“The Lifetime Framework”: The Devastating, Lifelong Consequences Of Student Debt
America has gone through a rapid social experiment over the last 20 years. We have created a system, in large part through public disinvestment, where our young people take on large amounts of student debt in order to achieve a college degree. The sea change has been so quick it’s been difficult to gather even basic, solid numbers on it, making the consequences of such massive student debt subject to intense debate.
A new report from Beth Akers and Matthew M. Chingos of the Brookings Institution has further fueled that debate, arguing that the conventional story of escalating debt burdens due to student loans are overstated. Even though the number of young households with debt has increased from 14 percent to 36 percent between 1989 and 2010, the percentage of monthly income those people put toward their student debt payments is largely the same. Even though student loan debts are going up, they’ve been accompanied by rising incomes, largely balancing out the burden. The focus shouldn’t be on student loans broadly, and instead on more targeted solutions like focusing on those who drop out of college but still have debt.
But this study, like many arguments along these lines, suffers from a major problem: It focuses on a month-to-month comparison. When we look at the effects of a major economic change—whether it’s government debt, taxes, or replacing a system of publicly funded free colleges with a system of debt for a diploma—we can’t just look at what immediately happens. We need to also consider how people behave in the long run. And when we look at student loans from the point of view of a lifetime, the results are more worrisome.
How could this matter? An infamous study on student debt by Jesse Rothstein of the University of California, Berkeley, and Cecilia Elena Rouse of Princeton looked at the results of a highly selective university replacing loans with grants. It concluded “that debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid ‘public interest’ jobs.”
Let’s imagine two scenarios. In the first you have high student loans, so you work for a corporation in the private sector for high wages. And in the second you have virtually no student loans, and you work for less wages in a job focused on the public interest, say as an educator or at a nonprofit. In both cases your student loan payment would be the same as a percentage of your income. The Brookings result would hold. However your lifetime choices will have radically changed as a result.
We see this with other lifetime measures, such as how entrepreneurial people are. A recent study by Brent W. Ambrose of Pennsylvania State University, and Larry Cordell and Shuwei Ma of the Federal Reserve Bank of Philadelphia, found “a significant and economically meaningful negative correlation between changes in student loan debt and net business formation for the smallest group of small businesses.” This makes sense. You can keep your high student loan burdens low if you stay with an established employer. But if you strike out on your own, you’ll have less and more volatile income when you start. This is harder to manage with student loans, which also impacts your credit rating. Again, we can see the short-term student loan burdens staying the same, even though lifetime choices are much more limited as a result.
The lifetime framework also puts front and center something the Brookings study largely hand-waves: the rapid increase in how long people are paying off their student debt. Though the percentage of income that student-loan debtors pay stays the same, the length they are paying those loans is up 80 percent. What was once an average length of 7.4 years in repayment in 1992 is now 13.4 years. All things equal, a large increase in the length you will be paying student loans means you will dedicate a larger portion of your lifetime income to student loans. This burden goes missing by narrowly looking at a month-to-month basis.
This has major consequences for people’s ability to build wealth. Indeed, much of the current energy in analyzing student loan burdens are looking at this longer dynamic, and how it interplays with the ability for people to amass savings. As Richard Fry of Pew found, using the same data set as Brookings, “households headed by a young, college-educated adult without any student debt obligations have about seven times the typical net worth ($64,700) of households headed by a young, college-educated adult with student debt ($8,700).” Fry also finds that those who took out loans are less satisfied with their financial situation compared to people without loans. Similar results have been investigated and found by the Federal Reserve Bank of St. Louis.
This, in turn, has major consequences for how young people will ultimately transition into adulthood. According to Dora Gicheva of the University of North Carolina at Greensboro, student debt decreases the long-term probability of marriage by a significant amount. In a result that should make social conservatives gasp, Gicheva found that an additional $10,000 in loans decreases the probability of marriage by at least 7 percentage points. Meanwhile, the Federal Reserve Bank of New York found that young student debtors are retreating from those traditional markers of adulthood, homeownership and owning a car. These effects reflect the long-term consequences of student debt on a young person’s economic security just as much, if not more, than their monthly bill.
This system of student debt has happened so fast that proper analysis is hard to do. But what’s most interesting is research showing how student debt threatens fundamentally American ways of life. Student debt chips away at the ability to be a risk-taking entrepreneur, a homesteader who has amassed enough wealth to be self-sufficient, or someone who has dedicated their craft to working in our rich civil society. These are three very real versions of the American Dream, and contrary to what studies like Brookings’s might show over the short term, they are all being weakened by the way we saddle young people with student debt burdens.
