Friday, May 27, 2016

Our Nation's Ever Growing Debt Bomb and the 'Value' of a College Degree

The economies of the world, as well as our own, are in a highly indebted and slow growth muddling through position.

This has been the case for the past several years, and it looks like it will represent the 'new normal' for a long time to come.

In America we have accumulated a boatload of debt and are following the lead of European and other nations around the world by developing a growing preference for the public sector and an increasing disdain for private sector led initiatives.

And while that has made the situation worse, as it inevitably has and will continue to do so, we look to more government as the solution.

Meanwhile, and as a result of all this wasteful government growth at the expense of the productive private sector, the indebtedness issue has become bigger than anyone wants to admit.This combination of debt and slow growth will negatively impact economic growth and investment for years to come.

For a quick overview of the nation's debt bomb that's getting bigger by the day, see Inattention-to-the-Deficit Disorder. Its scary subtitle is 'By one estimate, the government will spend $117.9 trillion more than it takes in this century.'

And that's not all the bad news that awaits this year's graduating class of young Americans.

Tricky Timing for the Class of 2016  tells another realistic but sad story:

"This year’s high school graduates were 10 years old when the economy hit the skids in 2008. Many college graduates in the class of 2016 were 14. Yet, their economic prospects remain darkened by the enduring effects of the Great Recession.

That is not to say there has been no improvement. The class of ’16 has more and better-paying job opportunities than earlier post-crash graduating classes, according to a new report from the Economic Policy Institute. But for the most part, today’s graduates still face employment conditions that are worse than in 2007, the year before the recession, and are much worse than in 2000, when the economy was last at full employment.

The recent unemployment rate for college graduates ages 21 to 24 was 5.5 percent, compared with 4.3 percent in 2000. Their underemployment rate — which includes the unemployed, those who have briefly left the work force and those stuck in part-time jobs — was recently 12.3 percent, compared with 7.1 percent in 2000. And in 2015, nearly 45 percent of college graduates ages 22 to 27 were in jobs that did not require a college degree, compared with 38 percent in 2000. Over the same period, student debt has soared, which means that many of today’s graduates are trying to pay off more debt with less secure jobs.

The situation for new high school graduates is far bleaker, in part because many lower-wage jobs are being filled by college graduates. Among high school graduates ages 17 to 20, unemployment is nearly 18 percent, compared with 12 percent in 2000. . . .

The soft labor market has depressed wages, with average hourly pay for young college graduates, recently $18.53, barely higher than it was in 2000, adjusted for inflation. Young high school graduates are averaging only $10.66, lower than in 2000, adjusted for inflation.

Without full employment to help push up pay, wages and salaries for all workers lag even as corporate profits rise. But the consequences for young people are particularly severe, because early bouts of unemployment, underemployment and low pay can continue to harm job prospects and earnings over a long period. One’s pay and position starting out has a big impact on subsequent raises and promotions, and thus on accumulated wealth over a career.

This trap is especially dangerous for racial minorities and women, who even in the best of times have to combat bias in hiring and pay. For young black college graduates, the recent unemployment rate, at well over 9 percent, is double that of young white graduates."

Summing Up

I wish the news were better, but it's time to face facts.

And the politicians won't do that unless we force them to admit to this debt bomb and slow growth reality.

We're not doing our kids and grandkids any favors.

That's my take.

Thanks. Bob.

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