Banks and Business Have Bounced Back, but Consumers Still Struggle to Pay Off Debt

Sep 14, 2011Bryce Covert

While families have made progress paying down credit card bills, mortgage and student debt levels remain stubbornly high.

In the run up to the financial crisis, everyone took on boatloads of debt: banks, corporations, consumers. In the aftermath, most have been eager to pay that debt off and get out from under the burden. Yet some are doing better than others. Corporations are now sitting on cash, having corrected their balance sheets. Banks are faring well after raising capital and selling off assets. But families aren't so lucky.

While families have made progress paying down credit card bills, mortgage and student debt levels remain stubbornly high.

In the run up to the financial crisis, everyone took on boatloads of debt: banks, corporations, consumers. In the aftermath, most have been eager to pay that debt off and get out from under the burden. Yet some are doing better than others. Corporations are now sitting on cash, having corrected their balance sheets. Banks are faring well after raising capital and selling off assets. But families aren't so lucky.

Households have made some progress in lowering credit card debt. According to TransUnion, consumers spent $72 billion more paying those bills than buying things in 2009 and 2010. In the first quarter of 2011, average credit card debt reached a 10-year low of $4,679. And the national delinquency rate (those who are 90 or more days past due on their credit card bill) was at .6 percent in the second quarter of 2011, the lowest level in 17 years.

Overall, household debt has fallen to 2004 levels. But mortgage debt isn't looking as positive as credit card bills. As the Wall Street Journal puts it:

Until the late 1990s, the sum of all American mortgages was about 40% of the value of the underlying homes. Americans borrowed heavily against their houses and then house prices fell. By this metric, the debt burden rose to about 62% -- and hasn't yet come down. (This is an average, of course... About one in five homeowners with a mortgage owes more than 100% of the current value of the house.)

Part of this, the article explains, is that unlike banks, households can't raise capital to pay it down. So to get housing-related debt levels down, consumers will have to see a rise in price appreciation or an increased ability to writedown or modify their mortgages. That, or they'll face foreclosures.

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And we're doing worse than ever before in another category of debt. Student loan debt is set to hit a total $1 trillion this year for the first time ever. Beyond that hefty load, though, default rates are rising. Overall, 8.8 percent of borrowers defaulted last year, up from 7 percent the year before. It gets even worse at for-profit schools, though, where the rate was 15 percent, up from 11.6. And while they only enroll about 10 percent of the nation's undergraduates, those students make up almost half of the defaults. They also tend to serve low-income students, who may already be struggling with the cost of an education.

But the problem doesn't stop there. In fact, it may be worse than those numbers show. The default rates only take a look at a two-year window -- but some studies show that as few as one in five defaults at for-profit colleges occur in that timeframe. Meanwhile, the New York Times reports:

A recent study by the Institute for Higher Education Policy found that for every borrower who defaults, at least two more fall behind in payments. The study found that only 37 percent of borrowers who started repaying their student loans in 2005 were able to pay them back fully and on time.

Banks and corporations may be feeling great about their debt levels, but they would do well to remember that consumers drive our economy. If we're all still buried under a mountain of debt that we can't pay off, the economy will continue to suffer.

Bryce Covert is Assistant Editor at New Deal 2.0.

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How Georgia Works Gives Employers Free Labor at the Expense of the Unemployed

Sep 12, 2011Mike Konczal

One of the key tenets of Obama's jobs plan rests on a program that is dubious at best.

In his jobs proposal, President Obama called for a modification of unemployment insurance based on Georgia Works, a proposal the administration refers to as the "most innovative reform to the unemployment insurance program in 40 years.” Georgia Works is a program wherein workers on unemployment insurance:

One of the key tenets of Obama's jobs plan rests on a program that is dubious at best.

In his jobs proposal, President Obama called for a modification of unemployment insurance based on Georgia Works, a proposal the administration refers to as the "most innovative reform to the unemployment insurance program in 40 years.” Georgia Works is a program wherein workers on unemployment insurance:

have the opportunity to train with a potential employer for a maximum of 24 hours per week for up to eight weeks. The Georgia Department of Labor (GDOL) provides a stipend and workers compensation coverage to participating job seekers. Employers pay nothing to these trainees. GW$ provides employers the opportunity to train and appraise candidates at no cost. There is no obligation to hire any given trainee...

Congressional conservatives such as Eric Cantor like the program, so there's a good chance it might pass. I actually missed the debate about this from a few weeks ago -- Zaid Jilani at Think Progress has a summary of some pros and cons from the time.

