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Back to the basement, graduates

by Ed Raymond | .(JavaScript must be enabled to view this email address) | Gadfly | May 3rd, 2017

The absolute destruction of the American dream

It has become commonplace. The majority of college graduates in the United States now are forced to move back home to their parent’s basements, sometimes for more than a decade, because the 2016 graduating class is the most indebted in history.

They might make more than $15 an hour in a job, but they cannot afford homes, cars, or other accoutrements of a middle class life.

There is no doubt that economic growth and the national competitiveness of a nation depend on education staying ahead of technology. The U.S. is failing dramatically in post-high school education because for the last 13 years we have been third from the bottom in the 34 nations that make up the Organization for Economic Cooperation and Development (OECD) in gains made in college and university education.

While several OECD countries cover the total cost of higher education, the American student loan debt has now reached $1.5 trillion, with defaults on the debt at more than 40% of debtors.

The debt is the largest of all other consumer categories except for housing mortgage debt. Student debt is much larger than credit card debt. Over 3,000 Americans default on student loans each day.

This massive student loan debt is currently damaging the lives of 42 million people, and they are trapped in debt until death because bankruptcy laws cannot be applied to student loans. Student debt collectors have the legal authority to garnish wages, seize Social Security payments, and sue to take assets from estates.

In 2008, states covered about $9,000 per student per year of higher education costs. In 2017 the states are covering an average of $7,000 per student per year, the lowest support in 30 years. Between 1980 and 2010 higher ed support dropped from an 8% share of state budgets to a 4% share. That meant a gigantic shift from state to family support.

Federal government support of higher education has remained about the same through research grants and various forms of student aid, but the real estate bubble and the 2007 recession developed into one of the greatest transfers of wealth from the middle class to the One Percent in our history.

Legislators bought by anti-tax billionaires such as the Koch brothers and the likes of Tax guru Grover Norquist slammed the doors shut on additional support for higher ed, and often have cut budgets halfway through the bone.

We have 4,000 colleges and universities -- and a few are very rich

We should all know by now that the One Percent take care of their own without much thought for the Ninety-Nine Percent.

We have 94 colleges with endowments of over $1 billion--but the top ten really stand out. Harvard is the leader at $37 billion, Yale is next at about $26 billion, Princeton has a $23 billion endowment, and Stanford has just over $22 billion under the mattress.

The rich get many tax breaks by their “generous” charitable donations to their elite colleges. The more they give the more they can deduct on their IRS 1040s.

Out of the 4,000, most colleges are in serious financial difficulty today. These schools have dramatically increased tuition fees, often forcing low and middle-income families and students to take on heavy debt. Since 1996 tuition and fees at public universities have gone up 114% -- while the median household income is 2% less than it was in 1999.

A survey of 33,000 students enrolled at 70 community colleges in 24 states reveals that 64% of the students don’t have enough to eat and 14% admit they are homeless. A third of the homeless rely on student loans. One-third of the food or housing “insecures” are working and receive some financial aid.

Another community college survey reports that 60% of students cannot come up with $500 in cash to cover an unexpected emergency. The Minneapolis Community and Technical College offers emergency cash, food, and child care grants. Its food pantry had 2,386 visits in the last two years.

But actually Americans over age 60 are the fastest-growing student-loan debtors, with most of them falling into debt after they co-signed the student loans of their children or after they got direct bank loans for their children. Borrowers over age 65 default on 40% of their loans. They then may face loss of a portion of their Social Security monthly checks, putting them way below the poverty line. Over 20,000 Americans over the age of 50 have had their SS checks cut below the poverty line, with 50,000 others suffering cuts in SS payments. These elders over 60 average $23,500 in student debt.

After the last recession 2.1 million people have joined the crowd of student loan debtors. At the present time we have a total of 27 million people unable to pay back their student loans who are in default or are in arrears in some way.

The average student loan debt is at $34,000 but some medical students, as an example, have borrowed in the $250,000 range.

The American dream has become unattainable for many student loan debtors

The American Dream historically has normally meant home ownership, adequate financial and job security, the ability to lead a middle class life in society, and the possibility that their children will have a better, more prosperous life.

But families who had a child in 2015 will spend an average $233,610 (in 2015 dollars) raising him or her to age 17. Parents with lower incomes will spend $174,690 for the same period, families with high incomes will spend $372,210.

