First, the bad news: the absence of inflation will mean a zero increase in benefits for Social Security recipients next year.
Next, the good news: The Social Security Act has a 'hold harmless' provision which limits annual increases in Medicare premiums to the annual increases in Social Security payments. Thus, for roughly 70% of the seniors, that also means that there will be no Medicare premium increases next year.
For the other approximately 30% of Medicare premium payers, however, the premium increase will be more than $50 monthly.
Here's the do-gooder government lesson for us all, and especially the young folks out there. When government makes something free to one person, it simply means it is making that same thing more costly to another person. Government doesn't create income. It takes it from the income creators.
It's just like making K-12 schools free, college tuition free, paying for underfunded pensions or anything else. Someone always pays when somebody else gets something without paying its full costs. And when government is the 'provider,' there is no free lunch, regardless of what the politicians say.
So watch out, young folks. The oldsters are growing in numbers and will vote for those who 'protect' them.
As Frederic Bastiat said long ago, "Government is the great fiction through which everybody endeavors to live at the expense of everybody else." It's at the very best a zero sum game, and the politicians play it all the time. Again, be on the alert, young Americans.
"Unless Congress or the Obama administration intervenes, nearly one-third of Medicare beneficiaries may see a 52% increase in 2016 premiums for Part B, which covers doctor visits and other types of outpatient care. . . .
Under the “hold harmless” provision in the Social Security Act, Medicare can’t pass along to most Social Security recipients a Medicare premium increase that exceeds any additional dollars they would receive through a Social Security cost-of-living adjustment. On Thursday, the Social Security Administration is expected to announce that it will pay no cost-of-living increase in 2016, which means no Part B premium increase for most Medicare beneficiaries.
But not everybody qualifies for the hold-harmless treatment. Those who don’t include new Medicare beneficiaries, those with high incomes, Medicare recipients who don’t receive Social Security and lower-income beneficiaries whose premiums are paid by state Medicaid programs—altogether, some 30% of Medicare’s 52 million Part B recipients.
With premiums frozen for 70% of beneficiaries, Medicare must spread the expected increase in its costs for 2016 across that remaining 30%. For them, the standard Part B premium—currently $104.90 a month—is projected to rise to $159.30 a month in 2016, according to a July report by Medicare’s trustees. Single individuals earning between $85,001 and $107,000 (and couples earning from $170,001 to $214,000) would see their 2016 monthly premiums rise from $146.90 a person this year to $223 in 2016. For those earning more than $214,000 (or $428,000 for couples), the projected increase is to $509.80 a month, from $335.70 in 2015.
Individual premiums are based on the most recent federal tax returns available—and for 2016, that is 2014 tax returns.
If your income has subsequently dropped to a level that would allow you to pay a lower Medicare premium, you can ask the Social Security Administration—which administers the income calculations—to re-run the numbers. To qualify, you must prove that your income fell because of reasons that include divorce, the death of a spouse, retirement or a reduction in work hours. (For more detail, see “Medicare Premiums: Rules for Higher-Income Beneficiaries” at socialsecurity.gov.)
If your income is no more than 135% of the federal poverty guidelines—a cap that this year is below $22,000 for a family of two in most of the U.S.—you may be eligible for a Part B premium subsidy from your state, says Joe Baker, president of the Medicare Rights Center. (For free help, visit your State Health Insurance Assistance Program at shiptacenter.org.)
Individuals with incomes of $85,000 or less (and couples with $170,000 or less) who have deferred claiming Social Security can escape higher Medicare premiums if they start receiving benefits—and have their Medicare premiums deducted from those benefits—by November.
But that might not be a smart long-term move. Because those who defer claiming Social Security increase their benefits by approximately 6% to 8% for each year they wait, “the amount of Social Security you would gain over the course of your expected lifetime by deferring could be much larger than what you would save next year in Part B premiums,” says Juliette Cubanski, an associate director of the Kaiser Family Foundation’s program on Medicare policy.
Another way to potentially offset some of the expected premium increase is available to Medicare recipients who have never tried Medicare Advantage, a program that typically offers medical and prescription-drug coverage in managed-care plans. Medicare allows each beneficiary a one-time trial of up to 12 months in Medicare Advantage, and those who face higher Part B premiums may be able to save money by using that option in 2016.
Medicare Advantage enrollees must still pay the full Part B premium. But these plans tend to charge lower premiums than what many in traditional Medicare pay for the prescription-drug and “Medigap” plans that supplement their Part B coverage, says Aaron Tidball, a Medicare expert at Allsup Inc., a Belleville, Ill., provider of Medicare plan-selection services.
Those who switch to Medicare Advantage can switch back to traditional Medicare within 12 months and return to the Medigap policy they had before without “worrying about being rejected or charged more due to health,” says Mr. Tidball. The downside: Medicare Advantage plans typically have more restricted provider networks.
Note that the big jump in 2016 Medicare premiums for some beneficiaries could be followed by a significant drop the following year. Assuming Social Security recipients receive a cost-of-living adjustment in 2017, the hold-harmless provision will affect a smaller portion of Medicare recipients—and so Medicare costs will be shared more equally. Indeed, the Medicare trustees are projecting that the base Medicare Part B premium will reset for everyone at $120.70 a month in 2017."
Summing Up
It's a complicated story for many, but it's worth making the individual effort to see that you're getting the best deal possible.
Maybe the Medicare premium increase will be a one time thing and inflation will bring about a downward correction next year.
That said, one person's downward correction will mean another person's upward correction
We'll just have to wait and see who gets the 'free stuff.'
"The former chief executive of the nation’s third-largest school district pleaded guilty to fraud Tuesday, just days after being indicted in what prosecutors described as a kickback and bribery scheme.
Barbara Byrd-Bennett, who resigned as chief executive of Chicago Public Schools earlier this year, pleaded guilty to one count of wire fraud. Under the plea agreement, prosecutors will recommend the 66-year-old be sentenced to seven-and-a-half years in prison. . . .
The plea came less than a week after Ms. Byrd-Bennett was indicted on 20 counts of wire and mail fraud connected to what prosecutors said was a scheme to steer more than $23 million in school district contracts to two consulting firms for which she once worked. . . .
Prosecutors said Ms. Byrd-Bennett received such benefits as sports tickets and meals, and agreed to have accounts set up in the names of her relatives to accept payments from the firms. Such payments were based on a percentage of the contracts the firm received and became a “signing bonus”. . . .
The plea by Ms. Byrd-Bennett is the latest blow to the school district here, which is struggling with mounting fiscal problems. Her indictment has put new pressure on Chicago Mayor Rahm Emanuel, who appointed her chief executive in the fall of 2012."
