Obama Administration

The Kids Aren't All Right

Younger Americans are being suffocated by spending, subsidies, and debt


A word of caution for kids heading off to college this year: Your degree may be worth less and cost more than you think. Your job prospects will likely be grim, whether or not you get that sheepskin. Oh, and you're on the hook for trillions in federal debt racked up by your parents and grandparents.

Washington has willfully ignored the looming crisis of entitlement spending, knowingly consigning young Americans to a future of crushing debt, persistent underemployment, and burdensome regulation. Politicians on both sides of the aisle share the blame.

This summer, Congress made a big bipartisan show of cutting student loan rates to 3.4 percent from an already artificially low 6.8 percent. But even that seemingly helpful gesture will wind up hurting the Americans it claims to help. Federal student aid, whether in the form of grants or loans, is the main factor behind the runaway cost of higher education. Subsidies raise prices, leading to higher subsidies, which raise prices even more. This higher education bubble, like the housing bubble before it, will eventually pop. Meanwhile, large numbers of students will graduate with more debt than they would have in an unsubsidized market.

And when those new, debt-laden graduates head out into the labor market with their overpriced diplomas, they may not be able to find a job. According to data provided to me by my Mercatus Center colleague, former Bureau of Labor Statistics (BLS) commissioner Keith Hall, fewer than half of Americans today between the ages of 18 and 25 are employed. For those in that cohort actively on the job market, the unemployment rate is 16 percent, versus 6 percent for job-seekers aged 25 and above.

These young folks are also more likely to be long-term unemployed: While accounting for just 14 percent of the labor force, they make up 19 percent of the long-term unemployed, defined by the BLS as 27 weeks or longer.

The lucky few young'uns with jobs of some kind also suffer from rampant underemployment. In a recent blog post, Diana Carew of the Progressive Policy Institute wrote: "In July 2013, just 36 percent of Americans age 16-24 not enrolled in school worked full-time, 10 percent less than in July 2007." In other words, of these 17 million young Americans, 5.6 million were working part-time, 3.2 million were unemployed, and 8.4 million were out of the labor force altogether.

This jobs crisis will have long-term consequences for young Americans. A forthcoming paper in the American Economic Journal: Applied Economics on Canadian college graduates by the economists Philip Oreopoulos, Till Von Wachter, and Andrew Heisz shows that in economies like ours, during normal times, the average person sees 70 percent of career wage growth in the first 10 years on the job. That is terrible news for people who are unemployed or underemployed at the start of their careers. The study also shows that those unlucky enough to graduate during a recession will suffer a 9 percent pay hit from the start of their careers-and it will likely take them a decade to climb out of that hole.

Weak economies always hit younger people hard, but this weak recovery is taking a particularly heavy toll, despite the massive government intervention in the form of stimulus and job programs. In fact, much of the uncertainty that gets in the way of employers hiring new full-time workers can be traced to government policies.

Take the president's health care law. Because ObamaCare requires employers with more than 50 workers to provide health insurance to all employees or pay a $2,000 penalty per worker, the law will likely increase the cost of current and future employees (those working at least 30 hours per week). There is increasing evidence that the new rules are leading employers to hire more part-time workers and/or to cap their workers' time at 30 hours, especially in the retail and fast-food industries. Outfits ranging from Walmart and Forever 21 to Virginia community colleges have already started increasing their share of part-time employees.

Health insurance premiums are also going up, thanks to ObamaCare's requirement that health insurers accept everyone who applies, that they never charge more based on preexisting medical conditions, and start paying for many medical conditions that previously went uncovered.

But not everyone is equally affected by the increase in premiums. In fact, while some Americans-mostly older and sicker-will benefit from lower rates, others (mostly younger and healthier) will see their rates go up significantly, even after accounting for federal subsidies. A 2013 study by Society of Actuaries fellows Kurt Giesa and Chris Carlson in the latest issue of Contingencies, the American Academy of Actuaries' bimonthly magazine, shows that 80 percent of Americans in their 20s will face higher costs under the law.

