That’s pretty sad when you think about it: the US government’s #1 financial asset is debt owed by tens of millions of its young people for university education that didn’t even necessarily qualify them for a real career.
Millennials are the most educated generation in history. Yet there are record numbers of them working off student debts as waiters and bartenders, and supplementing their income on the side with ‘gigs’ (like being an Uber driver).
On top of all that, young people will spend their entire working lives paying into a pension system that likely won’t be there for them when it comes time to collect.
The Board of Trustees of Social Security tells us that the program is going to completely run out of money within the next 15 years. Millennials’ retirement horizon is far beyond that.
Miami-based homebuilder, Lennar Homes, recently announced it would pay a big chunk of a student loan for any borrower buying a home from them.
Through its subsidiary Eagle Home Mortgage, the company will make a payment to a buyer’s student loans of as much as 3% of the purchase price, up to $13,000.
Debt has become such a keystone of our society, that the only way we can afford something is to swap one type of debt they can’t afford with another type of debt.
-- Simon Black
In reality, social security very likely WILL be there. But fostering cynicism about it is a prerequisite towards imagining it won't be, which makes it (theoretically) easier to dismantle. "Well it's in poor shape anyway, we should just blow it up..."
There are good informative comments below that are being downvoted, that are about how social security actually works. You just can't seem to avoid political crap here.
There is plenty of good information out there on various easy, non-disturbing ways to tweak social security if necessary. Google some of the ole trustee reports or publications by the late Bob Ball.
Your response is engaging in "political crap" by providing no evidence besides name-calling. For some actual proof of the Social Security situation, here's the SSA report  explaining how its Trust Fund will run out in 2035. So yes, Social Security will still exist, but it will rely on short-term funding rather than a big account. That's fine in theory, provided the budget is there. (It likely will be; I imagine the politicians will cut military funding before they hurt SS!)
For current or future recipients of said benefits, the answer is pretty clear : yes.
And, frankly, the government has promised these people compensation in terms of years or work, and amounts of income after those years of work. It should be illegal to make these claims. (and for the private sector, it mostly is, so frankly these laws are letting government lie on compensation letter, which is low, dishonest)
Pensions in this country have made unrealistic assumptions for years.
Just google it. Here’s one for you from the Brits, so no right/left anything: https://www.ft.com/content/456172b4-6b11-11e6-ae5b-a7cc5dd5a...
And here’s another: http://www.wfaa.com/news/local/dallas-county/retired-dallas-...
Do I need to continue? I will if you continue on your asinine positions that pensions are just fine in this country. So the idea that Social Security has issues is quite well founded.
And if social security doesn’t pay out, politicians on both sides will be to blame for kicking the can down the road.
Under Federal law and under many state constitutions, vested benefits under state and municipal employee pension plans are a property right, and cannot be reduced unilaterally (depending on the theory, either because of the Takings Clause or Contracts Clause of the Federal constitution). And because, unlike private pensions and the USPS, Federal law doesn't require state or municipal governments to fully fund liabilities as they accrue, these particular pensions have turned into a disaster.
But Social Security was designed and intended at its very inception to require adjustment to both benefits and retirement age. It's not a form of deferred compensation or other property right. So retirement age and benefits can and has and _will_ be adjusted to keep it solvent.
More over, Social Security was never designed to provide continuity of lifestyle, but rather to keep the elderly from starving and living homeless. All it has to do is provide as much as it can, no more or no less. It's a carefully designed social welfare program that is patterned after, but shouldn't be confused with, pensions and annuities.
The Social Security department has never made unrealistic assumptions, nor has Congress. The problem with Social Security is that there exists a political party that will cynically bemoan the pending collapse of Social Security while refusing to make the simple and obvious changes that were foreseen and expected of them 80 years ago and ever since.
 Actuarial tables back then were insanely accurate, and the bureaucrats who designed Social Security understand very well how things would play out. See this 1947 study, which also includes historical actuarial tables from the 1920s and earlier. https://www.cdc.gov/nchs/data/lifetables/life39-41_acturial....
In particular, note (PDF) pages 14 and 18 where it discusses the trends in longevity. I've seen better historical papers to make my point but don't have the references on hand. But I think that document suffices to show how actuarial science was well developed back then. And it's also worth noting that Social Security came about before the post-WWII baby boom. Populations were understood to be able to grow and shrink. Social Security was never predicated on a steadily growing population.
People should worry about pensions because they won't fail, instead they'll be adjusted to become much less, both in terms of years (longer work) and in terms of benefits (which will be your only form of income for decades).
This makes me wonder, what, exactly, do you think "failure" means, to normal people, for their pension fund/social security/... ?
In my humble opinion, it is that they'll have to work longer and make more money themselves, after getting a pension. And for various other social security recipients it'll be analogous.
So your long comment essentially says "pensions won't fail, they'll fail !". (Or perhaps one could say that you're being extremely pedantic on the exact meaning of fail versus the common meaning of fail)
Obviously the claim made to the population by social security is that they'll receive benefits for a given period. You clearly agree that that promise is unsustainable, and fail/("will be adjusted").
So no, it’s not one party - it’s both. And that’s what the problem is.
