In Which I Attempt to Match the Times’ Non-Reporting

Annie Lowrey, “Student Debt Slows Growth as Young Spend Less,” New York Times.

Do yourself a favor and don’t bother reading the piece. No that’s not reverse psychology; it really just rehashes stuff you already know, especially once you get to the bit of propaganda in the fourth-to-the-last paragraph:

On the other side of the equation, many college graduates now in their 20s and early 30s should eventually be able to make up for lost ground. Students who take on debt to pay for higher education commit themselves to paying off huge sums, but they usually lift their lifetime earnings by substantial amounts. And they are in a better position to insulate themselves against economic bad times, given the profound rewards the job market provides to the college-educated.

Four paragraphs earlier, the article states that the average (I think, the article doesn’t say) debt-to-income ratio for households under 35 has grown from 1:1 to 1.5:1 between 2001 and 2010. How lifetime earnings can rise while the young—which, I interject, are people whom society treated as full adults a few decades ago—are spending more on debt service is unexplained.

Okay, I can’t match the Times‘ non-reporting; here’s some value-added:

(1) More Americans have college educations than the past, so logically it’s harder to say that it provides an earnings premium. It could just be credential inflation.

(Source CPS)

(2) Young(ish) college-educated Americans make less money than they used to.

(Source CPS)

I included professional degrees, but the sample’s pretty small. It’s accurate but imprecise. Do not take it for the value of a juris doctor; those probably pull down professional degrees’ values.

To be fair, though, I’m going to give a little credit to the Times because people’s incomes would be higher if the economy were at full employment, and it’s not. In other words, it’s unlikely structural degree oversupply is the primary force depressing college graduates’ earnings. Thus, the 1.5:1 debt-to-income ratio should be lower than it is. But just when exactly will college graduates in their 20s and early 30s “make up for lost ground” after their prime earning years? The Times doesn’t say. You’re supposed to have faith that *it* can’t happen here, *it* being rule by the future-present aristocracy in a democracy-lite.

Liberal Law Professors Shielded by Hostility Towards Lawyers

I read Brian Tamanaha’s “The Failure of Crits and Leftist Law Professors to Defend Progressive Causes,” which castigates politically liberal law professors for participating in institutions that encourage both the class schism in the legal profession and law students to borrow unpayable debts. How could they not know what was going on? Tamanaha writes:

Seduced by the allure of prestige of material comforts, Crits and progressive law professors have become a part of the system they set out to reform. Watching market-thinking become pervasive and the gap between rich and poor in America steadily increase, knowing that on broader economic issues we had lost, we succumbed to the temptation to grab what we could for ourselves and our families. (35)

Ouch. It occurred to me while reading this passage that of all the topics I think or write about, legal education is the one where I think we need more “market-thinking,” so I end up sounding like a perfidious neoliberal. I’m not. Instead I think that what passes for “market-thinking” has largely shielded liberal law professors: Lawyers are regularly perceived as playing outside market rules. They chronically overcharge their clients—a belief that’s readily reinforced by actual instances of file-churning, etc.—and they don’t do enough for the poor given their awesome privilege. For the more conspiratorially minded, they file frivolous lawsuits against one another to drive up business, or they use their dominance in legislatures to enact laws that create yet more work for themselves. Even corporate America is powerless to negotiate lower rates against the almighty leveraged, billable hour.

The public’s uncharitable perceptions aren’t helped by economists who misunderstand the effects of professional licensing. Anyone who reads Dean Baker’s Beat the Press will regularly find the author complaining that free trade advocates are willing to subject manufacturing workers to competition with cheap foreign labor, but they hypocritically use professional licensing regulations as trade protectionism. Never mind that professional services aren’t as fungible as precision-made goods; that lawyers’ contributions to legal matters are usually more valuable than assembly line workers’ to their products; or that most states, including California, New York, D.C., Texas, Illinois, and Florida, allow foreign-trained lawyers to take their bar exams (subject to various other requirements, admittedly) with no evidence of lower lawyer incomes there as a result. For some inexplicable reason, foreign lawyers will be able to topple biglaw in a way that tens of thousands of unranked law school grads cannot.

An even better example is Clifford Winston’s, Robert W. Crandall’s, and Vikram Maheshri’s 2011 book, First Thing We Do, Let’s Deregulate All the Lawyers. The authors calculated that lawyers earned 50 percent more than people who had the same amount of education. They also found that over time lawyers’ incomes increased even though their GPA and LSAT scores did not, and that the number of lawyer jobs created each year is significantly less than the number of people who apply to law schools. Therefore lawyers must be creating a huge deadweight loss to society.