That fact is rather ironic: Since about two-thirds of the uninsured population is under the age of 40, this law, too, could end up hurting the very uninsured Americans it was supposed to help. As the Manhattan Institute's Avik Roy wrote of the study in a blog post at Forbes, because "premiums for younger, healthier individuals could increase by more than 40 percent," some will choose to pay the individual-mandate penalty rather than get coverage. In other words, they still won't be insured, the job market will still be constricted by ObamaCare, and they'll be poorer by the amount of the penalty.

Even if lawmakers repeal provisions in the new health care law, younger people will still not be out of the woods. That's because before Obama­Care, there was Medicare. And in addition, there is Social Security. Spending on these programs will explode in the near future, creating a massive pile-up of debt and unfunded liabilities. Medicare is the bigger ticking time bomb, with a projected shortfall of more than $30 trillion. Social Security's unfunded liabilities total about $7 trillion.

According to a Cato Institute report published this year by economist Jagadeesh Gokhale, making these two programs sustainable would require payroll taxes to be more than doubled immediately. Alternatively, the Cato report implies that Social Security and Medicare benefits would have to be cut immediately by more than 60 percent. In either case, ensuing payroll tax surpluses would have to be invested in securities that earn annual average real returns of about 3.5 percent. These calculations imply that for each year that passes without such fiscal policy adjustments, the combined fiscal imbalance of these two programs would grow by about $2.4 trillion.

While the entitlement problem represents the largest and most visible example of how younger Americans will be penalized by government overreach, it is far from the only trouble spot. Take farm subsidies: Not only do they artificially jack up the price of food, they also increase the value of farm lands, making it harder for young farmers to buy or rent land. The same can be said of the mortgage interest deduction, which artificially increases the value of homes, making it harder for first-time buyers. Like student loan subsidies, the mortgage interest tax deduction gives people an incentive to get deeper into debt than they would have otherwise.

From poor public schools to the minimum wage, well-intentioned policies tend to backfire. In addition, we are about to embark on a massive transfer of wealth from younger to older Americans. It is today's youth who will take the brunt of punishment from Washington's decades of "helping" previous generations of Americans. It is today's youth who will most likely see their own federal benefits cut dramatically, their taxes increased, or some combination of the two. And it is today's youth who will find it harder to get a good job (let alone start a company), buy a home, support a family, or do many of the things that were long considered a near-certainty for college graduates.

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  1. Since our school system graduates children woefully underprepared for the job market, I propose we enforce higher education on all students. Mandatory four years at university, with the requisite student loans. We can make collegiate truancy a felony, thus adding more into the prison system. Imagine the multiple multiplier effects!

    This bubble can’t pop fast enough.

    1. Well we’ve already determined that you can be forced to purchase a good or service whether you want it or not.

      1. That was determined long ago. Mop sink requirements have been around for a long time. As much as sometimes it seems to be just revenge against the Gavin Newsoms of the world, it is just wrong.

        1. I was wondering why my carpeted office building has a mop sink in the closet.

          1. That is part of the problem. They are still in the closet. They need to be out and proud.

        2. Mop sinks are gay, they just splatter grimy water everywhere. Laundry basins are the shit, though. I wash everything in them.

          1. Even your car? You just got called a liar. By me.

            1. By you? Basically a wash.

    2. Once the value of a bachelor’s degree has been watered down even more than it is now, we can make everyone get a master’s. What can possibly go wrong?

      1. Luckily the government is already ahead of your idea in many fields citizen. But thank you for trying to help us think of solutions.

    3. I can imagine walking around with a camera and mike asking, ‘should truancy be a felony or merely a misdemeanor?’ People are so eager to please I just wonder at the percentage of them that would accept the premise on its face. Likely faith in humanity destroying numbers.

      1. ‘should truancy be a felony or merely a misdemeanor?’