I'm fascinated by the terms under which people might justify this as a good program or would say it is a failed program. Its ideology works well for people who are concerned that our workforce lacks the training for 21st century jobs: it allows workers to brush up their skills at no wages so they'll be prepared to take on a job at the end. But even a quick glance at the underlying data shows that, instead of a program to jump-start education and training for skilled jobs, it looks like the Georgia Department of Labor is running a low-skills temp agency out of its UI fund for the benefit of employers.

Do the Numbers Fail?

How would you use the data to justify taking this program to a large, national scale? There are three hypotheses I can imagine being in play, and all of them turn out to have major problems.

The first hypothesis is that people who go through the program get hired for jobs. Now the comparison to be made isn't between getting hired and not getting hired; the comparison should be between those who do the program versus those who just keep on looking without using the program. Turns out that is problematic. As Jesse Rothstein told Arthur Delaney:

From its 2003 launch to the end of 2010, some 30,866 trainees entered the program, according to data provided to HuffPost by the Georgia Department of Labor. Of that total, 5,089 workers -- 16.4 percent -- were hired by the company that trained them during or at the end of the training period. (The department says that among workers who completed the full eight-week training, the employment rate is 24 percent.)...

Census Bureau data show that in 2007 and 2008, 15 percent of Georgians who'd been out of work for six months or longer found work within one month of a survey, according to Jesse Rothstein, an associate professor of economics and public policy at the University of California at Berkeley. In 2009 and 2010, the number fell to 10 percent.

So the transition from unemployment to employment looks to be very similar between those who do the program and those who don't, with the big difference being that those who do the program spend upwards of 24 hours a week working for free. Around 70% of Georgia Works participants are women. In so much as the workers in this program will have low skills and thus low resources (more on this in a second), it is likely much of their "leisure" time is spent on child care, uncompensated work in the household, or economizing household purchasing power -- there probably isn't much superfluous time to just give away to employers.

Hypothesis two, the most important one, is that these jobs require unique skills and the potential workforce doesn't have the right ones. Thus a special training period is necessary. What kind of jobs would these be? They would require more education than normal low-skill jobs. They would be jobs that are difficult to be productive in right away. They would involve new technologies, especially in manufacturing, that go beyond the normal workforce. They would cluster in the "some college" category at least.

Eileen Appelbaum of CEPR looked into the jobs data and concluded that for those who

found employment between November 24, 2009 and September 30, 2010 shows two-fifths found jobs doing general clerical work. Hundreds more found jobs as non-professional child care workers, janitors, retail sales persons, restaurant and fast food workers, hotel clerks and maids, or drivers and chauffeurs. In total, 70 percent of the trainees hired after the end of the training program found employment in these or similar low-wage jobs.

I was able to get the same data on successful job hires through the Georgia Works program for the period from November 2009 to October 2010. The total number of successful hires was 7,997, and they are divided up by NCCI code for categories. Here's a chart showing some of the major jobs types that stood out. Sixty percent of Georgia Works hires belong to four broad job categories:

What does this tell us? All of these jobs, according to the Bureau of Labor Statistics' (BLS) Occupational Outlook Handbook (OOH), require a high school diploma or less. They are all jobs that are "de-skilled": the types of jobs someone can go into and out of and be relatively productive at day one. Many of them are high churn, high turnover jobs. Indeed, they seem more characteristic of a temp agency than an institution that is focused on jobs that require skills to accelerate productivity.

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Next I took the top 30 classifications in the data and cross-indexed them based on my reading to education requirements and hourly wage as found in the OOH. The top thirty job classifications represent 80% of the hires of Georgia Works, so it is a representative sample. As you can see, I had trouble finding jobs in the top 40 occupations that required even an associate's degree, much less a college degree. This is the percentage of jobs by education level:



Among the top 30 jobs in Georgia Works, it is more likely that a given job will require less than a high school diploma, or no formal education, than it would require an associate's degree. They are more likely to be jobs like janitors, restaurant servers, and maids than those that require new skills and specific training unique to the new century. Even the high school level includes a lot of jobs -- clerical work, storage warehouses, drivers, retail -- that allude more to temp agencies than high-tech.

third hypothesis is that workers will make more money if they are hired through this program than through normal job searches. In this hypothesis, giving labor away is a sign of being a non-shirking worker and employers will largely compensate back the lost hours in the post-hire salary.

That's a simple empirical question I don't have the data for. But I did notice this slide in this October 2010 presentation on Georgia Works, A Perspective Toward Job Growth and Training Initiatives in a Recovering Economy:

If, after examining the data closely, you can go around telling employers that they are saving over $20 million dollars -- savings that must come from not paying salaries -- it's hard for me to think that it ultimately nets out back to workers.

