn’t cut… provide you with “enough” to live on even if “your own pocket” doesn’t have enough in it to “make up the difference.”

      The “debate”… there is no debate, it’s all about telling lies to the people until they accept those cuts as inevitable… the debate is based on a number of lies, repeated by people who don’t know what they are talking about. The lies include:

      Social Security is broke. Flat bust.

      Social Security is creating huge deficits.

      Social Security will be a huge burden on the young.

      Social Security is the old ripping off the young.

      Social Security is a bad investment.

      Social Security reduces savings.

      Social Security reduces people’s incentive to work.”
      http://angrybearblog.com/2013/11/how-to-sound-insane-by-talking-like-a-bi-partisan-expert-on-social-security.html#sthash.jM7peQl2.dpuf

      It is not a debate and it is the promulgation of lies, misconceptions, half truths, intergenerational warfare, etc. as Dale has pointed out in a recent post and answer to Stan Druckenmiller’s nonsense. You made this statement: “The system is set to crush the young in so many ways, I don’t even know where to begin.” and then you go to make it a battle over SS, Medicare, etc rather than the non-dischargeable student loan debt so many of them are burdened with today. I came with charts and graphs and you have offered opinion.

      “Taxes have not been so low in a long time but if they increase to redistribute, the kids will get hit for SS and health care.”

      How? At $80 cents per week on Median Income. How badly are they going to get hurt?

      “Taxes have not been so low in a long time but if they increase to redistribute, the kids will get hit for SS and health care.”

      Maggie Mahar: ” younger Americans will not be subsidizing these tax credits for their elders. Under the Affordable Care Act subsidies are funded by device-makers, drug-makers, hospitals—plus taxpayers earning over $200,000—and couples earning over $250,000) Very few twenty-somethings are that fortunate. http://www.healthbeatblog.org/#sthash.qeT5BQCC.dpuf

      How are younger adults going to be hurt by healthcare under the PPACA? Taxes do need to go up and much of the 2001/2003 tax breaks left on the table needs to be retracted for the 1% of the household taxpayers ($500,000 annually.

      “let’s say you are a young doctor graduating with 100-200K in debt because this whole structure was based on a past system offering you a revenue potential of 300-500K but the new health care system squeezes this down to 150-300k”

      If you are going into primary healthcare, you will not be impacted and will do better. If you are going into specialties, you will feel an impact; but, it will be in government subsidy and not in private income. The government will promote primary care over specialties. Furthermore, the larger problem is the cost of college which (as I pointed out) has outstripped the cost of healthcare and CPI as Alan Collinge of Student Loan Justice Org has pointed out.

      How? “There are a lot of boomers out there living a life that is bigger than they can afford and in the current pension structure does not give them any incentive to adjust their lives. Why should a young graduate live in a dump until age 35 while his income is skimmed to pay for the SS and healthcare of someone who is living in a leveraged Mcmansion?”

      Nationally, nearly half of all seniors (48%) live with incomes below 200 percent of the poverty threshold under the supplemental measure, compared to 34 percent under the official measure. The share of seniors with incomes below 200 percent of poverty is higher under the supplemental measure in every state than under the official measure. Kaiser Foundation as taken from the US Census (I am sitting in China and can not get into the US Census tonight).

      The median sized house in the US is ~1800 square feet and far from being a McMansion.”

      And no, you do not know how many people are suffering both young and old otherwise you would have stated it rather than the opinions you have stated here today.

  6. pigeon

    In Germany we tend to think that people with long term investment debt, for example a mortgage, end up better off because the need to pay off debt lets them refrain from overconsumption. I suspect this effect could also counterbalance the negative wealth effect of student loans as long as the investment in the degree pays off sufficiently (which of course is highly questionable in the current environment).

    1. Moneta

      If the ones doing the work are living a strikingly poorer material life than those retired because they are paying for all their benefits and past financial mistakes, you’ve got a problem.

      1. Spring Texan

        Framing this as “the young vs the old” is a very misleading way to put it. In fact it helps the young as a group when the old do well and vice versa. (Look at all the people who have gotten help from their parents with college and down payments because they are reasonably secure.)

        But yes making the young indentured servants is absolutely horrible. We absolutely need free college education. And an end to any form of absolutely inescapable debt.

        1. Moneta

          I agree that everyone must work together but the current system without reform will crush the young.

      2. craazyboy

        You seem to think Boomers were having a picnic or something.

        What we had to deal with:

        Graduate high school and register for the draft. (Viet Nam War)Graduate from college and enter the Volcker Economy. Pay 12% interest for a mortgage, and in parts of the country pay a bubble price for the house. We had the Japanese Invasion and the Midwest turned into the Rust Belt. And the Cold War and nuclear annihilation hung over our heads the whole time.

        1. Moneta

          I am not refuting the fact that you had your share of hard times. However, it is not a badge of honor that protects you from future hardships.

          If bad investments were made over the last few decades and your economy can not support how you structured your lifestyles, you can’t expect the kids to make it whole without a backlash.

        2. Moneta

          The average house went from 1200 square feet to 2500 square feet in 1 generation.

          Instead of increasing energy efficiency, the infrastructure was spread out over ever increasing geographic areas, entropy. All the funding of the social structures are still based on an unsustainable lifestyle.

          By just printing without fixing the banking system and the social structures you are just propping up an unsustainable system that will take everything away from the young to give to the incumbents.

            1. Moneta

              You do. With your wallet.

              I remember when I was around 5, mid 70s, my parents went to North Carolina and came back with a metre (probably a yard because from US) long pen on which it was written: “We makes things big in N.C.”.

              So on top of wasting resources for nothing, it was useless because I could not even use it. That pen is a reflection of your investments over the last 40 years.

              So if you want something to change, you’ll have to find another way to get your word in because your wallets are empty.

              1. craazyboy

                I’ll pass that insight along to our S&P 500 CEOs as an action item.

                Btw: In S. Cal people bought 1200-1500 sq.ft. houses built in the 50s and 60s, they still buy those very same houses today, and I’m happy to report they are still 1200-1500 sq. ft.

                1. Moneta

                  1. You can’t deny that the average throughout the country has doubled.

                  2. The size of the house is a metaphor for the setup of your infrastructure supporting your lifestyle.

                  3. I could make a long list of unsustainable choices California has made, starting with misappropriation and use of water.

                  1. craazyboy

                    I already know everything (almost) that is wrong with this place. The list is enormous, and I don’t want to type it all up here.

                    But I think you need to re-check your favorite housing stat. I think you’ll find that it is “new construction”. It tends to be large houses in far away suburbs purchased by the upper quintile, maybe second upper quintile. This is more a reflection of growing income inequality than lifestyles of America in general. If you think America is McMansions from sea to shining sea, you have been watching CNBC too much.

                    We have suburban sprawl because most cities can’t find a way to do urban renewal.

                    Over the last 35 years the population of the country has increased from 225 million to 310 million, and CA has gone from 20 million to almost 40 million. Wasting resources is a bit too simple of a characterization.

                  2. Yves Smith Post author

                    Might help if you get a handle on the distribution.

                    40% of the homes built 2004-2007, which happens to be a period of building big homes, were SECOND HOMES. You are making the increase in home sizes to be an average American issue when it is yet another symptom of widening income disparity, which means more people in the top cohort with second homes, and in that group, an explosion in home sizes). You see it in Manhattan, with the rich converting townhouses that had been rentals with 1-2 units per floor back into single family homes. That ironically means the home size for the rich in Manhattan hasn’t changed in 100 years. Actually, it has gone down. I live in the first elevator doorman building in Manhattan. Each full floor was one apartment, so originally, there were 17 apartments. Now there are only 3 floors that are single apartments. The other floors have 5 apartments each.

          1. run75441

            Moneta:

            In “300 Million and Counting” by Joel Garreau, a comment is made by Joel concerning the amount of land taken up by the population of the US. We seem to be extremely particular about where we live . . .