        Most likely response: “Duuuhhhhh, what’s trunacy?”

  2. Government loans are the primary reason that college is so expensive. Imagine what the price of cars would be if the government were tossing around $1M loans for any car you want without regard to the quality or value of the car, and no regard to the credit worthiness of the applicant?

    Something like that happened with housing too.

    1. Its far from a coincidence that the three areas that government subsidizes the most, health care, housing, and education, have seen much higher price inflation.

      1. That’s impossible. Tony has assured us many times that it’s the icky profit motive of kkkorporations that has driven prices up.

    2. It starts with the pell grants and snowballs upwards. The loans are going to kids whose parents make to much to get grants but not enough to pay out of pocket (although they probably could if they weren’t getting taxed to send other peoples kids to college).

      1. Anything like that, even though it should not exist in the first place, should be tied to the individual receiving it. Not to their bloodline, or people who they are cozy with in some relationship licensing scheme.

  3. Now I have Offspring stuck in my head.

    1. You say that like it’s a bad thing

      1. Yeah. It’s not a bad thing. It’s a terrible thing.

        Here is a good cure for Offspring.

  4. OT. Switzerlands first sex drive in. Although they could be paying off student loans I suppose.


    1. Zurich opened the fenced-in site, which is only accessible by car, in an industrial sector on the outskirts of town in August to move sex workers out of the city centre and provide them with a safer working environment.

      That discriminates against people who get around by public transit, bicycling, or walking.

      1. Which in prog western Europe is just about everyone. At least those are the affordable modes of transportation after all those “free” benefits are deducted.

  5. Even though it keeps becoming more and more obvious that these degrees are almost worthless, the general consensus is that the solution is to just get more college. Young people look up to adults who essentially tell them that, if you lost the bet the first time, just double down again on the same bet and get more college. I’m with Fist: this bubble can’t pop fast enough.

    1. Meanwhile there is an extreme shortage of skilled carpenters, mechanics, electricians, and plumbers. Because those are professions where your hands get dirty, they are not acceptable for the upwardly mobile middle class youth.

      I went to college for fourteen years and have multiple college degrees and I work as a construction project manager. I make about the same as our 27-year-old carpentry foreman.

  6. Get a math/actuarial/engineering degree. Math is hard, but its easier to live well once you learn it.

    1. But, but, but why should someone study a subject just because it’s a means to a job? They should study what they feel is right for them!

      1. I want my degree in German Musical Theater and you’re paying for it because…Koch Brothers! Citizens United! GMOs!

      2. Quite right. University is not a vocational program. If you say that often enough, it will magically absolve you of having to plan for your future.

        1. It’s true, though – University is not a vocational program, nor should it be. Thinking that it should be harms both the University and vocational programs.

          If people want vocational skills, they should (and should be able to) apprentice themselves in a vocation.

          The University is supposed to be there for disinterested research, not to train rich people’s kids so they don’t have to compete for jobs against poor people.

          Government should not be giving money to Universities, and it should not be giving money to people to attend them under the misguided principle that it is an elaborate job training system.

          1. Bullshit. Universities don’t merely exist for mental masturbation. The fact that some vocations require more advanced training (see above engineers, scientists, etc.) and that universities are the only actual and practical places to get those skills today means that universities are for vocational training as well as the waste of time and resources for English majors and [insert item here] studies.

            1. I agree in principle. Still, degrees are being used now in most social service jobs to weed out applicants. Is a degree necessary to be a case worker? Not in order to do the work, yes in order to get the job.

      3. Minor in Lesbian Babylonian Art, then.

        Heck, I got a finance degree but minored (just short of double-major) in history. It’s tougher to do that in engineering, of course, but it’s doable if you simply must.

        I’m rather dubious about majors that I could duplicate by reading a bunch of books.

        1. I’m rather dubious about majors that I could duplicate by reading a bunch of books.

          Don’t pay $150,000 for an education you could have gotten for $1.50 in late charges at the library.