Summing Up
Chicago politics is as corrupt as ever.
We the People deserve better ---- or do we?
So be informed, think things through, vote your conscience, and vote responsibly.
In last night's televised debate, Hillary and her band of presidential personating Democratic brothers didn't bother to talk about how to get the American economy growing again. It was an awful performance.
They all came off as phony sound bite driven shallow amateurs who are totally convinced that We the People will believe anything they say and that Republicans and the private sector job creators are the real enemies.
Growing the government, protecting the climate and saving the world from greedy American private sector fat cats (instead of Putin, Assad and the world's genuinely bad guys) is their sole politics based agenda.
Growing the U.S. economy and providing good jobs in our highly indebted society, and in a nation which is central to a globally competitive economy, isn't even on the agenda. The Democratic candidates instead are conducting strictly a 'trust me' show which is all about perceived 'fairness' and redistribution programs --- and not economic growth initiatives.
They all talked in totally populist terms about somehow making the sick Obama led U.S. economy more prosperous and 'fair' to the 'little' people, aka the average American voter. And to them, 'fair' means whatever they say it means as we continue down the 'progressive' road leading to more government control, indebtedness, less individual responsibility and the $15 per hour undereducated and unemployed would-be hamburger flipper.
Bernie, Hillary and the others railed about income inequality while completely ignoring the relationship between the quality of an individual's education and economic progress. Free politician provided lunches by taxing the fat cats were on the presidential candidates' menu all evening.
The night's 'dog that didn't bark' was school choice, vouchers, charter schools and the ever growing and unaffordable cost of pensions and bloated and unproductive overhead structures for K-12 schools, trade schools and colleges alike.
Hillary got a pass from the 'brothers' on her personal integrity issues, including the Benghazi, Clinton Foundation and e-mail server bag of lies. She and Bernie even shook hands on that one.
They all praised Obama's performance and ignored the sick economy, blaming any and all economic issues on the hated fat cats and Republicans.
I watched the entire fiasco but I'm sorry I did.
The socialists, tax the rich gang and climate change enthusiasts were all on stage in the amateurish political performance of the decade, if not century.
The big government 'progressive' Democrats are counting on We the People to keep them in office in the person of Hillary or perhaps Bernie or Joe. Sadly, they're probably right about that.
U.S. economic growth is slow and not likely to pick up significantly anytime soon.
The reasons are threefold: too much individual and government indebtedness in the U.S., ditto for the rest of the world, and too much reliance on government as the savior and protector of the 'little' people.
So if you're watching the Democratic debate this evening, do it solely for the entertainment and not for obtaining useful information. Same goes for Trump et al on the Republican side.
As you may be able to tell, I'm not a big believer in the BBB, aka 'Big Brother Bloviating,' school of governance.
"A goal of a 4% economy? That objective, mentioned frequently in the 2016 presidential race, is getting farther away, according to the latest projections from the staff of the Federal Reserve.
Minutes of the Fed’s Sept. 16-17 policy meeting disclose the Fed staff further trimmed its assumptions for the rates of productivity and potential growth over the medium term. . . .
The Fed staff’s view was already gloomy. . . . going into the Fed’s June policy committee meeting, the U.S. central bank’s staff penciled in potential growth averaging just 1.74% over 2015-2020, according to the document now on the Fed’s website. That’s down from an average growth rate of 3.1% over the past 50 years. . . .
Potential growth in the long run is a function of two things: population growth and productivity.
Over the last year, productivity has increased by just 0.7%, far below the long-run average of 2.2%.
Why it is falling remains a puzzle.
With trend growth so low, the economy is in a pickle."
Summing Up
Economic growth depends on additional hours worked and individuals becoming more productive during those hours.
Government employees are always less productive than those employed by the private sector, and continuing government growth is an 'accepted' fact of American life these days.
The lack of market competition in the monopolistic public sector is the primary cause for the lack of comparable productivity in government work when compared to the competitive private sector.
The additional hours worked which contribute to greater output can be a result of either or both higher employment and more regular and overtime hours for those full or part time workers already employed.
The additional productivity can be a result of either or both more automation and improved work methods or greater effort.
The 'new normal' sucks, but don't expect to hear any serious discussion by the politicians concerning how to get economic growth back on its historical track.
They'll be too busy pandering to their base and fiddling away while the jobs and productivity don't come.
{NOTE: We've been focusing recently on the debilitating debt levels which younger adult Americans have assumed without them understanding how the rest of their lives will be much more difficult financially that it otherwise could have been. We'll continue that discussion herein by looking today at the impact of excessive debt on Millennials, that group of Americans between their mid 20s and mid 30s.}
What gets us into the most trouble isn't what we know that we don't know. Instead it's that which we don't know and don't know that we don't know. Ignorance is bad, but confidence without a good reason therefor is what's really dangerous.
That pretty much sums up the state of ignorance about student loans specifically, financial literacy generally, and the dangers of taking on excessive personal debt obligations early in adulthood.
So let's do our best to shed some sunshine on this quite troublesome but definitely soluble problem of limited personal financial knowledge. Specifically, adequate familiarity with (1) student loans, (2) home mortgages, (3) car loans and (4) credit card borrowings is lacking in most young American adults.
"Much has been written about millennials . . . but one thing is clear: Millennials and debt go hand-in-hand.
Our research . . . shows that two-thirds of millennials (those aged 23-35 in 2012) have at least one source of long-term debt outstanding—whether student loans, home mortgages or car payments—and 30% have more than one. Among the college-educated, a staggering 81% have at least one source of long-term debt.
Not only do millennials carry debt, but they struggle with it. A majority report having too much debt, difficulty in making payments, and worries about it. Specifically, the ability to pay off student loans troubles more than half of millennials who have such loans. Low-income respondents tend to be more concerned than higher-income earners, but even 34% of millennials with annual household income above $75,000 doubt they will be able to repay their student loans. Moreover, even several years after college, the percentage of those worried about repaying student loans remains high. Fifty-four percent of millennials who are over age 30 and have student loans are worried about repaying them.
Along with long-term debt, millennials also carry short-term debt, most often from credit cards. This debt can be costly. More than half of millennials’ credit-card users say they carried over a balance—for which they were charged interest—in the last 12 months. A sizable share has been hit with late fees (22%), over-the-limit fees (13%), and fees for cash advances (14%)....
Twenty-nine percent with bank accounts report occasionally overdrawing them, and 22 percent of retirement-account owners took loans or hardship withdrawals in the 12 months prior to the survey. . . .
This next generation is not prepared for the financial engagement it faces. . . .
They owe a lot. They know too little. Millennials’ struggle with debt may eventually become our problem, too."
Summing Up
The problems with debt are widespread and will negatively impact American prosperity for a very long time.
