Category archives: Economics

Important Article on the College Debt Scene & Is the Bubble Exploding

by Chris Gacek

December 3, 2012

Recently released statistics by the Federal Reserve are causing some to wonder if the rapidly escalating rate of troubled college loans indicate a bursting debt bubble. Tyler Durden of Zero Hedge has this post; John Hayward at the Human Events Blog has this excellent comment on the Zero Hedge analysis.

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Student debt is a problem that is hurting many people over age sixty:

In the first three months of this year, the number of borrowers of student loans age 60 and older was 2.2 million, a figure that has tripled since 2005. That makes them the fastest-growing age group for college debt. All told, those borrowers owed $43 billion, up from $8 billion seven years ago, according to the Federal Reserve Bank of New York.

Almost 10 percent of the borrowers over 60 were at least 90 days delinquent on their payments during the first quarter of 2012, compared with 6 percent in 2005. ….

Some are losing part of their Social Security retirement benefits. Read about a “boomerang” parent – in this case, a mother who had to move in with her daughter due to college loans assumed by the parent on behalf of the child. See the story. (The focus here is “Parent Plus” loans not co-signed loans.)

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Another story discusses the drag that student loan debt may have on the housing market:

Naroff said another major factor weighing on young adults is student loan debt, which is approaching $1 trillion by some estimates. The burden of those monthly payments may be keeping some younger adults from paying the rent on their own, let alone buying a house, even if they do have a job.

You have a lot of the kids coming out with debt, and they’re not going out and buying houses, and that may be pushing out the whole process,” he said.

Naroff said it’s not yet clear how much of the problem is a cyclical one, caused by the high unemployment rate among young adults, and how much is a structural problem caused the increased burden of student loan debts leaving less money for things like homes.

You can find the NBC News story by Alison Linn here.

Is Capitalism Over?

by Krystle Gabele

November 15, 2012

Elise Amyx at Values and Capitalism writes about how Christian hipsters are declaring the demise of capitalism. Perhaps, it would be good to know what a Christian hipster stands for and how is capitalism over?

According to Brett McCracken, author of Hipster Christianity: When Church and Cool Collide, a Christian hipster is a young evangelical who strays from the typical stereotypes of the evangelicals of the 80s and 90s and prefers the progressive viewpoints, as well as intellectual Christianity. While most evangelicals prefer to help Republicans, the Christian hipster prefers Barack Obama.

Therefore, it should not surprise you that a Christian hipster might consider capitalism over.

Young Protestants today seem to be rebelling against the traditional Protestant work ethic because they associate it with a greedy, selfish, superficial version of the American Dream. Evangelical hipster culture implies that Christians should oppose capitalism and adopt pro-regulation, pro-environmentalism, pro-universal health care political positions to truly live a Christ-like life. (Source)

There is something wrong here. I am pretty certain that many Christian hipsters work hard. In fact, they might even embrace capitalism more than they think. Take for example, increased government regulations would squash freedom and innovation. This is surely something they might be against.

Whether or not they realize it, capitalism is all around them. After all, many of the products they use — whether it be Apple products or Starbucks coffee — began in a capitalist society. It was the free market and innovation that brought many of the modern conveniences they rely upon.

Is Profiting from Hurricane Sandy Ethical?

by Rob Schwarzwalder

November 1, 2012

There is a telling story today in one of the nation’s premier business publications, Barron’s, called “Playing a Superstorm.” In it, we read about some home repair-oriented companies whose stock is rising in the wake of Hurricane Sandy. Of course, this makes perfect sense: Given the hurricane’s devastation, the value of firms with the resources needed to rebuild is at a premium. However, as the article notes, “These opportunities to scalp some profits out of the aftermath of the hurricane are likely fleeting, so act fast or do not act at all.”

Scalp some profits” - yikes! Profiting from disaster seems untoward. Yet in a market-based economy, such investments can animate economic growth in regions where it is most needed - places such as those destroyed by this week’s massive “Frankenstorm.”