A Failure in Ideology?

Here's a cool thing about neoliberal policy: you can justify any kind of terrible proposal by invoking the idea of a market and throwing more weight on the back of that already overburdened word "choice."

So I could say, "This certainly looks like a way to run a low-skill temp agency giving weeks of free labor to employers, employers who already probably have monopsony power and labor that is effectively deskilled, with taxpayers picking up the tab." A neoliberal would then respond, "Well this program gives people the market dynamism of the choice to be choosing in the market of choice for the market of uncompensated labor, a choice market that synergizes with employer's full choice of market wages," and in our age that would somehow constitute a strong retort. Repeat that enough and the policy fellowships will just start falling into your lap.

But we have to step back and think: What kind of labor contract do we want the government creating, encouraging, and setting boundaries on? I've been discussing how our laws, courts, and institutions create the free-floating notion of a "free" labor contract. For all the talk about "choice," this program nudges people into working for free in what are likely already difficult, exploitative markets. What are already high-churn industries will now have wages depressed even further from taxpayers subsidizing unpaid labor. And the ideas that derive from it -- that the problem with our economy is that workers are lazy and stupid rather than that the fact that there are no  jobs, that employers should get more claims on work for free and that the spirit of indenture should be strengthened in the workplace -- are the ideas that liberals have to fight against in these dark times.

Mike Konczal is a Research Fellow at the Roosevelt Institute.

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Recession Has Lit the Fuse on Explosive Student Debt

Aug 24, 2011Bryce Covert

Troubling long-term trends have gotten even worse as schools, government, and families cut back and student loans skyrocket.

This week's credit check: Average student debt can spiral up to $100,000 with interest and late payments. Room and board charges at colleges have doubled in actual dollars since 1982.

Troubling long-term trends have gotten even worse as schools, government, and families cut back and student loans skyrocket.

This week's credit check: Average student debt can spiral up to $100,000 with interest and late payments. Room and board charges at colleges have doubled in actual dollars since 1982.

It's no great secret that student loan debt is exploding. The total amount is set to top $1 trillion, more than total credit card debt. But accompanying that post-recession surge in student debt (as all other consumer debt is being paid down) is a surge in delinquencies. As The Wall Street Journal reports, "In the second quarter, 11.2% of student loans were more than 90 days past due and the rate was steadily rising, according to data from the Federal Reserve Bank of New York. Only credit cards had a higher rate of delinquency -- 12.2% -- but those numbers have been on a steady decline for the past four quarters."

The rise in student borrowing is a longtime trend, but things have clearly gotten worse in the recession. A lot of it is because of decisions schools are making. In a recent Atlantic Monthly article, Andrew Hacker and Claudia Dreifus explain that higher tuition -- paid for by student loans -- "keeps most colleges going." Private colleges Loyola University and Franklin Pierce see 77 and 85 percent of students enroll with loans, respectively. Historically black colleges, which tend to have lower endowments and a poorer population, are closer to 90 percent. Part of this, they report, is not because the actual education is more costly, but because "room and board charges have doubled in actual dollars since 1982 to enhance campus life." That's a long-term trend. But part of it is unique to the recession: As endowments tanked, priorities changed. They note:

Recent actions by Dartmouth and Williams, two wealthy schools, convey a lot about academic priorities. In the past, both schools announced that anyone they accepted would be able to enroll without having to take out loans. That is, the colleges would ensure all the aid that was needed to make attendance possible... That was before 2008. But when Dartmouth and Williams' endowments tanked, hard decisions had to be made. Among the first was telling their needy students they would henceforward have to borrow.

The government has taken much the same tack in looking at its own shrunken budget post-recession. Back in March, President Obama proposed a budget that ended an experiment that gave Pell Grants for summer courses and eliminated a subsidy for paying interest on student loans for grad students. His plan was better than the GOP's, which wanted to cut the maximum Pell Grant payment by $845, end funding to other aid programs, and kill AmeriCorps. This comes on top of a longtime trend in which student debt has come to replace grants. As Roosevelt Institute Fellow Dorian Warren reminded his host Melissa Harris-Perry on MSNBC, "When we were in college, Melissa, Pell Grants paid almost half our college in the 90s. Now Pell Grants barely cover a quarter. It's all student loans." Grants used to cover two-thirds of financing an education; now two-thirds comes from loans. Post-recession, the government is looking to shrink that even more.

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Families have also reacted to the recession by, understandably, socking less away for college and pitching in less for tuition. As Hacker and Dreifus note, "Fully two-thirds of our undergraduates have gone into debt, many from middle class families, who in the past paid for much of college from savings." Those savings have likely dried up. A typical family spent only about $2,055 on education last year. Only half of freshmen entering college said their parents had put anything aside for their education, and of those who had, half had saved less than $20,000.