Graduates with large student-loan debts are very poor marriage prospects. Almost half of the 24-34 age bracket are not married because of financial considerations—particularly the accumulation of student debt. Cohabitation is thriving among this age group, but relationships often break down faster than in married couples.

Highly ranked private colleges and universities have tuition in the $50,000 to $70,000 range with most public entities in the $17,000 to $25,000 range. States have failed to keep up with the costs of public higher education. Even in the relatively good years of 1998 and 2008, private colleges increased tuition by 33% while four-year public universities went up an astounding 54%.

Then came the Great Bush Recession and years of wage stagnation. The costs of higher ed are rising faster than the personal resources of most American families. At the same time families were suffering huge losses during the recession, 36 presidents of private universities were making more than $1 million.

Because poor Hispanics, African-Americans, and whites cannot afford higher education, many sociologists believe we are creating a caste system similar to India.

Are taxes a bond or a burden?

Long ago, Supreme Court Justice Oliver Wendell Homes told all of us why we pay taxes of many kinds: “Taxes are what we pay for a civilized society.”

Do Americans hate to pay taxes? Robert Samuelson of the Washington Post tried to answer this question in an article “Taxes—The Great Divider?” He wrote that the Gallup Poll has been asking Americans for decades whether the federal income taxes are too high. Between 50 to 60% always say taxes are too high.

The common response is that most Americans hate to pay taxes. But he adds an interesting observation: “Except that it’s not true or, at any rate, is too simple and incomplete. The tax system is not just a divider; it’s a uniter, too.”

He cites a new book by political scientist Vanessa Williamson, “Read My Lips: Why Americans Are Proud To Pay Taxes,” in which she states, after a thorough study of several other surveys and numerous interviews with average Americans that: “Around four in five Americans…see taxpaying as a moral responsibility and tax evasion as morally wrong.”

(It’s quite evident she did not run across many American millionaires and billionaires while taking her survey. They are laughing at her statement while they are cavorting wildly in the hundreds of luscious tax havens around the world).

She writes that the United States has one of the world’s highest rates of tax compliance when compared with all European countries. Maybe it’s because we have one of the most complex tax systems in the world and rank 33rd out of the 35 most industrialized countries in the world in the rate of taxation.

Although we live in a more complex society than most, we are actually paying less tax than we did in the 1940s—and have the highest income inequality in almost 100 years.

No wonder our roads, bridges, dams, airports, and other infrastructure are getting to be third-world instead world-class.

No wonder we have about 90 colleges with more than a billion dollars in endowments while we have 3,910 in financial difficulty.

No wonder we have slipped from first to sixteenth in the industrialized world in the rate of college graduation in just the last 40 years.

In one of Vanessa Williamson’s interviews, she quotes a 61-year-old Republican postal worker who told her: “I feel like I’m doing my part in supplying the needs and to help pay for things in this country that are needed. So in a small way, I do feel like it’s my civic duty and that I’m responsible for paying taxes.”

How about 32,000 corporations working out of one tiny building?

One might think that the super-rich would make an effort to maintain the society that allowed them to get super-rich. Don’t think that at all. It’s quite evident they enjoy the feeling of the green so much they stash trillions of dollars overseas in island tax havens to evade taxes at home.

I still remember that little building in the Bahamas that is the “home base” for 32,000 corporations that operate around the globe. It’s absolutely amazing they get anything done in a few square inches.

And then we have the super-rich who have negotiated almost a lifetime lease on the Congress of the United States through these foundations supported by the super-rich: the Tax Foundation, the Charles Koch Foundation, the Charles Koch Institute, the John Templeton Foundation, Freedom Works (funded by the Koch brothers); and the Earhart Foundation, the Atlas Network, the Chase Foundation of Virginia, and numerous others formed to protect only wallets. They just don’t seem to give a damn about anything except money. Shouldn’t that be classified as an addiction?

Greenwich, Connecticut is one of the most beautiful small cities nestled next to New York City and is one of the wealthiest cities in the country. Hedge fund billionaires live in beautiful manicured estates in the city of about 60,000. It’s a short trip to Wall Street where they make all of their money, taking advantage of the low tax rate purchased from Congress.

But Connecticut has a budget deficit of $1.8 billion, which will force the cutting of 2,500 state jobs and require $1.5 billion in concessions from other workers.

The regular people of Greenwich are pissed because they have been screwed for years. They are leaving signs at the doors of the super-rich saying they owe billions in taxes to the state government to keep the state functioning. I wish them luck.

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