By: Mike Konczal, a Fellow with The Roosevelt Institute; The New Republic, June 24, 2014
“The Three Biggest Right-Wing Lies About Poverty”: So Why Do So Many Right-Wing Republicans Tell These Lies?
Rather than confront poverty by extending jobless benefits to the long-term unemployed, endorsing a higher minimum wage, or supporting jobs programs, conservative Republicans are taking a different tack.
They’re peddling three big lies about poverty. To wit:
Lie #1: Economic growth reduces poverty.
“The best anti-poverty program,” wrote Paul Ryan, the House Budget Committee chairman, in the Wall Street Journal, “is economic growth.”
Wrong. Since the late 1970s, the economy has grown 147 percent per capita but almost nothing has trickled down. The typical American worker is earning just about what he or she earned three decades ago, adjusted for inflation.
Meanwhile, the share of Americans in poverty remains around 15 percent. That’s even higher than it was in the early 1970s.
How can the economy have grown so much while most people’s wages go nowhere and the poor remain poor? Because almost all the gains have gone to the top.
Research by Immanuel Saez and Thomas Piketty shows that forty years ago the richest 1 percent of Americans got 9 percent of total income. Today they get over 20 percent.
It’s true that redistributing income to the needy is politically easier in a growing economy than in a stagnant one. One reason so many in today’s middle class are reluctant to pay taxes to help the poor is their own incomes are dropping.
But the lesson we should have learned from the past three decades is economic growth by itself doesn’t reduce poverty.
Lie #2: Jobs reduce poverty.
Senator Marco Rubio said poverty is best addressed not by raising the minimum wage or giving the poor more assistance but with “reforms that encourage and reward work.”
This has been the standard Republican line ever since Ronald Reagan declared that the best social program is a job. A number of Democrats have adopted it as well. But it’s wrong.
Surely it’s better to be poor and working than to be poor and unemployed. Evidence suggests jobs are crucial not only to economic well-being but also to self-esteem. Long-term unemployment can even shorten life expectancy.
But simply having a job is no bulwark against poverty. In fact, across America the ranks of the working poor have been growing. Around one-fourth of all American workers are now in jobs paying below what a full-time, full-year worker needs in order to live above the federally defined poverty line for a family of four.
Why are more people working but still poor? First of all, more jobs pay lousy wages.
While low-paying industries such as retail and fast food accounted for 22 percent of the jobs lost in the Great Recession, they’ve generated 44 percent of the jobs added since then, according to a recent report from the National Employment Law Project.
Second, the real value of the minimum wage continues to drop. This has affected female workers more than men because more women are at the minimum wage.
Third, government assistance now typically requires recipients to be working. This hasn’t meant fewer poor people. It’s just meant more poor people have jobs.
Bill Clinton’s welfare reform of 1996 pushed the poor into jobs, but they’ve been mostly low-wage jobs without ladders into the middle class. The Earned Income Tax Credit, a wage subsidy, has been expanded, but you have to be working in order to qualify.
Work requirements haven’t reduced the number or percent of Americans in poverty. They’ve merely increased the number of working poor — a term that should be an oxymoron.
Lie #3: Ambition cures poverty.
Most Republicans, unlike Democrats and independents, believe people are poor mainly because of a lack of effort, according to a Pew Research Center/USA Today survey. It’s a standard riff of the right: If the poor were more ambitious they wouldn’t be poor.
Obviously, personal responsibility is important. But there’s no evidence that people who are poor are less ambitious than anyone else. In fact, many work long hours at backbreaking jobs.
What they really lack is opportunity. It begins with lousy schools.
America is one of only three advanced countries that spends less on the education of poorer children than richer ones, according to a study by the Organization for Economic Cooperation and Development.
Among the 34 O.E.C.D. nations, only in the United States, Israel and Turkey do schools serving poor neighborhoods have fewer teachers and crowd students into larger classrooms than do schools serving more privileged students. In most countries, it’s just the reverse: Poor neighborhoods get more teachers per student.
And unlike most OECD countries, America doesn’t put better teachers in poorly performing schools,
So why do so many right-wing Republicans tell these three lies? Because they make it almost impossible to focus on what the poor really need – good-paying jobs, adequate safety nets, and excellent schools.
These things cost money. Lies are cheaper.
By: Robert Reich, The Robert Reich Blog, June 13, 2 014
“Undermining Their Own Priorities”: When GOP Obstructionism Becomes Self-Defeating
The point of congressional Republicans’ obstructionism, which has reached unprecedented levels in the Obama era, is obviously to block Democratic priorities. GOP lawmakers could, in theory, negotiate with Democrats and work on bipartisan compromises, but in recent years, Republicans deliberately chose an unyielding strategy: no concessions, no cooperation, no tolerance for progressive goals.