Young Americans know too little about the perils associated with taking on excessive debt at an early age and the huge negative consequences it will have for the remainder of their lives.
Yet too many young Americans decide to ignore the very real need to save and invest for the long haul, and instead elect to borrow and then spend those borrowed monies today.
The following facts about student loans for college under the supervision of the Department of Education and a related piece of history about the underlying reasons for establishing that same Department of Education aren't well known. They should be.
The fact is that the total of student loans outstanding, and the administration thereof, represent a huge and perhaps insoluble problem where trusting students unknowingly have signed up for a lifetime of troubling financial issues by borrowing money that they won't be able to repay.
And another simple fact is that the K-12 focused Department of Education wasn't created to help students and their families. Instead its intention was and is to assist 'union educators' and their political allies. Yes, politics sucks.
College lending programs are no longer primarily centered around serving the best interests of the students. As the student loan crisis grows bigger each day, the U.S. Department of Education seems to be totally disinterested is dealing with the issues confronting new and old borrowers alike.
That’s how Patrick Wittwer, 31, described his experience trying to repay his roughly $50,000 in student loans. Between misdirected payments by one of the companies servicing his loan and the abusive collection tactics he encountered when he fell behind, Mr. Wittwer said the repayment process simply seemed stacked against him. . . .
Consumer advocates say student-loan servicers often make an already heavy debt load even more burdensome for borrowers. . . .
A report issued late last month by the Consumer Financial Protection Bureau supports this view. Even though the economy and labor market have improved, student loan borrowers are experiencing high distress levels compared with borrowers with other types of consumer debt, the government report found. More than one in four student loan borrowers are delinquent or in default on their obligations.
In the aftermath of the financial crisis, we learned repeatedly about dubious practices among mortgage servicing companies that made it harder for homeowners trying to repay or renegotiate their loans. Now, similar horror stories are emerging about the companies servicing student loans....
Repaying a student loan is challenging enough without servicers adding to the burden with incompetence or dubious practices. Borrowers and taxpayers deserve better."
2- DEPARTMENT OF EDUCATION
The Department of Education isn't what it purports to be. What should be a focus on the well being of the kids and their parents isn't that at all. Initiatives such as government funded school choice, advice on the perils of borrowing for college, and courses dealing with basic financial literacy aren't part of the Department of Education's standard 'curriculum.' Instead there exists a collusive partnership between government and the professional 'union educators' who combine to make up the education establishment.
Educators are failing to teach tomorrow's leaders about the virtues of American private enterprise and how that has made our nation and its citizens the most prosperous in world history. In today's American system of education, the idea of a meritocracy and individual entrepreneurialism is absent. Instead the trend of embracing mediocrity and equality in results is everywhere.
We call teaching a profession, but the teachers are paid according to seniority and level of formal education. Their job security is guaranteed by the tenure system, and there is a systemic powerlessness to remove poor teachers from the classroom. Meanwhile, the good ones go largely unrewarded in the name of producing 'income equality' for those bad teachers, regardless of performance.
Since this embrace of socialist practices prevails in teaching, can you guess what our kids are being taught about free markets while in school? Not much, if anything.
In any event, Chief of Staff Hamilton Jordan in 'A memo to President Carter about creating the Department of Education' offered this advice:
"From a 1978 memo to President Jimmy Carter from Chief of Staff Hamilton Jordan regarding the possible creation of a U.S. Department of Education:
Political Considerations
The following are the major political considerations that you should be aware of in making this decision:
1. The teachers organizations—particularly the National Education Association—are the fastest growing, most active, and by many standards the most effective political organizations in this country. With a membership that exceeds two million, they comprise one of the most committed and articulate political constituencies in our country.
2. These groups—particularly the NEA—have been our political friends in the Presidential campaign and our allies on many crucial legislative battles. For the first time in its 114 year history, the NEA endorsed a Presidential candidate in the 1976 general election. . . .
I would strongly recommend that you support the creation of a separate Department of Education for the following reasons:
Your unequivocal promise in the campaign to do so
The teachers of this country have been our political friends in the past and can be our valuable political allies in the future
The arguments for the creation of a separate department are at least as convincing as the arguments are against it
If you make the decision not to create the separate department, I would strongly recommend that we not pursue some organizational middle ground that would allow us to claim that we have met our campaign promises to the teachers. We promised a separate department, and I think that it would be an insult to our teacher friends to argue that some internal reorganization is a satisfactory substitute for the separate department they were promised."
Summing Up
When the outcomes and costs are appropriately factored into the equation, today's American system of public education doesn't measure up well when compared to the 'good old days.'
Politics still sucks.
So do the effects of America's collusive government and union dominated system of education from kindergarten though college and beyond.
{NOTE: Our most recent post concerned the widespread ignorance surrounding student loans and the negative impact that indebtedness at a young age has on far too many lives. This one should be read as an important part of that continuing discussion.}
The plain fact associated with ignorance and borrowing is that how and when the principal amount to be repaid will in fact be repaid is often ignored by the borrower when taking out a loan.
Sellers today focus on the attractive low interest rates and borrowers don't focus on what it will take to repay the amount borrowed over time. This is speculative borrowing, pure and simple, and begins a dangerous practice for first time borrowers which likely will become an established habit later for borrowing on credit cards, home mortgages and auto loans. At that point the hole is deep and the outlook for one's financial security is worrisome at best and disastrous at worst.
To add to the problem, this now well established practice of ignoring the requirement of principal repayment at the time the loan is made is especially troublesome in a non-inflationary economy --- such as the one we have now. When inflation reigns, principal can be repaid in cheaper dollars. Of course, the reverse happens when inflation is low, as it is now and will be for the foreseeable future as well.
Nevertheless, we are encouraged to borrow that which we may very well be unable to repay, even though those doing the encouraging know better. After all, the 'encouragers' are usually the educators and the government providers of the money we've borrowed and which is then pocketed by the educators. This collusion between the educators and government lenders does a great deal of long lasting and often irreversible financial harm --- and is harm from which many borrowers will never fully recover.
"The media is filled with stories about student loan debt. . . . They focus on the nearly $1.2 trillion in outstanding student loan debt, an amount that exceeds auto loan and credit card debt.
We are told that nearly 70% of four-year college students graduate with student debt that averages about $30,000, and some owe more than $100,000.
The student-loan burden apparently is even reducing the number of first-time home and auto buyers, delaying marriages and retirement savings and reducing the number of children being born. And the net worth of young households with student loans is substantially lower than those without student loans.
What is often missing in these portrayals of student debt is an explanation of what the federal government and colleges are doing to give student loan debtors the personal finance knowledge and skills that they need to safely and responsibly manage their debt.
