Rant of the Week

Debt

 

In 1974 it cost me (a Canadian from Ontario) about $3,000 to go to a U.S. college for one year.  That included tuition and room and board.  I had a job cutting grass and plowing snow too, for spending money.  So a poor boy like me could get a college degree and get a good job and do well.

I ended up with about $10,000 in student loans.  A house, at that time, would have cost me about $80,000, in Chatham, Ontario.

Now of course there has been some inflation since 1974 and everything costs more and people earn more money, but the rate of increase in college tuition has been nothing short of astronomical.  It is now, typically, $35-50,000 for a year in college.  In the U.S., a graduating senior typically owes about $50,000. 

What happened?  Did it suddenly cost ten times as much to hire a professor?  To build a lecture hall? That $80,000 house is now $175,000. Why is that $3000 education now ten times as much?

Part of the reason is that State governments cut back on the amount they contributed to the cost of higher education.  In Washington State, for example, in 1991, the state's contribution to the costs of colleges and university education was (inflation adjusted) $96 for each person in the state.  Today it is $31. All while politicians of every stripe whine and kvetch about the low achievement of American students on international tests and their unpreparedness for work after they receive their diplomas!

The other reason college costs rose astronomically is quite simple:  the money available to pay for it increased; the colleges knew how to get that money flowing by facilitating access to government-sponsored loan programs and young students with poor judgment about the relative advantages and disadvantages of massive debt signed up in droves believing that high-paying, secure jobs awaited them upon graduation.

There was, in short collusion.  The government offered student loans thinking they would be applied to 1974 tuitions in a 1974 job market.  College Presidents rewarded themselves for increasing student debt by paying themselves $500,000 a year or more, with lavish benefits.  Athletic departments received more money for stadiums, dressing rooms, uniforms, and coaches.  When tuitions skyrocketed and the job market tanked, you suddenly had a huge population of deeply indebted under-employed young people.  It's almost as if the fast food industry's wettest and juiciest dream came true: a large population of mcjob candidates, desperate for any kind of income.

I think what most people don't get about the economics in the United States, and elsewhere, is that the system is largely controlled by the banks and large corporations and the purpose of the system to keep the vast majority of people in perpetual debt, continuously streaming vast sums of money into the coffers of the investor class.  The government is utterly complicit with this process, allowing banks to offer money to people who clearly cannot afford to pay it back, at unconscionable interest rates which serve to trap them the way the giant insect alien in "Aliens" traps it's victims, with gooey slabs of useless consumer goods and mortgages and degrees.  Unable to move or free themselves or escape the massive interest payments.

And the emblematic moment of this relationship, in 2008, after the banks got too greedy-- an almost incomprehensible development-- more greedy than before?!-- and the mortgage securities markets collapsed and the economy was threatened with disaster, the government bailed out the banks. The consumers were strung out to dry with continuing liabilities for houses that had lost half or more of their value or cars they could no longer drive or educations that no longer produced jobs.

There were no consequences to the investors or managers of these banks.  In fact, most of them were lavishly rewarded for their greed, their ruthlessness, their incompetence, their monumenal callousness towards the home-owners who held their mortgages, and their ability to bribe politicians effectively. 

A few of them must have a sleepless moment or two imagining what it would be like to live in a world in which there are consequences for psychotic behavior on a grand scale-- a moment or two.  But such anxieties will vanish quickly when they meditate on the poetry, the operatic grandeur, the delightful, soaring arias of the capitalists, the Republicans singing in  harmony praises every day to a system, they insist, that is going to benefit the average working guy as much or more than those who are already rich.

 

 

 

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