Every action has three ethical dimensions: Its motivation, its implementation, and its effect. Those on the Left who insist on evaluating every action based on motivation (“greedy capitalists!”) rather than outcome (renewed businesses, reconstructed neighborhoods, etc.) are looking at only one aspect of a larger picture.

I’m not suggesting that motives are unimportant. Rather, at a time of national crisis, aspersing the intentions of those whose investments can help transform extensive damage into rebuilt lives seems a tired and useless exercise. The alternative - a government-run, command-and-control economic system - would never provide the diversity, quantity, or quality of products and services needed when disaster strikes. As scholar Jay Richards wrote in his book Money, Greed, and God, we must be wary of “contrasting capitalism with an unrealizable ideal rather than with its live alternatives” (watch Jay’s thoughtful FRC lecture on this theme here).

Ultimately, it’s about what the Founders called “ordered liberty,” the freedom to make reasonable, moral decisions in an open marketplace. To deny such liberty to image-bearers of God is an affront to human dignity. Our Founders understood this, which is why they valued the right to private property ownership so highly. We should maintain their commitment to free enterprise and opportunity with intentionality and energy; unless we do, when a future “Sandy” hits, we will lack the means to respond with the rapidity and resources they require.

Whither the Horror of Dependency?

by Cathy Ruse

October 29, 2012

Its worse than you think. Read George Will on demographer Nick Eberstadts recent study on changes in how the government transfers wealth over the last 50 years, especially under the rubric of disability.

Here are a few of the eye-popping particulars:

  • During most of FDRs 12 presidential years, income transfers were a third or less of federal spending. But between 1960 and 2010, entitlements exploded from 28 percent to 66 percent of federal spending.
  • The growth of entitlement spending over the past half-century has been distinctly greater under Republican administrations than Democrat.
  • The normalization of dependency helps explain the unprecedented exit from gainful work by adult men. Since 1948, male labor force participation has plummeted from 89 percent to 73 percent labor force participation ratios for men in the prime of life are lower in America than in Europe.
  • One reason for this is the gaming (defrauding) of disability entitlements: In 1960, 455,000 workers were receiving disability payments; in 2011 that number was 8.6 million nearly half of the 8.6 million were disabled because of mood disorders or ailments of the musculoskeletal system and the connective tissue.
  • In 1960, 134 Americans were engaged in gainful employment for every officially disabled worker; by December 2010 that number had dropped to just over 16.

Want More Jobs? Lets Build Stronger Families

by Rob Schwarzwalder

September 7, 2012

Strong families lead to a strong economy.

This thesis is proven substantially and repeatedly by FRCs Marriage and Religion Research Institute in studies of the effects of family formation on economic growth (see, for example, The Divorce Revolution Perpetually Reduces U.S. Economic Growth).

We are now witnessing the results of family dissolution inAmericas troubling employment situation. The intact family, in which a married mom and dad raise children and worship together weekly, results in a better education for the children and a higher incentive for a Dad, or if need be, for both parents, to provide for their family.

These facts augment this mornings disappointing job numbers, not only because those numbers reflect more than 25 percent fewer new jobs than had been anticipated, but also because a closer look shows them to indicate a growing undercurrent of hopelessness among job-seekers.

Heres how the Wall Street Journals Phil Izzo explains it:

The unemployment rate is calculated based on the number of unemployed people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The actively looking for work definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. That number declined by 250,000 in August, but it was overwhelmed by a 368,000 drop in the size of the labor force. That suggests that many of those 250,000 stopped looking for work not because they found a job, but because they dropped out of the labor force … (the labor force participation rate of) 63.5% is at the lowest levels since women first started entering the labor force in large numbers.