If you want to criticize Democrats, they did choose to expand Medicaid and Medicare without a more comprehensive long-term financing plan. OTOH, unlike the GOP tax reform, these expansions were at least nominally revenue neutral thanks to some targeted tax increases, the insurance mandate, etc. Democrats may spend but they _tax_ and spend, which is better than spending or (as Republicans do) cut taxes and spend.
Republicans could come to the table and attempt to compromise with Democrats. Democrats would want to expand benefits. Republicans would like to cut them, at the very least, if not eliminate benefits or privatize the entire program. But compromise theoretically could be fairly easy. But Republicans are committed to a nihilistic "starve the beast" strategy. That's the crux of the problem. Republican ideology has become so extreme that compromise is literally anathema. It's no coincidence that old-school Republicans have been bowing out left-and-right.
I see similar trends happening on the left with an insistence on single-payer healthcare, but it's early and not even remotely comparable to where Republican politics is at.
Why are you talking about pensions? The subject was social security.
That’s not how Social Security works. For practical purposes, it’s pay-as-you-go system: http://www.heritage.org/social-security/report/misleading-th.... As boomers retire, taxes will need to go up to account for the higher ratio of retirees to workers. But when the millenials retire, unless they end up having a substantially smaller generation after them, that strain will not be there.
The sooner we can have a society more like Star Trek's utopian future the better for anyone that wants to retire without being a burden on the current generation. (Even then, I don't think I'd ever want to /fully/ retire, I'd just like to focus on things I actually find fun and meaningful.)
The right wing frame is that the surplus "doesn't exist" or is full of "IOUs" or something. It's hogwash.
Here's how it really works. When Social Security is in surplus, more money comes in from payroll taxes than is paid out in benefits. Payroll taxes come from people who get W-2 income and pay FICA.
That surplus is then used as part of the general fund to pay for various things including thing like tax cuts for lower capital gains. In reality, the general deficit is larger, because the surplus money isn't allocated for those purposes - the surplus continues to exist to pay for social security when it goes into deficit.
If we then pretend that that surplus "isn't actually there", then it means that we've effectively used payroll taxes to fund tax cuts for people that are richer than the people who have paid their payroll taxes. It's a two-step con. It's also false.
Social Security has also transition from surplus to deficit and back to surplus in the past as well.
Other countries are already seeing this, but there is no escape from raising the retirement age, and the best way to slash benefits, which is to keep them behind real inflation. Also, medicare is an even bigger problem as it has no upper limit on spend, which will also have to be cut somehow.
Bottom line is, the more resources you spend on the past, such as aging people and infrastructure, the less you can on the future, such as for you and your kids. That is unavoidable.
I think the latest figures for the national debt are just shy of $14 trillion, of which about $3 trillion is owed to the Social Security trust funds.
In FY2016, it ran a surplus of $23 billion. For FY2017 the surplus was $35 billion.
1- taxes aren’t going up, even though Boomers have already begun to retire;
2- if Boomers live for a long time in retirement, everyone after them is hosed.
This isn't quite true.. In addition to the assets in the chart, the governemnt has about 8T in mortgages (out of 15T total outstanding) through several Government Sponsored Enterprises, like Freddie Mac and Ginnie Mae: https://www.federalreserve.gov/econresdata/releases/mortouts...
The only difference is that the government took over the student loan market without creating a GSE to manage it.
The Fed's balance sheet on the other hand, now that makes the student debt load seem miniscule.
Failing government systems, check. Unaffordable educational system, check. Limited housing and land, check. Degrading climate, check.
Some days I believe I just may find a way out of it. But, for every day I participate in the rat race is just another lost when I should be working on building a better future for my family.
P.s. honestly, I don't understand how ppl who are so hoplessly indebted are not migrating here. Bulgaria offers very cheap life with the opportunity of doing business with the EU and the US. Why work 24/7 when you can enjoy a good life in a place where the local people and economy need a foreigner to lead them in the business and globalizing world?
Every election season, many people in the US say "If X is elected, I am moving to Canada." Then they check the immigration department website , realize it is going to take multiple years and thousands of dollars for them to navigate the immigration system, and even then there is a high likelihood of failure. So most promptly give up.
The bureaucratic difficulty of immigration is not the only issue dissuading potential immigrants. Language barrier, cultural differences, loss of one's professional network, the possibility that one's education and experience wouldn't be acceptable to the employers in the destination country, family and friends, etc. also play a role.
I am sure many consider moving to Easter Europe, but few end up going through with it.
tldr: There's more to the equation than finance.
- The overwhelming political nature of everything here. It is "free-market is the solution to everything or you're a socialist" mentality. The Moore race is a good example of this. The only thing worse than a Dem is a pedo. I'm moderate right, for reference. (maybe some of this is just the political climate of the times)
- Bible belt and churches around every corner. Religion is much more common place, and I definitely get weird looks if I mention that I don't go to church.
- Everyone is big. I mean the obesity thing here is common and I'm shocked at the amount of fast food and all meat diets people do. This can lead to some bland food, though there is also some really good food. Great BBQ here.
- There is much more casual racism here (I'm white, but it is enough that I notice it when I'm not looking for it). Lots of confederate war flags and for some reason people keep telling me that the civil war had nothing to do with slaves. I don't know why people keep bringing that up in discussions that it isn't related to. These things also pop up in the frequent political discussions that I can't seem to avoid.