          1. Indeed. Of course, you can say that about a lot of majors, but it’s less true for some than others.

      4. I dated a young lady with a BS in Psychology and a minor in Womynz Studies. Her job? Answering phones at an insurance company.

        Worked with waiters and waitresses with degrees ranging from BS in Environmental Studies to Masters in English. For all I know they’re still dropping plates onto tables and refilling drinks.

        Funny thing though. Everyone I knew who studied some Engineering related field got a job in some engineering related profession. Imagine that.

        1. There are jobs in fuzzier disciplines, but they are fewer, and the competition is much greater. Most of the people I know who work in those fields had to get graduate degrees to do so. That, or do their time in shit, unrelated jobs until they got their opportunity.

          The world doesn’t need everyone to be in science and/or technology, but it’s idiotic not to see that those paths offer more opportunities than most fluffy majors, and, for the foreseeable, there are more job opportunities than there are candidates (at least in some areas).

          My oldest son is an ME major, and the next oldest (daughter) wants to go to med school. At least we’re avoiding any more lawyers.

        2. I decided to go to college last year after having graduated high school in 2000. I am working towards my BS in Computer Science.

          I have a classmate who has a BS in Political Science. As our calculus instructor said after she introduced herself “that and a dollar will get you a soda out of the machine”.

          I had a customer at my job (which is quite good for a non-college-graduate) who had a masters in English. She is working as a physical therapy assistant and is hoping to go to physical therapy school.

          I have no idea what the debt of these students might be, but it has to be astronomical. They have whatever debt remains from their first degree, and now they have to take on more debt to get a degree that is actually useful.

          Of course, even in the STEM fields, where employment opportunities are still great, there is room for improvement. A degree in these fields essentially serves as credentials to get a foot in the door for a job, because no other credentials exist in many fields. There is no test I can take that says “yes, he is qualified to be a software engineer, even though he has no degree”. None that I am aware of anyway. If the STEM fields had exams that allowed people to prove that they were qualified for jobs, even a degree in these fields wouldn’t always be needed.

          1. I’ve got a BS in CS, and I hate to say it but it doesn’t go very far. If I was to do it over again I would have gone for a Masters, while taking every internship opportunity I could find.
            With a Masters in CS, and connections built from internships, the sky is the limit. As for me, I’m stuck in a dead-end government contractor job having my soul slowly sucked out of me as I become increasingly less and less employable in a shitty economy that appears to be the new normal.

          2. Also, take as many OOD classes as you can. Employers like that. I didn’t take that class. Makes me less employable.

            1. I hope to be able to continue on to get my Masters. It all depends on how much I owe when I get my BS. So far, pretty much everything is OOD. Even my basic Java class stresses OOD.

              1. I came in during the transition from C++ to Java. They didn’t start to stress OOD until I was wrapping things up.

            2. I’ll also add that you want to find unique skills. I’ve seen so many entry-level resumes with “.NET expert, Access guru, SQL fluent” it’s not even funny.

              I highly recommend that you start playing with Git as a source code repository, even if they try to force SVN or CVS on you. Git is the way things are going in industry, and having experience with it is something i look for when hiring interns. Also, become Bash and Python fluent, people love having a new intern or coworker who can write scripts.

              I was surprised how many folks i interviewed for a CS intern position were completely uninterested in computers except as a major. I asked a few “how much of a techie are you?” type questions and got scary answers.

              “How often do you use Linux?”

              “Well, i think that in one of the labs on campus is a linux lab. I had to print a paper in there once for class”

              “What makes computers interesting to you?”

              “In this one assignment I did “

              1. oops, you’d think as a sw engineer, i’d remember to not use angle brackets.

                “In this one assignment I did [insert some completely boring and likely automated in industry task]

              2. Q) How many software developers does it take to screw in a light bulb?

                A) None. That’s a hardware issue.