No one pointed out to them that (a) demand for legal services is income elastic, which means rich people and corporations spend more money on brand-name firms as they become wealthier (and they have become wealthier); (b) the wages of lawyers are determined by their marginal product, not their education; and it might just be the case that lawyers are more productive than people who drop out of English PhD programs; (c) incomes for high-test-scoring people have increased generally over the last few decades as credentials from elite universities have led to higher-paying jobs; and (d) demand for legal education is not the same thing as demand for legal services.

One need only read First Thing We Do‘s introduction (PDF) to understand the methodological problems with the authors’ argument:

As regulatory economists, we find it natural to reason that occupational licensing, like other regulations that restrict entry, benefits existing suppliers by limiting competition. Thus its primary effect is to generate earnings premiums to practitioners in a particular profession such as law—earnings premiums that could be inefficient.

In short, it’s an argument from incredulity nestled in a begging-the-question fallacy: We can’t believe the legal profession would allow more people to purchase legal education than there are jobs available for them because that would mean lawyers are bad at creating licensing restrictions, and they would be callously dumping over-indebted, underemployed law graduates onto the labor market and tolerating a massive wealth transfer to law professors that doesn’t directly benefit lawyers. Therefore, the licensing requirements must be restricting supply and raising incomes.

However, the fact is, applicants’ willingness to risk rejection, which indicates they would pay full freight if accepted, increases with tuition. Behold the number of rejected full-time applicants at private law schools (ex. Puerto Rico’s and Brigham Young) and public law schools whose tuition is higher than the average private law school’s.

Those of you who wanted an upward-sloping demand curve, here is your upward-sloping demand curve.

Even in my private life, I’ve encountered two economists (whom I respect) who thought “licensing = labor cartel” applied to lawyers ipso facto. In fairness, it’s not self-evidently untrue, but it shows the heuristics that go into analyzing who’s cheating society and who isn’t.

Okay, I didn’t write this post to rehash First Thing We Do—not that I didn’t savor the empty calories and hope you did too—rather, I brought it up to show that “positions, not interests” explain conventional views about lawyers and law schools:

• Lawyers = cheaters, thieves
• Law students = greedy turds who refuse to serve the poor at lower pay and are whining because they’re bitter they didn’t get to be cheating thieves
• Law professors = tragic figures because despite their liberal agendas, their students still refuse to serve the poor and aspire to be cheating thieves
• Student debt for education = good because education = “upward mobility” = good

Once this framework for the law school debate sets in, it’s no wonder that Tamanaha’s peers call him an outrageous elitist conservative. It takes the ideological equivalent of a spontaneous reversal in the earth’s magnetic field to recognize that law schools have more in common with Bain Capital than they do with Legal Services NYC, which has been working without a contract since July 2012 and might go on strike soon. The dominant liberal story over the last thirty years is that rich conservatives and neoliberals (including cheating thieving lawyers) captured the government to crush labor and redirect incomes from the poor to themselves. Thus, liberal law professors are the types of people we’d least expect to support too-big-to-failist institutions. The fact that conservatives tend to hold anti-higher education and anti-student lending views further warps the discussion along ideological lines.

That law schools were caught fighting on the wrong side of the class war at the same time the banksters wrecked the economy is only a coincidence, but it doesn’t appear that way to the students, who are increasingly seeing a generational war between entrenched, entitled boomers and themselves. Law schools’ legacy will be a severely cynical generation—not something supposedly labor-loving liberal academics see themselves as promoting.

NYT Prefers Discussing Postindustrial Apocalypse to Rule by the Future-Present Aristocracy

Worry not millenials, your underemployment is a fantasy! The “Real World” is so much worse:

Annie Lowrey, “Do Millenials Stand a Chance in the Real World?,” New York Times.

This line stands out:

Thirty or 40 years from now, young millennials might face shakier retirements than their parents. For the first time in modern memory, a whole generation might not prove wealthier than the one that preceded it.

This is a novel definition of “wealth.” If we are talking about land, there’s global warming (why people use “climate change” escapes me), so there may be less of that, but it’s not like the U.S. is so densely populated that we live cheek by jowl coast to coast, document-review style. If we’re talking about capital, however, then it would be pretty crazy to believe that there will be fewer buildings in 40 years than there are today. Maybe when the last boomer dies, we’ll build a pyramid and throw all their stuff in it with them so they can enjoy it in the afterlife.