- Finding friends is hard. Part of this is just moving to a new area, part of it is cultural differences. I expect this to be a challenge for anyone that is moving not into a big area or into a job/school that you have a lot of peers. You'd be surprised how many friends you have because you sit next to them for hours a day.
- Everyone is extremely nice. This isn't really a bad thing, but it is surprising. People will go out of their way to help you.
And there are just cultural norms and vernacular that are strange to me. I'm also in a small town, so that definitely plays a factor. But it isn't a hick town either. I can't escape the feeling that I'm a foreigner. And I think that feeling of being a foreigner is off-putting for a lot of people.
If the former is cultural shock, the latter is a multi-story Tesla Coil to the face :)
They say the confederate war flags are fine. Well, if it isn't racist to them, then it isn't racist to them. You won't fit in until you accept that. There are actually black people with that flag...
Based on your non-southern culture, you're reading something into the actions of other people. You are using an incompatible cultural context to make judgements about other people. They aren't unaware of this, which is why it keeps popping up. You are giving off some sort of vibe, perhaps disgust, and they can see it. The only fix is to adopt the cultural definitions of those around you.
Racism in the south is more obvious than racism elsewhere, but not more common. All across the north and west you can find tokenism and low expectations.
The appearance that everything is political is partly just the times, but also partly because you were unaware of it in your former location. Political opinions in your former location were just the norm that you'd always known, so you didn't really see them. Now they stand out. To see the other side of this story, how things are in fact political outside of the south, read through this lawsuit: https://www.scribd.com/document/368688363/James-Damore-vs-Go...
I'm only back in the US now for a limited time. I've done the math and found that I need a few more years of work to live in Bulgaria full-time for the rest of my life.
I speak broken Bulgarian.
I say this as someone that had a wonderful trip there and like the country and people quite a lot.
It's a classic example of "worldly" Americans going to the Louvre and being "cultured" but not having the depth of understanding that Eastern Europe is a wonderful, beautiful place. It's just not as well-kept and poorer so they turn up their nose.
Failing government systems? Have always existed. Unaffordable education? Never went, no idea. Online education still free. Limited Housing and Land? Flyover country, tons of cheap housing and land. Degrading Climate? Yes. But even the most pessimistic projections are unlikely to effect my life.
Its a great time to be alive. Country not at war, unemployment is low, stock market doing amazing, crime is low, tons of new fields are emerging, sex is significantly easier to find then past generations, and the internet is still pretty great.
Although a still more pedantic person might point out that there was no formal declaration of war in Korea, so technically it's not a "war" (it was called a "police action").
I’m with that other commenter who suggested Eastern Europe is much more interesting.
I've found it pretty easy to get into a negative spiral when reading about all the shit going on. Our awareness of the myriad problems and the seeming political and cultural insurmountability of them don't do our minds any favors.
EDIT: being a little presumptive here, see below.
All of this is in addition to my 9-5.
What else should I be doing?
Also, I don't appreciate your presumption that I have a "defeatist" attitude just because I shared some of my honest thoughts. Next time ask.
I will say however that a lot of the issues you talk about are systemic and larger than what can be affected by local politics. Compositing programs won't address there are still large corporate farms out there that contribute the most to climate change. The same is true of recycling, being vegan or eating local, etc. A lot of change that needs to occur involves regulating large corporations.
It sounds like you're aware of this, but that's how you address the future. I think you agree.
EDIT: leaving my presumptive comment above unchanged so people reading won't be confused.
For example, If we as a society would stop buying cheap food, it would force the hand of these industrial operations to change their behavior.
So I'm taking the time I have now to learn and improve my mentoring and educational skills when working with the local community. In addition to regulation, I also think it's critical that sustainable change occurs from our within society.
While voting with your wallet and trying to be a conscientious consumer is great, the asymmetry between ad=hoc networks of consumers pursuing smarter more sustainable choices and people who are directly invested in selling crap fora quick buck is huge. Since the large industrial concerns can spend a fortune on advertising and demand creation how exactly are you going to 'force their hand'? So far evidence suggests they often just create an additional line of healthier-seeming products at a higher price point that can be marketed to your demographic segment.
Surely you have noticed that there are also people who systematically attempt to undermine such public education efforts. I think you might at least acknowledge their existence and the existence of advertising that attempts to bypass educational channels to sell crappy foods.
I don't agree. The Midwest is very affordable. Plenty of land. Remote work is a definite possibility.
FYI - I'm pretty sure central Minnesota is gonna be just fine.
"More heavy downpours may increase the likelihood of property damage, travel delays, and disruption in services. Sediment runoff and erosion may clog reservoirs and reduce storage capacity."
Erosion is harmful because the top six inches of the soil has the majority of microbial life that contribute to healthy soil. When their ecosystem is disturbed, it takes years for it to come back. No amount of fertilizer or additives will help in it's absense and only worsens the health of the soil.
"Midwestern agricultural lands make up two-thirds of the region's land area and produce 65% of the nation's corn and soybeans."
Corn and soybean production has historically used harmful chemicals and harmful farming practices. These techniques harm the microbial life in the top-soil in addition to other ecosystems.