On several key issues, most notably economic growth and job creation, the GOP tactic has proven to be quite effective. But what if the plan has quietly backfired? What if, by simply blocking attempts at governing, Republicans have undermined their own priorities?
On combatting the climate crisis, for example, GOP officials are obviously outraged by the Obama administration’s decision to use the Clean Air Act to impose new rules to reduce carbon pollution. But Jamelle Bouie raises an underappreciated point: “If Republicans are outraged by the announcement, they only have themselves to blame.”
In 2009, President Obama threw his support behind climate legislation in the House, and the following year, a group of Senate Democrats – including Kerry – began work with Republicans to craft a bipartisan climate bill. The process fell apart…. It’s not that EPA action wasn’t possible, but that the administration wanted legislation and would make key concessions to get it. In the absence of a law, however, the White House was prepared to act alone. […]
With a little cooperation, Republicans could have won a better outcome for their priorities. They could have exempted coal from more stringent spectrum of regulations, enriched their constituencies with new subsidies and benefits, and diluted a key Democratic priority. Instead, they’ll now pay a steep substantive price for their obstruction, in the form of rules that are tougher – and more liberal – than anything that could have passed Congress.
Congressional Republicans, through filibusters and obstinacy, can stop much of the governing process, but not all of it. When a policy runs into a choke point, its proponents begin looking for an alternative route to implementation.
In the case of climate policy, GOP lawmakers assumed they’d win by simply folding their arms and refusing to do anything. In practice, this often-mindless obstructionism simply forced the administration to begin to work on its own – without any regard for whether Republicans on Capitol Hill would like it or not, since the White House didn’t need their approval.
In other words, Republican tactics were self-defeating – GOP officials would have produced a more favorable policy, from their own perspective, if they’d only agreed to work a little with Democrats.
This keeps happening.
On judicial nominees, for example, Senate Democrats were reluctant to pull the trigger on the so-called “nuclear option.” Instead of leveraging that reluctance, Republicans did the opposite, vowing to block a series of nominees they found unobjectionable in order to force the issue.
Had the GOP minority been a little less ridiculous, Dems wouldn’t have pursued the nuclear option and Republicans would probably still be blocking a variety of judicial nominees right now.
The Affordable Care Act offers an even more striking example. President Obama and his team were desperate to strike a bipartisan deal on health care – they started with a Republican-friendly reform blueprint; they were prepared to bargain away progressive priorities, and they even signaled a willingness to incorporate conservative goals like “tort reform” into the legislation.
GOP lawmakers, under strict orders from party leaders, balked anyway, refusing any and all offers. No matter what the White House offered, Republicans said, the GOP would reject any attempts at reform.
But again, the obstructionism worked against Republicans – they didn’t stop the legislation; they simply blocked their own opportunity to easily move the legislation to the right.
We may yet see a similar dynamic unfold on immigration policy. House Republicans refuse to consider a bipartisan solution with broad support, pushing the president to consider unilateral action. If GOP lawmakers worked with the White House, they’d get a package that reflected their priorities, but by refusing to govern, they’re likely to end up with a presidential directive that gives Republicans nothing.
Bouie concluded, “[A]fter five years of relentless obstruction in the name of small government, Republicans may have helped set the stage for a world where government is much bigger – and expansive – than it is now. And if it happens, we should remember to thank Republicans for helping to make it possible.”
By: Steve Benen, The Maddow Blog, June 4, 2014
“What Matters Is Reducing Emissions”: How Conservatives Will React To Obama’s New Climate Regulations
President Obama is set to announce new rules for carbon emissions today, and what we’ll see is a familiar pattern. The administration decides to confront one of the most profound challenges we face. It bends over backward to accommodate the concerns of its opponents, shaping the policy to achieve the goal in ways that Republicans might find palatable. Then not only are its efforts to win support from the other side fruitless, the opposition is so vituperative that it veers into self-parody.
That’s what happened with the Affordable Care Act; not only was the law not “socialism” as Republicans charged, it was about as far from socialism as you could get and still achieve universal coverage. It involved getting as many people as possible into private insurance plans, where they could see private medical providers. But Republicans who had previously embraced similar market-based ideas decided that once Obama poisoned them with his support, they were now the height of statist oppression.
Something similar happened with cap and trade, a carbon-credit system, which before 2008 was considered a conservative alternative to heavy-handed government regulation, harnessing the power of the market to reduce pollution—one that had the support of many Republicans. But once Obama began advocating cap and trade, Republicans decided it was the most vile sort of government overreach. The new regulations the administration is about to announce allow for state cap and trade systems, but the administration is carefully avoiding using the term.