With so many sources of aid pulling away either out of necessity or stupidity, students are left hanging at just the time they need more help. The College Board puts average debt at $27,650, but that figure can spiral up to $100,000 due to interest and late payment penalties, which are even more likely in a recession. This is on top of the bleak job market graduating students face. The New York Times writes, "The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008... Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted. That compares with 90 percent of graduates from the classes of 2006 and 2007." It's hard to pay student loans when you don't have a job.

And don't forget, this debt isn't going anywhere, no matter how little students are able to pay it back. Unlike almost all other forms of consumer debt, student loans can't be discharged. Barmak Nassirian of the American Association of College Registrars and Admissions Officers told Hacker and Dreifus, "You will be hounded for life... They will garnish your wages. They will intercept your tax refunds. You become ineligible for federal employment." They can also dock Social Security checks when you retire, he adds. No matter when the economy finally pulls out of this stagnation, students will still be saddled with a heavy load.

Bryce Covert is Assistant Editor at New Deal 2.0.

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Dorian Warren on MSNBC: Millennials Face an "American Nightmare"

Aug 18, 2011

Roosevelt Institute Fellow Dorian Warren joined guest host Melissa Harris-Perry on The Last Word last night to discuss what she calls the "recession generation": young people graduating into this economic morass. And what do they have to look forward to if things keep going they way they are? Dorian's answer: "An American nightmare, not an American dream."

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Roosevelt Institute Fellow Dorian Warren joined guest host Melissa Harris-Perry on The Last Word last night to discuss what she calls the "recession generation": young people graduating into this economic morass. And what do they have to look forward to if things keep going they way they are? Dorian's answer: "An American nightmare, not an American dream."

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It didn't used to be this way. "Thinking back to the legacy of Franklin Roosevelt and the New Deal," Dorian points out, "we had investment in national infrastructure, not an austerity politics." There was even a National Youth Administration to specifically tackle youth unemployment. But now, he says, our politicians "don't have that same vision."

But Millennials do. Speaking of the Roosevelt legacy, Dorian recounts his experience working with Campus Network students at the FDR Library in Hyde Park recently. "The ideas and the vision are there for this recession generation," he says, "but their voices aren't being heard in the same way." Maybe it's time for D.C. to tune in.

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Providing Low-Income Students the Benefits They Deserve and the Education They Need

Aug 11, 2011Andrew Hammond

lesson-150In a week-long series, prominent thinkers will look at ways to harness the private sector or extract more from a recalcitrant public sector in order to combat poverty and inequality.

lesson-150In a week-long series, prominent thinkers will look at ways to harness the private sector or extract more from a recalcitrant public sector in order to combat poverty and inequality. In the fourth post, Andrew Hammond, Director of Strategy for Single Stop USA, looks at ways to coordinate existing government benefits and financial aid programs to make community college more affordable.

How can we increase economic mobility in America in the midst of this troubling time of fiscal austerity? By repurposing the safety net to help students get through college.

A postsecondary education is the best way to disrupt intergenerational poverty. Yet private and even public universities have become prohibitively expensive to many would-be college students. It is no accident, then, that more Americans are going to community colleges than ever before. Community colleges educate more immigrants and more first-generation college students than their higher education peers. More veterans go to community colleges than any other educational institution in the country. Educating a plurality of American college students, community college is the most viable academic option for low-income students.

Yet, more than two-thirds of students fail to complete community college or transfer to a four-year school. For postsecondary education to lead to economic mobility, students must leave college with a credential that has some purchase in the labor market. While some college coursework can make a marginal difference in a young person’s employment prospects, it’s the degree or certificate, the imprimatur of a college, that can generate significant returns for the student and the student’s family. For that kind of generational transformation to occur, more students need to finish their degrees.

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To increase the frequency of community college graduation, we need to demolish the barriers to completion. Aside from the need for remedial education, the most significant obstacles to community college graduation are the indirect costs associated with enrollment. For community college students, especially those who are working and parents, costs like child care, transportation, and housing conspire to make even part-time education untenable.

Community colleges must reorient their financial aid systems to meet these indirect costs of attendance by improving student access to government programs that can help students meet these expenses. Yet, often these programs, like food stamps, Medicaid, and tax credits, exist in silos, spread out across state agencies and federal departments. Community colleges need to play an active role in helping to connect students to these programs and services, just as they help students fill out their forms for traditional financial aid, like Pell Grants and state aid.