Federal law requires colleges to provide student loan counseling to first-time borrowers. After this single educational intervention, often at the stressful beginning of college, the next time students might talk about finances is during the exit interview, when they are graduating (or leaving the college). Student feedback indicates that most do not comprehend the information provided in these sessions and view the information as one more requirement of the financial aid process rather than a learning opportunity. . . .
Except for the few elite colleges with huge endowments, most of the two- and four-year colleges could not exist without student-loan funding. Professors and administrators ultimately rely on these loans for their take home salaries and benefits. In 2014 approximately $134 billion in federal student loan debt and grants was used by colleges for expenses, an amount roughly equivalent to more than seven times the 2014 total operating expenses of Apple Inc., the largest company by market capitalization in the S&P 500. . . .
And yet, the vast majority of colleges are not providing students with substantive and mandatory personal finance instruction, especially as it relates to how they should manage the economic burden that they are taking on to get a college degree.
Higher education has a moral obligation to help the students understand how credit and credit scores work. Students should learn from trained individuals and the efficacy of the program should be measured.
We know that college students often have not received personal finance training in grades K-12 or at home. So, as colleges load young people with debt, they also must give them the tools that they need to responsibly manage it. . . .
For most students, their first experience with debt is their student loan, and they simply don’t understand the consequences of this transaction, even as they take on additional loans to complete college. . . .
In 2008, the President’s Advisory Committee on Financial Literacy recommended that the president direct the departments of treasury and education to require college students to take a much more comprehensive course in financial literacy than is currently required. Sadly, this recommendation was never acted on. . . ."
Summing Up
An already bad situation is rapidly deteriorating as the old high inflationary economy transitions to the 'new normal' low inflationary economic environment. The absence of inflation isn't all god news and represents bad news for borrowers with heavy indebtedness.
Because when inflation is quiescent, nominal wage increases are small but real, nominal interest rates are low but real interest rates are high, and the repayment of principal becomes more difficult and expensive as the dollars previously borrowed are the equivalent purchasing dollars that must be repaid.
Here's the real deal --- the interest rate on borrowings isn't even close to the most important element in a long term loan. Instead what matters most is the principal amount which has to be repaid --- as well as where the additional money will come from to pay back that principal amount borrowed.
Thus, how we will manage to earn enough additional income to repay the new borrowings, plus interest, is of the utmost importance. Because the lack of stable and high paying jobs, high single digit salary increases, and inflationary home prices won't bail us out in this new and ongoing non-inflationary and sluggish economic environment.
That means simply that the routine speculative borrowing which has become the norm with respect to paying for expensive college costs has become a most tricky, risky and often mindless endeavor.
Yet if not appropriately forewarned and therefore forearmed with relevant information, our young students, future home owners and nation's leaders won't know what they don't know until the debt hole is deep and it's too late to do anything about it.
Financial literacy is sorely lacking in our schools and too often in our homes as well.
That's not a healthy sign for the future financial health of today's young Americans.
We are bombarded continuously with the following 'easy money' sales routine: 'no money down --- no payments necessary for years --- and then only minimum monthly payments are required.' Credit card companies and retailers use it to their advantage continuously. Let the buyer beware!
But should this same story be unfolding with government sponsored student loans? And shouldn't high schools, colleges and trade schools be teaching the young soon-to-be-excessively-indebted borrowers to beware? Well, they're not, and it doesn't seem fair to me. How about you?
Are they selling or lying? To the young heavily indebted borrowers, as Hillary Clinton would say, "At this point, what difference does it make?"
So here's my answer, Hillary. To me the difference the student loan borrowing and repayment fiasco makes is this: it tells the story of an intrusive government that misleads the very people it claims to help --- those poor and middle class kids that you falsely purport to represent. In other words, it makes a tremendous difference to those young people who then age and eventually end up on the losing side of their deal with government.
We all know that much truth is to be found in the common sense saying that figures don't lie but liars figure. This definitely is the case when our government claims with respect to a delinquency rate on student loans that 8.5% is equal to 71% -- or that 12.9% is the same as 78.2%.
But in fact that's how much student loan debt delinquencies are understated by government lenders. They make the borrowing easy and the repaying hard, if not impossible. Maybe that's why Hillary wants to make college 'free.' It's election season.
So what are We the People to believe about the government lending programs in which we mistakenly place our trust? Do government officials really lie when they 'shade the truth' in order to make the sale? You be the judge.
"After a series of blockbuster hearings held 25 years ago on abuses in the higher education industry, Congress designed a system to protect undergraduates from risky student loans.
But two weeks ago, the Department of Education released a trove of new data suggesting that the system is failing and that, at some colleges, the saddling of students with loans they can’t afford to pay down is far more dire than anyone knew.
The loan crisis hits hardest at colleges enrolling large numbers of students from low-income backgrounds. These undergraduates have to borrow for college, then often have difficulty finding well-paying jobs after graduation — if they graduate at all. As a result, they struggle to repay their loans. The colleges with the lowest student-loan repayment rates include many for-profit colleges, but also some public and private nonprofit colleges, including a substantial number of historically black institutions. Even some wealthier, more selective colleges turn out to have a bigger student loan problem than previously realized.
Congress created a rule called the “cohort default rate.” Every year, the education department calculates the percentage of borrowers who have recently left a given college and have defaulted on their federal-government-backed loans. If the default rate is too high, the college is kicked out of the federal financial aid system. The rule was an immediate success — more than 1,500 for-profit schools were pushed out. A number of public and nonprofit colleges were also forced to bring their default rates down.
But the system has limitations. Only colleges with a default rate above 30 percent for three consecutive years, or above 40 percent in any single year, are expelled from the financial aid system. And students who default more than two to three years after leaving college don’t count as defaulters. Nor do students who manage to avoid default, but struggle to repay their loans.
In September, the department made a different calculation. Instead of default rates, the department calculated non-repayment rates, which include both defaulters and borrowers who have never paid a single dollar of principal on their loans.The non-repayment category includes people who are only paying interest, have delayed making payments by enrolling in graduate school or are getting loan extensions. The non-repayment rates were calculated over a longer time period: at one, three, five and seven years after students leave college.
Some of the numbers are startling.American National University — a “military friendly” for-profit chain offering degrees in business, health care and information technology, both online and at 30 campuses in six Midwestern states — has an official default rate of 8.5 percent, well below the national average of 11.8 percent. But its five-year non-repayment rate is 71 percent. Even after seven years, most of the university’s students, the large majority of whom borrow, have failed to pay back a penny of their loans.
