Young People Are Doomed by Student Loans, Not the National Debt

Rich old people love to freak out about the budget deficit. They are ignoring a much bigger issue.

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Feb 11 2019, 8:30pm

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That America faces a mounting student loan problem is increasingly difficult to ignore. Coming across a youngish person or couple who own their home in the wild can feel like a spectacular find in a country where so many have to prioritize paying off college debt. Millennial home-ownership rates have been lagging behind those of other generations at the same age, and student loans are one of the many reasons behind that trend. According to numbers released by Federal Reserve economists last month, some 400,000 young people who might otherwise have owned a home in 2014 didn't because they had racked up so much debt in the preceding decade. Essays about student debt—including sometimes-greater credit-card debt, or Millennial economic woe generally—seem to go viral with alarming frequency. At least two television shows have recently promised cash payouts to help people pay down student debt, and at least two potential 2020 presidential contenders, Eric Swalwell and Pete Buttigieg, have made reining in student loans a key part of their pitch targeted at Millennial voters in particular.

But because this is America, personal debt held by individuals is rarely discussed as a topic of concern by policymakers, who instead fixate on national debt, which is typically portrayed as somehow collapsing the economy or at the very least threatening to rip apart our social fabric. The people making these frantic arguments often tend to be vaguely compromised old men determined to cut social programs like Medicare—programs young people, if anything, might like to see get bigger and more generous in an era of relentless precarity.



A column published in the New York Times Monday amounts to a case in point of just how broken America's elite dialogue is about debt and money. Steven Rattner, a former Treasury official under Barack Obama who was banned from Wall Street trading after being implicated in a pay-to-play scheme, spends about 1,000 words freaking out about how buzzy left-wing wish-list items like Medicare for all, "free college tuition," and the Green New Deal would explode the debt. Rattner suggests young progressives are wild-eyed dreamers disconnected from reality in a column that is itself deeply disconnected from reality: At one point, Rattner says Republicans and Democrats might, in some bizarro future, "quickly agree" on investments in national infrastructure, which is odd given they have spent the last two years failing miserably to even have a serious conversation about said investments, much less agree on them.

To his credit, Rattner concedes that Donald Trump's tax cuts targeted mostly at the super rich are part of the problem here—and that the GOP, which once marketed itself as the party of fiscal discipline, is increasingly populated by jokers who barely bother pretending it's a concern. (Trump's top budget official, a former deficit hawk in Congress, reportedly explained the lack of focus on the national debt in the latest State of the Union speech by intoning, "Nobody cares.") But Rattner also insists raising taxes isn't enough on its own to get us out of this mess, nor pay for ambitious new spending. The facts might disagree with him: Elizabeth Warren's proposed wealth tax alone could probably cover the cost of making public colleges tuition-free, and while other, more expensive, programs such as Medicare for all might be extra complicated—and require non-rich people pay more in taxes, too—the idea that the deficit is out of control often just seems like a way to target social welfare programs Americans love and depend on. Indeed, Rattner suggests raising the retirement age.

Rattner is just the latest in a long line of wealthy, finger-wagging moderate types who tend to enjoy generous platforms in the national media to opine about the national debt. His warning was preceded most recently by the third-party presidential trial balloon of ex-Starbucks CEO Howard Schultz, a billionaire who thinks the national debt is "reckless" and also that Medicare for all is as "reckless as [Trump's] wall." (That is odd thinking given even skeptical analyses of the Medicare proposal found it would in fact likely reduce healthcare spending, even if it shifted those costs to the government ledger.) Another peddler of this kind of thinking is Michael Bloomberg, the billionaire former mayor of New York who may run for president as a centrist Democrat and recently tussled with candidate Kamala Harris when he said Medicare for all, which she supports, "would bankrupt us for a very long time." Concern over debt fuels opposition to any sort of government project in a way that could potentially hamstring the larger progressive agenda—last month, Democrats in the House passed a rule requiring new spending to be offset by tax increases or budget cuts elsewhere, despite left-wing opposition.

Federal deficits now seem like less of an urgent public concern than in the early 90s, when billionaire Ross Perot briefly led in the presidential polls by waxing poetic about the perils of the national debt. But Perot's spiritual descendants are still with us: relatively wealthy people who seem to be more worried about the vague problem of a US balance sheet more than the actual day-to-day anxieties of people with jobs and personal debt. And because so many American politicians are wealthy themselves, few members of Congress actually know what it's like to be called by a debt collector or have to choose between paying off a loan or buying groceries for the week.

There is an increasingly fashionable idea among some on the left that national debt isn't really a concern and the government can spend money basically without limit—it's called Modern Monetary Theory, and it essentially holds that the only limit on deficit spending is the risk of inflation. But even if you don't buy that kind of thinking, the government reaching some kind of fiscal point-of-no-return is far from inevitable. Social Security and Medicare, for instance, are decades away from insolvency even under our broken—and fixable—tax code, runaway inflation is hard to envision, and new taxes could pay for at least some of the major social programs progressives are enamored with, free public college being the most obvious. And if we want to be fiscally disciplined, how about asking the Pentagon to start taking the idea of saving money seriously?

Which brings us back to student debt. The next president should probably not pass deficit-busting tax cuts—instead, they ought to raise rates significantly and try to be more fiscally sane than a bankruptcy-prone reality TV huckster. (Low bar.) But as much as polls do find Americans worried about the national debt, recent survey data also shows a vast majority of voters—including a majority of Republicans—think the student debt situation is a "crisis." Yet somehow, with the exception of fringe contenders like Swalwell and Buttigieg, and one mainstream candidate in Elizabeth Warren—she's made a career of understanding personal debt—few in the political class seem willing to actually have a serious conversation about what it means to be $100,000 in the hole and not working a job that will help you pay that off.

That's a real problem. As long as our politics is consumed by misguided panic over vague concerns that do not actually resonate in the lives of everyday Americans—young ones in particular—it's hard to envision faith in the system getting any better. In that sense, people raising the alarm over the prospect of fiscal armageddon aren't just being buzzkills or scolds; they're actively doing harm to society.

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