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Have Universities Harmed America? Part 2

The New York Analysis of Policy and Government concludes its two part review of the impact skyrocketing tuition rates and biased universities have had on America. 

A Consumer Reports study found that 45% of people with student loan debt said that college was not worth the cost. The detrimental impact on the U.S. economy has been dire. 44% of those in tuition debt have cut back on daily expenses, 37% have delayed saving for key financial goals, 28% delayed buying a house,  and 12% delayed marriage. “Step by step, one law after another has been enacted by Congress to make student debt the worst kind of debt for Americans—and the best kind for banks and debt collectors…and in one of the industry’ greatest lobbying triumphs, student loans can no longer be discharged in bankruptcy…”

Donna Rosato, also writing in Consumer Reports, notes: “To put the growing education debt crisis into perspective, many attendees at the conference drew parallels to the housing market bubble of the mid 2000s.  Rohit Chopra, [special adviser to the Department of Education and formerly the top student financial services regulator at the Consumer Financial Protection Bureau] pointed out that both going to college and owning a home are goals that people strive to reach. But when something good, like owning a home, involves toxic mortgages, it can quickly becomes a bad situation. Chopra says that we may now be at a similar point with student debt.”

But the problem looms beyond finances.

The American Association of University Professors notes that  “…even as colleges and universities have become the focus of increased attention from the general public and policy makers alike, these institutions themselves seem to have lost their focus on a mission of preparing an informed citizenry for participation in democracy and expanding knowledge for the benefit of all. Without a doubt, higher education still provides a transformative experience for the millions of individuals who take part in its many activities. Behind the scenes, however, American higher education is changing in ways that detract from its potential to enhance the common good.”

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As colleges become completely dominated by left-wing academics, (see the New York Analysis of Policy and Government study  which reported that Democrats outnumber Republicans by a greater than 10 to 1 ratio, and at many elite universities there was not a single registered Republican on staff) traditional, core beliefs in the unifying principles of America, especially respect for the Constitution and Bill of Rights, as well as adherence to an empirical method of thinking, diminished, reducing the ability to logically review and resolve national challenge.

There is, indeed, an increasingly incestuous relationship between the Democrat Party and the university establishment.  Rather than calling for a halt in excessive tuition rates, (a concept espoused by Democrats in many other pricing areas) Democrat presidential candidates are calling for “free tuition,” meaning that taxpayers would bear the burden. This, of course, would have the net effect of allowing colleges to continue raising rates, in a manner similar to the way that medical costs skyrocketed after third-party payments became commonplace.

The Great American Experiment in College for All, at devastating costs to all, has financially crippled students and their families, and is leading to a financial crisis that may make the housing bubble recession of 2007—2008 look mild. In return for all that burden and risk, a generation has endured significant unemployment and has been indoctrinated into acceptance of views that diminish the accomplishments and merits of their nation, and has inculcated them into acceptance of limitations on their freedom of speech.

Major reforms are needed.  Colleges should be required to explain to applicants and current students what the tuition costs pay for, in detail, with particular emphasis on how much is spent on non-educational salaries and activities.   There should be full disclosure of the percentage of graduates who obtain jobs that make use of a college degree. No federal support should go to institutions that charge excessive rates. Washington should get out of the tuition loan business, and the same consumer protections that apply to other debts should apply to tuition loans. State education departments should provide high-quality alternatives paths to careers that do not require college degrees, including vocational degrees in much-needed (and frequently lucrative) professions such as electricians, plumbing, carpentry, and mechanical fields.

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American Economy continues weakness

Research by The Federal Reserve Bank of New York’s February 2015 Business Leaders Survey, which includes an economically vital area of the nation,indicates that activity in the region’s service sector leveled off recently. The survey’s headline business activity index fell 15 points to 0.8. After rising to a level just above zero last month, the business climate index gave up those gains, signaling that, on balance, respondents viewed the business climate as worse than normal. …The prices paid index climbed 12 points to 51.5, pointing to steeper input price increases, while the prices received index dropped six points to 6.2, signifying a slower pace of selling price increases… After rising out of negative territory last month, the business climate index gave up its gains, falling nine points to -8.4, indicating that, on balance, firms viewed the business climate as worse than normal.”

Generation X, which is a key sector of the American economic picture, is also not doing well. According to the Federal Reserve of St. Louis, The average household debt of the 1970 Gen X cohort was $142,077 in the first quarter of 2014 (that is, approximately at age 44), while the average household debt of the 1956 baby-boomer cohort was $88,553, adjusted for inflation, in the first quarter of 2000 (when this cohort would also have been age 44). This represents about 60 percent more debt for the 1970 cohort compared to the 1956 cohort. Meanwhile, average real household income of the 1970 cohort was only about 5 percent higher than that of the 1956 cohort in the most recent data.
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 William C. Dudley, President and Chief Executive officer of the NY Fed, also delivered worrisome news.  “In 2010, aggregate outstanding student loan balances surpassed credit card indebtedness, and in 2013 eclipsed a trillion dollars.  During the historic household deleveraging that took place between 2008 and 2013, student debt bucked the trend, and was the only form of household credit that continued to increase each year.” The taxpayers are the final source on the hook for these loans, which, thanks to the continuously slow economy and the lack of suitable employment for college graduates, may present the next great economic bubble

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U.S. economy not adequately recovering

There are a number of key indicators revealing that the U.S. economy continues to languish, and will continue to do so in the new year, despite attempts to portray it as improving.

1.Employment remains in a crisis state.

The Century Fund  outlines three reasons why the job market is actually worse than federal statistics indicate:

“The ratio of workers to non-workers is nearing an all-time low. Part of the drop in headline unemployment numbers is explained by the fact that many have just given up on looking for work entirely…

“The share of long-term unemployed is up. People who are out of work for more than twenty-six weeks can sometimes end up permanently unemployable…

“Many who are working are underemployed. The unemployment rate is silent on those who have part-time jobs but would prefer full-time jobs…

According to Economic Outlook 2015,  “Wages remain stagnant. Even those who do have jobs are facing flat or even declining wages.” “For those who have jobs, they’re making less than they did before the Great Recession. Wages for workers at every pay level, save for the bottom 10%, declined from the second half of 2013 through to the second half of 2014. And there’s no indication wages will increase….For 70% of the workforce, inflation-adjusted hourly wages are still lower than they were in 2007. Over the same period, inflation (CPI) has risen 15%.”
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  1. The U.S. Balance of Trade remains weak.

America’s balance of trade picture is far from favorable. According to the U.S. Bureau of Economic Analysis, the latest export numbers show that September exports of $195.6 billion and imports of $238.6 billion resulted in a goods and services deficit of $43.0 billion, up from $40.0 billion in August. September exports were $3.0 billion less than August exports of $198.6 billion. September imports were $0.1 billion more than August imports of $238.6 billion.

  1. There are too few First Time Home buyers

Another key component of economic recovery, first time home buyers, remains weak, accounting for  only 33% of purchases, down from last year’s 38%, according to the National Association of Realtors.   First time buyers spark the economy with an entire range of purchases, from electronics to furniture, various services, and more.

  1. The student loan bubble lurks.

As reported by USAtoday, “Total student loan debt was $240 billion in 2003, but has nearly quintupled to $1.2 trillion today. This affects students and non-students alike, as new graduates’ purchasing power is sapped by their student loan repayments.”