Single Stop USA is making this type of intervention a reality. Here’s what it looks like at over a dozen community college sites across the country:

Counselors use a cutting-edge technology tool called the Benefits Enrollment Network (BEN) to determine which benefits a student is eligible for in as little as 15 minutes. They then guide the students through the application process and connect them to other on-site services. Tax preparers at the college prepare the students’ tax returns for free. Legal and financial counseling help address housing and other needs and enable students to manage their debt. We are already seeing incredible preliminary results at our partner colleges including the largest college in the country, Miami Dade College.

By supporting students with wrap-around social services, we can remove multiple barriers to college completion across the country and, in doing so, community colleges can become a powerful engine for economic mobility in America.

Andrew Hammond is the Director of Strategy at Single Stop USA.

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Family Values? Conservative Economics Have Shredded Marriage Rates

Aug 9, 2011June CarboneNaomi Cahn

male-female-150Falling marriage rates aren't a question of morality, but an issue of class.

male-female-150Falling marriage rates aren't a question of morality, but an issue of class.

A recent article in The Economist on the "sorry state of marriage in the United States" quoted Census data that show that, for the first time, married couples now make up less than half of all households. The article concludes:

Do not expect the Democratic Party, however, to make an issue of the marriage gap in next year's elections. Unmarried women voted overwhelmingly for Barack Obama. "You don't want to suggest to someone who isn't married and has children that they should be married," says [Isabel] Sawhill. "That is a denigration of their lifestyle."

Ms. Sawhill is right that Democrats will not denigrate those on the losing end of the economic changes remaking America. And Democrats shouldn't suggest that single mothers get married for the sake of having a ring on their fingers. Marriage doesn't solve the underlying problems.

Because the "sorry state of marriage" in the United States isn't the declining number of married couple households. Instead, the sad truth is that just like access to health care, stable employment, and higher education, access to marriage has become a class-based affair. The Economist correctly observes that marriage and the two-parent family has become a marker of income level. According to the National Marriage Project, a half century ago, marriage rates did not vary much by education, and college educated women were less likely to marry than those without college degrees. Today, the likelihood of marrying, staying married, and raising children within marriage correlates strongly with education. Indeed, for white college graduates the non-marital birth rate has stayed at 2%; for African American high school dropouts, it's 96%. In between is a steeply slanted line that links family form to education, income, and race.

The Republican Party has effectively exploited working class fears about family disintegration to peddle the message that these changes reflect elite disdain for traditional values. In their view, the primary way to encourage marriage is to criminalize abortion, discourage contraception, and bring back pregnancy as the punishment for sex (with the scarlet letter soon to follow). In response to the Obama administration's plans to eliminate the co-pay for contraception, Dana Perino of Fox News responded that she didn't see why women spending money on $5 frappuccinos couldn't spend $5 for a contraception co-pay -- with no clue that there might be women who can't afford $5 for coffee. The Republican plan is apparently to distribute Bibles and promote the Christian radio that blankets the airwaves with stories of screwed up men who regain their ability to make a go of family life only after Jesus saves them.

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What the National Marriage Project indicates, however, is that those who show up at church on Sundays are the ones who are doing well economically and maritally. While church attendance has fallen overall since the 70s, it has fallen most dramatically for those at the losing end of the economic spectrum -- and those far less likely to marry. Today, men without college degrees earn less in real dollar terms than they did before Reagan was elected president. Thus marriage becomes an unaffordable luxury for many women because they would have to manage a husband's life as well has their own and that of their children. Even for men who have regular employment, employment stability has taken a hit. A half century ago, well educated and minimally educated men worked about the same number of hours a week with about the same level of job turnover. Today, employment stability and average hours correlate strongly with educational achievement. Working class men (think of construction workers) have much higher rates of unemployment and employment instability and recent studies show that employment instability is a major factor in divorce rates. Unemployed men help out less at home than employed men, and are far more likely to abuse alcohol, play video games in their spare time, or beat their wives. It's hardly surprising that working class women conclude that marriage is a luxury they cannot afford.

A big part of the solution for the problems of the family is jobs -- more and better jobs. We also need to rebuild a safety net that encourages family stability. Studies indicate that the greater the male income inequality in a region, the lower the female marriage rates. We have created a society that writes off a high percentage of men through chronic unemployment and high rates of imprisonment for minor offenses. In The Spirit Level: Why Greater Equality Makes Societies Stronger, authors Wilkinson and Pickett show that the higher the inequality in a society, the higher the rates of mental illness and substance abuse, particularly among males.