            3. Someday we’ll look back on OO and realize how many lives were wasted on that stupidity. Give me rich data types and procedures any day over all of this polymorphic dichroic heritable disease shit.

              Why learn a language from a ~200pp book (K&R C) when you can chop down a fucking redwood and still not have enough paper to contain all the goddamn frameworks and templates?

              Thankfully I don’t have to code for a living. You have my sympathies.

      5. :)) (so they can move out of their parent’s basement.)

    2. All right-thinking people know that the only degrees worthy of study involve pomo/decon gibberish, navel-gazing identity studies, or preferably both. When I was in graduate school, people actually told me that the STEM subjects have nothing to do with the real world.

      1. In a sense entirely not meant by them, there’s some truth to that. Because what you do on the job and what you learn in school aren’t always quite the same, though, of course, physics is physics and math is math.

      2. I hope you explained to them that, YES! You do want fries with that.

      3. Deconstruction is dead to university humanities departments. It died when Derrida defended Paul de Man’s pro-Nazi propaganda and then wrote a book about how Marxists are full of shit.

        I went to see him speak at UC Davis a few years before he died, and 95% of the crowd was there to boo and hiss.

    3. Math is bullshit. Practical engineering requires little to no math.

    4. Where would y’all place a BS in Architecture? I know it’s not technically STEM but part of the reason it’s a BS and not a BA is how much math and science we have to take.

      1. I had some friends who majored in architecture at Florida, and I can say with some authority that they seemed to have a heavier workload than just about anyone else in undergraduate programs.

        My roommates all the way through were engineers, and, as hard as their classes were, they didn’t seem to be at it nonstop like the architecture students did. Don’t know if that was just UF’s program or what. I remember a Chem. E. friend of mine (who graduated with a 3.8 or something ridiculous for that major) saying he wouldn’t want to go through all of that crap.

        1. That’s pretty much universal. The joke on my campus was that the only three buildings with lights on 24 hours were the library, the computer lab, and the architecture building.

          It’s a tough program, but so much of our work is aesthetics and subjective that a lot of people don’t think of it as anything other than art.

          1. but so much of our work is aesthetics and subjective that a lot of people don’t think of it as anything other than art.

            And code compliance. I think there’s some code compliance in there somewhere. 😉

            1. Yeah, there might be some of that too. 🙂
              But most people don’t even think about codes, if they know they exist at all.

        2. Yep, my friend did one semester in architecture and switched to an easier major in mechanical engineering. The architecture was an odd mix of artistic and technical studies. She pulled one all-nighter trying to complete a drawing of her foot.

      2. Unfortunately, I read an article recently that said that people who have a BS in Architecture currently have a lower employment rate than people with a BA in Philosophy.

  7. Hopefully this generation of youths will learn some very valuable lessons about real life from what they’re going through, because much of it is their own fault.

  8. Desubsidize all fucking higher education.

  9. In addition to some of the (justified) derision of the humanities for their lack of employability, I’ll add that the actual intellectual worth of the humanities majors has been in decline for years. Essentially, they’re not even really being taught much of the things you’d expect a humanities degree to impart to those receiving it – writing skills, an ability to detect themes an broad patterns, an ability to form a coherent argument, etc. Honestly, I can likely expect to have a more intelligent discussion about history or literature with a 40-year-old engineer than I can with a newly minted humanities major.

    1. It is pretty depressing. I got a BA in English 20 years ago and when I looked around at the other ignorant dipshits who were being handed the same degree I realized how completely meaningless it was going to be to list that on a resume.

      1. The truly depressing thing is that those dipshits from 20 years ago were probably an order of magnitude better than what is being churned out today.

  10. Yeah, but what’s the down side, Veronica?

  11. my buddy’s step-sister makes ==$82== an hour on the computer. She has been laid off for ==8== months but last month her payment was ==$19918== just working on the computer for a few hours. Here’s the site to read more

  12. I wouldn’t be in college if it weren’t for the military and I wouldn’t have joined the military if I knew what that meant. Unless you have a scholarship or some kind of free ride, it’s a waste of time.