Oh wait, that’d create jobs. Can’t have that.

Absent an apocalypse (unless global warming really is that bad), the whole generation will prove wealthier than the one that preceded it. It will just be embarrassingly unequally distributed. Many millenials will basically spend their adulthoods waiting for their boomer ancestors to die so they can liquidate their assets. Whether they can live off them is a whole other discussion. The remaining children of the wealthy will be shoed-in to semi-hereditary positions. Not that this doesn’t go on already, it’s just a lot easier to hide, and the public is still very willing to accept it when the system is designed to give the impression that anyone can get into these positions.

For example, education:

Millennials are the best-educated generation ever. Their challenge may just be to preserve that advantage for their own children.

Pop quiz, hotshot: After applying the appropriate discount rates, which document has a higher net present value: an Ivy League university degree dated May 2013, or a birth certificate with Sallie Mae exec Albert Lord’s name in the “Father” field?

Assets Are Not Income

Jordan Weissmann, “Why Twenty-Somethings Aren’t Doomed to Be Poor (but Thirty-Somethings Might Be),” The Atlantic.

Referring to the recent Times article about the Urban Institute’s study on young (under 40) people, Weissmann opines:

But the Times misses something key, I think, which is that not everybody under 40 is in the same boat. As this graph from Urban Institute’s study shows, it’s mostly Americans in their thirties (in red) who have seen their net worth collapse compared to 30 years ago. The quarter-life set are actually doing a bit better.

Weissmann further argues that the wealth lost by 29-37-year-olds is due to the housing bust, which didn’t affect their juniors. Twenty-somethings may have some student loan debt, but they’re better-educated than their parents were, so they can expect higher incomes, he says.

Would that Weissmann were right, but young people (however broadly you feel like defining them) are doomed because they don’t have much income. This is how the financial life cycle works. Young people are asset poor but cash rich, the cash being their unrealized net future incomes as good drones in the capitalist order. As they work, they gain skills and wage raises, pay down their debts, save for retirement, and dissave as they age. As I wrote last week, if you lock their wages and load them down with nondischargeable debts they don’t get to be good drones and end up paying an income surtax to the government.

And how are the drones’ incomes? The Census Bureau (P-28–P-31) tracks mean earnings by age bracket and education via the Household Survey.

Observe that the income growth stops for most age brackets in 2000.

The under-25 crowd is especially in a bind because its income increases even to 2000 were trivial in absolute terms. Thus they drop out of the workforce (and probably go to college):

Top: Civilian Noninstitutional Population (16-24); Middle: Civilian Labor Force Level (16-24); Bottom: Civilian Employment Level (16-24)

How many “young people” can afford to wait until their 50s for their first real job so they can become land speculators?

None of this is to say I’m in favor of wholesale generational warfare. Many older Americans lost everything in the last two bubbles, they pay high health care costs, and even their student debt levels are exploding upward. Rather, it’s a handful of older Americans who are hoarding the country’s wealth. People like Mark Zuckerberg and Lena Dunham are extreme exceptions.

I’m not going to address Weissmann’s value-of-the-college-degree point.

If You Wonder Why I Keep Saying Henry George Was Right…

…Then wonder no longer.

Annie Lowrey, “Younger Generations Lag Parents in Wealth-Building,” The New York Times.

A new study from the Urban Institute finds that [people] up to roughly age 40 have accrued less wealth than their parents did at the same age, even as the average wealth of Americans has doubled over the last quarter-century.

Because wealth compounds over long periods of time — a dollar saved 10 years ago is worth much more than a dollar saved today — young adults probably face less secure futures for decades down the road, and even shakier retirements.

“In this country, the expectation is that every generation does better than the previous generation,” said Signe-Mary McKernan, an author of the study. “This is no longer the case. This generation might have less.” The authors said the situation facing young Americans might be unprecedented. [Emphasis LSTB]

More accurately, most people in this generation will have less. Some people will inherit vast fortunes because some wealth is zero-sum, like land. The Urban Institute, much less the Times, won’t say that existing wealth has been redistributed to a handful of war generationers and boomers, even though they know that average wealth has doubled over the last 25 years. Rather, they believe that we’re failing to create the economic conditions that enable young people (now redefined as “under 40″) to thrive. To them, people work to accumulate wealth and hooray! We have more than people our age did thirty years ago. It’s magic.

