Posts Tagged ‘debt’


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Chart of the day

Posted: 26 March 2014 in Uncategorized
Tags: , ,

student debt

According to a new report from the New America Foundation, debt for graduate students in a range of master’s and professional degree programs accounts for the most dramatic increases in student borrowing between 2004 and 2012. About 40 percent of the $1 trillion in outstanding student loans in the United States is financing students who are working toward graduate and professional degrees.


Once again, the work of Hyman Minsky has been discovered—this time, by the BBC.

Minsky’s main idea is so simple that it could fit on a T-shirt, with just three words: “Stability is destabilising.”

Most macroeconomists work with what they call “equilibrium models” – the idea is that a modern market economy is fundamentally stable. That is not to say nothing ever changes but it grows in a steady way.

To generate an economic crisis or a sudden boom some sort of external shock has to occur – whether that be a rise in oil prices, a war or the invention of the internet.

Minsky disagreed. He thought that the system itself could generate shocks through its own internal dynamics. He believed that during periods of economic stability, banks, firms and other economic agents become complacent.

They assume that the good times will keep on going and begin to take ever greater risks in pursuit of profit. So the seeds of the next crisis are sown in the good time.

Much the same can be said about Marx’s work. In both theories, crises are endogenously produced within the capitalist system itself.

The approaches differ, of course: while Minsky focused on rising debt and complacency, Marx emphasized class exploitation and capitalist competition. But it doesn’t take much work to combine the insights of the two thinkers to identify what we might call the “Minsky-Marx moment”—the moment when, as a result of rising debt and competition over the surplus, the whole house of cards falls down.

But you won’t find either in modern macroeconomics. In fact, if you search inside one of the leading texts—Robert Barro’s Macroeconomics: A Modern Approach—you won’t find even a single mention of Minsky or Marx.

It’s no wonder modern mainstream macroeconomists and their students had so little to offer in terms of understanding how and why the latest crisis occurred or what to do once the house of cards did in fact come tumbling down.


Tens of thousands of Spaniards joined together in Madrid to protest against the continued imposition of austerity measures.

Demonstrators were protesting over issues including unemployment, poverty and official corruption.

They want the government not to pay its international debts and do more to improve health and education.

The BBC’s Guy Hedgecoe in Madrid says protesters travelled from all corners of Spain, many of them making the journey on foot, in order to voice their anger.

They called their protest the march of dignity, our correspondent says, because they say that the government of Mariano Rajoy is stripping Spaniards of just that.

For many of them, the cutbacks that Mr Rajoy has implemented, in particular to health and education, are causing Spain irreparable damage.

GCS Fig1 GCS Fig 2

Mainstream economists and politicians continue to promote higher education as the solution to all the major economic and social problems in the United States. Meanwhile, as Demos has shown, our nation’s higher education system is being dismantled by state-mandated budget cuts (including staff and faculty layoffs and the elimination of key academic programs) and transformed into a debt-for-diploma system.

The University of Southern Maine is the latest school to announce Draconian budget cuts, the dismantling of some academic programs, and union-busting layoffs even in programs that are not being eliminated—all while engaging in corporate “rebranding” and the creation of new programs such as cybersecurity and entrepreneurship. As one current student wrote:

I am beyond livid with the way these budget cuts are being handled and the way the faculty is being treated. It’s not the faculty’s fault that we dumped thousands of dollars into misspelt and incorrect signs last summer. Or that the basketball coach’s salary and cutting 26 faculty positions just last Spring apparently hasn’t helped. The reality is that the only thing right with this school is the faculty. They seem to be the only people left who care about the students earning an education. Maybe the administration just hasn’t been alerted that we are paying to be educated, not to have pretty classrooms and a better basketball team. We are paying for an education and, if they would be so kind as to give it to us, everyone just might end up content.

Meanwhile, other college campuses are seeing a rise in food pantries [ht: sm] to take care of increasingly impoverished students.

Days after biology major Gillian Carll arrived at Stony Brook University last fall, she encountered a young woman on a bench outside her dormitory who said she had nothing to eat.

“I was just like, ‘Oh, my gosh!’ I didn’t know kids could afford to go here but couldn’t have mac and cheese or something like that,” said the Livonia, N.Y., freshman. “It was kind of unbelievable.”