Industrial farming practices are negatively impacting ecosystems such as insects, birds, and microbial soil life.
"In the long-term, climate impacts are likely to have increasingly detrimental effects that increase variability in crop and agricultural production"
When these crops start to die off, the soil is going to be exposed to severe weather conditions and will only make it worse for the microbial life to live. Healthy soil need's protection from UV, typically that's in the form of a mulch layer (leaves, twigs, bark, wood chips, plants, bushes, trees, etc...)
'Many tree species are expected to gradually shift their ranges northward."
The forest edge is Nature's sign of the best growing conditions. Tree's provide protection, energy, and food for top-soil. Without them, it will require significant energy and expense to simulate what they naturally provide.
It provide a healthy ability to save and access lasting economic mobility if that's the goal.
At the end of the day what you make doesn't matter, it's what you're able to keep and move forward (or stabilize with).
This is utterly short-sighted thinking.
We in Western nations are utterly privileged and blessed to live in today's world. Abundance of clothing! Abundance of food! Free and accessible plumbing! Clean drinking water! Travel anywhere you like for relatively cheap! You probably own a large climate-controlled contraption that can transport you long distances in a short amount of time! No epidemic diseases/plagues of yesteryear! No famines! The average lifespan is already 80+ years old and that number continues to increase.
The world we are heading to will likely continue to see advances in technology and medicine, leading to less suffering and healthier, longer lifespans. More resources too - there are fewer destitute poor today than at any other time in history.
Warren Buffet said that the moment one was born in the United States or another Western country, that person has essentially won a lottery. Puzhong Yao, a Chinese immigrant to the US put it this way:
"If someone is born a U.S. citizen, he or she enjoys a huge advantage in almost every aspect of life, including expected wealth, education, health care, environment, safety, etc., when compared to someone born in developing countries. For someone foreign to “purchase” these privileges, the price tag at the moment is $1 million dollars (the rough value of the EB-5 investment visa). Even at this price level, the demand from certain countries routinely exceeds the annual allocated quota, resulting in long waiting times. In that sense, American citizens were born millionaires!"
Jeff Atwood of Coding Horror blog expounded further: "Being born today, rather than 50, 100, 200, 500 years ago is also effectively winning a lottery."
If you don't wish to have children for some reason, fine. But don't give us the foolish nonsense about refusing to bring up children in a terrible world. The world is the best it has ever been -- technologically, socially, medically, and probably morally -- and that trend is pointing in the right direction.
You are right that we (at least in the First World) are standing at the pinnacle of human civilization. We have access to the knowledge of the whole world, going back throughout much of world history. We have science, medicine, technology that would dazzle our ancestors. All of the great things you talked about are true.
I've seen the migration of the Monarch Butterfly. It's glorious, absolutely magical. Uncountable numbers of these gorgeous orange and black beauties fill the air, all fluttering together, all wobbling along in the same direction. It's impossible to describe the feeling of witnessing it, of being surrounded by an aerial sea of these soft gentle beautiful beings.
It doesn't happen anymore.
The Monarch population tanked a couple of years ago. Not enough milkweed for the caterpillars to eat. Too much land has been given over to human food production. People are planting milkweed in their gardens now, but who can say if the Monarchs will rebound?
Our food animals outweigh all other land mammals combined, by more than twenty times.
All the glories of our Western civilization come from an extraordinarily wasteful system that is converting oil and natural biomass into humans and meat animals and trash. There are always trade-offs, and we may well be about to become victims of our own success.
I don't want to have to explain to my children what Monarch Butterflies were, what tigers and elephants were, what coral reefs were.
When the waters rise and billions of people have to move or die, I don't want my kids to have to deal with that.
I don't want them to suffer when the first genegineered virus sweeps through our cities.
I don't want them to be embedded in a technological panopticon that indelibly records their every movement and communication.
There are some serious problems that humanity is facing and I don't have the faith to create a new human being in light of them. And that's what it is: faith.
Dismissing these concerns as "foolish nonsense" is the "utterly short-sighted thinking" in my view.
No sir, I'll keep my kids safe in the Uncreate, at least until such time as things have settled.
"May you live in interesting times" is a curse, and I won't pronounce it on my own unborn offspring, thank you.
 > Our phytomass harvests go beyond the metabolic needs to secure raw materials (wood, fibers, pulp) and energy (fuelwood, charcoal, straw) whose inputs remain indispensable even in the age of metals, concrete, synthetics, and fossil fuels. The biosphere has paid a considerable price for these human gains as both its total stock of standing phytomass and its overall productivity have declined by significant margins. And because we are an omnivorous species we have also been harvesting a wide variety of zoomass by collecting and hunting animals as foragers and eventually also deliberately raising them as pastoralists and farmers. These actions have reduced the stocks of wild terrestrial and marine animals while massively expanding the stocks of cattle, water buffaloes, horses, camels, sheep, pigs, and poultry.
"Harvesting the Biosphere: The Human Impact" ~ Vaclav Smil http://www.vaclavsmil.com/wp-content/uploads/PDR37-4.Smil_.p...
If you are waiting for scary things to pass, you'll wait forever.