How is this possible? Because, as American National’s “Department of Repayment Success” web page helpfully explains, students are legally allowed to defer or otherwise delay making their loan payments based on economic hardship, continuing education and other factors. Of course, interest accumulates in the meantime. This is “repayment success” only in the sense that it successfully helps students postpone paying back their loans long enough to push the moment of debt crisis beyond the federal default-rate window and keep American National eligible for more federal aid. Proving economic hardship is likely to be easy, since the typical former student earns only $22,400 per year 10 years after entering school.
Some more mainstream colleges also have significant non-repayment rates. Louisville, Georgia State and the Universities of Cincinnati, Houston, South Florida and Alabama all have single-digit default rates but have five-year non-repayment rates of over 20 percent. At the University of Memphis, 35 percent of students have not paid down principal after five years. More than half of the students who borrowed to attend the for-profit University of Phoenix, which enrolls hundreds of thousands of students, have been unable to pay back a dollar of their loan principal after five years.
All told, over 700 colleges . . . have over half of their borrowers fail to pay down any debt after seven years. Nearly all of those colleges remain eligible for federal financial aid.
Among both public and private nonprofit institutions, the debt problem is most acute when students with very little money attend colleges with very little money. All 25 of the public universities with the highest five-year non-repayment rates are historically black institutions. Of the 25 private colleges with the worst non-repayment rates, 22 are historically black. One example, Lane College in Jackson, Tenn., has a 12.9 percent default rate but a 78.2 percent non-repayment rate.
Historically black colleges are neither unusually expensive nor profligate institutions. Most have served their communities for decades or longer, suffering racism and inadequate funding while enrolling young people who are often low-income, first-generation college students. As a result, despite the fact that tuition at historically black schools is often much lower than at well-heeled private schools, the vast majority of their students borrow.
That so many graduates of black colleges struggle to repay their loans may exacerbate racial wealth disparities. These non-repayment rates, moreover, do not include the private loans that many students take out once their federal aid is exhausted, or the debt that parents are increasingly carrying to pay for their children’s college education."
Summing Up
Our monopolistic and expensive government schools graduate many poor and middle class kids from high school who aren't prepared to do college work.
Next our government loans those same poor and middle class kids the money to attend the expensive college or trade school of their choice.
Then many of those kids drop out before graduating while others graduate but are unable to get good jobs. In any event, the now young adults are incapable of properly servicing the 'helpful' loans they were 'encouraged' to undertake by both 'helpful' government and college administrators.
Reality then 'happens' to those young, uninformed, undereducated and now heavily indebted Americans.
And regardless of what the 'official' stats reveal, the 'real' repayment problem that is broadcast to be less than 10% often exceeds 70%. That isn't an accidental miscalculation: it's a flat-out lie.
And it's a lie whose repercussions and ramifications will endure for the rest of our young and misled students' lifetimes. Yet they'll still vote for Hillary.
Isn't government great? Aren't expensive colleges wonderful? Aren't We the People well informed?
Sadly, that's not the case. At least that's my take.
Politics sucks and we'll better explain why in this 'NRA vs. NEA' posting.
Politically the NRA generally doesn't support gun restricting Democrats. Of course, the NEA does support Democrats overwhelmingly. For that matter, so does the AFT.
President Obama recommends that Americans become 'single issue voters' and oppose those politicians who favor ownership of guns and the right to bear arms guaranteed in the second amendment to the U.S. Constitution.
My view is that he should take the time to visit inner city Chicago and not the grieving small town of Roseburg, Oregon. But where he decides to go is not the point of this post, so let's focus on the 'single issue' of educational choice in America as a higher national priority than gun control.
Our public system of education doesn't permit poor and middle class parents to choose the individual schools their children attend, except in severely limited instances. Government officials instead choose to protect the jobs of the public school teachers and administrators.
In essence, government appeases the teachers' unions and opposes the best interests of the parents and their kids. It's all about protecting the current underperforming and unaffordable system where 'educators' and politicians conspire to rob the taxpayers of their money and children of the opportunity to get a solid education.
Let's see what an experienced school teacher in New York says about this in A Tale of Two Schools, One Building. It's subtitled 'I taught at a New York city charter, upstairs from a school where the neglect of students is tragic:'
"Over the past three school years, I unintentionally participated in a tragic educational case study on the west side of Harlem. I worked in the same building as the Wadleigh Secondary School, at which 0% of students in grades six through eight met state standards in math or English. That isn’t a typo:
Not a single one of the 33 students passed either exam, though many of the questions are as straightforward as “What is 15% of 60?”
Two floors above Wadleigh, I taught math at Success Academy Harlem West, a public charter school. The students there eat in the same cafeteria, exercise in the same gym and enjoy recess in the same courtyard. They also live on the same blocks and face many of the same challenges. The poverty rate at Wadleigh is 72%; at Harlem West, it is 60%. At both schools, more than 95% of students are black or Hispanic. About the only difference is that families at Harlem West won an admissions lottery.
Yet for our students, the academic year ended in triumph: 96% were proficient in math—compared with 35% citywide—and 80% scored at the advanced level. In reading and writing, 75% of our students were proficient, compared with 30% citywide.
This was not easy. My students do not have easy lives. Many are in households in which no English is spoken, or have moved in and out of homeless shelters. Others shoulder the primary responsibility of raising younger siblings. Yet we set high expectations. Our school day runs from 7:30 a.m. to 5:15 p.m., and teachers spend evenings and weekends speaking with families about their children’s progress. This blueprint works. Rigorous, well-designed and joyful schools can overcome the challenges of poverty.
Last month, instead of acknowledging the astounding lack of learning at schools such as Wadleigh, New York City Mayor Bill de Blasio proposed a hodgepodge of feel-good programs. He will create new Advanced Placement courses that students from Wadleigh won’t be prepared to take. He will enlist “literacy specialists” to try to counter chaotic classrooms and poor instruction. In short, he will do nothing effective.
I often think about those Wadleigh students, navigating unruly hallways and classrooms. They hold the same promise as my students, but of those who move on to high school, fewer than 10% graduate with the skills to complete college-level work. What if those Wadleigh students had attended the public school only two floors above them?
New York City has the resources to create world-class public schools for all students. The Big Apple spends $20,331 per pupil. That ranks No. 2 among the 100 largest school districts in the U.S., according to 2012-13 census data.The problem is that in New York the needs of adults supersede those of children. My colleagues finished summer vacation on Aug. 3, underwent two weeks of professional development and welcomed back students on Aug. 17. The district’s unionized teachers were required to arrive one day before the school year began on Sept. 9.
Harlem West almost didn’t open in 2011. Mr. de Blasio, then the city’s public advocate, opposed my school’s move into the building on the grounds that it would cramp Wadleigh. “I believe in my heart there is time and the opportunity to protect what is here,” Mr. de Blasio said. That’s the mentality of city officials, who want to “protect” the entrenched interests of a system in which only 19% of black students in district schools are working on grade level.