            “One is that to accommodate our growth of almost 1 percent a year—about 2.8 million new Americans annually—we have to build the equivalent of one Chicago per year. That’s not impossible. Lord knows we have enough developers eager to do the job. What’s more, if you fly across this country and look down, you will see that it includes a lot of emptiness. If you are among those people stuck in endless traffic jams from Boston to Richmond and from San Diego to Santa Barbara, you may find this hard to believe, but only 4 percent of all the land in the contiguous United States is urbanized, and only 5.5 percent is developed.” Smithsonian 2006.

            I doubt we have increased that growth even 1%.

          2. run75441

            Moneta:

            Handy little 2010 HUD report on Housing which says a lot.

            “•The median size of an occupied home is 1,800 square feet (compared to 1,610 in 1985, the earliest year this information was collected), with owner-occupied units being larger than renter-occupied ones. Newer Homes are also usually larger, with median size of 2,300 square feet.

            •Median lot size for single-family homes, including mobile homes, is 0.27 acres (compared to .36 acres in 1973) with owner-occupied units generally having more land than renter-occupied ones.”
            http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2010/HUDNo.10-138

            But then Housing was not really the thrust of my blurb on Angry Bear which Yves was kind enough to headline for me. Student Loan Debt was the issue which supersedes any “imagined” threat from fully funded Social Security and funded Medicare. Both are fixable with minimal increases in Payroll Withholding Taxes and without removing the cap on income.

            As Dale Coberly and Bruce Webb would tell you, an increase of 80 cents per week would take Social Security well beyond 2033. If nothing is done, then it can be cut back to 75-78% of planned benefit which will still be larger than todays benefit.

            Louise Sheiner and Glen Lafollette wrote a nice study on the sustainability of healthcare expense which debunked CBO’s Douglas Elmendorf projections on healthcare which is not sustainable and erroneous. The problem is not Medicare and old people. The problem is the healthcare cost model which is service for fees without regard for outcome. Change the cost model which the PPACA (sorry Lambert) attempts to do and Medicaid/Medicare is reining the overall cost growth as indicated by the S&P Healthcare Index. Since 2010 roughly 70% of this slow down can be attributed to the PPACA.

            1. Moneta

              The problem is not Medicare and old people. The problem is the healthcare cost model which is service for fees without regard for outcome
              ———-
              Baloney. You could throw your entire GDP into health care an people will still die.

              Here in Canada the older population is already putting a strain and we are going to have to decide what % of GDP goes to health care, what gets funded and what not.

              1. Expat

                The problem in Canada is the same as it is in all neoliberal countries: politicians who govern according to the interests of the business elite. Canada has been Washington’s willing partner since NAFTA, when both countries decided to jettison their manufacturing base, stop taxing buisnesses and redistribute wealth upward. A significant minority of the electorate consistently voted against these stupid policies, but, as with any winner-take-all system, they lost. Lost big, I might add. Now is not the time to blame the victims but to place responsibility squarely where it lies, with the business elites and their willing executioners.

                1. Moneta

                  The perpetrators are to blame but so are the victims. When you don’t equally blame the victims, they have no incentive to change their ways. They expect the others to change their ways while they stay the same.

                  People don’t seem to want to accept that there is a symbiosis.

                  1. skippy

                    How can poorly informed humans make choices ie. how can full immersion ideological cortex injected humans get – non ideological behavioral adjusted information – to start with.

                    1. Moneta

                      If you’re an alcoholic you can blame the liquor commission all you want for selling you the booze, sue them in class action suit but in the end your situation will not improve until you admit to yourself that you have a problem.

                    2. skippy

                      @Moneta – if were only so simple. Sadly there are many examples where such grievous social outcomes are almost nil.

                      Skippy… why did native Americans not have the same social disorders et al.

                    3. from Mexico

                      @ Moneta

                      So now we’re comparing growing old to having a drinking problem?

                      Phew! Who can argue with logic like that?

                    4. jonboinAR

                      @Mex:
                      Unless I’m mistaken I think she means to compare American voters being intellectually slothful and willfully ignorant, then voting stupidly and against their economic interests due in part at least to the aforementioned ignorance, to being an alcoholic.

              2. run75441

                Moneta:

                Was I talking about Canadian healthcare or US Healthcare? The problems in Canada concerning the aging population are different. Keep the non sequiturs out of the discussion and stick to the topic.

                The problem still remains; The US healthcare model is bent on selling Americans more service with less benefit or better outcome. It is not gauged towards better outcomes. The cost lies in the services which do not achieve a better outcome.

                Then too, this post you have high-jacked is about student loans? Isn’t it?

          3. from Mexico

            Moneta says:

            Instead of increasing energy efficiency, the infrastructure was spread out over ever increasing geographic areas, entropy. All the funding of the social structures are still based on an unsustainable lifestyle.

            Channelling your inner Rick Santorum there, are we? To wit:

            “We went into a recession in 2008. People forget why,” Rick Santorum told an audience recently. “They thought it was a housing bubble. The housing bubble was caused because of a dramatic spike in energy prices that caused the housing bubble to burst … People had to pay so much money to air condition and heat their homes or pay for gasoline that they couldn’t pay their mortgage.”

            –DEREK THOMPSON, The Atlantic, “Rick Santorum Is Right: Gas Prices Caused the Great Recession”

            http://www.theatlantic.com/business/archive/2012/02/rick-santorum-is-right-gas-prices-caused-the-great-recession/252790/

            And of course Santorum can line up plenty of economists and other “experts” and pundits to sing from his playbook:

            Still, there was a housing bubble. And there was a financial crisis. How do we account for them and still hold onto the gas story? Here’s a one-paragraph theory of the Great Recession that begins with gasoline. Cheap gas ruled in the 1990s. This encouraged families to settle down farther from the cities where they worked. In the 2000s, super-low interest rates, declining lending standards, and an appetite for mortgages on Wall Street (among other factors) further encouraged sprawl and residential development in the ‘burbs. As the price of gas went up, families stopped buying homes 30 minutes from the city. For folks shacking up in the exurbs, higher gas bills ate into mortgage money. For companies, higher energy bills shocked productivity. Classic oil-shock + housing development arrested + financial crisis = Great Recession.

            So Moneta, the bottom line seems to be this: Blame the old folks. Blame the enrgy situation. But whatever you do, don’t blame the ruling elites.

            1. Moneta

              I believe in pay-as-you-go pensions and universal health care. I also believe in socialism.

              I just don’t believe the pension system and health care systems of today will work unless the banking system gets right-sized first.

              I did not know Rick Santorum was a socialist. I guess I learn something new every day.

              1. AbyNormal

                months of ‘blame the victim’ post and now your yakking yourself a socialist

                maybe i need to rethink Walters suggestion about my hallucinating…cause this page of label realities has me feelin i’ve mainlined a gusano

                  1. Moneta

                    When my daughter was getting bullied I blamed both the bully and her, the victim. I showed her what she was doing that was attracting the bullying and helped find a solution.

                    If you don’t help the victim recognize their role in the matter, they will not feel obligated to change.

                    1. anon y'mouse

                      bullies don’t need a reason. they will find one where none exist. since we are not all made in the same image, there are plenty of ‘differences’ to pick on.

                      i’d hate to have a parent do this to me if I were robbed, raped, attacked, spousal-abused, malpracticed in a hospital and so on. “well, gee…what did you DO to bring that on, m’dear? what were you thinking? whywereyousostupidiraisedyoubetterthanthat!”

                      translation: we voted with our dollars thus we deserve whatever we get, even though in many cases we only had a choice between Brand A and Brand B, or go without.