There will never be a perfect utopian time when the economy is running 100% efficiently, when humanity is in perfect harmony with nature, when there are zero threats of war, etc.
Your argument doesn't address this simple truth: there has never been a better time and place for humanity as now in first-world nations. It isn't perfect -- as you point out there are serious problems to tackle -- and yet, it's never been better.
The idea that civilization will die has been a remote possibility for virtually all of human history. That we should not have children because of this remote possibility is fear-driven foolishness.
If you don't want or can't have children, no judgment. But let's not claim the reason is because civilization is so terrible - when in fact it's the best it's ever been, especially in rich first-world nations of the West.
99% of the key to wealth is to live beneath your means. It's unglamorous advice, but it's absolutely effective.
"The Millionaire Next Door" should be required reading in high school. It has all you need to know about living below your means, building wealth slowly and consistently.
In 17 years* the Social Security system will probably have to cut benefits by 23% unless we either raise the retirement rate or raise the maximum salary at which you have to pay social security tax. The latter is a pretty painless thing to the average tax payer, who already has all their salary subject to social security tax.
The social security system was in much greater danger in the Reagan era, when they decided to make benefits taxable, which was ultimately a progressive way to reduce benefits.
Can anyone explain this to me?
Not saying I agree with it but that's my guess as to the reason.
Can you cite any sources on this? Im fairly certain it will not be completely out of money, but will be to a point where more money is going out than coming in.
"In the annual Trustees Report, projections are made under three alternative sets of economic and demographic assumptions. Under one of these sets (labeled "Low Cost") the trust funds remain solvent for the next 75 years. Under the other two sets (the "Intermediate" and "High Cost"), the trust funds become depleted within the next 20 years. The intermediate assumptions reflect the Trustees' best estimate of future experience.
Some benefits could be paid even if the trust funds are depleted. For example, under the intermediate assumptions, annual income to the trust funds is projected to equal about seventy-nine percent of program cost once the trust funds become depleted. If no legislation has been enacted to restore long-term solvency by that time, about three-quarters of scheduled benefits could be paid in each year."
As long as the government continues to exist and has the ability to tax, Social Security will be around.
How does this make economic sense? It reminds me of the deals home sellers would make to prop up their numbers in '06/'07.
Or at least, that's my guess.
I know home loan standards are pretty static, so I'd guess it's to allow indebted students to qualify.
We're the most educated in history, but many people decided to use that education to learn topics that aren't lucrative/in demand. Personal responsibility plays in a ton here, and some people made bad decisions. It's still simple/easy to get a good education at a state school, entirely paid for by loans, and come out with a degree that will allow you to pay those loans back in a few years. People who plan accordingly benefit in a HUGE way from the availability/accessibility of student loans, the barrier to entry is that much lower.
As far as SS goes, I'd be happy to see it fail but I'm also happy to keep paying into it without a guarantee of return in order to ensure my parents generation doesn't find themselves destitute. There are so many ways to plan for your future, having the government come in and force you to participate in SS is far from ideal. Not sure how my fellow Millennials feel about that, though...
If everyone studied computer science, every single one of our salaries (save for maybe the top 5% of us, in terms of skills and experience) would drop significantly.
I know the absurd stereotype is that millennials are going to college and studying feminist underwater basket weaving, but there are many, many students who are chasing the "hot" new fields, only to find that they weren't the only ones who had that brilliant idea at 18 years old.
P.S. Most of my friends grew up in families around the poverty line, so that'll affect my story.
I have friends with English degrees with no student loans that are happy. I have friends with English degrees with $150k in debt, not happy.
"Just get a degree" is bad advice. I know electricians that make more money than me, and work shorter hours. "Get a skill" is good advice, and college is only one way of doing that. But you can't dismiss personal responsibility when it comes to decision making, both good and bad.
I don't know what you do for a living, but I'm guessing it doesn't involve contorting yourself into a pretzel inside a hot attic and twisting wires together all day. Electricians work hard and come home sore.
> I know many, many millennials who grew up hearing ‘Just get a college degree and you’ll be in good shape’ who did and aren’t, respectively.
Getting a useless degree because other people told you to and then blaming it on society seems like the very definition of not being personally responsible.
Except everyone is constantly told they need to go to college by authority figures as they go through the education system. There's also responsibility that falls on employers demanding college degrees for jobs that in no way need them, e.g., secretary.
I wouldn't. If SS fails, there will be riots, if not armed uprisings in the streets.
People keep saying this as if it's true without citing anything regarding it. Is there any hard evidence this is true?
How we learned from history.
[a] Figures are as of November 2017. See page 12 here: https://www.federalreserve.gov/monetarypolicy/files/quarterl...
[b] Many people don't realize or understand that the largest creditor of the US federal government is the US federal government, through the Federal reserve. The US federal government currently pays interest on $2.466 trillion of treasuries to the Federal Reserve, which, at the end of each year, sends all that interest back to the US Treasury.
Student loan debt has ballooned. That's because there are a lot of people going to college that really shouldn't be going to college. And yes, there's some greed involved too: people are willing to take out loans and pay for school, so the schools charge as much as they can get away with. But most schools (believe it or not) reinvest that money into better facilities in order to attract more and higher quality students.