This interpretation is based not on partisan projections, but data from the Bureau of Labor Statistics (BLS). Heres what the BLS said this morning about the true nature of the unemployment situation:

In August, 2.6 million persons were marginally attached to the labor force, essentially unchanged from a year earlier … There were 844,000 discouraged workers in August … Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.7 million persons marginally attached to the labor force in August had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

According to the BLS, there minimally are 23.1 million persons unemployed, underemployed, or too discouraged to look for work. These are federal, not conservative or Republican, statistics.

To bring it back to families: As Drs. Pat Fagan and Henry Potrykus demonstrate in their new paper, Non-Marriage Reduces U.S. Labor Participation:

The long decline of adult male labor participation represents a withdrawal of able-bodied workers from productive employment. A persistent ‘gap’ exists between the employment rates of married men and unmarried men … Given the cultural-demographic drift away from marriage the risk of (economic) depression will be exacerbated over time.

This paper shows how among working-age men, half of the current labor drop-off is caused by this gap and the population shift away from marriage.

Marriage and children incentivize work. Cohabitation, divorce, and fatherlessness create dependency on government, a fact born out by the fact that now roughly one in seven Americans are receiving food stamps.

Are there other factors, such as tax and trade policies? Sure. But even if we somehow get them completely right, we cannot we meet our need for stable growth, and cannot foster the intangible but essential belief that families and individuals can have a brighter financial future, without a family unit that is sound, secure, and vibrant.

Debt and Liberty

by Family Research Council

September 5, 2012

Debt is a major problem in America. Ballooning governmental and individual debt threaten our financial stability. Debt undermines one of the inalienable rights of our Declaration of Independence, liberty. The Scripture says in Proverbs 22:7 that the borrower is a slave to the lender. This connection between debt and slavery is important, though regularly overlooked in public policy and personal pocketbook decisions. Owing money to a financial institution is not nearly the same as slavery but there are parallels.

When individuals exchange freedom for temporary comfort it is a sacrifice of their liberty. Sadly many exchange financial freedom for what they consider to be indispensable luxuries such as televisions, automobiles, degrees, and clothing. These things are purchased by the borrower with a promise that he will work for the lender in the future to pay back the debt. Often times this promise has dire consequences for not just the borrower but for his family as well. Many marriages are harmed due to financial strains. And many people suffer a lower quality of life due to unwise or impulsive purchases.

One of the most costly sources of debt is college education. It has even received special attention as a separate category in FRCs recent Social Conservative Review. Many people begin new jobs and new families with high debt loads due to their education. At some of the most vulnerable points in their life they are burdened by creditors. Some say a college education is the path to get a good paying job which will then make you a happy and productive citizen. If someone cant afford college, then loan agencies (often the Federal Government) will be more than happy to help. Some students live at home or even go on government aid programs to help with the expenses. Unfortunately, in todays economy, students finish four or five years of college only to struggle to locate a full-time job after graduation. Regardless of the job they do eventually find, many graduates must then allocate a large portion of their take-home pay to cover their debt, or else pay it off over many years. As graduates feel the pressure of their debt, they bypass opportunities to gain valuable experience in their chosen field through an entrylevel job, because they must find a job any job- that will pay more.

Having gone to college as well as graduate school I am well aware of the temptation and the burden of debt. Thankfully my wife and I are currently debt-free although we have taken some careful measures to get there. Freedom from debt has allowed me to pursue my calling from the Lord to work as salt and light in our nations public policy arena. Having things immediately at the cost of enslavement by debt is not worth the price when compared to the value of liberty. I can give to my church or another charity, work at an entry level position in a field I enjoy, and slowly save for special purchases, without the constant burden of debt on my shoulders.

Being debt free means living differently than many of my peers, eating a sack lunch every day, driving older cars, and living in a very small apartment. But I still have one possession for which our founders pledged their lives, their fortunes and their sacred honor. Freedom. And that is worth more than anything a loan could buy.

