Wintery Knight

…integrating Christian faith and knowledge in the public square

Obama’s irresponsible student loan policies leave taxpayers with trillion-dollar bubble

President Obama's student loan bubble

President Obama’s student loan bubble

This is from Investors Business Daily.

It says:

In 2010, Obama eliminated the federal guaranteed loan program, which let private lenders offer student loans at low interest rates. Now, the Department of Education is the only place to go for such loans.

Obama sold this government takeover as a way to save money — why bear the costs of guaranteeing private loans, he said, when the government could cut out the middleman and lend the money itself?

The cost savings didn’t happen. In fact, the Congressional Budget Office just increased its 10-year forecast for the loan program’s costs by $27 billion, or 30%.

What did happen was an explosive growth in the amount of federal student loan debt. President Clinton phased in direct federal lending in 1993 as an option, but over the next 15 years the amount of loans was fairly stable. The result of Obama’s action is striking. In each of the past six years, federal direct student loan debt has climbed by more than $100 billion. (See chart.)

And since Obama keeps making it easier and easier to avoid repaying those loans, it’s a problem that taxpayers will eventually have to shoulder.

Through words and actions, Obama has encouraged irresponsibility on the part of student borrowers. He constantly talks as if student debt were an unfair burden they unknowingly had foisted upon them.

At the same time, he’s made it easier and easier to avoid paying back student loans in full. Earlier this year, for example, Obama expanded eligibility for his “pay as you earn” program, which limits loan payments to 10% of income, with any debt left after 20 years forgiven.

Students got the message. The St. Louis Fed reports that 27.3% of student loans in repayment are at least a month behind in payments. That’s a far higher delinquency rate than any other kind of debt, and it’s significantly higher than the delinquency rate 10 years ago.

“This overall level of delinquency is very concerning,” concluded authors Juan Sanchez and Lijin Zhu.

A 2013 Consumer Financial Protection Board report found that less than half of this federal loan money was actually being paid. About 30% was held by borrowers still in school or in a grace period, another chunk in deferment or forbearance, and almost 14% was in default.

The problem here is that whenever the government nationalizes something that the private sector is doing, it always creates a problem. Let me explain. If student loans (or mortgage loans) are run solely by the private sector, then the motivation for lending money out at interest is to make money for the bank’s depositors and investors. In other words, because the bankers are in a free market and have to compete for depositors and investors, they have an interest in making sure that the loans they make get paid back.

But when the government takes over loans, they are not interested in being wise with the money they lend out – it’s not their money. They want to lend out as much as possible today in order to buy votes, and then kick the can down the road on the repayment. So instead of being careful about asking “will this get paid back?” they ask “how can I borrow from the future in order to buy as many votes as I can right now?” And that’s how we got the housing crisis of 2008, as well as this trillion-dollar student loan crisis.

When you take the profit motive out of the lending decision, then money gets lend to people who will never be able to pay it back. No private bank that has to answer to shareholders hands out money to students who want to study underwater basket-weaving. But the government does. They want to buy as many votes as possible. And besides, this is not their money. They are borrowing it from the future earnings of the very students they are giving it to! That’s what happens when you let big government decide everything.

Whenever big government politicians want to buy votes with taxpayer money, they always sell it to the people with sob stories about some poor, helpless group of people will suffer through no fault of their own. There are a lot of voters who will vote for politicians who cry crocodile tears for them, especially ones who don’t understand economics. There is no free lunch – somebody has to pay. Democrats are basically throwing a party for students, and then mailing them the (unexpected) bill for it, with interest.

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As senator, Hillary Clinton paid women 72 cents for every dollar she paid men

Hillary Clinton and Planned Parenthood

Hillary Clinton and Planned Parenthood

I already knew that Hillary Clinton was pro-gay-marriage, and radically pro-abortion, but it turns out that she is a hypocrite on women’s issues, as well.

The Washington Times reports:

During her time as senator of New York, Hillary Rodham Clinton paid her female staffers 72 cents for every dollar she paid men, according to a new Washington Free Beacon report.

From 2002 to 2008, the median annual salary for Mrs. Clinton’s female staffers was $15,708.38 less than what was paid to men, the report said. Women earned a slightly higher median salary than men in 2005, coming in at $1.04. But in 2006, they earned 65 cents for each dollar men earned, and in 2008, they earned only 63 cents on the dollar, The Free Beacon reported.