                      I can see often enough where we should’ve gone without. but those that holds the gold pay the piper who calls the tune that the rest of us dance to. he also pays the guards who hold the axes who prevent us all from leaving the dance hall.

                      who has the real power to decide the outcome? we do, but only if we can a)act as one and b)survive long enough to impose our will on the despotic rulers and their armed guards, and their laws and their laywers, and their jail system and so on.

                      resistance works. just ask the African American community in this country, whose young men are more likely to be incarcerated than in college. yes, we can overcome if we just stop expecting a pension, or a home, or anything else that would give any of us any security.

                      i’m with you on suburban sprawl. no, most individuals even in those mcMansions are not living large. they left the city for a variety of reasons. some for ‘better schools’, some for ‘less crime’, some simply because the urban environment is psychologically trying to live within, some with a fantasy of being in the country, some because prices in the city were simply too high, and so on. but the builders had to build and offer the suburban housing first. and they did it with cheap materials in farmland that was also cheap and made a killing.

                      who’s laughin’ now? doughboy in his McMansion with his 80 mile commute, or developer dude? yes, doughboy is wasting some energy. perhaps our government should have more rationally planned development around actual productive use and mass transit? that was not in doughboy’s hands. he just wanted to leave the dirty, expensive, crowded city behind and own something of his own where he didn’t have to brush drug dealers off of the picket fence posts every evening.

                      so yeah, I guess domesticity and a desire for security leads us all to our doom or something.

                    2. Moneta

                      Well, you are right. There are all types of reasons. After going through the thing with her, we realized that what goes around, often comes around. Her previous bullying had made her lose some brownie points and when she got attacked, no one supported her. In grade school most of them do some form of bullying at one point or another.

                      It’s the same thing here. Most of us here agree that there are kleptocrats and instead of banding together we bully those who are too conservative or too progressive by distorting everything they say or continually nitpicking.

                    3. Moneta

                      In so many words, you have managed to say that I am a bad parent which id probably one of the most insulting things one can be told.

                      One does not convert by insulting, thus you are looking for support from those who share your view which is effectively a form of bullying.

                    4. AbyNormal

                      typical Moneta MO…backstep with your own karma sequence

                      Anon nailed you perfectly!
                      your child will think twice about confiding in you and that is parenting you’ll won’t live down…cause you’ll hold to your guns…’HONEY, THE MAN DOWN THE STREET FONDLED YOU? WELL WHAT WERE YOU WEARING…WHAT DID YOU SAY THAT BROUGHT IT ON.

                      i’ve spent 30+ years in childcare…i’d determine your FU*KED but it’s your daughter i tear for

                      “Our tastes greatly alter. The lad does not care for the child’s rattle, and the old man does not care for the young man’s whore.”
                      Samuel Johnson

                    5. anon y'mouse

                      if it is indeed as you say, a what-comes-around-goes-around situation, then it is a vital lesson that you imparted to her.

                      i have witnessed a family member victimized, and due to her own past behaviors (chronic lying), none of the family believed her tale. that none believed her was her own fault, but that she was victimized was NOT. there definitely was a serial rapist preying on people in her neighborhood, which was later confirmed by the police.

                      i tried to give support and be on her side while knowing that potentially she was inflating the story for sympathy points. i would hope that my mother would give me benefit of the doubt and be leaning towards my side.

                      that is all. i don’t know enough about you to say whether you are a bad parent or not. and, not being a parent myself some would say i have NO right to tell anyone whether they are. although i come from a long line of very bad parenting, and recognize it when i do encounter it.

                      please accept my apologies. my empathy is almost always going to be with the victim first, and then finding out what the situation is and the contributing factors to it later.

                    6. Moneta

                      My daughter is a beautiful person who plans on working with people with special needs when she grows up.

                      I do not condone abuse in any way, shape or form but I do realize that there will always be sickos looking for targets. I also realize that we do not live in a protected bubble and our actions could lead to an aggression. So I have conversations with my daughter in which I make her talk and analyze how her words and actions could impact other people. I also try to help her spot the sickos in her life and how to keep them at bay.

                      During our talks, I asked if she was the only one being bullied. She said no. So I proposed that she start defending the others when they are attacked. They might trust her again and be able to unite and stop the bullying.

                      I don’t know how she dealt with it but it all stopped.

                      I throw a lot of opinions and ideas around here. I don’t bother “proving” them because I’ve tried for over 15 years and it does not work. People only change their opinions when they NEED to. On top of it, no one can forecast what will happen in the future. We can all push for what we want but “que sera, sera”. The web we have tangled is so knotted up that we will have to cut parts off to untangle it. Yves is doing an amazing job and I don’t feel she really needs my help.

                      So when I throw me ideas in here, it’s partly to vent and partly to test the waters; to get a feeling for where the American psyche is in the process. IMO, they still have a long way to go.

                      By your vitriol, I assumed you’d witnessed some awful stuff in your life but to be put at the same level as a rapist was quite a shock, I must admit.

                    7. anon y'mouse

                      there is a miscommunication here. no one compared you to a rapist.

                      I was simply thinking about how I would feel if my own mother asked me what I did to cause such a thing, before offering comfort and support to me for what I had endured.

                      this is unfortunately what happened with my relative. that is a related point, but not totally parallel. I have seen some parents behave this way towards their kids though, as well. a kind of judgemental “what did you DO that stupid thing for?” instead of first sympathy, then understanding and discussion and so on. it’s rather like kicking someone when they’re down, and that doesn’t seem very helpful really. in some ways, it just makes it less likely they’ll come for support and discussion later, when they REALLY need guidance.

                      as I said, I don’t have any rights to judge your parenting. the only people who can are most likely your daughter, and you.

    2. Dbqb1

      Except that the consumer economy and consumption is the economy.

      The problem arises when young people use credit to purchase everyday goods. The use of credit drives up inflation. S now everything is more expensive the grad with a lot of debt and little money in The first place

    3. Banger

      Certainly if Americans were Germans that would be the case here in the USA. Originally it was thought that debtors would make good German-type workers and this was one reason why burdening workers with mortgages would create social stability. But our culture here is very changeable and consumption in this country has become a sacred duty. Life is seen as “about” consumption which fills the dual role of establishing status (the main role) and providing pleasure, meaning and fulfillment. People actually create “bucket lists” of things they want to spend money on and work to fulfill those desires rather than finding meaning through deeper endeavors. This extends even to the “deeper” endeavors which are generally pursued as objects of desire. For example, taking Yoga to tone the body, and connect with spirituality simply to be able to say to your peers that you are “into” it.

      I’m not going to say these tendencies don’t exist in Germany but, generally, you all are a more sober lot on an every day level. We here in the USA are, by comparison, a country of loose cannons who recognize little communality with each other.

      1. richardcorey

        Yes, it is amazing how even yoga has become a prestige, ego-boosting consumer good.

        Making a living off yoga used to be an incomprehensible idea. And in fact, only a few well capitalized yoga studios really make anything. Ironically, they make their big money selling teacher training — the New Age education scam. But you can sell anything with a sexy model doing some impossible pose on the cover of Yoga Journal.

        Most old-school yogis do physical yoga (what many civilians think of as “yoga”) to support health and the ability to sit in meditation for a long time, not make themselves “better” than others. They are after union with God, which is something you just can’t get if what others think of you, or the things you own, are more important than God. The Yoga Sutras of Patanjali, one of yoga’s main texts, has about 180 verses and only three (yes, three!) discuss physical yoga. Old-school yogis learn a good set of yoga poses to do (hopefully from a real Master), and do them in private, without need to spend money regularly on classes.

        Finally, yoga teaches that no person can be better than another (we are all made of the same “stuff”). It’s my hope that new yogis who begin in a “consumer-ish” practice find their way to the real thing eventually, and not my intention to say that they are worse people than others. Finding our way in the “spiritual supermarket” takes decades for many of us.

      2. from Mexico

        Germany pursued an economic model which Latin American analysts have called “conservative developmentalism,” which heretofore was known as just plain old mercantilism.