The creation of greater inequality, the shredding of the social safety net, and the increasing cost of higher education have much more do with the changing structure of the family than Hollywood mores or internet porn. It is time that the Democrats discovered family values as an issue -- and link those values to a campaign to rebuild community in America. Republicans, the people who successfully blocked taxing people to pay their fair share and spending what it takes to build an effective society, should be forced to look themselves in the mirror when it comes to the destruction of family stability. Marriage rates by themselves have a variety of meanings, but class-based increases in family instability have one overriding consequence: the creation of a less just society with diminished prospects for a large percentage of our children. What we really need to do is increase our investments in children, employment stability, and healthy communities and stop pretending that family structure is simply a matter of morals or will.

June Carbone is the Edward A. Smith/Missouri Chair of Law, the Constitution and Society at the University of Missouri-Kansas City.

Naomi Cahn is the John Theodore Fey Research Professor of Law at George Washington University Law School. She is the author of numerous books and law review articles on gender and family law.

Cahn and Carbone are the co-authors of Red Families v. Blue Families.

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Despite Self-Esteem Boost Now, Young People are in for Long-Term Pain from Debt

Jun 22, 2011Bryce Covert

No matter how good taking on debt may feel at a young age, today's grads are being set up for disaster.

This week's credit check: Those ages 18-27 report a self-esteem boost from student loan and credit card debt. But about 9% of people ages 55-64 are still paying back student loans.

No matter how good taking on debt may feel at a young age, today's grads are being set up for disaster.

This week's credit check: Those ages 18-27 report a self-esteem boost from student loan and credit card debt. But about 9% of people ages 55-64 are still paying back student loans.

A new study recently came out that says young people get a self esteem boost from taking on debt. For those ages 18-27, its findings show, more credit card and student loan debt lead to higher self-esteem levels and a feeling of control over life. This lines up with some common sense: student debt is considered to be "good" debt, an investment in the future. And as Annie Lowrey reports, there is ample evidence that credit cards give us all the joys of consuming without the pain of spending actual money. She quotes George Lowenstein of Carnegie Mellon explaining, "Credit cards effectively anesthetize the pain of paying. You swipe the card and it doesn't feel like you're giving anything up to make the purchase, unlike paying cash where you have to hand over bills."

But the other side of the coin, the study finds, is that the self-esteem high plummets later on when the students have to start paying that debt back -- and realize how long and hard it will be to do so. For those over 28, having higher levels of debt reduced that sense of self-esteem and mastery. "By age 28, they may be realizing that they overestimated how much money they were going to earn in their jobs. When they took out the loans, they may have thought they would pay off their debts easily, and it is turning out that it is not as easy as they had hoped," one of the study's authors opined. This is unsurprising: While student loans help finance a college degree, and that does have an effect on eventual pay, the burden of paying them back often hangs around late into life. About 9% of people ages 55-64 still have student loan debt. Part of that is due to the fact that unlike most other forms of personal debt, student loans can't be discharged in bankruptcy -- there's no way to get rid of them except payment.

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And those loans will linger even longer without savings -- even though young people think they are saving better than their parents. Almost half of respondents to a recent SavingsAccounts.com poll said they think as much. But as Jill Schlesinger points out, this isn't really true. "The Bureau of Economic Analysis' personal savings data indicates that the personal savings rate averaged only 3.48 percent of income over the previous 10 years, and doesn't come close to matching the 10-year average personal savings rate of 9.63 percent seen from 1971-1981." In fact, one in three adults under 33 have no savings at all. So on top of young grads being loaded to the hilt with debt burdens, they have very little stocked up to help pay it off.

They'll be even more hindered, in fact, by another aspect: they can expect lower wages than their parents. Overall, middle class wages have almost completely stagnated over the past few decades. As CNNMoney reports, "In 1988, the income of an average American taxpayer was $33,400, adjusted for inflation. Fast forward 20 years, and not much had changed: The average income was still just $33,000 in 2008, according to IRS data." On top of that trend, grads are entering an absolutely dismal job market, one that will likely have lasting effects on how much they'll earn over their lifetimes. The NYTimes writes, "The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008... Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted. That compares with 90 percent of graduates from the classes of 2006 and 2007." And any reduction in pay now will have profound effects later. Charlie Eisenhood found that drops in initial wages due to high unemployment rates hang around: "even 15 years after college graduation, the wage loss is 2.5% and is still statistically significant," according to one study.

All in all, the short-term ego boost of student and credit card debt pales in comparison to what young people are up against in the long run. A college degree can lead to good jobs, higher pay, and of course education, but the amount of debt students are asked to take on is getting out of control. They should probably sober up for a rocky road ahead.

Bryce Covert is Assistant Editor of New Deal 2.0.