[…]Mrs. Clinton has spoken against wage inequality in the past. In April, she ironically tweeted that “20 years ago, women made 72 cents on the dollar to men. Today it’s still just 77 cents. More work to do. #EqualPay #NoCeilings.”

Meanwhile, she is making “equal pay for women” her top priority.

CBS News reports:

Hillary Clinton lamented the number of women in the fields of science, technology, engineering and math at a Silicon Valley women’s conference on Tuesday, and called for more action to close the wage gap.

[…]In advocating for closing the pay gap, Clinton also endorsed the impassioned plea for wage equality made by Patricia Arquette in her Oscars acceptance speech for Best Supporting Actress.

“Up and down the ladder many women are paid less for the same work, which is why we all cheered at Patricia Arquette’s speech at the Oscars — because she’s right, it’s time to have wage equality once and for all,” Clinton said.

All right, let’s take a look at the facts on the so-called “pay gap” between men and women.

The facts

This article is from the very left-wing Slate, of all places.

Excerpt:

The official Bureau of Labor Department statistics show that the median earnings of full-time female workers is 77 percent of the median earnings of full-time male workers. But that is very different than “77 cents on the dollar for doing the same work as men.” The latter gives the impression that a man and a woman standing next to each other doing the same job for the same number of hours get paid different salaries. That’s not at all the case. “Full time” officially means 35 hours, but men work more hours than women. That’s the first problem: We could be comparing men working 40 hours to women working 35.

How to get a more accurate measure? First, instead of comparing annual wages, start by comparing average weekly wages. This is considered a slightly more accurate measure because it eliminates variables like time off during the year or annual bonuses (and yes, men get higher bonuses, but let’s shelve that for a moment in our quest for a pure wage gap number). By this measure, women earn 81 percent of what men earn, although it varies widely by race. African-American women, for example, earn 94 percent of what African-American men earn in a typical week. Then, when you restrict the comparison to men and women working 40 hours a week, the gap narrows to 87 percent.

But we’re still not close to measuring women “doing the same work as men.” For that, we’d have to adjust for many other factors that go into determining salary. Economists Francine Blau and Lawrence Kahn did that in a recent paper, “The Gender Pay Gap.”.”They first accounted for education and experience. That didn’t shift the gap very much, because women generally have at least as much and usually more education than men, and since the 1980s they have been gaining the experience. The fact that men are more likely to be in unions and have their salaries protected accounts for about 4 percent of the gap. The big differences are in occupation and industry. Women congregate in different professions than men do, and the largely male professions tend to be higher-paying. If you account for those differences, and then compare a woman and a man doing the same job, the pay gap narrows to 91 percent. So, you could accurately say in that Obama ad that, “women get paid 91 cents on the dollar for doing the same work as men.”

I believe that the remainder of the gap can be accounted for by looking at other voluntary factors that differentiate men and women.

The Heritage Foundation says that a recent study puts the number at 95 cents per dollar.

Excerpt:

Women are more likely than men to work in industries with more flexible schedules. Women are also more likely to spend time outside the labor force to care for children. These choices have benefits, but they also reduce pay—for both men and women. When economists control for such factors, they find the gender gap largely disappears.

A 2009 study commissioned by the Department of Labor found that after controlling for occupation, experience, and other choices, women earn 95 percent as much as men do. In 2005, June O’Neil, the former director of the Congressional Budget Office, found that “There is no gender gap in wages among men and women with similar family roles.” Different choices—not discrimination—account for different employment and wage outcomes.

A popular article by Carrie Lukas in the Wall Street Journal agrees.

Excerpt:

The Department of Labor’s Time Use survey shows that full-time working women spend an average of 8.01 hours per day on the job, compared to 8.75 hours for full-time working men. One would expect that someone who works 9% more would also earn more. This one fact alone accounts for more than a third of the wage gap.

[…]Recent studies have shown that the wage gap shrinks—or even reverses—when relevant factors are taken into account and comparisons are made between men and women in similar circumstances. In a 2010 study of single, childless urban workers between the ages of 22 and 30, the research firm Reach Advisors found that women earned an average of 8% more than their male counterparts. Given that women are outpacing men in educational attainment, and that our economy is increasingly geared toward knowledge-based jobs, it makes sense that women’s earnings are going up compared to men’s.

