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Good morning. I’m only half way through my first cup of coffee, but what I discovered in today’s New York Times sent me scurrying from the breakfast table to my computer. Paul Krugman’s Op ed, Wasting Our Minds, first caught my attention, and then the lead editorial, The Economy Downshifts, launched me irretrievably into my day. This post simply couldn’t wait until after breakfast.
This weekend, my son will be graduating from law school. His accomplishment is something he should be very proud of, as we are proud of him. He managed to do it, too, while incurring a relatively small amount of college and law school debt by today’s standards, because he’s a former U.S. Marine, and he received significant financial help from the G.I. Bill and President Obama’s “Yellow Ribbon” program for veterans, which augmented the G.I. Bill’s tuition support. Of course, he now faces an increasingly difficult prospect, along with other graduates, of finding work in this depressed economy.
This circumstance is much different from what I faced, graduating from law school 42 years ago. I had received less financial help from my parents than we have been able to give our son, yet I was able to graduate from one of the country’s most expensive small colleges and one of its best and most expensive law schools, and enter the workforce immediately after graduation carrying a combined college and law school debt of only $3,800 (which, according to the Coin News inflation calculator, is $22,466.23 in today’s dollars). That’s a lower level of education debt than my son faces, and he’s one of the lucky ones. Recent reports are that total education debt in America now exceeds credit card debt, and totals more than $1 trillion. These facts seem surreal, and their consequences are unimaginable. That the cost of higher education greatly discourages enrollment in today’s depressed economy is already old news.
In today’s Op ed piece, Krugman writes:
You’ve probably heard lots about how workers with college degrees are faring better in this slump than those with only a high school education, which is true. But the story is far less encouraging if you focus not on middle-aged Americans with degrees but on recent graduates. Unemployment among recent graduates has soared; so has part-time work, presumably reflecting the inability of graduates to find full-time jobs. Perhaps most telling, earnings have plunged even among those graduates working full time — a sign that many have been forced to take jobs that make no use of their education.
College graduates, then, are taking it on the chin thanks to the weak economy. And research tells us that the price isn’t temporary: students who graduate into a bad economy never recover the lost ground. Instead, their earnings are depressed for life.
What the young need most of all, then, is a better job market. People like Mr. Romney claim that they have the recipe for job creation: slash taxes on corporations and the rich, slash spending on public services and the poor. But we now have plenty of evidence on how these policies actually work in a depressed economy — and they clearly destroy jobs rather than create them.
I was struck by this fact: “Students who graduate into a bad economy never recover the lost ground. Instead, their earnings are depressed for life.” The message that sends is that that something happening in America is causing irretrievable losses, and permanent damage.
That message is re-enforced by the New York Times editorial. It reports that the economy is experiencing slower growth that is wreaking havoc with a feeble recovery. “Austerity,” its subtitle reads, “is just as bad a response in America as it has been in Europe”:
The slow start for the economy in 2012 — an annual rate of 2.2 percent in the first three months of the year — is evidence that the recovery is too weak to push joblessness much lower than its current 8.2 percent, and too fragile to withstand the kinds of budget cuts Congressional Republicans are proposing.
First-quarter growth was not far off the recent average pace and conditions are certainly worse elsewhere, with many European nations in recession. But that’s false comfort. To make up the damage the Great Recession did to jobs, income, wealth and confidence, the economy needs consistent above-average growth. Europe’s problems will only exacerbate America’s own, by shaving growth from exports or, in a worst case, by destabilizing banks that are linked to the European financial system. * * *
The fledgling recovery, beset by lopsided growth, will not be helped by a continuation of high-end Bush tax cuts, nor can the weak economy withstand severe budget cutbacks. Meanwhile, the uncertainty over future policy is yet another harbinger of continued slow growth.
Europe, having driven itself into the ground following the “austerity” doctrine (a medieval economic prescription, analogous to the medieval medical practice of bleeding sick patients) is now awakening to the tragic irrationality of the “trickle-down” ideology it embodies, as discussed a few days ago by Paul Krugman in another Op ed piece, Death of a Fairy Tale.
All of this re-enforces my conviction that permanent damage is being done. I’m down to my last few sips of coffee, so I’ll make this short and sweet:
It isn’t just students graduating into a depressed economy that can never recover lost ground. The circumstances and forces that caused our depressed economy are relentlessly forcing it to continuously lose ground, and preventing it from ever recovering.
The New York Times is only partly right: The economy is not just downshifting now, in response to recent assaults from austerity budgeting. It downshifted 30 years ago during the “Reagan Revolution” and has been lugging ahead in second gear ever since (except for a brief up-shift into third gear during the Clinton Administration), with the parking brake still engaged.
The culprit is the growing inequality caused by a dysfunctional tax system. It turns out that trickle-down Reaganomics not only doesn’t work, it’s a prescription for Great Depression #2. It has been relentlessly depressing growth and slowly destroying the American economy for three decades. The top federal income tax rate belongs at 70%, and to make recovery even possible, the top rate must be returned to at least 55-60%. Think of it as an i.v. drip.
I’ve been sounding the alarm for over a year, and I am now working on a comprehensive treatise on this subject, which I hope to finish soon. Meanwhile, please help me tell the New York Times, President Obama, his supporters in Congress, and folks like Ben Bernanke to start thinking more deeply about the full implications of Keynesian macroeconomics. Ask them to listen more closely to what Robert Reich has been saying. And please tell everyone that Mitt Romney, Paul Ryan, Grover Norquist, Mitch O’Connell, John Bayner and the rest of that “conservative” crowd are selling a very dangerous poison pill, worse than most of us, until recently, had any reason to believe.
JMH – 4/30/2012
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