And since magic is a fiction, so too is “upward mobility” a red herring concept. You can’t be upwardly mobile in a world of fixed opportunities and growing populations. This is why I think “young” Americans in particular should tune in to Henry George because they can expect to pay the following fees for the rest of their lives:

• Federal income tax (the all-time number one)
• FICA (probably worse than federal income tax, but no one cares)
• Rent
• State income tax (usually)
• State and local sales taxes (almost assuredly)
• Local income tax (all too often)
• User fees (Go-Go Gadget transit hikes)
• Student loan graft (the crowd pleaser)
• All kinds of other windfalls, e.g. hospital chargemasters, patent rents, and interest on public debt for wars to spread democracy by shooting people

Do the monopolists pay these? Yes, but they get the rents and windfalls, which more than offsets the other costs.

Young Americans have the following options:

(1)  Wait for their aging war generation or boomer parents to die and liquidate their assets (if available)

(2)  Make way for the new aristocracy (if the previous option is unavailable or insufficient)

(3)  Sail away

(4)  Demand a tax shift

Me, I’m for the tax shift. The people interviewed by the Times should be too.

Washington Bar Not Facing Retirement Crisis by Boomers

Via Mark Hansen, “Washington State Legal Community Braces for Huge Turnover in Lawyer Population,” ABA Journal.

Adam Worcester, “Legal profession braces for turnover as half the state’s lawyers say they want out,” Puget Sound Business Journal.

According to the original article:

“A recent Washington State Bar Association survey discovered that 7,200 of its members – almost a quarter of the state’s practicing attorneys – are considering retirement within five years … Seventy-one percent of the WSBA membership is age 50 or older, with 21 percent being 61 or above.”

According to the numbers, Washington has 23,741 active and resident lawyers in 2012, and in 2010 14,231 were actually working as lawyers (including self-employed lawyers).  If 7,200 members constitute nearly a quarter of the state’s practicing lawyers, that means there should be around 28,000 attorneys on the rolls, which clearly isn’t the case. Someone isn’t right here.

But it doesn’t matter because when an industry’s practitioners are so old and all about to retire, one must be dying to know how such a bizarre set of circumstances could’ve arisen. I’d think industries would reflect the population, but the two stated answers, blame Bill Gates and blame selfish Gen-Xers don’t persuade me.

“First, dot-com companies lured away many potential lawyers and other professional workers. Second, an emphasis on work-life balance soured Generation Xers on following traditional career paths.”

Using ABA and Census data, it appears that Washington’s lawyer population grew faster than its normal population, and it doesn’t appear significantly different than the rest of the country. Note that anyone over 50 today would’ve been at least 25 in 1987, so all these Boomer lawyers have been working in a growing legal market—or, rather, growing numbers of active and resident lawyers.

If the dot-coms were luring necessary people away, the solution would normally be to raise salaries. If work-life balance is the issue, then give workers more work life balance. The fact that they didn’t indicates that Washington’s legal needs were being met.

I’d be remiss if I didn’t point out that the original article said as much.

To be sure, not all industry observers see a crisis brewing. Tammy Gibson, the Seattle division director for staffing firm Robert Half Legal, said the pool of attorney candidates remains deep.

“I’ve not noticed any less count of potential recruits,” Gibson said. “What I am seeing is that there’s becoming more competition within firms.”

In sharp contrast to last year, larger firms are asking specifically for candidates they can train to become senior partners. Smaller firms, meanwhile, are expanding searches nationwide.

The result for job seekers has been multiple offers, quick placements, and increased incentives such as signing bonuses and reimbursement for moving expenses. Firms trying to retain lawyers, on the other hand, are raising salaries and offering other compensation, such as flextime and telecommuting.

See?

If the profession is grayer than in the past, and if the wages and benefits are stagnant until people start retiring, then it sounds like the problem’s with demand for profession’s services and not everyone else. It’s not as though the clients of retired lawyers will be unable to find new counselors to handle their matters.

Class of 2015 Law Grads Will Have Six-Figure Earnings after All

Certainly that’s what the IRS will tell them in 2035 when ED cancels their loan balances on IBR. Of course it won’t be real income; it’s non-negative income that they’ll never see but will have to pay income tax on nonetheless. Don’t worry though, after they wipe out their savings and take second mortgages on their houses (they will own houses, right?) they will learn the true value of higher education, to say nothing of the Social Security system they will depend on into their dotage.