The essence of the administration’s plan, at least in the details that have been reported so far, is that it will set statewide targets for reduction of carbon emissions from existing power plants (which are the single largest source of such emissions), then let each state decide how it wants to meet those targets. A state could institute a cap and trade program, or it could do any number of other things. That’s supposed to be just the kind of federalism conservatives love.
We’re likely to hear a number of responses from conservatives to these new regulations. Some will say climate change is a hoax, and there’s no reason to worry about it. Others will say that though climate change is real, we shouldn’t actually do anything about it. Others will talk about how despite the state-by-state flexibility, these regulations will be “job-killing.” But the word you’re likely to hear more than any other is “lawless.”
Every time Barack Obama takes an executive action they don’t like, Republicans describe it as “lawless.” There are certainly times when Obama has tested the limits of presidential power, just like pretty much every president before him. But Republicans make this charge even if what he’s doing is squarely within the president’s rights. (I contend that they make this charge so often because at a fundamental level, they believe Obama’s entire presidency is illegitimate, but that’s a discussion for another day.)
It’s true that early in his presidency, Obama tried unsuccessfully to pass climate legislation (a cap and trade bill passed the House but died in the Senate), and is now doing through regulation what he couldn’t do through legislation. But there’s nothing lawless about that, so long as the regulations are within his authority. In this case, Obama is not only allowed to regulate carbon emissions, he’s required to do so by law. In a 2007 case called Massachusetts v. E.P.A., the Supreme Court ruled that the Clean Air Act mandated that the federal government take steps to regulate carbon emissions, and that’s what the EPA will be doing.
Even if the state flexibility fails to win over Republicans, it’s still a good idea. What matters is reducing emissions, and whichever way a state gets there is fine. The states will be able to learn from each other; if they accomplish the reductions in different ways, we’ll discover which paths were the easiest, most effective, and least expensive, and states can adapt over time with that knowledge. But the details won’t matter to the administration’s opponents; because Barack Obama is proposing these regulations, they must be job-killing socialism intended to destroy America.
By: Paul Waldman, Contributing Editor, The American Prospect, May 27, 2014
“More Conservative Demonology”: Countering The Minimum Wage With More Help For “Lucky Duckies”
One of the key contributors and promoters of the “reform conservative” cause (and the new “manifesto” Room to Grow), Ramesh Ponnuru, has a Bloomberg View column making the fairly obvious suggestion about how Republicans might respond to the drive for a higher minimum wage:
One way to do so is to support expanding the earned income tax credit, an earnings subsidy that targets poor households much better than the minimum wage does and poses no threat of destroying jobs. That credit may not be as easily understood as the minimum wage, but it would give Republicans a way to show that they want to help the poor — and that their stated objections to raising the minimum wage are sincere.
He might have added that the EITC used to be a very popular initiative among conservatives, from Ronald Reagan to George W. Bush.
But not any more, as both Jonathan Chait and Ezra Klein quickly pointed out. Here’s Ezra’s brisk summary of the Republican revolt against the EITC:
The most recent Republican budget lets a stimulus-era boost in the EITC to expire and, on top of that, includes huge cuts to the part of the budget (the “income security budget function,” for wonks) that houses the EITC.
But it’s worse than that: the EITC has been largely responsible for eliminating federal income tax liability among low-income Americans. And that has become a deep source of grievance, and even of conspiracy theories, among conservatives at both the elite and grassroots level. The classic slam at the EITC was articulated by the Wall Street Journal editorial board, which got into the habit of referring to poor people who didn’t owe federal income tax as “lucky duckies.” This in turn became integral to the popular conservative theory that people who didn’t pay income taxes didn’t bear the cost of governing (an argument, of course, that ignored all the other kinds of taxes the poor pay, often at regressive rates), and thus represented looters who voted themselves more and more of other people’s money.
I personally became convinced this had become an important part of conservative demonology when watching Rick Perry make his statement of presidential candidacy in 2011, at a RedState gathering in South Carolina. In the midst of an extended tirade about the need for lower taxes, Perry suddenly blasted “the injustice that nearly half of all Americans don’t even pay any income tax.” The crowd responded with what I described at the time as a “feral roar.” So it wasn’t surprising a year or so later when Mitt Romney got caught buying into the same idea in his “47 percent” comments, about “people who pay no income tax” but nonetheless receive federal benefits.
Even if they didn’t rely on EITC cuts to pay for upper-end tax cuts in their budget schemes, Republicans seem to have developed a moral aversion to the EITC that’s more important to them than finding a sensible alternative to minimum wage increases. So Ponnuru is almost certainly barking up the wrong tree.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, May 23, 2014
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