A couple of pieces I've read this morning brought to mind a conversation I had recently with a government economic official (a Republican, in a non-partisan job) who is deeply concerned about the economic situation and the future ("God help your generation, and my son's"), and the failure of both parties to deal with the real challenges facing us.
For starters, there's this Financial Times commentary about the public debt bubble rapidly inflating, and the threat it poses to the stability of the American economy. Excerpt:
I believe the risk posed by this debt is systemic and could do more damage to the economy than the recent financial crisis. To understand the size of the risk, take a look at the numbers that Standard and Poor's considers. The deficit in 2019 is expected by the CBO to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen.[snip]
The time for such excuses is over. They paint a picture of a government that is not working, one that creates risks rather than reduces them. Good government should be a nonpartisan issue. I have written that government actions and interventions in the past several years caused, prolonged and worsened the financial crisis. The problem is that policy is getting worse not better. Top government officials, including the heads of the US Treasury, the Fed, the Federal Deposit Insurance Corporation and the Securities and Exchange Commission are calling for the creation of a powerful systemic risk regulator to reign in systemic risk in the private sector. But their government is now the most serious source of systemic risk.
The official to whom I spoke said, and this is a close paraphrase, "I'm really worried that people don't understand how serious this crisis is, and how deeply in trouble we all are. They think this thing is passing, but it's not. I think we're looking at a jobless recovery, if we have a recovery at all. And this debt the government is piling up is completely unsustainable. Do you know that we now have the government making what are essentially liar loans to people in an attempt to prop up the housing market? The same thing that banks were doing that caused this mess, we now have the U.S. government doing. It's insane. We're doing everything we can to keep from having to deal with our problems straight on."
Second, there's an op-ed from the Chronicle of Higher Education speculating on the coming burst of the higher education bubble. Excerpt:
Is it possible that higher education might be the next bubble to burst? Some early warnings suggest that it could be.With tuitions, fees, and room and board at dozens of colleges now reaching $50,000 a year, the ability to sustain private higher education for all but the very well-heeled is questionable. According to the National Center for Public Policy and Higher Education, over the past 25 years, average college tuition and fees have risen by 440 percent -- more than four times the rate of inflation and almost twice the rate of medical care. Patrick M. Callan, the center's president, has warned that low-income students will find college unaffordable.
Meanwhile, the middle class, which has paid for higher education in the past mainly by taking out loans, may now be precluded from doing so as the private student-loan market has all but dried up. In addition, endowment cushions that allowed colleges to engage in steep tuition discounting are gone. Declines in housing valuations are making it difficult for families to rely on home-equity loans for college financing. Even when the equity is there, parents are reluctant to further leverage themselves into a future where job security is uncertain.
Consumers who have questioned whether it is worth spending $1,000 a square foot for a home are now asking whether it is worth spending $1,000 a week to send their kids to college. There is a growing sense among the public that higher education might be overpriced and under-delivering.
In our conversation, the government official spoke of the bleak employment prospects facing job-seekers, and how skeptical he's become of the value of a college education these days. "I tell young people these days, 'Learn a trade. Don't think you have to go to college. It might be a bad decision.'" I told him that his view runs counter to the system we have now, which tells young people that there's something wrong with them if they don't go off to college. He indicated that reality is going to bring a rude shock to this mentality. I told him he needed to get his hands on a copy of Matthew Crawford's brilliant new book. When I told him the thesis of it, he nodded vigorously, and indicated in his later comments that such a book is overdue.
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As two Gen X'ers with liberal arts degrees, I can say that if while our four years of study was fabulous for our minds, if we had graduated with the crushing debt that many grads are now saddled with, our subsequent years would have been much less happy ones.
We spent the years immediately after graduation underemployed and sometimes very bored, but we built up a work experience and tool set to ultimately start our own business. Being self-employed is equal parts stress and freedom and simply cannot be taught in a classroom. But college gave us the skills to be open to new ideas, innovations, to articulate our product to customers. I would argue that working for others added to those very skill sets and enhanced them.
My husband laughs that he once was terrified of any sort of math problem, and now he conquers them daily with an easy confidence that arrives out of seeing the physical manifestation of a math equation in a three dimensional product. I watch our employees, a well-paid skilled team of artisans, none of whom are college graduates, handle the geometry of fitted cabinetry and trim details, framing, etc. without difficulty.
The Financial Times commentary is indeed troubling. I wish ALL politicians especially in DC would read it and take it to heart. I heard today that several hundred million $$ in "stimulus" money has now arrived at my state of Washington. But I thought to myself "this is fake, borrowed money", which has come from simply more exploding national debt. I actually wish we weren't receiving it.
And on the matter of college--I have two kids who are either in college or bound for it. But I told them "The dirty little secret about college that no one tells you is that it's highly overrated." Yah, that's right. I said it. Unless you are entering a field like dentistry or medicine et al where you absolutely can't work in the field without those letters, then sorry-- but college is really kind of overrated. Oh, it taught me to learn to think, alright. That's quite valuable. But there's no way I'm going to spend $50k a year to send any of my kids to learn that when there are cheaper undergrad alternatives. My oldest attends a private college, but one that is less than $40k a year plus they gave her a partial scholarship to come. My other one is seriously looking at an excellent private college that only costs about $19,000 per year currently. Which is pretty much unheard of. But it's either that, or public university of some other private college which will need to offer her some kind of scholarship (which she stands a great chance at getting). $50K out of pocket may be affordable for some, but that's not necessarily a good reason to spend it, nonetheless. Not even for Ivy League, which I think is overrated, too.
I never never understood a word of it, and still don't.
Showing that we don't teach math well. There's no excuse for you not understanding it or for a math teaching giving you an A when you didn't understand it. I don't expect every student to be able to teach himself algebra, but in too many schools, that's the only way they will understand it.
"We're doing everything we can to keep from having to deal with our problems straight on." And what, pray tell, is so new about this? The Congress has failed to address the humongous problems in Social Security or Medicare, and when someone attempts to merely begin a discussion on these topics, or sets forth ideas for potential 'fixes' such as voluntary opt-outs from the system, they get hammered by their enemies in the "elect me" class. We are in very deep trouble in this country and the "best and brightest" (just ask them) from those hyper-expensive Ivy-League schools are pushing us farther along.
And the cost of higher education is a sad farce. Where does the money go? Are you telling me that the Billions in the endowments of schools such as Harvard are not capable of funding the annual budgets of such schools? Unbelievable.
mm: Thanks for sharing the details of your own small business's micro-economics. This is exactly the kind of analysis which I have hoped to see applied to the motorcycle repair business in "Shop Class" book, and precisely which was *not* included in the NY Times excerpt. I wonder if it is even in the book at all. My guess is that it's not - and probably because the business is being heavily subsidized by income from the author's academic earnings.
This is fine that he has a "day job" ... but it's unrealistic to put forth "just get a trade!" as a solution to some substantial problems with running a small business in the USA, especially in the absence of affordable health insurance.
Also interesting that you mention that you personally chose to forgo health insurance. For many families, that is not an option, especially if someone in the family has an ongoing condition. As I said, my bet is that the author gets his insurance through his academic work, as well as his other benefits like sick pay and vacations. (Don't professors/ academic fellows usually have the summers off?)
So while I do thank you, mm, for your own forthrightness, I do think any blanket discussion of "get a trade" needs to be coupled with the nitty-gritty details of just how such a business plan is to work, if one isn't going to lapse into yet another form of corporate drone-ism.
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