This joke popped into my mind when the powers that be at the Federal Reserve opened their ecclesiastic doors and told us that six-figure student loan debt isn’t a problem and certainly not a national crisis. Not that these same folks have any credibility after ignoring an $8 trillion land bubble and their mandate to ensure full employment over price stability. That doesn’t mean they’re wrong, but it does mean we get to laugh and hurl fruit at their expensive robes.

And laugh we will, for instance, when Zero Hedge plants a FRED graph of government-held nonrevolving debt growth, and proclaims, “Please mark your calendars accordingly as yesterday [August 7, 2012] the Chairman just guaranteed that student loans will be cause for the next ‘financial stability issue.’” (Emphasis original). Funny, yes; accurate, no.

Rather, it’s ED cutting its own loans and relieving banks of their FFELP loans, which transforms them into Direct Loans. Here’s the amount of government-held nonrevolving debt to GDP (bottom), all other nonrevolving debt to GDP (middle), and all nonrevolving debt to GDP (top).

All other types of nonrevolving debt are dropping as we’d expect when everyone’s trying to pay down their debts simultaneously, but mostly it’s government debt growing and taking up a larger share of total nonrevolving debt.

So why is the government issuing and buying all these loans?

(1)  Deficit reduction shell-gaming. When the government makes interest on your student loans, it “doesn’t have to raise taxes,” meaning the federal student loan program’s purpose has quietly shifted from “making college affordable” to secret, misleadingly voluntary taxes that allow politicians to avoid discussing who should actually pay for high per capita health care costs, to say nothing of all those aircraft carriers and air-conditioned tents in Afghanistan. Issuing a guaranteed loan is also a risk-free way for banks to make money—which they do—and the federal government wants in on that. Don’t worry, though. At some point in the next decade the government will tell you that the only way to bring the deficit under control is by making you pay VAT just to buy shoes.

(2)  Bank bailout. If the government guarantees a loan, cancels the guarantee, and then allows the debtor to discharge the loan in bankruptcy, the bank gets hosed. The benefit of buying up the loans is it takes that risk off the banks’ books. Remember, guaranteed loans are pre-TARPed, and direct loans are Auto-TARPing in that the government bails itself out by raising taxes to cover shortfalls to its creditors, something banks can’t do.

(3)  Giving borrowers better terms? Maybe, but FFELP loans have the same options as Direct Loans, e.g. they’re just as eligible for IBR.

And what of IBR, which opened this discussion? EduBubble intelligently points out that IBR socializes the debt. Not only do debtors pay taxes on their canceled debts but the revenue shortfalls must be compensated by everyone’s taxes, so debtors pay twice, once for their canceled student debts and again for others’ student debts. The latter isn’t going to be a big chunk of anyone’s tax bills, but it’ll be used as a pretext to enact poverty 1.0 taxes like VAT.

But let me soothe you: VAT is a political non-starter. Sure, Japan just doubled its VAT to 10 percent by 2015 to “reduce its deficit” (it won’t), but that country is run by masochists. In the U.S. of A., the nation’s elderly will descend on Washington like unpaid mercenaries if it tries to do something so stupid as make them pay sales taxes on their Social Security benefits. No, I suspect that by 2025 or so political gridlock caused by the taxes-on-rich-people-are-the-second-evilest-thing-in-the-history-of-evil caucus will cause our friends at the Fed to finally monetize the debt by printing money, which the taxes-on-rich-people-are-the-second-evilest-thing-in-the-history-of-evil caucus considers the evilest thing in the history of evil. Heckuva job evil-haters.

This comes as good news for our class of 2015 law grads, for the inflation will erode their debts, and they’re going to need it because almost paradoxically one of the biggest engines of inflation (the reduction of purchasing power of goods and services for the same nominal currency) is wage inflation (the reduction of purchasing power of labor for the same nominal currency). Given that we now live in the era of perpetual McJobs, here’s the hourly wage for three possible categories for underemployed law grads: retail, manufacturing, and construction over the years (2012 $).

Average Hourly Earnings of Production and Nonsupervisory Employees: Retail Trade

Average Hourly Earnings of Production and Nonsupervisory Employees: Manufacturing

Average Hourly Earnings of Production and Nonsupervisory Employees: Manufacturing

So what’s $20.00/hour worth? In full-time annual salaries that’s $41,600. Naturally, this excludes income taxes, payroll taxes, sales taxes, property taxes, health care taxes, rents to landowners, rents to intellectual property holders, costs for subsidizing imports, student loan payments, pollution costs, commuting costs, and global warming costs.