The problem here isn't debt. There are people who want to go to college and who should go to college that need debt to get there. The problem is in the fact that people who should have learned how to weld in high school are pressured to go to college and find an office job, because we've told ourselves (or our parents have told us) that learning a trade is beneath us and that not going to college is awful (it's not).
Of course, it would be better to improve monetary policy rather than just making a bunch of dumb, risky loans leading to a dramatic boom and bust.
But that would require policymakers understanding basic macroeconomics, so don't hold your breath...
But the point is, regardless of how much people "actually" want them, it is in fact technologically and ecologically possible to provide most people in the U.S. with these goods. (The evidence is that a lot of people do in fact have these things, even if on paper they are underwater on a mortgage or saddled with a big student loan.)
The bad policy is that by subsidizing and insuring these loans / mortgages far too cheaply, the government is driving up demand, and as a result people buy a bigger house than they need, or get an education that isn't useful for getting a high-paying job.
If the government stops subsidizing mortgages and student loans with bailouts, insurance, laws preventing default, etc. the result will probably be
1) the cost of a college education goes down and also that less people actually go to college 2) people don't buy as many homes and buy smaller houses than they otherwise would have
If you then want more people to have houses, education, healthcare, food, etc., whether or not they are able / willing to sell enough of their labor to pay for these things themselves, the next step is to solve wealth inequality.
We could probably fix wealth inequality with good monetary policy (e.g. NGDP targeting) and "taxing the rich" in a sane way, e.g. with land value taxes, luxury consumption, VAT taxes, etc. After that, you're probably done, but for the remaining poor, the government can just give them cash, e.g. basic income, instead of trying to subsidize a million different services like healthcare and education and homes, in which case the subsidies end up in the pockets of doctors and administrators and landlords.
Good monetary policy would be the fed doing NGDP level targeting a la Scott Sumner: https://www.mercatus.org/system/files/NGDP_Sumner_v-10%20cop...
Monetary policy only goes so far though, if you actually want to distribute resources in an equitable way, you probably also need good tax policy.
Good tax policy would be taxes which decrease wealth inequality (e.g. luxury consumption taxes, land value taxes).
Not suggesting I recommended it but it is an option for an across the board sweep.
bad monetary policy, in regards to student loans, means subsidizing them in two ways (at least):
1. paying the difference in interest rate compared to going to a regular bank. I can get student loans w/3% interest, but a bank wouldn't give me that money for less than 7%.
2. Making it illegal to disperse student loans in bankruptcy.
Both of these are monetary policy decisions that "hide" risk.
The higher interest rate is to compensate for the riskiness of the loan, while making loans illegal to disperse is the gov't response to the risk.
both of these will hide increasingly large amount of risks, where everything looks like its going fine, until it will all fail, catastrophically.
The politicians will claim no one could have seen it coming, but if they'd not allowed the risk to be so hidden, they'd have seen the institution crumbling decades before.
With your framing above, it was "everyone should be a homeowner" and "everyone should be educated"... well we did that. Reality conformed. Just at tremendous cost and risk.
The issues are of course way more complex than "# of ppl who own a home" and "# of ppl with a degree"
So the question, then, is how do we use instruments of governance to move complex systems in the direction we think we want.
This is complicated by, among other things: 1.) the fact that politicians are really just optimizing for "signaling" that they are fixing things rather than tangible results. 2.) long time horizons on these issues clashing with shorter time-horizons of political attention spans and our capacity to even reason about long-term things. etc...
Corporate debt is tax deductible, for terrible economic reasons. Why should raising money through debt be tax deductible, but not through selling equity? My finance prof. told me these were ultimately the same thing. One kind of transaction has a strong lobby behind it. This causes all kinds of problems of excessive leverage in our system.
Loans loans loans, recession, loans loans loans, recession.
We needed something like rent control enforced on public universities, for government backed loans. But we didn't.
So it created a situation that caused an enormous amount of millennials to be taken advantage of by universities and colleges. Those universities and colleges pumped full of government loan cash became increasingly predatory. They increased their administrative costs, they increased their tuition costs, and they lured unsuspecting teenagers into taking enormous debt for worthless degrees like gender studies over engineering.
This has been a catastrophe, that will be used as a case study of unintended consequences.
The extreme amount of student loans has lead to extreme unrest, unless action is taken quickly it will only get worse. We see it in the rise of the alt-left and alt-right fueled by extreme fanatics in desperate and angry situations.
Econ 101: if you want the price of a 'product' to go down, increase supply.
The correct thing to do is to provide more supply (full ride public institution, paid for by taxpayers at government run community colleges) and focus production on fields valued by society.
The US higher education system is an excellent example as to what happens when you subsidize positional goods. Daycare workers and firefighters are starting to be a college-degree-required position. They're not there yet, fortunately, but it's absolutely ridiculous.
The solution has three parts:
1. Expand the examination system used in places like actuarial work and civil service to encompass a broader range of skills.
2. Declare a student loan debt jubilee.
3. Add a "don't ask, don't tell" policy for college degrees, or otherwise shut down the ability for college degrees to matter in resumes. Banning colleges and other organizations from confirming whether or not a student actually got a degree is a good start.