        It is an export model based on bolstering industrial produciton while at the same time suppressing internal demand. German workers have paid an extremely high price for the nation’s pursuing this economic strategy:

        Net real wages in Germany have hardly risen since the beginning of the 1990s. Between 2004 and 2008 they even declined. This is a unique development in Germany—never before has a period of rather strong economic growth been accompanied by a decline in net real wages over a period of several years. The key reason for this decline is not higher taxes and social-insurance contributions, as many would hold, but rather extremely slow wage growth, both in absolute terms and from an international perspective. This finding is all the more striking in light of the fact that average employee education levels have risen, which would on its face lead one to expect higher wage levels. In contrast to the prevailing wage trend, income from self-employment and investment assets has risen sharply in recent years, such that compensation of employees makes up an ever shrinking percentage of national income. Inflation-adjusted compensation of employees as a share of national income reached a historic low of 61% in 2007 and 2008.

        http://www.diw.de/sixcms/media.php/73/diw_wr_2009-28.pdf

        Besides the moral issues involved with the German ruling class murdering its workers, there is something else: Running large trade balances and exporting the superfluous capital to debtor countries is not a sustainable economic model.

        The reasons why Germany pursued conservative developmentalism, with its built-in austerity mandate, in lieu of neoliberalism may be due to nothing more than circumstance, and have little to do with the “German character.” The rank and file German probalby had little to do with the decision to follow this economic model.

          1. tim s

            Ruling elites in any country these days seem to have the most in common with the ruling elites in most any other country. Similarities between the elites and the rest of their countrymen may reside in certain habits, but not in deep ties or world views anymore.

            I believe that the elites know this…the rest of the people, someday….

  7. astrid

    Maybe the young will eventually wake up and realize that the ideal of wealth and economic security, without social justice and ecological awareness, is an illusion that can be striped away at any time by an increasing tyrannical world kleptocracy.

    Probably not though. Most people are very capable of avoiding the nastiness of intraspection and critical thinking, especially if shiny consumerist trophy (gas guzzler, McMansion, Ivy league diplomas) is dangled in front of them.

  8. Sara K.

    Speaking as a young person who graduated from college within the last five years, did not take out student loans (thanks to luck), and who is currently employed (albeit not making so much money), and actually has some extremely modest savings (which I regard as a rainy day fund, not retirement savings) the thing I question about young people missing out on so much compounding interest is that the interest rates on savings accounts are super low right now. The magic of compounding interest is a heck of a lot less magical when interest rates on savings accounts are close to zero.

    Of course, interest rates are so low because of Fed policy … so this is still big finance’s fault.

    1. Spring Texan

      You are right, but they won’t be this low forever; it’s anomalous. Yes, we do need somewhat higher inflation (which also helps on debt because then you are paying back depreciated dollars).

    2. EricT

      The ultra low interest rates are not a result of the fed keeping interest rates low, the reason why interest rates are low, is because there is a ton of money out there to be lent, but no one is borrowing money because income has stagnated, the security of a long term job has been lost, overall demand is low, so no new business opportunities to consider. Pay attention to the mortgage rates, you’ll notice that the banks have been trying to push the rates up, especially during the high demand times such as late Spring through late Summer, to increase profits, but when the demand for mortgages drops( off season ), the rates start falling again. This is what Kenysians call the zero lower bound, the only way to escape it is through state investment, and that’s not happening now.

      1. They didn't leave me a choice

        Wait, how can there be “ton of money out there to be lent” when the act of lending itself creates the money?

        1. from Mexico

          Really. I’m not buying into the loanable funds model, regardless of what Paul Krugman says.

    3. Alejandro

      Thanks for alluding to the chameleonic tandem, often missing from this conversation, of compound interest and the “unilaterality” of risk. IF higher ”Education” must be “financialized” (A big IF, imo, and where the real debate should be centered) why not spread the risk by having the University/College and the FED co-sign the loans. It would at least incentivize the quality of “Education” and the “Employment Mandate”.

      The student debt scam is just another trophy for “Le Esprit de Corps de Rentiers”.

  9. Spring Texan

    You write “The whole pension situation is a disaster and heartbreaking but I am amazed at the number of older people who are essentially pretending that the younger generation will be fine and not need to worry about SS and other benefits. And when people protest, they are instantly called heartless. There are a lot of boomers out there living a life that is bigger than they can afford and in the current pension structure does not give them any incentive to adjust their lives. Why should a young graduate live in a dump until age 35 while his income is skimmed to pay for the SS and healthcare of someone who is living in a leveraged Mcmansion?”

    You may not be heartless but you are very shortsighted. In essence it is good for both young and old if both prosper. (Think of how many young people are helped by their parents with down payments and college — parents who often couldn’t afford that if they were more insecure about retirement.) You are totally buying off on the way the oligarchs want you to look at this.

    Moreover, universal benefits — such as free public education (which SHOULD include college) are a good glue for society. Apparently you suggest means-testing for old age benefits. This turns an entitlement into welfare and makes those programs super-vulnerable. “Programs for the poor are poor programs.” I don’t believe we should be means-testing for social security OR for college costs — these things are in society’s interest to provide and to fund through taxes on everyone.

    Also, means-testing is cumbersome and inefficient. One reason Obamacare is working so badly is that it is the ultimate means-tested program. They even want a refund from you if you make more money than you projected next year. What a horrible mess!

    As I noted in another reply, Yves posted a very good link on this yesterday, saying “Please circulate widely. Provides a very simple-to-understand debunking of the generational burden canard.” http://neweconomicperspectives.org/2013/11/obama-wants-cut-social-security.html

    Warren Buffett deserves his Social Security and Medicare just like anybody else (and his children their free college education). But, as he has himself noted, he should be paying more taxes. This is the right way to adjust the situation, NOT pitting young against old as you want to do (but I hope will rethink).

    1. Moneta

      Me short-sighted? Don’t you see? Printing is increasing the wealth discrepancy. Why? Because you are asking for more printing without fixing the banking system first!!!!

      Health care and SS will not work properly as long as it is getting funded by a skewed financial system.

      The current method of printing gives labor from the young and lower tranches to the top 20-30% until the top 20-30% will also get squeezed. The ills are just moving up the wealth curve.

      The first issue that needs to be dealt with is the banking system. And only then will it make sense to overhaul the health care and SS system. Until then, all you will see is cannibalism.

      1. Roland

        Well, Moneta, this Canadian leftist is mostly in agreement with you here.

        In the absence of an aggressive regime of fiscal redistribution, loose monetary policy can do is spur misinvestment and widen income disparities.

        Better to have both Socialism and Hard Money. We don’t need unchecked fiat to have social equality.

        1. MRW

          Roland, you are just as ignorant as Moneta of monetary operations. You would do well to investigate what you don’t know, because then you could make realistic and intelligent comments about how everyone has been scammed since Reagan came into power. What’s killing Canada now is the balanced budget idea.

      2. MRW

        @Moneta,

        Why should a young graduate live in a dump until age 35 while his income is skimmed to pay for the SS and healthcare of someone who is living in a leveraged Mcmansion?

        It is you who does not understand monetary operations. Young graduates DO NOT PAY for the SS and Medicare of older citizens.

        FICA taxes DO NOT PAY for Social Security and Medicare. Read Frank Newman’s Freedom from the National Debt. He is a former Deputy Secretary of the US Treasury. FICA taxes do not go into something called the Social Security Fund because there is no such thing. The accurate description of the insurance programs were put into a basket called the Social Security Fund as an accounting name. All Social Security checks are paid out of the General Account of the US Treasury, and since April 2013, they are done electronically by using keystrokes in accounts.

        FICA taxes were bank lobbyist Alan Greenspan’s gift to Wall Street in 1983, done with the hope that those earning under $100,000 or $125,000 would object so strenuously to having 6.2% gross removed from their earnings that they would revolt. It didn’t happen. So the false tax remained. You’ll notice that those earning over $125,000 didn’t have their earnings dinged yet they get their share of SS receipts.