When women make different choices about education and labor that are more like what men choose, they earn just as much or more than men.

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Study: recessions result in lower birth rates

A new study from Princeton University caught my eye.

Excerpt:

[…][N]ew research from Princeton University’s Woodrow Wilson School of Public and International Affairs shows that women who were in their early 20s during the Great Recession will have fewer children in both the short and long term. This result is driven largely by an increase in the number of women who will remain childless at age 40.

The paper, published in the Proceedings of the National Academy of Sciences, is the first to show that recessions have long-term effects on fertility, which actually increase exponentially over time.

[…]Their calculations show that a one-percentage point increase in the unemployment rate experienced between ages 20 and 24 reduces the short-term fertility of women by six conceptions per 1,000 women. When following these women to age 40, the same unemployment rate increase leads to an overall loss of 14.2 conceptions per 1,000 women. This increasing effect over time is largely accounted for by an increase in the fraction of women who remain unmarried and childless at age 40. These women not only forego first births, but forego later births as well.

In terms of the Great Recession, the researchers estimate that the increase in unemployment rates experienced between 2008 and 2013 will result in an additional 151,082 women who will remain childless at age 40, leading to a long-term loss of 420,957 conceptions (and 426,850 live births) – a 2.4 percent decrease.

People don’t just marry and have kids whenever they feel like it. However individual people may feel about romance and recklessness and risk-taking, the general behavior pattern is that if the economy is lousy, then people have fewer children. That’s because they can’t afford them. Maybe grown-ups should be thinking more about economic growth, by lowering taxes and reducing wasteful spending.

But there’s more to it than that:

But what are the economic mechanisms driving these results? Currie and Schwandt cite recent empirical studies showing that young adults – especially young men – who enter the job market during an economic downturn are likely to have persistently lower earnings as they age. This phenomenon may make young men less attractive matches for women, explaining the increase in the number of women who forego childbearing.

This quote made me think of another post from the liberal 538 blog.

Ben Casselman writes:

In its report last week, Pew suggested that one reason for falling marriage rates is the decline in employment among young men. That may also help explain the education gap in marriage. Put simply, men without jobs are much less likely to get married, and men without a college degree are much less likely to get jobs.

In the Pew survey, 78 percent of never-married women said it was “very important” for a prospective spouse (in most cases, a husband) to have a steady job. That ranked above any other requirement, including “same moral and religious beliefs” (38 percent), “at least as much education” (28 percent) and even “similar ideas about having and raising children” (70 percent). The survey results are borne out by women’s actual behavior. About half of men ages 25 to 34 with a steady job have been married, compared to just a third of those without a steady job.

For men without a steady job, having more education doesn’t help much in terms of finding a spouse — marriage rates are nearly identical regardless of education. But having a degree makes men much more likely to be employed — and therefore more likely to get married. According to the Current Population Survey, more than 20 percent of men ages 25 to 34 with a high school diploma are out of work, versus 10 percent of young men with a college degree. And when they do have jobs, less-educated men earn less and are more likely to be laid off.

For a long time in this country, we have had schools that discriminate against young men and punish them. There are virtually no male teachers in the classrooms. This has a profound effect on young men, causing them to become disinterested in school, which makes it harder for them to find jobs.

USA Today reports on a relevant study:

For all the differences between the sexes, here’s one that might stir up debate in the teacher’s lounge: Boys learn more from men and girls learn more from women.

That’s the upshot of a provocative study by Thomas Dee, an associate professor of economics at Swarthmore College and visiting scholar at Stanford University. His study was to appear Monday in Education Next, a quarterly journal published by the Hoover Institution.

Vetted and approved by peer reviewers, Dee’s research faces a fight for acceptance. Some leading education advocates dispute his conclusions and the way in which he reached them.

But Dee says his research supports his point, that gender matters when it comes to learning. Specifically, as he describes it, having a teacher of the opposite sex hurts a student’s academic progress.

Everything is connected together. We need a strong economy and well-educated young men in order to make marriage and child-bearing reasonable to men.