Carll got the student some food from her dorm room and later volunteered at Stony Brook’s new food pantry — one of dozens cropping up at colleges across the country in recent years as educators acknowledge the struggles many students face as the cost of getting a higher education continues to soar.

“The perception is of college students that if you are able to go to college and you have an opportunity to go to college, you’re part of the haves of this country, not part of the have-nots,” said Beth McGuire-Fredericks, assistant director for college housing at the Stony Brook campus on eastern Long Island and a co-founder of the pantry.

“How can someone who’s in college be someone who has a need like food?”



Many poor Americans face jail when they can’t pay steep fines for nonviolent crimes, like $1,000 for stealing a $2 beer. That’s because many courts have adopted the “offender-funded” probation model, which fills the coffers of private probation companies and forces taxpayers to pay for the incarceration of poor debtors.

In January 2013, Clifford Hayes, a homeless man suffering from lupus and looking for a night off the streets, walked into the sheriff’s office in Augusta, Georgia. It was a standard visit: he needed police clearance, a requirement of many homeless shelters, to stay overnight at the Salvation Army.

Hayes expected to go straight to the shelter. Instead, he was handcuffed and later thrown in jail. Hayes hadn’t committed a crime – or at least, he hadn’t in many years since 2007, when he committed several driving-related misdemeanor offenses, for which he pled guilty and was put on probation. That probation left him $2,000 in debt for court fines – and fees he was supposed to pay to a private company the state hired to monitor him until his probation ended. Hayes needed to pay $854 to the court to avoid a jail sentence; because he had no money except a $730-a-month disability check, he was thrown in Richmond County lockup.

The cost to taxpayers of Hayes’ eight-month jail sentence: $11,500, according to Georgia court documents.

This is the twenty-first century American equivalent of debtors’ prison.


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Special mention

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Those of a certain age will remember “hearts and minds”—both LBJ’s words (“the ultimate victory will depend on the hearts and minds of the people who actually live out there”) and the powerful film by Peter Davis.

Today, it is the Right that is conducting a battle for the hearts and minds of young Americans.

There is, of course, the Opt Out campaign waged by the Koch brothers-backed group Generation Opportunity, urging Millennials not to sign up for insurance on the health care exchanges created by the Affordable Care Act.

And then there’s Stan Druckenmiller, the billionaire fund manager, who is traveling around the country visiting college campuses.* His goal is to scare young people into believing that (a) there’s a debt explosion coming, which will ruin the country, and (b) the primary causes of the growing debt are entitlement programs, which means that seniors are stealing from the young. This is the Tea Party-inspired generational theft meme I’ve written about before.

According to the generational theft campaign, the dramatic lowering of the poverty rate among the nation’s senior citizens (via Social Security and Medicare) represents not progress but, instead, the cause of an approaching apocalypse, as Baby Boomers begin to retire and more claims on made on those programs. There’s no discussion, of course, of why the federal debt is a problem (just some large scary numbers), and alternative means of containing the debt, such as raising tax revenues from large corporations and wealthy individual) are derided (because, in his view, rich people would simply stop working).

During his most recent presentation, Druckenmiller made much the same argument to scare his young audience, and then invoked the memory of the anti-Vietnam War movement:

“My generation, we brought down the president in the 60’s because we didn’t want to go into the war against Vietnam,” he said. “People say young people don’t vote, young people don’t care. I’m hoping after tonight, you will care. There is a clear danger to you and your children.”

Put aside for the moment the obscenity of comparing the carpet-bombing of the Vietnam War to the strains associated with the federal debt. The fact is, the federal debt is not out of control (not now and not for the foreseeable future). And the existing programs for the elderly—those who are currently retired and those who will be leaving work in the coming decades—should be expanded, not cut back. It can be done if we begin to seriously discuss and address the instabilities and inequalities created by current economic arrangements.

As it turns out, the next evening, the inaugural Chuck Craypo memorial lecture featured a panel discussion with Nelson Lichtenstein and Dan Schlademan on Wal-Mart. They demonstrated to the young people in attendance what they should really fear is living a world that is being remade in the image of retailing giants like Wal-Mart. It’s that prospect, and not the supposed conflict between generations, that should really capture their (and our) hearts and minds.

*Disclaimer: I don’t remember him but Druckenmiller apparently graduated from Bowdoin College the year before me. Here’s a link to Julia La Roche’s description of Druckenmiller’s presentation at his alma mater a few months ago.