      3. MRW

        Moneta,

        Me short-sighted? Don’t you see? Printing is increasing the wealth discrepancy. Why? Because you are asking for more printing without fixing the banking system first!!!!

        “Printing” is a term from the gold standard days. You are almost a century out of touch. No one prints money anymore. It’s keystrokes. Only 11% of the US currency is actual dollars and those are walking around money for the population.

        Before you can fix the banking system, you need to understand how things work.

        You need to know how the Fed works with Treasury and the banks’ relationship with the Fed. Your frustration and ‘upsetness’ are 100% correct, but you are not armed with facts.

    2. JTFaraday

      I think there’s more than a little personal animus there, so I wouldn’t count on it.

      Most people are not very good at self overcoming.

  10. DakotabornKansan

    “History is becoming more and more a race between education and catastrophe.” – H.G. Wells

    American society will be judged by how treats its children.

    Neofeudalists, by turning young adults into debt slaves, are consuming our children and throwing their fate to the market vagaries.

    “When the social system does not build security but induces peril, inexorably the individual is impelled to pull away from a soulless society.” – Martin Luther King, Jr.

    The content of our democracy is rapidly being emptied.

    “Student loans are destroying the imagination of youth. If there’s a way of a society committing mass suicide, what better way than to take all the youngest, most energetic, creative, joyous people in your society and saddle them with, $50,000 of debt so they have to be slaves? There goes your music. There goes your culture. And in a way, this is what’s happened to our society. We’re a society that has lost the ability to incorporate the interesting, creative and eccentric people.” – David Graeber

    1. diptherio

      Which is why we define “full employment” as anything under 4 or 5%, and why the Fed has done everything in its power (in the past) to keep unemployment levels up (er…I mean, “protect against inflation”). Nowadays, of course, Federal Reserve action is unnecessary to maintain high unemployment. “Benign” neglect seems to be the order of the day.

  11. Larry

    The story on higher education reminds me of the healthcare field. We emerged from the New Deal and WWII with social programs that covered a lot of expenses, but not in a way that was guaranteed. Health care is kind of a public right (in that many ERs cannot turn you away for treatment) that has a private and bloated middleman extracting rent. Education of K-12 has been universal for years, and as noted in the piece, getting a HS degree and working hard got you pretty far. College was a luxury in many senses. Then we built up the infrastructure for higher education, but never put in the mandate to fund it publicly like we have with K-12 education. The only way I see out of this is taking higher education to the logical conclusion of publicly funding it. That doesn’t mean it’s going to happen, like with healthcare, but there’s no other way to relieve this burden and distribute it in a more fair fashion. If the US wants a highly educated public (and many elites pay lip service to this notion) then we have to do this.

    1. JTFaraday

      “If the US wants a highly educated public (and many elites pay lip service to this notion)”

      They don’t want a highly educated public. They pay lip service to the notion so that they can pull out an elite strata (Harvard, MIT, etc) which they define as “highly educated” in order to constitute the rest of the population as having an education, skill, and intelligence deficit.

      This deficit then becomes the rationalization for exploitation, the failure to develop the economy of the nation as a whole, and declining living standards for the majority.

      When they started incessantly lecturing high school students c. 2000 that unless they got into an elite school they weren’t going to be able to compete, the writing was on the wall.

      1. anon y'mouse

        an enlightening comment. suggestive that the 90whatever percentage of us was simply going to be ‘disposable’. I’ve been seeing this myself for years.

        unless you ‘excel’ through numerous internships, student government, projects, portfolios, specific credentials, and work a full time job while coming from a poor background (Meritocracy—yay!) they don’t want to know your name. if you are of the gentry, they already know your name.

    2. run75441

      Hello Larry:

      A long time with no discussions. :)

      State colleges were funded by states. Here is Michigan the funding has been cut 30% and pushed on to students in the form of higher tuitions financed by out-of-pocket and loans.

      It can be handled in a fashion which does not require any more funding than what was had previously but at lower interest rates. Is there any reason to loan students money at 9% for a Grad degree when we give it to Goldman Sachs at <1% to invest in risky ventures? Warren was right except she was too late in the process as she was not a Senator in 2008. If they had taken up loaning funds to students at Fed rates in 2008, we would have been graduating a cohort of BAs, etc. at costs which could be sustainable.

      They should have access to bankruptcy,

  12. LAS

    Over the weekend I overheard some Princeton alumni riding in the same train back to NYC sharing experiences since graduation. Two were out of work and afraid to apply to law school because of anticipated debt; they know jobs in law are shrinking and applications to law school as well. The two employed ones described how they are expected to work a 50 hour week, not a 40 hour week. Despite the ultimate prestige degree, the world is not their oyster. It made me realize that my own 50-60 hour work week is not unique.

    1. ambrit

      LAS;
      Without trying to pry too much, does your pay packet, (I’m assuming you are on a Salary, with hours like you mention,) consist of a straight yearly sum, or does it, like the middle managers at the Boxxstore I labour in, consist of a salary plus results driven bonus? The latter has a clearly seen downside for all concerned, (not that your situation is the proverbial bed of roses,) that affects not only the managers, but the hapless drones they oversee. My version of ‘Trickle Down’ has excrement falling like the gentle rain, (of Golden Showers,) upon the floor workers.
      Our CEO class has become the new Marie Antoinette Party. They are unwittingly creating their own Party of the Sans-Culottes.

      1. Lambert Strether

        That is very very true.

        When and if you listen to “the news,” and you hear “the economy” ask “Whose economy?”

        And when you hear “jobs” (pron. “jawbs”) think “human rental” and ask yourself: If owning humans is wrong, why is renting them right?

  13. bh2

    Prices fall with reduced demand. Prices rise with increased demand.

    The realized “value” of most collegiate programs ending in a degree has dropped like a stone, yet prices for these economically useless degrees continue to rise. This is just another example of politically sponsored mis-allocation of resources to levitate over-priced markets with fake demand.

    The answer — in all cases — is to quit the “stimulus” and the long-term debt burden it inevitably creates without comparable benefit.

    Debt obligations are not a problem only for the young. They are a problem for the entire social order.

    Academic economists — who directly and personally benefit from this vast “degree scam” — will never admit to equally vast social consequences of all the other truly rotten financial rackets they persistently endorse as “stimulus” which can only end in unpayable debt.

    As long as rich pay packets and fat retirements for academics are guaranteed by tenure and the state, these racketeers will continue to pour poison in the ears of greedy politicians who are generous only with other people’s money.

    The academics prosper, the politicians prosper, and the bankers prosper. The multitude are steadily impoverished.

    It’s persistent, pervasive control fraud at every level.

    1. craazyboy

      I’m starting to think an Austrian Economics approach may be the only way to go with both industries. No more loans, no more insurance, then lets see how fast prices fall and if we get some “creative destruction”.

      Then we just have defense and banking to whittle down. Slay the Four Horseman and we may be able to live after all.

      1. bh2

        The often mentioned example is Lasik surgery, which used to be expensive and is now dirt cheap, even as cost of general medical and dental services have steady multiplied.

        Why the difference? Because Lasik surgery is elective and not covered under insurance; like buying a computer, it’s paid privately and out of pocket.

        To sell more of something, price has to decline. For price to decline, delivery performance must improve. As unit price falls, sales volume again rises, which allows unit price to fall further. Competition for customers (not insurance premiums) is the driving force.

        This process is called “free market capitalism”. What prevents this happening in US medicine and education is collectivism — where everything is subsidized by the state or paid by third parties. Virtually nobody pays out of pocket. The result is ever more costly service with no appreciable improvement in outcome.