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Republicans Remain Poor at History – But So Do American Citizens

Jun 17, 2011Harvey J. Kaye

story-book-200We could all use a brush up on some of the nation's most important historical moments.

story-book-200We could all use a brush up on some of the nation's most important historical moments.

In a recent article, New York Times writer Sam Dillon reports that the results of nationwide exams conducted as part of the National Assessment of Educational Progress show that "American students are less proficient in their nation's history than in any other subject." And there is, as Dillon notes, a developing consensus as to why this is so: "History advocates contend that students' poor showing on the tests underlines neglect shown to the subject by federal and state policy makers, especially since the 2002 No Child Left Behind act began requiring schools to raise scores in math and reading but in no other subject. The federal accountability law, the advocates say, has given schools and teachers an incentive to spend less time on history and other subjects."

That may well be so. But I want to suggest another possible cause for young people's poor knowledge of American history: kids are simply emulating conservative celebrities. And the kids are no fools. They know from the news that if you want to get ahead, if you want to be taken seriously, if you want to be a contender, if you want to be a candidate for President of the United States -- a rightwing candidate, that is -- you can't be good at history. Isn't that the lesson of the past few weeks? Sarah Palin couldn't explain what Paul Revere's ride was all about. Bachmann didn't know that Lexington and Concord -- the first battles of the American Revolution -- were fought in Massachusetts, not New Hampshire.

But while we can laugh all we want at Palin and Bachmann, the problem isn't that they don't have the facts straight about American history -- it's that too many of us don't know enough about it. And our ignorance can be politically debilitating. Consider...

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Two weeks ago, on the 67th anniversary of the D-Day Landings at Normandy, former U.S. Senator Rick Santorum, a Pennsylvania Republican, announced that he was entering the race for the presidency. Eager to harness the Greatest Generation to his cause and strike a blow against "Obamacare," Santorum stated: "Almost 60,000 average Americans had the courage to go out and charge those beaches on Normandy, to drop out of airplanes who knows where, and take on the battle for freedom... Those Americans risked everything so they could make [their own] decision on their health care plan."

Naturally, leftwing commentators mocked him for saying it. But the progressive punditocracy missed a great opportunity. Santorum wasn't just speaking stupidly; he was also speaking wrongly. Contrary to what he asserted, the GIs who stormed the beaches of Normandy essentially were fighting for the chance of pursuing freedoms and securing government-guaranteed national health care. They and their fellow Americans knew quite well that just six months earlier President Franklin Roosevelt, in his State of the Union Message of January 1944, had translated his original vision of the Four Freedoms -- freedom of speech, freedom of worship, freedom from want, freedom from fear -- into a proposal for a Second Bill of Rights. And among the rights he enumerated was "The right to adequate medical care." Moreover, the President himself knew that the vast majority of his fellow citizens supported his proposal. Polls conducted for the White House in 1943 by Princeton's Public Opinion Research office showed that 83 percent of the American people wanted Social Security to include health care, not just for veterans, but for all Americans.

To listen to the right, you'd think the very idea of national health care was the Trojan Horse of communism. And yet a bit of history teaches that the Greatest Generation and its greatest leader -- our foremost heroes of the twentieth century -- hoped to enact it. Un-American? Hardly.

I don't care if conservatives know enough about history. But I do care that we and our fellow citizens do. For starters, we have got to be able to point out when the Tea Party right gets history dead wrong. Moreover, we have got to remember who we are. And to do that we need to not only restore the study of history to its rightful place in the school curriculum, but also make sure that the history we teach enables students to think and act as citizens, not game show contestants. Responding to equally dismal reports of student ignorance of America's past, progressive columnist Max Lerner wrote in April 1943: "History belongs to the people. It must be taught as part of the people's struggle to build a free democracy on this continent. It must be taught as the prelude to what American democracy can do and be."

Harvey J. Kaye is the Ben & Joyce Rosenberg Professor of Democracy and Justice Studies at the University of Wisconsin-Green Bay and the author of Thomas Paine and the Promise of America. He is currently writing The Four Freedoms and the Promise of America: FDR, the Greatest Generation, and Us. Follow him on Twitter: www.twitter.com/HarveyJKaye

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The Changing Class Divisions that Tear at Low Income Families

Jun 17, 2011June CarboneNaomi Cahn

family-150There is a new, successful family model that combines marriage and work -- but only for the middle class.

family-150There is a new, successful family model that combines marriage and work -- but only for the middle class.

A new study of newlyweds found that increases in workloads were associated with increases in marital satisfaction for both men and women.  The researchers expected this to change when the newlyweds became parents, and indeed it did -- for men. For women who became parents, however, increases in the amount of time and energy they devoted to work were associated with increases in their marital satisfaction. The authors speculated that, once they become parents, husbands and wives might respond differently to changes in each other's workloads; fathers might spend more time on childcare when their wives face high demands at work.