Worthless eh? I bet if companies Uber hired some of these gender studies majors they might not have fucked up?
Uber's human resources and or lawyers should have caught many of its missteps. Common undergrad degrees for HR being in management, business administration, and related business degrees. Lawyers are well lawyers.
Gender Studies doesn't prepare you for business as well as an actual business related degree, it prepares you for a mostly academic career which has limited spots.
That being said, even STEM and business degrees are worth less and less as competition increases. You now need a degree and often years of experience for jobs.
The only thing that really angers me is charging 60,000 dollars for a gender studies degree, and having a student take loans for it. 1/100 might get lucky and work at a big tech company as a tech evangelist, but it's not sustainable.
We need universities to be far more accountable about what degrees actually lead to jobs.
Maybe Uber wouldn't have had the toxic culture they ended up with if they had hired conscientious people who have spent time studying things like how gender power dynamics play out in the small - and empowered them to speak - instead of relying solely on business graduates.
So I wouldn't blame much on US backed government loans. The US government could offer free loans for people wanting to get Justin Bieber tattoos, and it would increase tattooing I'm sure, but wouldn't cause a generational economic crisis.
A portfolio of loans, however, can impact the credit worthiness of the borrower if the default rate exceeds historic expectations, which is what US experienced in 2008 with mortgage-backed loans.
But mostly the government is a borrower of cash and not a lender.
Here the government is indirectly financing people's education by offering cheaper loans than the market would give. There is not much to talk about...
US 10-year note is 2.58% at the moment, but Argentina's is 7%.
The other day a minister in China floated the idea of buying less US Treasuries. It became apparent that there just weren't a lot of other instruments available with which to invest that sheer volume of money.
It would be rather deceptive to craft your definition of asset to exclude the most important one.
And roughly speaking, there are two ways society can turn current productivity into future support for retirees. The first is to forgo consumption of current production in exchange for a promise of future consumption of others production - this can either be implicit through a tax-and-distribute scheme, or directly implemented through debt. Retirement saving in general is the latter, and increased savings rate leads to savings gluts which cause cheap debt which forces the price of debt-financed goods up to make the market clear. This, in short, is why college is so expensive: every creditor needs to find a debtor, and Grandma bought up fixed-income products.
The second way to use current production is to leave easy-to-collect natural resources like oil in the ground, use current productivity to fund current consumption instead, and collect those resources later. Everything else is impractical on a society-wide scale.
True, there were minority voices clamoring that this would result in ruin, but to be fair there are still well regarded "smart" people who argue that the problem for millennials is that those people in charge just didn't do it ENOUGH.
I don't see a lot of evidence for this, except perhaps Reagan's program of deficit spending on an arms race to bankrupt the 'evil empire'. Maybe people should be forgiven for believing in the trickle-down lie once, but it's now simply a transfer of wealth scam.
I don't see anything in that report that confirms this.. did I just miss it? where did the data come from?
Progressives in Oakland want the city to create a municipal bank. If they do, maybe progressives will then complain "Y% of Oakland's assets are mortgages and small business loans."
For any level of student debt, I think it is obviously better that the government own a lot of it, as the payments the government receives can be used for spending. The payments banks receive go to shareholders. In fact, given the government can borrow money at 2% while student loan rates are like 4-8%, it might not even be a bad idea to have the government issue treasuries and buy more student loans. Administratively, perhaps this would be bad for reasons I can't guess ex ante, but off the cuff I can't see why it's bad for the government to own lots of student debt, especially when government is what enforces the debt contracts (siphoning off your wages in the event of default, etc).
One could argue that the government should just cancel all or most of that student debt. Maybe so, but if that would cause the government to forgo $X billion in revenue every year, I think it would be better to just have another $X billion in spending. However, if the $X billion would just go to more tax cuts for the super-wealthy then perhaps it would be a good idea.
If 40% of the loans are in default and/or the borrowers aren't making payments for some other reason (which is the actual case) it would be a very bad idea.
There are just a few small differences between education today and education 30 years ago. Off the top of my head, you can go online today and see lectures for upper level MIT courses for free... Literally, the best university in the world has lectures available for free. And instead of learning the dewey decmial system and taking 10 books and flipping through looking for a specific answer, you can google any specific topic and immediately get relevant information. And you can go on reddit.com/r/askscience and ask questions to experts in any field. Just a few small differences.
What the hell are people paying for, then? The "college experience"? Does it really cost tens of thousands of dollars to validate that someone has adequately learned from consuming educational material? Schools today have dorms that look like luxury hotels and the best gyms in the country; what the fuck is going on?
Meanwhile, primary education hasn't fundamentally changed in 100 years, outside of a select few schoolboards adding iPads to the classroom and thinking to themselves, "Yes, now we're modern." Nevermind that we still exclusively group children by their age group rather than their educational progress until they're 18. Nevermind that we have never questioned the idea of teaching children 7 different topics every single day, wasting extraordinary amounts of time with context switching, instead of focusing on a topic for longer periods (as it works in the real world.)
I just do not understand how this debt is going to be managed when (not "if") the education system is fundamentally disrupted. Economists more or less universally agree that federally guaranteed student loans are unsustainable and make education more expensive. So what's taking so long?