        1. Lambert Strether

          Exactly like hernia surgery. Probably the same thing with arthoscopic surgery. One can always optimize for a simple enough subsystem. The fact remains that the health care system in the United States is exceptional bad, both in terms of money spent and excess deaths. The health care system in the United States is also the least “collectivist” not the most. The “collectivist” systems are doing much better. (Using your loaded word collectivist, of course. You know, like France or Taiwan or the Great Republic to the North.) No winger anecdotal chestnuts in response, please.

          1. bh2

            If the Great Frozen North is such a kick-ass bargain of collectivist (strictly defined) success, then why do Kanucks come here for what they cannot readily obtain at home? Time preference for treatment isn’t cost-neutral — an economic fact often ignored by people touting superficial comparisons among countries.

            http://dailycaller.com/2012/07/11/report-thousands-fled-canada-for-health-care-in-2011/

            Moreover, cost differences of US vs. Canadian health care may have a lot to do with population/behavioural differences in the two countries.

            http://en.wikipedia.org/wiki/Comparison_of_the_health_care_systems_in_Canada_and_the_United_States

            The Mayo Clinic has no branch hospitals in Canada. They do offer an advisory service in Canada for information:

            http://www.mayoclinic.org/international/canadian.html

            1. from Mexico

              @ bh2

              The article you cite is counterfactual to your argument.

              It reports that about 46,000 Canadians sought medical treatment outside Canada in 2011. But approximately 900,000 persons from the US sought medical treatment outside the U.S., making the per capita rate for the U.S. over double that for Canada:

              If, as you infer, the number of those who seek medical care outside a country serves as a gauge of how unhappy they are with the country’s medical system, then US citizens are more than twice as unhappy with their medical system as what Canadians are with theirs.

              Usually it’s a good idea to cite articles which bolster your argument, not counter it.

              1. bh2

                “It reports that about 46,000 Canadians sought medical treatment outside Canada in 2011. But approximately 900,000 persons from the US sought medical treatment outside the U.S., making the per capita rate for the U.S. over double that for Canada.”

                That is quite true. But they are not seeking that treatment in Canada, which was the point of comparison, so your rejoinder is moot.

                What Canada offers is lower overall financial cost at the expense of higher overall time-preference cost. Translation: “Get in line, eh?”

                Americans leaving the country for treatment are mainly going to Thailand, India, and other countries which offer exceptional medical (and dental) care at a fraction of cost in the US. And they get a free vacation in first class tourist hotels as a free bonus.

                Costa Rica is also building a significant “medical vacation” industry, and it’s just a few hours airtime from LA.

                Frankly, I’ve been amazed the US insurance industry hasn’t endorsed those offshore alternatives for expensive surgical procedures. Air fare and hotels are cheap. It’s one of the ripest markets for outsourcing and would probably drive down US costs in a matter of several years. Of course, it wouldn’t be true-blue ‘Merikan to do that. Better to pay far, far more as proof of one’s patriotism.

                1. craazyboy

                  Actually, the president of Mexico proposed that to Obama a few years back. He said the US should allow Medicare to pay for procedures in Mexico hospitals and the US would save a lot of money.

                  Obama said no, with no explanation.

                  Then Cuba is out, of course.

                2. from Mexico

                  Ah, but if you will read carefully, the study which that article cites never says that those 46,000 Canadians sought medical treatment in the US. What it says is “The nonpartisan Fraser Institute reported that 46,159 Canadians sought medical treatment outside of Canada in 2011.”

                  So less than half the number of Canadians seek medical care outside their country than what Americans do, all those Canadians aren’t flocking to the US for medical care as you would have us believe they are, and just maybe the US isn’t the healthcare Mecca you’ve managed to convice yourself it is.

                  And according to your cost-benefit analysis, wait-times are of utmost importance, but price gets dismissed out-of-hand. But if we believe people vote with their feet, then your priorities are exactly 180º bassackwards, and reality is exactly the opposite of what you claim it is.

                3. Moneta

                  Our system is good for everyone. The US system is excellent for the rich. Therefore, many rich Canadians will opt for excellent care when they have the money.

                  Sometimes the US system will send Canadians to get treatment in the US when the system is overloaded.

                  If you want to stick to excellent care for the rich and subpar for the rest, that’s your prerogative.

              1. craazyboy

                Tho I think they are/have made that illegal – even at a licensed web pharmacy and you fax a prescription.

                Also, a lot of the medical tourism from countries with national health to places like Cuba, Thailand, etc… are for cosmetic surgery which may not be covered by national health programs.

                Then if you are rich and need a new ticker…there is the Mayo Clinic.

        2. diptherio

          It’s the poisonous combination of private service delivery and state subsidies that is the problem. If the service was also provided by the state, the costs wouldn’t explode

          1. Klassy!

            Drive by the outskirts of Flint MI once a year. I always noticed the surfeit of billboards for medical practices and hospital systems. Nothing unusual there except Flint is poor. I guess they still have retired auto workers though. This year I noticed less of that and more higher education billboards. I suppose they found out that the demand for health care services is more elastic than thought. Time to move on to a new govt subsidized racket.

  14. Yancey Ward

    Good grief, this post shoots and shoots, but misses the real target. The real target should be the misplaced value of the things being financed by the debt in the first place. It is perfectly possible to get a college degree taking on no debt at all. Given the misguided perceptions of the authors of this piece, a better solution, though not one I would ever support, would be to make it illegal to loan money to anyone under the age of 26.

    1. anon y'mouse

      possible for whom, and under what conditions? (to get a degree with no debt at all)

      how many in the population meet this criteria.

      if a student is working full time (if they can get it) making min. wage at BigBoxRetailer, how much money will they have left over to spend on college? what if they aren’t living at home (being subsidized by family)?

      if they do this, how many hours will they have to attend to school and learning-related tasks? studies supposedly show that every hour worked over 10/week decrease GPA. how badly should you let your grades sink to pay your rent? if you attend part-time or less due to time/money constraints, how long will it take to finish your degree? I don’t have proof, but would imagine that the longer it takes, the more likely you are to fail to finish, but perhaps that is not true.

      at any rate, who meets the criteria? my grants used to pay for all of my schooling, but only at community college. then they paid for almost-nearly-all except fees, books, supplies and transport. they pay for less and less every year.

      my much younger cousin, who blasted through school in slightly over 3 years graduated with no debt. how? mom paid rent, food and everything not covered by grants and scholarships, and told her that her schooling WAS her job during that time. if she’d had to work, pay rent, buy her own books or any of that, she may not have even gone to school much less finished.

      so, saying something is “possible” doesn’t mean much until you show how many it is possible for. if it is possible for only the best, brightest, and most hard working students then I guess you have a meritocracy of the best, brightest and hardest working (and luckiest, and perhaps with the most family support) students. the rest of us will just have to suck eggs, or commit ourselves to 10 year degrees and night school and low GPAs and not enough study time left over after work.

  15. Banger

    My main comment seems to have disappeared. So I’ll make it briefer.

    In their book Academically Adrift: Limited Learning on College Campuses Arum and Roksa argue that in college young Americans learn very little particularly in terms of critical thinking and problem solving skills. They are spending less time on academics and more time on socialization. Money is flowing to elaborate building projects, sports, and executive salaries and staff rather than people who actually try to teach students. As everyone knows by now there is a very dramatic class divide within the system between tenured/tenure track professors and other instructors who don’t earn much more than janitorial staff. I recommend the book to anyone with college-age children.

    I recommend young people to go to community college and get alternative degrees by learning on your own, online courses, cultivating mentors and teachers from outside the system, discussion groups and so on. A college degree is just not worth it unless you have a clear path to grad school–and even there in many areas jobs are drying up so check out what fields are hot.

    The education scam is a scam like almost every other part of our political economy. The best thing is to stay away from it and, indeed, all “official” systems unless you have money to burn which many people in this society do have.

    The object of the ruling elites is to create a steady-state society of debt-peons and a rigid class system with a ruling elite that has no chance of being diplaced either by political movements or technological change which these elites are now systematically suppressing.