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Liberal feminist Hanna Rosin debunks the 77 percent pay for women myth

In the far-left Slate, of all places.

Excerpt:

The official Bureau of Labor Department statistics show that the median earnings of full-time female workers is 77 percent of the median earnings of full-time male workers. But that is very different than “77 cents on the dollar for doing the same work as men.” The latter gives the impression that a man and a woman standing next to each other doing the same job for the same number of hours get paid different salaries. That’s not at all the case. “Full time” officially means 35 hours, but men work more hours than women. That’s the first problem: We could be comparing men working 40 hours to women working 35.

How to get a more accurate measure? First, instead of comparing annual wages, start by comparing average weekly wages. This is considered a slightly more accurate measure because it eliminates variables like time off during the year or annual bonuses (and yes, men get higher bonuses, but let’s shelve that for a moment in our quest for a pure wage gap number). By this measure, women earn 81 percent of what men earn, although it varies widely by race. African-American women, for example, earn 94 percent of what African-American men earn in a typical week. Then, when you restrict the comparison to men and women working 40 hours a week, the gap narrows to 87 percent.

But we’re still not close to measuring women “doing the same work as men.” For that, we’d have to adjust for many other factors that go into determining salary. Economists Francine Blau and Lawrence Kahn did that in a recent paper, “The Gender Pay Gap.”.”They first accounted for education and experience. That didn’t shift the gap very much, because women generally have at least as much and usually more education than men, and since the 1980s they have been gaining the experience. The fact that men are more likely to be in unions and have their salaries protected accounts for about 4 percent of the gap. The big differences are in occupation and industry. Women congregate in different professions than men do, and the largely male professions tend to be higher-paying. If you account for those differences, and then compare a woman and a man doing the same job, the pay gap narrows to 91 percent. So, you could accurately say in that Obama ad that, “women get paid 91 cents on the dollar for doing the same work as men.”

I believe that the remainder of the gap can be accounted for by looking at other voluntary factors that differentiate men and women.

The Heritage Foundation says that a recent study puts the number at 95 cents per dollar.

Excerpt:

Women are more likely than men to work in industries with more flexible schedules. Women are also more likely to spend time outside the labor force to care for children. These choices have benefits, but they also reduce pay—for both men and women. When economists control for such factors, they find the gender gap largely disappears.

A 2009 study commissioned by the Department of Labor found that after controlling for occupation, experience, and other choices, women earn 95 percent as much as men do. In 2005, June O’Neil, the former director of the Congressional Budget Office, found that “There is no gender gap in wages among men and women with similar family roles.” Different choices—not discrimination—account for different employment and wage outcomes.

A popular article by Carrie Lukas in the Wall Street Journal agrees.

Excerpt:

The Department of Labor’s Time Use survey shows that full-time working women spend an average of 8.01 hours per day on the job, compared to 8.75 hours for full-time working men. One would expect that someone who works 9% more would also earn more. This one fact alone accounts for more than a third of the wage gap.

[…]Recent studies have shown that the wage gap shrinks—or even reverses—when relevant factors are taken into account and comparisons are made between men and women in similar circumstances. In a 2010 study of single, childless urban workers between the ages of 22 and 30, the research firm Reach Advisors found that women earned an average of 8% more than their male counterparts. Given that women are outpacing men in educational attainment, and that our economy is increasingly geared toward knowledge-based jobs, it makes sense that women’s earnings are going up compared to men’s.

When women make different choices about education and labor that are more like what men choose, they earn just as much or more than men. What does it mean that people on the left keep pushing pseudo-science on us to try to punish men and reward women? Why are men so awful that they need to be denigrated like this? And how will men respond to social expectations when they have to face being told that they are “bad”? It seems to me that putting men down is going to lower their level of engagement.

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New study: the effects of declining marriage rates and lower salaries for men

First, let’s remember that Obama’s massive trillion dollar stimulus program was designed to help women, not men, even though men had a higher unemployment rate than women when it was enacted.

Christina Hoff Sommers explained it in the Weekly Standard.

Excerpt:

A “man-cession.” That’s what some economists are starting to call it. Of the 5.7 million jobs Americans lost between December 2007 and May 2009, nearly 80 percent had been held by men. Mark Perry, an economist at the University of Michigan, characterizes the recession as a “downturn” for women but a “catastrophe” for men.