Where does this leave our folks who don’t see student debt as a crisis? Aside from Chairman Bernanke, we have two contributions: Eric Kelderman, “Student Debt Is Growing but Is Not a National Crisis, Speakers Say,” Chronicle of Higher Education, and Tyler Kingkade, “Six-Figure Student Loan Debt Reviewed in Study by Mark Kantrowitz, Showing Rapid Growth in Past Decade,” Huffington Post.

Starting with Kantrowitz:

“[News articles about students graduating with six-figure debt levels] have shock value and sensationalize the student debt problem, but the borrowers depicted in these stories are not representative of typical college graduates,” Kantrowitz writes, going on to add “Nevertheless, much can be learned by examining extreme examples. Extrema can help identify the strengths and weaknesses of the student loan system.”

In an amusing note he tucks in his paper, Kantrowitz acknowledges that he’s only talking about people who graduate with $100,000+, not people who have that amount. He does, however, have the decency to advocate for allowing the discharge of student loans, but that’s as far as he’s willing to go because arguing that the Direct Loan Program is probably doing more harm than good means arguing himself out of a job. Can’t have that. It’s much easier to wag fingers at families and say it’s their fault the government has given up on creating living wage jobs for young people and offers them a higher education system that essentially requires students to “buy” their jobs with time and debt dollars. A hundred years ago they called this “graft”; today, they call it “getting ahead,” or “upward mobility.”

The senior economist for the Federal Reserve Bank of Kansas City, whom the Chronicle reports on, Kelly D. Edmiston, is equally unhelpful.

“The typical student borrower is not in crisis,” … [T]he median student debt—the middle range for all borrowers—is less than $14,000 … The average student debt is significantly higher, at more than $24,000, due to the 25 percent of borrowers who owe at least $30,000 for their college education. Still, another quarter of student borrowers owe less than $6,000, Mr. Edmiston found, and less than 3 percent have debt exceeding $100,000.

Elsewhere I think Edmiston misses the meaning of the default rates, as more careful Fed economists analyzed earlier this year, but the point is how the dialogue has now played out since it began a couple years ago.

Debtors and Friends: “Unpayable debt and underemployment suck hosewater.”

Establishment: “…”

Debtors and Friends: “Really, unpayable debt and underemployment suck hosewater.”

Establishment: “…”

Debtors and Friends: “Do we have to set up tents in parks? Unpayable debt and underemployment suck hosewater.”

Media: “These people have lots of debts, some graduate with more than six-figures into glutted labor markets.”

Establishment: “Hm. Let’s see. Ah, according to my research only a few of you have an arbitrarily high amount of debt (say $100,000+) and since that won’t topple the economy—not that we have any credibility predicting that—we can ignore you. You’re all ants in a glass case as far as we’re concerned.”

Liberal Establishment: “Most of you will pay those loans back anyway, and we don’t care if that reduces your standard of living compared to earlier generations. Some jobs and a little wage inflation will solve all your problems. The real problem is people with large amounts of underwater mortgages, even though they can simply mail their house keys to the mortgagees and discharge the deficiencies in Chapter 7. You need to make better arguments.”

Three responses:

(1)  As Michael Hudson says, Debts that cannot be repaid, will not be repaid. Our 2015 grads will not repay their debts, IBR or no. Nor does it matter if it’s 30 million debtors or just one million. If the debts can’t be repaid, that’s a problem. I may not write about (or even think a lot about) prison abuse or drone strikes, but that doesn’t mean that I lack the compassion to form political opinions about the victims when I do read about them. It’s one thing to say that we as individuals don’t have the bandwidth to care about every single problem in the world equally; it’s another to say that because one problem is small compared to others, we don’t have to care about those suffering from it.

(2)  No, student debt isn’t exactly like the housing bubble, but that doesn’t settle the issue. If the Great Depression was like a spinal fracture, and the housing bust a femur fracture, then student debt is like anemia. Defaults, negative amortization, accounting shortfalls, IBR cancellations, overpriced educations, credential inflation, and opportunity costs of schooling will sap the economy’s strength if nothing is done. This is the benefit to the government of Auto-TARPing the loans: the losses are hidden.