    1. ambrit

      Dear Banger;
      Not to be an obstructionist but, I am now thinking more and more about the conclusions drawn from the television programme “Catastrophe”, which, briefly, states that a probable super-volcano eruption in the area of the Sunda Strait, (it might have actually created the Sunda Strait,) around 535 A.D. created a climate disaster that finished off the Western Roman Empire.
      We may be giving ourselves too much credit, for good or ill.

      1. Ulysses

        I’m always fascinated by how well-meaning folks try to “explain” the collapse of the Western Roman Empire through invocation of one simple cause. For Gibbon it was Christianity, more recently lead pipes, climate catastrophes, etc. The Western empire was under all kinds of stresses and strains for centuries. No single factor can be pointed to as “the” cause of its collapse.

        Likewise, our present slide into corporatist tyranny is happening for many different reasons. The greedy kleptocrats are now taking advantage of myriad circumstances that have developed in this diverse world over many generations. Of course they enjoy an advantage in pursuing a single goal: relentlessly taking for themselves more and more power and wealth.

        Those of us who care about all of humanity will rightly disagree about the best way to achieve a better world. We will only have success if we postpone our debates until after the handful of obscenely rich kleptocrats destroying our planet are exposed and brought to justice.

        1. bh2

          It has been said there are two things which a nation state must successfully control else collapse and die:

          1. It’s currency, and…
          2. It’s borders.

          Rome lost control of both. The currency declined abruptly in value (from “over-printing” of coinage in worthless base metal) and could no longer protect its borders.

          America may yet prove itself “exceptional” of these core requirements, but it seems likely the smart money will bet against it.

          1. run75441

            bh2:

            Paul Kennedy wrote in “The Rise and Fall of the Great Powers.” No nation since the Qin dynasty has remained a tier one nation spending more on defense/war exceeding the growth in GDP versus domestic productivity. There are a steady stream of nations who have proven this time and time again.

            The US is on a similar path.

            1. bh2

              That is quite true … empirical powers typically bleed themselves to death at increasingly greater cost to sustain over-reaching hegemony.

              This futile effort eventually requires steadily debased currency to “pay” military and other costs demanded by an aggressive foreign policy. Eventually the currency is worthless and is no longer accepted even by village idiots.

  16. TomDority

    In spite of the ingenious methods devised by statesmen and financiers to get more revenue from large fortunes, and regardless of whether the maximum sur tax remains at 25% or is raised or lowered, it is still true that it would be better to stop the speculative incomes at the source, rather than attempt to recover them after they have passed into the hands of profiteers.
    If a man earns his income by producing wealth nothing should be done to hamper him. For has he not given employment to labor, and has he not produced goods for our consumption? To cripple or burden such a man means that he is necessarily forced to employ fewer men, and to make less goods, which tends to decrease wages, unemployment, and increased cost of living.
    If, however, a man’s income is not made in producing wealth and employing labor, but is due to speculation, the case is altogether different. The speculator as a speculator, whether his holdings be mineral lands, forests, power sites, agricultural lands, or city lots, employs no labor and produces no wealth. He adds nothing to the riches of the country, but merely takes toll from those who do employ labor and produce wealth.
    If part of the speculator’s income – no matter how large a part – be taken in taxation, it will not decrease employment or lessen the production of wealth. Whereas, if the producer’s income be taxed it will tend to limit employment and stop the production of wealth.
    Our lawmakers will do well, therefore, to pay less attention to the rate on incomes, and more to the source from whence they are drawn.

    Written around 1925

    Laborers knowing that science and invention have increased enormously the power of labor, cannot understand why they do not receive more of the increased product, and accuse capital of withholding it. The employer, finding it increasingly difficult to make both ends meet, accuses labor of shirking. Thus suspicion is aroused, distrust follows, and soon both are angry and struggling for mastery.
    It is not the man who gives employment to labor that does harm. The mischief comes from the man who does not give employment. Every factory, every store, every building, every bit of wealth in any shape requires labor in its creation. The more wealth created the more labor employed, the higher wages and lower prices.
    But while some men employ labor and produce wealth, others speculate in lands and resources required for production, and without employing labor or producing wealth they secure a large part of the wealth others produce. What they get without producing, labor and capital produce without getting. That is why labor and capital quarrel. But the quarrel should not be between labor and capital, but between the non-producing speculator on the one hand and labor and capital on the other.
    Co-operation between employer and employee will lead to more friendly relations and a better understanding, and will hasten the day when they will see that their interests are mutual. As long as they stand apart and permit the non-producing, non-employing exploiter to make each think the other is his enemy, the speculator will prey upon both.
    Co-operating friends, when they fully realize the source of their troubles will find at hand a simple and effective cure: The removal of taxes from industry, and the taxing of privilege and monopoly. Remove the heavy burdens of government from those who employ labor and produce wealth, and lay them upon those who enrich themselves without employing labor or producing wealth.

    Written around 1925

    1. run75441

      Tom:

      I agree. CDS and Naked CDS are a perfect example of this speculative type of investment not requiring labor input. It should be taxed as ordinary income.

  17. John Mc

    I do not want to pile on too much to what I see as a very salient article, but we must not forget how the starve the beast or pottery barn-break-to-fix outcomes have affected university life. The rise of the administrative class in higher education (Ben Ginsburg’s book is helpful here: The Fall of the Faculty: The Rise of All-Administrative University and Why It is Important).

    The consolidation of the student as customer model (since they are paying astronomical rates), leads in some students to air of entitlement. Professors can exacerbate this by spending little time in office hours or after class, filled with justification as their tenure review is right around the corner. “Publications and grant money” are the keys for the pay-to-play world of higher education accomplishment.

    And then, there is sphincter-spasm of the CYA (cover your ass) culture of committee work, program marketing, justifying your position to each level of the university bureaucracy (i.e. annual reviews, program reviews, departmental performance evaluations, and once every 5-7 years credentialing body visit from a national organization).

    I am not asking you to feel sorry for all the system participants here, but the 1500 emails/semester/faculty member recieved from students, faculty colleagues, administration, technology, and pleas to join the weekly social functions of the university leaves one wondering how many wannabee universities are really serving the student’s interests.

    In fact, many issues which are most relevant to this article really never gets brought up in most departments: student textbook costs, financial aid conflict of interest, student’s liklihood of paying off the loan with predictable income, and those students who fall through the cracks. There is a collective…. YOYO (you’re on your own). The four-fold increase in the student loan debt just highlights how the system has been corrupted from within and those internal participants most likely to fight for internal change are suborned or weighted down with tasks they could not possible accomplish by themselves.

    Enough of my rant here. I will end with this belief that this environment produces a hollowed out and expensive experience leading to nowhere for many students. This is a triple whammy where curriculum is not responsive to the larger culture, the costs are three times as high for the same degree as a decade before and the actual student-teacher connection has been damaged in all sorts of ways (technology, online courses, sub-prime admission standards, harried professors, cheap-labor-less-experienced-adjuncts, high-quality-underpaid-adjuncts, and a system that prefers competition and individualism in false meritocracy.

    Done now.

    1. anon y'mouse

      congratulations. I would love to see much more (are you a professor?)

      you must understand that many of us are trapped on the other side as well. you can’t even get past certain rounds of the application process today without having credentials of some kind. without a college ed., you are basically consigned to, what? retail hell for life?

      it has become a caste system. we’re simply paying to get out of the Untouchable cast. sad….

      think i’ll take my worthless degree and become a street-sweeper. it will never do anything but lie in the bottom of some drawer anyway.

        1. anon y'mouse

          ha! thank you. but the world appears to belong to the achievers—the young, the bold, the innovative and the ambitious. I am none of those things.

          besides, the statement was rather like an homage to Diogenes-like principles. street-sweeper? someone has to do it.

          i’ll be lucky if I can get such a regular gig.

  18. John Mc

    I just wrote a few paragraphs of raging against the machine here, but it seems to not have been posted.