On Wednesday, families across New York City will rally in Cadman Plaza, Brooklyn, march across the Brooklyn Bridge to City Hall, and call on our leaders to tackle this crisis. Excellent public schools shouldn’t be a privilege enjoyed only by those lucky enough to win an admissions lottery; they should be the standard. The city has the resources—now it needs the will."
Summing Up
So here's my sincere advice for President Obama.
Go to your favorite city of Chicago instead of Roseburg, Oregon, Mr. President, and take some politicians, NEA and AFT leaders along with you.
And make sure to set aside enough time to visit some inner city neighborhoods after dark and the inner city schools during the daytime.
As Yogi Berra said, you can see a lot just by watching.
"Americans are living right on the edge — at least when it comes to financial planning.
Approximately 62% of Americans have less than $1,000 in their savings accounts and 21% don’t even have a savings account, according to a new survey of more than 5,000 adults conducted this month by Google Consumer Survey for personal finance website GOBankingRates.com. “It’s worrisome that such a large percentage of Americans have so little set aside in a savings account,” says Cameron Huddleston, a personal finance analyst for the site. “They likely don’t have cash reserves to cover an emergency and will have to rely on credit, friends and family, or even their retirement accounts to cover unexpected expenses.”. . .
In the latest survey, 29% said they have savings above $1,000 and, of those who do have money in their savings account, the most common balance is $10,000 or more (14%), followed by 5% of adults surveyed who have saved between $5,000 and just shy of $10,000; 10% say they have saved $1,000 to just shy of $5,000. Just 9% of people say they keep only enough money in their savings accounts to meet the minimum balance requirements and avoid fees. But minimum balance requirements can vary widely and be hard to meet for some consumers. They can vary anywhere between $300 a month and $1,500 a month at some major banks.
Some age groups are less likely to have savings than others. Some 31% of Generation X — who are roughly aged 35 to 54 for the purpose of this survey — while being older and presumably more experienced with money than their younger cohorts, actually report a savings account balance of zero, which is the highest percentage of all age groups. Around 29% of millennials — aged 18 to 34 — and 28% of baby boomers — aged 55 to 64 — said they have no money in their savings account. Baby boomers (17%) and seniors aged 65 and up (20%) have the most money saved of any age group while less than 10% of millennials and approximately 16% of Generation X have $10,000 or more saved."
Summing Up
Have too many of our fellow Americans given up on having a secure financial life, both for themselves and their children?
And if they have, will they use credit cards, student loans, home mortgages, car loans and other forms of debt to make the current huge problem an even bigger one down the road?
Are credit cards the new 'American way' of saving for a rainy day?
If so, then it's game-set-match, and ALL of We the People will be on the losing side.
Individuals are wisely and properly encouraged to save and invest from an early age until retirement. Of course, the overwhelming and stark evidence is that far too many Americans don't bother to heed that sage advice.
The problem represents a 3-fer in that (1) we don't begin to save early enough, (3) we don't save enough when we do begin to save, and we don't invest wisely for the long haul that which we do manage to save and invest. That negative trifecta creates huge problems for us upon reaching oldster status along with unnecessary bouts of anxiety during our working years.
Although there are countless teachable examples from which we can and should learn, how many of us will learn those valuable lessons in time to do something about it? That's the question.
"Connecticut has roughly half of what it needs to pay future retirement benefits for its workers . . . with financial distress rivaling that of Kentucky or Illinois. . . .
Connecticut’s surprising pension predicament shows how even the wealthiest parts of the U.S. are struggling to keep pace with ballooning retirement obligations that now amount to $1 trillion nationally.
Connecticut’s unfunded pension liabilities more than doubled over the past decade to $26 billion as the state’s retirement system reeled from inadequate state contributions, a subpar investment record and longer lifespans for its retirees. . . .
Some Connecticut officials and union leaders said they are unfazed by the pension problems and pledge to reverse the deficit in the coming decades. Their strategy hinges partly on predictions the various state retirement systems will be able to earn 8% or more annually, a goal that is more optimistic than most public pensions across the U.S. The average target for all state plans is 7.68%, according to the National Association of State Retirement Administrators....
Connecticut’s pension gap developed as a result of decisions made over decades to scrimp on payments when the economy sputtered and to cut taxes, according to state leaders and public-finance experts. And there is a quirk: Connecticut officials contributed almost no money to the state’s various public pensions from the late 1930s until the early 1980s, meaning little had been saved up because the state had chosen not to prefund the retirement system for future payouts....
Connecticut only has 51.9% of the assets it needs to pay future obligations to workers, lower than all states except for Illinois and Kentucky, according to the National Association of State Retirement Administrators.
Connecticut has scaled back pension benefits in recent years, reducing cost-of-living adjustments for retirees and pledging to make the appropriate annual payments to fully fund the system by 2032. State officials have raised taxes twice since 2011 as a way of covering some liabilities, reduced its workforce by more than 3% and held back on deeper spending on education and local aid.
Connecticut now allocates 10% of its budget to paying down unfunded pension obligations, up from about 7% four years ago . . . ."
Summing Up
(1) For several decades, Connecticut didn't set aside and invest funds to cover its growing pension liabilities. That has proved to be an unaffordable oversight.
Of course, too many individuals make exactly the same mistake by not saving and investing early in their careers.
(2) Connecticut assumes it will earn 8% annually on its pension investments going forward. That's highly unlikely to happen unless 100% of the funds are invested continuously in stocks, which they won't be.
In other words, that 8% assumed rate of return on a blended portfolio of stocks and bonds is a pipe dream.
Bonds will have difficulty earning much in excess of the rate of inflation over the next several years, and the annual rate of inflation will probably be 2% or lower. Thus, any investment in bonds will seriously restrict overall portfolio investment returns.
A blended total return of 5% to 6% is a much higher probability than the assumed 7.68% to 8% rates assumed by most states. That will mean annual large funding shortfalls for the pension funds over the next several years.
(3) The states won't make big enough contributions to offset the shortfall in earnings, and the shortfalls may result in adding several hundred billion dollars to the current $1 trillion funding hole.
All this means one of two things: lower pensions or higher taxes are ahead for many states, including Connecticut, Illinois and Kentucky.
Here's the real point: individual families should be forewarned and forearmed.
Allowing parents to use taxpayer money and school vouchers to enroll their kids in the school of their choice is a great idea whose time may never come. It's an excellent example of 'you scratch my back and I'll scratch yours' rotten-to-the-core American politics.