Unemployment, Families, and the Child Tax Credit

by Rob Schwarzwalder

June 7, 2012

The Congressional Budget Office reports that the “amount of federal debt held by the public is projected later this year to surpass 70 percent of the nation’s annual economic output.” This comes on the heels of a very weak Bureau of Labor Statistics job report, which notes that for the month of April, “the unemployment rate was essentially unchanged at 8.2 percent.”

This unpleasantly abiding statistic likely is much too low. FRC’s Chris Gacek, an economics graduate of the prestigious Wharton School of Finance at the University of Pennsylvania, recently noted an Investor’s Business Daily article showing that when all the data are evaluated, actual unemployment stands at over 11 percent.

And consider this: “According to federal statistics, the unemployment rate of 18-29 year olds reached 12.1 percent in May and when those who have given up looking for work are added in, the rate skyrockets to 16.9 percent.” In tandem with explosive college debt, it is little wonder so many young Americans especially those without the benefit of college - have grave doubts about their future.

What can be done? Clearly, the federal government taxes, spends, and regulates too much. But for American families, relief is needed now practical financial help to make raising children, our greatest economic resource, a bit easier.

Thats why FRC is calling for the President and Congress to make the Child Tax Credit permanent and to increase it to $5,000 per child for every household. The data makes clear that strong families are the true engine of the economy, and letting Moms and Dads keep more of what they earn so their children can enjoy a higher quality of life makes both immediate and long-term sense.

In the short term, an expanded Child Tax Credit means families will spend more for their needs and wants, which itself stimulates the economy and fosters both higher growth and a larger, more rapid influx of federal revenues. Longer term, as the costs of having children become more affordable, the number of Americas children might also become more plentiful an especially significant economic benefit, as human capital is the single greatest contributor to Americas economy.

Alan Viard of the American Enterprise Institute and former senior economist at the Federal Reserve Bank of Dallashas written, The child care credit is not just another middle-income tax break. It plays an important role in encouraging work by providing tax relief for expenses that are closely linked to work. An improved and expanded credit can help offset the work disincentives of the income tax and boost economic growth.

Well said. Now, its up to policymakers to act.

Where Are the Dads? How Richmond, VA and FRC Are Working to Restore the Family

by Rob Schwarzwalder

June 5, 2012

Christianity Todays This Is Our City site is devoted to showcasing how Christians are helping to transform the lives of their fellow citizens in several cities around the nation. As the site notes, This Is Our City … seeks to spotlight in reporting, essays, and documentary video how … Christians are responding to their cities’ particular challenges with excellence, biblical faith, and hope.

As the articles in This Is Our City demonstrate, many of our cultures needs derive from the breakdown of the family. Recently, in Where Are the Dads? Treating Richmond’s Fatherless Epidemic, Katelyn Beaty writes about how believers in Virginias capital are building human capital through public health—one man at a time.

According to Beaty, The Richmond Family and Fatherhood Initiative (RFFI) uses ad campaigns, legislation, and partnerships with Richmond’s sizable Christian community to reach its goal: Decrease the nonmarital birthrate, reconnect fathers to their children, and foster strong two-parent families—all for the future health of Richmond.

The article quotes Danny Avula, the citys deputy health director, as saying, “If you look at health, education, and poverty indicators, people in stable families with a married mother and father have higher high-school graduation rates and income. It’s not only about the theological basis for the design of a man and a woman. When you look at outcomes, it’s a no-brainer.”

Mr. Avula sounds like hes been reading reports on fatherhood, marriage, and children found on FRCs Marriage and Religion Research Institute (MARRI) website. As Dr. Pat Fagan, MARRIs esteemed director, has written, the intact married family that worships weekly is the greatest generator of human and social positive outcomes and thus it is the core strength of the United States.

To learn more about the importance of fathers to children and of strong families to the economic, social, and moral well-being of our country go to the MARRI Web site and read some of the leading-edge research produced by Dr. Fagan and his team.

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