This is important information for those of us trying to balance work and family. On the other hand, increasing numbers of people in the United States are neither married nor employed. Family structure has become a marker of class, and studies can cloak profound differences among different types of families. Unpacking this research requires reconsideration of the relationship between work, marriage, and class. First, limiting the examination to married mothers skews the study from the outset. The most elite women, as measured by education, have become the most likely to marry, a reversal of historical trends.

Second, the most elite women have become the most likely to work. According to 2007 Census Bureau data, only about 26 percent of mothers with a college degree stay home with their children, while more than 40 percent of mothers lacking high school diplomas are full-time homemakers. College educated women are more successful in combining work and family than other groups in part because they tend to have the resources to pay for child care and other help, and because they are more likely to have flexible positions with more generous family leave policies.

Third, the best educated women have also become more likely to have partners who help with the children. Unsurprisingly, married fathers contribute more to child care than unmarried fathers, but even among the married, fathers who are college graduates contribute more than those without college degrees. Indeed, since the start of the Great Recession, the only group of women whose fertility rates have increased are those with graduate degrees, but only if the men in their lives assist.

For the college educated middle class, therefore, this study gets it right. It confirms the results of Penn State sociologist Paul Amato's in-depth comparison of the changes in family life between 1980 and 2000. Amato shows that over the last twenty years it is well educated, two-career families that have experienced the greatest gains in family stability. For two-career couples, women's workforce participation brings greater income and marital quality, along with greater pressure on men to help with the children.

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Amato found, however, that the same did not hold true for working class wives. The marital quality of  couples in financial distress dropped significantly during the same twenty year period. This was in large part because women in less satisfying jobs who preferred to be home with the children have increasingly found that they have to work because their husbands cannot support them. More recent studies confirm that unemployed men, in contrast with both unemployed women and men with stable jobs, are less likely to help with either the children or the house, increasing their partners' unhappiness.

The new study, by focusing on newlyweds, largely misses these effects. There is a new, successful family model that combines marriage, childbearing and workforce participation. It incorporates a more egalitarian division of work and family roles. It produces higher rates of income and marital satisfaction. It also, however, requires investment in men and women's education -- and it is increasingly beyond the reach of large portions of the public.

This study fails to show the class based increases in employment instability -- instability that in the long run discourages marriage and contributes to family instability. The fact that the middle class is successfully combining work and family roles says little about those for whom both work and marriage are becoming increasingly difficult to obtain. While the Great Recession has at least temporarily decreased divorce rates, it has also lowered marriage rates. Any focus on newlyweds therefore is likely to include only those who can marry, and that overwhelmingly means the better educated with the best jobs. For the rest of the country, the prospects for marriage and jobs remain bleak -- so news about how to manage the tensions between work and family are not comforting.

June Carbone is the Edward A. Smith/Missouri Chair of Law, the Constitution and Society at the University of Missouri-Kansas City.

Naomi Cahn is the John Theodore Fey Research Professor of Law at George Washington University Law School. She is the author of numerous books and law review articles on gender and family law.

Cahn and Carbone are the co-authors of Red Families v. Blue Families.

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Some Millionaires Who Want to be Taxed!

Jun 7, 2011

A group of millionaires have gotten together to create a video about a "mistake" made ten years ago: the Bush tax cuts for the wealthy. While they got more money (which has gone to dance floors and yachts), local, state, and federal budgets are facing shortfalls that mean cuts to vital investments. Roosevelt Institute Senior Fellow Rob Johnson and ND20 contributor Dan Berger joined other wealthy Americans with one simple call: "Tax me."

A group of millionaires have gotten together to create a video about a "mistake" made ten years ago: the Bush tax cuts for the wealthy. While they got more money (which has gone to dance floors and yachts), local, state, and federal budgets are facing shortfalls that mean cuts to vital investments. Roosevelt Institute Senior Fellow Rob Johnson and ND20 contributor Dan Berger joined other wealthy Americans with one simple call: "Tax me."

"You decided our country needed less money," Berger points out. This has lead to less money for "science research, education," as Johnson says, among other things. But "rich people are the cause of a robust economy, they're the result of a robust economy," says David Watson, a Google Software Engineer. So they should be taxed their fair share to ensure we have the revenues to keep the country strong.

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Will policymakers heed their call? **Also be sure to check out Roosevelt Institute Fellow Mike Konczal discussing why the tax cuts haven't led to more jobs like we were promised.

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