Let's make this as simple as possible. The leadership of teachers' unions wants as many members as possible to pay as much in union dues as possible. That's how teachers' unions are funded and able to pay their leadership generous salaries. And despite their pleas of poverty, career politicians make plenty of money off We the People as well. That's the real American public school educational partnership.
To teachers' unions, membership growth is good. A declining membership is bad. It's all about the dollars coming in, and the more dues paying members, the more dollars in dues. It's really that simple.
The Democratic party's biggest supporters are the teachers' unions. In the American world of politics, Democrats and teachers unions' are totally aligned. When it comes to education, free parental choice and school vouchers are perhaps their biggest enemy.
"Hillary Rodham Clinton on Saturday won the backing of the nation’s biggest labor group, the National Education Association, an endorsement that was expected but that nonetheless gives her a boost as she heads toward the first nominating contests.
The nod represents the second major group of educators to back Mrs. Clinton, after the American Federation of Teachers endorsed her in July – an early move that her allies hoped would be the first of many dominoes in organized labor to fall her way. The N.E.A. has three million members . . . .
It’s Mrs. Clinton’s eighth union endorsement. But it comes as Senator Bernie Sanders of Vermont has become a favorite of many of the rank-and-file members in some unions, whose leaders are reluctant to try to thwart members of their own constituency who are supporting a candidate who is speaking so directly to many of their issues. . . .
Asked whether the group came under pressure to endorse Mrs. Clinton from her campaign as she faces headwinds in the nominating fight, Ms. GarcÃa insisted the timing was set by the union. But people privy to the discussions said that Mrs. Clinton’s advisers had pressed for an endorsement after a three-month lag since the A.F.T. endorsement.
On Friday, officials with the International Association of Firefighters publicly pulled back a planned endorsement of Mrs. Clinton, saying their rank-and-file members were not supporting her.
“As president, I will fight to defend workers’ right to organize and unions’ right to bargain collectively, and I will ensure that teachers always have a voice and a seat at the table in making decisions that impact their work,” Mrs. Clinton said in a statement about the N.E.A. endorsement.
Mr. Sanders, in his own statement, pointed out that he is the choice of many members.
“I am proud to have the support of many hundreds of thousands of members of the National Education Association and trade unionists all across America,” he said. “We are going to win this nomination and the general election because of support from grassroots Americans. We are on track to do just that.”
Summing Up
Hillary is all about Hillary. Bernie doesn't have a chance with the leadership of the teachers' unions.
Teachers' union leaders are all about themselves --- and Hillary, of course.
Accordingly, the fix is in. The parents of kids attending poorly performing schools won't have an opportunity to receive a solid education by taking taxpayer money and changing schools.
Meanwhile, these same parents will vote for Hillary, Bernie, Joe or whoever else runs against whichever hated Republican gets the nod and who favors school choice and vouchers for one and all.
Isn't life interesting? And doesn't politics suck?
The U.S. economy continues to grow each month, albeit slowly.
In fact, this is the slowest multi-year subpar economic recovery from any economic recession in memory. The inescapable fact is that instead of having now reached and surpassed the historically normal annual growth rate of 3%, we are muddling along at a ~2% growth rate with no end in sight.
Prices paid for purchased goods, including energy and imported products, are low. That's the good news.
Manufacturing employment gains and wage and salary increases are missing. That's the bad news.
In a globally competitive employment environment, the U.S. is losing the jobs competition for high paying manufacturing jobs. Thus, low wage part-time local service employees are the winners and high wage full-time U.S. based manufacturing employees are the losers.
Sadly, that's not likely to change anytime soon as government policies continue to ignore manufacturing in particular and the private sector in general. Energy and tax policy provide the clear and unmistakable evidence of this wrongheaded government stance.
"One of the most disappointing parts of a dismal U.S. jobs report for September was another decline in the percentage of Americans in the labor force.
The so-called labor-force participation rate continued its steady march lower, falling to 62.4% in September, government data show. That’s the lowest reading since October 1977, long before Americans turned sour on first-year President Jimmy Carter.
In other words, barely six in 10 of all working-age Americans have a job or are looking for one.
The participation rate peaked at 67.2% in 1997, fell slightly over the next decade, and then tumbled during the Great Recession. It’s been falling ever since. It had been at 62.6% for the previous three months.
Much of the decline in participation can be attributed to waves of baby boomers retiring. And more young people are going to college or staying in school longer, hoping to buff their credentials before entering the labor market. It’s harder for them get a good job than it was when their parents were young.
Yet those factors alone can’t explain all or necessarily even most of the decline.
Consider prime-age Americans who are 25 to 34 years old, past the age when most graduate from college. Their rate of involvement in the labor force fell to 80.6% in September — just a tick above the all-time low — from 84% in early 2008, just as the recession was starting.
With job openings at an all-time high and the economy on more solid ground compared to just a few years ago, more so-called millennials should be joining the labor force and finding work. But that hasn’t been the case."
Summing Up
The economy still struggles while the President talks about climate change.
The jobs market, tax policy and the U.S. energy and manufacturing sectors are in need of our President's immediate attention.
Yet the needs of the private sector continue to be ignored by this administration to the detriment of American workers and especially our young people.
And that's not all --- Socialist Bernie Sanders and Democratic frontrunner Hillary Clinton, along with many of the Republican candidates for the presidency, are not even discussing the growing unaffordability for future taxpayers of already enacted (1) entitlement programs and 2) the cost of education from K-12 through trade schools and college.
With respect to energy, a drill, baby, drill and then both use and export what we have drilled discussion, along with approval of the Keystone XL Pipeline, are absent from too many of the stump speeches.
Also missing is a much needed discussion of school vouchers and reducing the cost of education which are now possible by implementing distance learning and other low cost teaching enhancements made available by the internet.
And the ever growing debt burdens of government and far too many American individuals and families are not a serious part of the political discussion either.
At the very least, a candid conversation about the reasons and remedies for too few high paying American based jobs and the causes of our ongoing slow economic growth, including too much waste in government at all levels, are of vital interest to most Americans --- yet the deafening silence from Washington continues.
We the People deserve better. Why don't we demand better?
That's my question du jour in search of an answer.
The unemployment news this morning was expected to report continuing solid growth of 200,000 jobs for September along with upward revisions to previous monthly reports.
That didn't happen. In fact, the news was surprisingly weak on the employment front for September and adjusted downward for previous monthly reports. There's no good news in the numbers.
