Tag Archives: economics

Student Debt and Savings

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The lede’s lead sentence leads into it.

Everybody knows that US households’ savings soared after the pandemic struck, as the combined effects of checks from the government and fewer opportunities to spend swelled wallets.

Increasing household savings is, in almost all cases, good since we Americans don’t keep a big enough cash cushion against unexpected exigencies, anyway. There was, though, one key area, one Critical Item, that did—and does—represent quite a large opportunity legitimately to spend: paying down the student debt held by one or more members of a household.

Sure, the Federal government, with questionable legality, initiated a pause on student debt payment and associated interest accruals. However, that pause was on lenders’ ability to demand payment. That pause in no way blocked the ability of the student borrowers to continue making payments of their loans.

Where we stand today is indicated by the San Francisco Fed (keep in mind that they say their estimate is pessimistic):

They calculate that excess savings peaked at about $2.1 trillion in August 2021, but by the second quarter of this year less than $190 billion remained, putting them on pace to be depleted in the current quarter.

Now (assuming arguendo, the estimate is accurate), in the face of those vastly depleted and rapidly disappearing savings, those student debtor households will have to resume student loan payments, whether they want to or not, next month. That represents a sequence of problems for our economy and for them: student loan debtors must make loan payments from shrunken resources, which means they’ll spend less in the consumer economy. Less consumer spending slows our economy. In a slowing economy, employers hire fewer employees or employ fewer folks outright—furloughs and layoffs. That tightening, even shrinking, labor tightens even further the economic condition of those student debt-laden households.

Lying or Hostage-Taking Threat?

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Our Progressive-Democratic Party President, Joe Biden, is at it again. On the possibility of a Federal government partial shutdown due to a lack of a budget—which Biden distorted as being a complete shutdown—he had this threat regarding our military:

Let’s be clear. If the government shuts down, that means members of Congress and members of the US military are going to have to continue to work and not get paid….

This, of course, is false, or should be. There is plenty of revenue coming in to the Federal government under existing tax law to continue paying the Federal debt, Medicare and Social Security outlays, DoD expenses and military salaries, and on and on.

Biden knows this full well. The only interpretation to his claim is that he’s lying outright, or he intends deliberately to withhold our military members’ pay, taking them hostage against his demand to get his way.

You decide.

Some Basic Arithmetic

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Washington State has spent $143 million to get homeless folks out of camps from state property near roads and housed.

About 1,300 people were swept from roadside camps as of July 31, with roughly 430 of those rejecting help getting into temporary or permanent shelter. That means it took $165,000 per person to clear the camps and house 870 people.
The department says 126 people have successfully exited the program into permanent housing….

Washington has 25,200 homeless folks (that makes Washington’s homeless population the fourth largest in the nation, for those of you keeping track at home). Those exited from the program represent less than 10% of those 1,300 swept. The State’s Progressive-Democratic Party Governor, Jay Inslee, says he needs more money:

You can’t do this with zero dollars. We’ll need the legislature in January to step up to increase funding….

Now the third grade arithmetic. The State blew through $143 million to deal with 1,300 homeless. That means Inslee wants $2.772 billion to handle all of the State’s homeless.

Inslee is willing to spend Other People’s Money, those $2.772 billion, in order to house 16,900 of those 25,200 homeless, or, still $165,000 per homeless person accepting the State’s housing offer.

Inslee is willing to spend Other People’s Money, those $2.772 billion, in order to permanently house 2,440 homeless, or $1.135 million per permanently housed.

Of course, my arithmetic ignores economies of scale, and duplication of fixed costs, but you get the idea. The only solution to this problem, or any other, that Progressive-Democratic Party politicians can conceive is to throw ever more Other People’s Money at it.

Greedy UAW

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The United Automobile Workers Union, per its president Shawn Fain, is threatening to strike the three automakers GM, Ford, and Stellantis (nee Chrysler) simultaneously after midnight Thursday (as I write Thursday midday). The union is demanding

  • 36% pay raises over the next four years
  • raises to correspond to the cost of living
  • an end to tiered-wages for factory jobs
  • a 32-hour work week with 40 hours of pay
  • pension increases

Some of those would seem legitimate, or at least open to discussion, and typical union wants that most employers could find some sort of agreement on. The pay raise demand is egregious, and the demand to be paid for hours not worked is simply greedy, glorified featherbedding.

Furthermore, the strike is a direct attack on the companies’ ability to function at all: by the design and purpose of the strike, it closes the businesses and prevents it from earning any revenue. From that, it closely approaches extortion. In the present case, the UAW plans to maximize the damage they intend to inflict with what Fain is calling a “Stand Up Strike:”

“…keep the companies guessing as to where and when the next local walkout would be,” Fain said.

The car companies need to stand tall and refuse to negotiate as long as the union holds this metaphorical gun to their heads.

Aside from that, in a world where unions weren’t given special considerations—they’re even exempt from antitrust law, even though they have a monopoly on workforces in union shops and in unionized industries like the auto manufacturing of Michigan—such overt attacks would invalidate any contract to which management is coerced into agreeing.

Update: The UAW has, indeed, struck all three automakers, one major plant each. The union has shut down GM’s Wentzville, MO, plant, a 4.25 million sq-ft facility that was producing mid-size trucks and full-size vans under the GMC and Chevrolet brands; Stellantis’ Toledo, OH, 3.64 million sq-ft facility that was producing Jeep Wranglers and Jeep Gladiators; and Ford’s Wayne, MI, 5 million sq-ft facility that was producing Rangers and Broncos.

But, But—Bidenomics is Working

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That’s the claim of President Joe Biden (D) as he insists our eyes are lying, and we should believe him, instead. These two lede paragraphs say otherwise:

Surging inflation gobbled up household income gains last year, making 2022 the third straight year in which Americans saw their living standards eroded by rising prices and pandemic disruptions.
Americans’ inflation-adjusted median household income fell to $74,580 in 2022, declining 2.3% from the 2021 estimate of $76,330, the Census Bureau said Tuesday. The amount has dropped 4.7% since its peak in 2019.

It’s true enough that the Biden inflation runup has ebbed, but it’s still nearly double what it was in the fall before he took office. It’s also true that, over the last couple of months, wage increases have been greater than current inflation.

We still have, though, that overall shrunken income, and it’ll be a long time before that recovers. Recall the income loss during the Obama-Biden years post-Panic of 2008, a loss which lasted for several years, until roughly 2015. Keep in mind, too, that even with the lower inflation today than the Biden peak, the prices us ordinary Americans pay remain badly elevated. What we pay for critical items like food and energy—items typically excised from inflation measures because they’re so “volatile”—still is 16% higher than when Biden took office.

There’s this tidbit, too:

Total [Federal tax] receipts are down 10%, year over year, owing to slower growth….

But ’twas a famous victory, by Biden and his cronies. Over truth and the facts, but not over reality and the straits our economy truly is in.