(3)  Remember whom you are dealing with. Student debtors are an easy constituency to mobilize, and they are no less sympathetic to others who are suffering, e.g. underwater homeowners. Alienating them with condescension leaves political capital on the table for others to use. Like extremists.

The takeaway for our 2015 law grads is that the Establishment has spoken: Until the Monetary Miracle of ’25 and IBR cancellation of ’35, you will be an “extrema” for arrogant social scientists’ curiosity. Expect low wages and even less sympathy from the public. You are on your own.

Esquire Magazine Knows Its Target Demographic

Stephen Marche, “The War Against Youth,” Esquire. H/T LSFFP

Marche lays into the privileges Boomers have received over the years.

I try not to indulge in intergenerational warfare, but if I do, I try to be honest about the score. Marche overreaches in points like this.

“Only 58 percent of Boomers have more than $25,000 put aside for retirement, so the rest will either starve or the government will have to pay for them.”

There are three things to say about Boomers.

(1)  They lost all their equity in the housing bubble. They meant to Ponzi their land off to young people–which is a problem in itself–but that won’t happen because young people have no money and little desire to buy underwater houses in a short-sale.

(2)  The Boomers paid for their Social Security. It came out of their paychecks. They deserve it back. For example, when Marche writes:

“The biggest boondoggle of all is Social Security. The management of entitlement programs, already weighted heavily in favor of the older population, has a very specific terminal point that coincides neatly with the Boomers’ deaths. The 2011 report by the Social Security trustees estimates that, under its current administration, the fund will run out in 2036, so there’s just enough to get the oldest Boomers to age ninety.”

We should call bullshit. (a) Social Security is a pay-as-you-go system. (b) The trust fund was set up to ensure that there was enough money in it for Boomers to retire on; it was never meant to last forever and most of the scheduled benefits will continue to be delivered after 2036 because there will still be younger workers paying into the system. (c) We can increase the payroll tax brackets (or add new top ones for the super earners) to recover the shortfall. So no, Social Security isn’t a boondoggle.

 (3)  If the median Boomer has little in assets (slightly greater than $25,000), then the above graph is misleading. Marche concurs in part:

“This is no conspiracy; no nefarious backroom deal by political and corporate overlords. The impasse of the moment is, tragically, the result of the best aspects of the Boomers’ spirit. The native optimism that emerged out of the explosively creative postwar world led them to believe that growth would go on forever; that peace and prosperity were the natural state of things.”

The reality of the situation isn’t that the Boomers were overoptimistic, nor are we doomed to decline. This situation occurred because a minority of Boomers are parasites and did cut backroom deals with political and corporate overlords. They hosed other Boomers during the Dot-com and housing bubbles, and now they’re feasting on the young. This is the ideology of America: Make money without having to build anything that people need.

Here are six ways to get back on track for everyone:

(1)  Close the trade deficit, even if that means adopting bold ideas such as Keynes’ recommendation of an international currency like the “Bancor.”

(2)  Adopt a universal healthcare system like every other civilized country, i.e. one that doesn’t pay for every single frivolous medical test and procedure but doesn’t tell poor people to shut up and die.

(3)  Tax rents, not wages and interest. Shift taxes onto land values as Henry George argued. Force landowners to build on their property. Reurbanize America. Rent out the EM spectrum, geosynchronous orbits, and taxi medallions. Tax pollution and congestion. Enact severance taxes on those who harvest our natural resources. Return our shared property in the form of a citizen’s dividend like the commie-run Alaska Permanent Fund. Stop extending copyrights because Disney Corp. can’t come up with anything better than Mickey Mouse. In fact, recognize that we no longer live in the Holy Roman Empire. Copyright is obsolete. Embrace the future with new ways of supporting the arts and the public domain. Publicly fund drug research instead of giving away patent monopolies, and let depressed people smoke pot instead of paying out the nose for SSRIs. Use Linux instead of Windows or Snow Leopard.

(4)  Reduce people’s housing and student debt burdens.

(5)  Decisively confront global warming.

(6) Stop building aircraft carriers to fight the Soviet menace. Bring the troops home.

See? Society saved. 下課.

On a slightly brighter note, here’s Japanese mega-group L’Arc~En~Ciel at Madison Square last Sunday. No, they didn’t play for a week straight to sold-out crowds like Yes did in 1978, but they sure were glammed out. My seats were in the third tier (there’s that phrase again…) perpendicular to the stage so I got to watch an audience watch a show. Truly an alienating experience.