Men are bearing the brunt of the current economic crisis because they predominate in manufacturing and construction, the hardest-hit sectors, which have lost more than 3 million jobs since December 2007. Women, by contrast, are a majority in recession-resistant fields such as education and health care, which gained 588,000 jobs during the same period. Rescuing hundreds of thousands of unemployed crane operators, welders, production line managers, and machine setters was never going to be easy. But the concerted opposition of several powerful women’s groups has made it all but impossible. Consider what just happened with the $787 billion American Recovery and Reinvestment Act of 2009.

[…]The National Organization for Women (NOW), the Feminist Majority, the Institute for Women’s Policy Research, and the National Women’s Law Center soon joined the battle against the supposedly sexist bailout of men’s jobs. At the suggestion of a staffer to Speaker of the House Nancy Pelosi, NOW president Kim Gandy canvassed for a female equivalent of the “testosterone-laden ‘shovel-ready’ ” terminology. (“Apron-ready” was broached but rejected.) Christina Romer, the highly regarded economist President Obama chose to chair his Council of Economic Advisers, would later say of her entrance on the political stage, “The very first email I got . . . was from a women’s group saying ‘We don’t want this stimulus package to just create jobs for burly men.’ ”

[…]Our incoming president did what many sensible men do when confronted by a chorus of female complaint: He changed his plan. He added health, education, and other human infrastructure components to the proposal. And he tasked Christina Romer and Jared Bernstein, Joseph Biden’s chief economist, with preparing an extraordinary report that calculated not only the number of jobs the plan would likely create, but the gender composition of the various employment sectors and the division of largess between women and men.

Romer and Bernstein delivered “The Job Impact of the American Recovery and Reinvestment Plan” on January 10. They estimated that “the total number of created jobs likely to go to women is roughly 42 percent.” Lest anyone miss the point, they added that since women had held only 20 percent of the jobs lost in the recession, the stimulus package now “skews job creation somewhat towards women.”

But in the lower quintiles, women can do a lot better for themselves and their children by getting married before having children. The second income makes a big difference. But what if men’s incomes go down, and their unemployment rate goes up?

The left-leaning Atlantic explains how it works.

Excerpt:

The good news, trumpeted in Women’s Work,the latest report from the Pew Economic Mobility Project, is that dramatic increases in women’s labor-force participation have boosted the “financial security and mobility” of millions of families across America since 1970. The bad news is that growing economic opportunities for women have not translated into more family income for poor and working-class families at the lower end of the income ladder.

[…]What accounts for the paradox that women’s income is rising across the board yet family income is falling for the bottom 40 percent of families? Mainly, to paraphrase [feminist] Hanna Rosin, the end of marriage and men in working-class and poor communities across the nation, coupled with the fact that maternal labor-force participation has plateaued since the 1990s. That is, a dramatic retreat from marriage, declines in men’s employment and income, and a leveling off of maternal labor-force participation have all combined to limit the income available to lower-income families, and to offset the increases in women’s income documented in this new report.

[…]One reason that lower-income families are losing economic ground is that gains in women’s income have been offset by declines in marriage among the poor and working class. As the figure below indicates, more than half of these families are headed by just one parent—typically a single mother. Lacking the income of two parents, or the income of a father, these single-parent families are much less likely to reap the benefits of increases in income that have accrued to today’s working women.

[…]Another major factor holding back families financially in the bottom 40 percent are declines in men’s income. Consistent with Rosin’s thesis, which argues that many men in the United States are seeing their economic fortunes erode, the graph below indicates that men’s personal income has fallen across most groups, but particularly among working-class and poor men. So, one more reason that family income has declined for poor and working-class families is that husbands and boyfriends have less dough to put on the table than they once did. This is particularly important because, even today, as the Pew report notes, men’s wage rates in couple-headed families are almost “twice as important as those of their female partners for boosting family income.”

So if you want to help poor women, here are two things that you should do. First, you should help men get better educations so they can get good-paying jobs, even at the low end of the job market. Second, we should be encouraging women to marry in order to get that second income (or only income, if it’s high enough) in order to help make ends meet. Unfortunately, the Democrats are opposed to both.

 

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