    Well, there is some luck out there for readers. My major points involved including Ben Ginsburg’s ideas found in the Fall of the Faculty: The Rise of All-Administrative University and Henry Giroux’s work called the University in Chains.

  19. run75441

    Yves:

    Thank you for posting on students. In China now and I can not draw upon the rest of my information to answer more tonight. I am blocked from certain gov sites . . .

    Next up college costs.

  20. Jim in SC

    I think speculators get a bad rap. It is hard, in the first place, to reliably distiguish speculation from investing. Who was it who said that, ‘people in the business of gambling are frowned upon by those in the gamble of business?’

    What distiguishes the present, however, is that it is the Fed and their low rates that are making the gamble of speculation possible, at least at the margins. We have the wolf by the ears, as Jefferson once said of slavery. If we allow rates to rise, the evil wolf deflation will bite us, and perhaps send the economy into a tailspin from which it cannot recover. If we keep rates artificially low forever, we will institutionalize inequality–as only the TBTF institutions can actually borrow at zero interest rates–and capital is eventually misallocated to the point that we will run out of it.

  21. Walter Map

    Okay, let’s check the score here.

    Corporatists are taking over the world. People are expected to be enslaved and enserfed wholesale and die off in droves. Civilization itself is in grave danger.

    Corporatists hate liberals because they’re socialists.
    Socialists hate liberals because they’re corporatists.
    Libertarians just hate everybody except themselves, but at least corporatists and socialists are on the same side about those damned liberals, whoever they are.
    Go figure.

    So liberals and their liberal social programs and liberal civil right protections are getting thrown out by corporatists and socialists alike, bathwater, baby, and all.

    This is what you’re left with:
    .
    .
    Stomping sound of hobnailed boots.
    Muffled screams.
    Furtive Twittering. Plus a little Facebook.
    .
    .
    I leave you now. No, no, don’t thank me. I tremble at your doom.

    Good night. And good luck.
    .
    .
    Crickets.
    .
    .

    1. jrs

      “So liberals and their liberal social programs and liberal civil right protections are getting thrown out by corporatists and socialists alike, bathwater, baby, and all.”

      Exactly which socialists are the problem? Do you mean people who would bring down the ACA because they want single payer? (to call that a liberal social program is itself a stretch). Those who are tired of voting LOTE? Do you mean countries that supposedly have socialists leaders like France that are tacking to the right like everyone else? And you think that’s happening because socialism?

    2. Huxley

      It’s all true, Master Yoda. Liberals are tainted because they’re all really neoliberals. Paul Krugman, Robert Reich, Al Gore, FDR, Bill Moyers, Tom Engelhardt, Paul Craig Roberts, John Nichols, Robert McChesney, Andrew Leonard, Joan Walsh, Richard Wolff, Tom Hayden, and Russell Brand can all be smeared because every single one has some dark past association with the Corporate Imperium.

      The corruption of liberals runs wide and deep. Dean Baker tries to pass himself off as an economist, for God’s sake, even though we know economics is a Wall Street sham and nothing more, so you know he’s in cahoots. Glenn Greenwald is in bed with them too because he’s been a staunch defender of the Supreme Court’s Citizens United decision and supports ObamaCare besides. Everybody seems to have forgotten that Ralph Nader has taken money from the Republican Party.

      No, Dr. Map, not a single liberal is worthy, because they’re all corporatists. Only dedicated socialists possess the requisite Ideological Purity. You’re not worthy either, because you’re a dreaded liberal think tank, and you deserve whatever crap they can fling at you. They have figured out that you’re a think tank here, haven’t they?

      Let’s just hope you’re really gone this time, you neoliberal you.

  22. totalclaptrap

    It is absolutely absurd to thing that “forgiving” student debt would “boost” the economy. This show an astounding ignorance of the economy.

    Either the taxpayer pays for that forgiveness, or the people that made the loan did.

    Since most of those loans are govenment subsidies or supported in some way by the government, it is likely to be the former.

    Let us be clear, the (mostly Democrat) politicians went out and bought the student vote AND the Academics vote with government backed student loans. This glut of money served to raise tuition and held back any real analysis of the competiveness of those degrees.

    Furthermore, it is the hideous “policies” of the Left, incarnate in the Democrat Party, that has caused this mess and which prolongs it.

    It is all entirely corrupt.

    Now, after the votes have been bought, the hussle has been made, the money has changed hands, and all the parasites have gotten what they want, you want the rest of us to pay for these brats’ bad decisions and the imnmorality of the Academics.

    Nonsense. Let the universities dip into their pockets and pay off those “crushing” loans.

    But no, soon the democrats will use this for more vote buying and more electioneering.

    just where do you people think the money comes for all the “free” stuff?

    What are you teaching these people: to be irresposible parasites?

    To be Democrats (but I repeat myself).

    The solution is to radically reduce government, and take back the welth pilvered by the Left wing Nomenklatura.

    1. Lambert Strether

      “Wealth.” “Pilfered.” As for making government smaller, we gutted banking regulation, and the banksters murdered the economy and then looted the corpse. The Democratic nomenklatura are light-fingered bit players compared to the FIRE sector. Know your enemy, sir.

      1. Huxley

        Liberals are the enemy. Only socialists possess the requisite ideological purity. Liberals are tainted because they’re all neoliberals and libertarians and corporatists.

      2. bh2

        The government was not made smaller because it enabled the banksters. It continued to grow and did no harm to the financial sector because that would be biting the hand that feeds it.

        1. from Mexico

          The government “continued to grow”?

          That’s not totally true, is it?

          The government had actually shrunk signficantly from what it was under Reagan and Bush I. Then in 2002 it expanded robustly due to the cost of the Afghanistan and Iraq wars.

          When the GFC hit in 2007 all the automatic stabilizers kicked in so the size of government increased dramatically at that time.

          This graph tells the whole story:

          http://2.bp.blogspot.com/-1s9cYUVV9gI/UDMR07qFuoI/AAAAAAAARVY/4q0iwns4U3c/s1600/Governemnt%2BSpending%2Bas%2BPercent%2Bof%2BGDP%2B-%2BTotal.png

          So the post 2001 growth in government had two causes:

          1) The military adventures in Afghanistan and Iraq, and

          2) The GFC

          But I’m with you and totalclaptrap. I’m sure all three of those events were caused by the young people who recently egressed from college, and therefore they should be punished appropirately.

    2. run75441

      total:

      “It is absolutely absurd to thing that “forgiving” student debt would “boost” the economy. This show an astounding ignorance of the economy.”

      Where was that statement made?

      The student loans pay for themselves. Even in default they payout more at $1.22 than what they cost at $.94. There is a history of student loans being profitable. The return on investing in student education exceeds the cost of the original investment in productivity and tax revenue.

      Why is it we can allow Lehmans to go bankrupt when they were gambling and not allow students to go bankrupt? Why is Goldmans a bank who can borrow money at Fed Rates to invest? Why am I subsidizing Goldmans and other pseudo-banks with the returns going into private hands? Why was AIG worthy and not Alan Collinge of rescue?

    3. Banger

      The Democratic Party long ago left the left. How you on the right can call its policy leftist is beyond me.

      The idea of supporting students started with the GI Bill way back when. These parasites (my father) actually got their degrees and helped to create a vibrant middle-class. Thus helping students get training to improve the country as a whole is the point. Student loans are the least we can do but they are crippling young people in part because education has become a racket.

      However, you don’t care about that–you evidently believe, with Maargaret Thatcher that “there is no such thing as society” so that helping other people or the country as a whole is harmful because only the rich should be allowed to live a decent life the rest–well, if they are extra good lickers of behinds they should be allowed to live.

      Your view is naive, nasty, selfish, irrational and without compassion or decency. The world you want is a literal Hell on earth. Human beings are made for connection, compassion and cooperation not isolation and selfishness as science is showing us.

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