* Bachelor's degree in CS
As someone without a degree, there are quite a few positions unavailable to me. Some positions state a degree is required even though they would take an exceptional developer, but many others are very strict and require the degree. The pedigree of the employees can be important when the company is in the market to be bought or sold.
... which merely means you need to calculate where the knee in the curve of issuing them was, extrapolate to life expectancy, and know when to cash out. Convenient!
True. I think most people don't realize this. Government programs push young, naive people to borrow to pay for degrees that are unlikely to have positive ROI, and then if life doesn't go as planned there is effectively no bankruptcy protection.
Sorry, what does that mean?
You could theoretically calculate when the bubble is going to pop but figuring out when the majority of loans was issued, life expectancy and some financial details on student loan recipients. With details along these lines you can theoretically calculate an approximate picture of how much student loan debt will be written off and when.
I was with you till the last bit. How does one "keep ahead" with that timescale?
Let’s be clear, students will NEVER be allowed to default these loans, nor should they. They must either pay it or take their debt to the grave and pass it down to their heirs.
You wanna try that again with a little empathy?
I could not afford to go to the college I wanted to go to, so I went to a cheaper one I could afford but no one really gives a fuck about. However, it left me with no debt, straight after graduating.
Today, as people struggle to pay off loans for universities they once boasted proudly about, it’s clear I made the right choice.
AFAIK, (and I'm a pretty ignorant fellow) debt in America isn't passed down, the creditors just take what they're owed out of a dead person's estate before its divied up by a will. So there could be a big "pop" if a bunch of people with lots of student loan debt and no assets die.
You mean the estate that contains value I would otherwise get the full value of were it not for the student loan debt that was taken out? The debt is most certainly passed down, it's just abstracted away a bit. The only way the debt doesn't get passed down is if the debtor dies penniless.
Another way to put it is if the creditor extracts anything to pay that debt after the debtor dies, then the debt is most certainly passed on to someone because that money didn't materialize out of nowhere.
I think you mean “discharge in bankruptcy”, not “default”; default is what happens when you miss a scheduled payment; lots of students do default.
Also, they are dischargeable in bankruptcy, though the standard is harder than with other debt.
When discovered to be so, it's also possible to alter the deal.
Regardless of whether that kid should have been free-thinking enough to see outside their existence's bubble, it's irresponsible to exploit their ignorance for profit. Most of these kids haven't ever seen a debt-ridden life like they're signing up for. I grew up with parents who ranted and raged about debt, and I still did it. Are you sure the problem lies with the kids signing the papers (I guess clicking the "Get your loan here!" button these days)?
2) There are no blood debts in the US. Debts are NOT passed on to heirs like property.
Not yet, but given the steady rightward shift of American politics I can see it happening in the future.
Also, you mentioned the Fed, which isn't the same thing as the US gov't, right?
Ginnie Mae is part of the government as well (also mortgages). Fannie/Freddie are GSE's but currently under directly government control since the financial crisis.
I'm not sure how the accounting works, but they are somewhat autonomous and have their own balance sheets.
The interaction of the accounting rules and the new tax plan was fascinating too because the value of their deferred tax asset changed:
> “A reduction in corporate tax rates would require us to measure our net deferred tax asset using the new rate in the period in which the rate change is enacted, resulting in a one-time charge through the tax provision in the period the tax rate was changed, ...”
These numbers look to me a bit as if gov is paying anyway, but with the current model it gets the money back only (eventually) after the citizens education, and pushes a lot of people into debt.
All of that for essentially avoiding that one person might add a few $$$ to the pot that could benefit another...
I know US policy sees the self-responsibility of the individual completely differently, but having grown up in Austria and profited from top education that is _naturally_ free for everyone, all of this student debt stuff looks like madness to me.
1.Pay off the loan holders (by printing money, huge inflation) 2.Allowing indentured servitude 3.Debt forgiveness (now all the lenders are out of money)
Sadly, I think the 3rd option is the best one, but is by no means actually a good one.
The federal government is the overwhelmingly dominant player and they set the terms by fiat rather than any kind of market.
The “lenders” are the USG, and the cost of capital is only the imputed inflationary effect of transforming a loan into spending. Given the experience of the last decade those inflationary pressures may well be smaller than we had thought.
If you assume student loans are a bubble: the long-term earnings potential of students is being bid up (and will collapse, leaving the government with lower worth/worthless assets.)
If college students are defaulting on their student loans en masse that means we’re in a recession. Recessions are deflationary. Monetising the debt would just take the place of central bank bond buying, except in a more egalitarian way.
This isn’t actually a meaningful number, The far more important number is the converse: what percentage of total student debt (and total residential mortgage debt) is held by the US government? Almost all of it.
Those “markets” only exist because the government is the industry, and everybody would save money if the govt cut out the intermediaries (banks) who are collecting huge fees for nothing.
The charts look a bit too similar...
Other charts as well
It’s also not hard for me to imagine, in the near future, a social media movement like “don’t pay back your loans.”
Gig economy + cryptocurrency + social media + student loan debt could lead to some very interesting times.
Even if they millenials can get out of paying for it, it'll still be passed on to tax payers, so the effect will be the same, a very long period of reduced consumer spending, leading to less economic growth.