" The U.S. economy created just 142,000 new jobs in September and the number of new hires in August and July was also revised lower, suggesting the labor market cooled off toward the end of summer. The unemployment rate was unchanged at 5.1%, though more people dropped out of the labor force. Economists . . . had expected a gain of 200,000 nonfarm jobs, so the results are sure to disappoint Wall Street and raise questions about whether the Federal Reserve will raise interest rates at all in 2015. Employment gains for August and july were revised down by a combined 59,000, the Labor Department said Friday. The government said 136,000 new jobs were created in August instead of 173,000. July's gain was cut to 223,000 from 245,000."
Summing Up
That's bad news, but it's really not very surprising.
Jobs aren't plentiful, people aren't getting big raises and companies continue to struggle with a lousy worldwide economy.
And our government gurus talk about everything other than doing everything necessary to get the economy growing again through encouraging private sector growth initiatives.
Though hardly good news when viewed in perspective, interest rates, energy costs and prices paid for imported products will remain low for a long time to come.
I guess slow growth and bad government policy are worth something to at least some of We the People.
The productive private sector has long served as the primary wealth creating vehicle leading to America's world leading position as the most prosperous nation in the history of the world. And the wealth results from what We the People do and then are able to enjoy.
Meanwhile, the unproductive public sector with its 'baked-in' entitlement spending programs for a rapidly aging society has become too large as well as too intrusive. Its redistribution programs and huge indebtedness both severely inhibit the strong economic performance needed for growth.
"The net result of budget policies since 2010 will be to undercut the federal contribution to the country’s human, physical and intellectual capital, undermining long-run economic growth, as an unreformed safety net swallows up ever more of national income and saps growth in the labor force.
The simplest illustration of this dichotomy is that under current law, domestic discretionary programs—programs that must be reauthorized each year by Congress—will shrivel to 2.3% of the country’s gross domestic product, the broadest measure of economic output, by 2025, the Congressional Budget Office projects. That would be the lowest since before 1965, down from 3.4% in 2007. This category includes most federal spending on research, education, training and infrastructure (though not highways)—in other words, the sort of spending that enhances economic growth.
At the same time, mandatory programs, which don’t need annual authorization and include most of the social safety net, will balloon to 14.1% of GDP by 2025 from 10.1% in 2007, according to the CBO.
This is due partly to the Affordable Care Act, but even more to the impact on Social Security, Medicare and Medicaid of an aging population and health care costs, which, after a respite, will outstrip inflation in coming decades." .............................................................................
The free market is the vehicle that creates and maintains the millions of jobs that 'pay for themselves' and therefore generate lasting societal wealth. The monopolistic public sector at all levels (local, state and national) simply takes a large part of that created wealth from the wealth creators and spends it on such things as government 'road to nowhere' projects and enormously underfunded entitlement programs for our aging American society.
And since this has brought us to the 'road to nowhere' we're now traveling, let's see how bad things are looking for future generations, including the very people the politicians claim to be trying so hard to help today.
But the genuine help that would be effective and is really needed is not the false vote seeking help found in today's political environment which advocates ever more expensive and intrusive government redistribution programs and policies. The politics inspired, economy debilitating and populist backed war on the private sector has to end.
The False Income-Equality Narrative is subtitled 'The focus on divvying up existing wealth instead of creating more for everyone hurts the very people the left says it wants to help:'
"An enduring theme of the Democratic presidential race has been income inequality, coupled with an enduring belief that America’s affluent reached their status at the expense of the poor and the middle class.
Bernie Sanders speaks of little else on the stump. And . . . Hillary Clinton will tell you that the “deck is still stacked in favor of those at the top.” If Joe Biden gets in, expect more of the same. The vice president is said to be contemplating a 2016 bid in large part because struggling middle-income families may have trouble relating to Mrs. Clinton on inequality given her high living since leaving the White House.
This theme, in any case, seems to resonate with voters, which is no huge shock in the sixth year of an economic “recovery.” Envy and resentment fuel class warfare, and lackluster economic growth throughout the Obama presidency has made people less optimistic and more inclined to fault others for their circumstances. A Wall Street Journal/NBC News poll this week reports that four-in-five Americans “were either ‘angry because our political system seems to only be working for the insiders with money and power’ or ‘anxious and uncertain because the economy still feels rocky and unpredictable’—or both.”
Liberals want to address income disparities through wealth redistribution—by taking money from more productive people and giving it to the less productive in the name of “fairness” as the left defines it. They want to raise income taxes, expand the welfare state, lift minimum wages and strengthen the bargaining power of unions. . . .
And all the focus on divvying up existing wealth instead of creating more risks making matters far worse for the people they are trying to help and the country in general. “To the extent that the expanding welfare state allows more people to live without working—and therefore without earning income or developing their own human capital—supporters of the welfare state are contributing to the very income disparities they so much decry,” writes economist Thomas Sowell in his new book, “Wealth, Poverty and Politics.”
Mr. Sowell is the author of more than 30 books over the past four decades, many having to do with what drives different social and economic outcomes among different groups in the U.S. and elsewhere. . . . One common assumption is that proportionate or random outcomes are the natural order of things and that gaps or disparities are evidence of something wrong. In fact, huge disparities are the norm, not the exception, because the demographic, cultural and political factors that influence the development of the human capital that makes people productive also tend to be unequal.
In 2013, only 9% of U.S. women with college degrees who gave birth were unmarried, versus 61% of women who were high-school dropouts and unmarried. Harvard’s Robert Putnam reports that children from professional families will hear 19 million more words than their working-class peers before the first day of kindergarten.
These children don’t all have the same prospects. “Equal opportunity, in the sense of being judged and rewarded by the same standards as others, cannot possibly mean equal life chances for children born and raised in these very different settings,” writes Mr. Sowell. The “fact that life is unfair is not the same as saying that a particular institution, or a particular society, is unfair.”
The argument that social mobility is a thing of the past in the U.S. also is disputable. Longitudinal studies by the IRS and others that measure the progress of individuals over time show that the American dream is alive and well. One such paper, published by the Pew Charitable Trusts in 2012, measured “whether a person has more or less income, earnings or wealth than his or her parents did at the same age” and concluded that “the vast majority” of Americans had higher incomes, while 50% had greater wealth.
In other studies, Pew has found generational stagnation but the authors have noted that it didn’t apply to immigrants. If low-income immigrants are able to rise even when the native-born don’t, writes Mr. Sowell, “that strongly suggests that American society continues to offer opportunities to move up economically, but that not all groups make the same use of these opportunities.”"
Summing Up
No, life isn't always fair.
And the plain fact is that things aren't going well for too many Americans.
That said, there is still ample opportunity for all Americans to achieve great things on their own, especially if the government would stop hindering progress and simply lead, follow or get out of the way.
And if We the People would encourage more self help and greater individual choice with respect to educational and entrepreneurial private sector driven opportunities, things would become much more equal for those who dare to work hard and improve their lot in life.