  13. my roomate’s mom makes $73 an hour on the computer. She has been unemployed for seven months but last month her pay was $18333 just working on the computer for a few hours. pop over to this website


  14. like Walter explained I am taken by surprise that a single mom able to profit $5487 in four weeks on the internet. visit their website

  15. The unspoken problem, at least unspoken by the Progressives is, most degrees were designed in a different time, for a different life. Most degrees, or at least many, are designed for someone who wishes to become an academic. Obviously with the number of degrees out there all can’t become professors.

    Make a degree in manufacturing, and teach manufacturing processes. Graduate 10,000 kids a year with manufacturing degrees and guess what? 1,000 of them will start companies and make things.

    I had a funny conversation with a young woman who was incensed she wasn’t offered a high paying job after she graduated. What is your degree in, I asked. Art history. I asked her, “When was the last time you or anyone you know ever wanted to hire an art historian for any reason? When was the last time you heard anyone say ‘does anyone know a good art historian? All the ones I know are booked solid. We have a painting in our hallway that we need deconstructed. It is driving us crazy.’ Well, never, she conceded. When was the last time you spent any money on art, or art appreciation, or anything else to do with art administration. Well, a long time ago, she said. So, why do you think you should be offered a job? You don’t spend your money on art appreciation, you spend it on housing and lattes and shoes. That’s where the jobs are. get over it.

  16. I find it hard to feel sorry for them. They keep voting Democrat for the worst of reasons, even though the Democrats are obviously and demonstrably sucking them dry to pay for Baby Boomer Circuses now.

  17. Some how we have empowered our leaders to ignore illegal aliens. We have millions of poor and unemployed, plus young people looking for work, and yet we allow them to flow in with impunity.

    The reason the illegals are welcomed, is they work cheap because they are illegal aliens fleeing even worse poverty in Mexico and the middle east.

    There is no other reason to willingly encourage an illegal workforce to compete with the legal one. Exactly what is the benefit of being an American other than the ability to go on welfare.

    This is madness.

  18. When writing about generational debt, wealth transfer or theft (whatever one wants to name it), it is critical to understand the demographics of Blue and Red voters. The demographics show that Blue voters don’t care enough about the future to populate it. Three Blue States (NM, NV, HI – not exactly major metropolises) are over 2.1 (flat) total fertility. Three. This is the same driving factor for the fiscal crises in europe: Too few kids to pay for an aging population. Only three Red states are below 2.1.

    The common argument in the discussion of the impact of Debt on future Americans completely ignores that it is Blue voters driving up Debt – and the children of Red voters who will be paying the bill. Consequently, this Debt is a truly free lunch for the Left; to expect them to stop increasing it seems absurd.

    America is, by and large, a “fair” nation. Properly educating those in the Center that this is fundamentally unfair may well be the ONLY way to constrain future Debt increases as Center parents decide that the future of their children is more important than good-sounding Dem programs today – the primary reason those in the Center vote Dem.

  19. “It is today’s youth who will most likely see their own federal benefits cut dramatically, their taxes increased, or some combination of the two. And it is today’s youth who will find it harder to get a good job (let alone start a company), buy a home, support a family, or do many of the things that were long considered a near-certainty for college graduates.”

    … and it is today’s youth that vote for Obama in such numbers. We hope they’re finally starting to wise up. College didn’t make them very much smarter.

    1. Many of today’s youth mistakenly voted for Obama thinking that it would alleviate racial tension and remove proof that America discriminates against people of color. I heard this argument many times in ’08 from college students and recent graduates.

      That isn’t to say there weren’t plenty of other supporters superficially voting for the cool young black guy rather than the old, white, war hero.

  20. Vote Conservative… kick these bums out!

  21. About 20 years ago I remember reading that the next great political battle will pit the young against the old because of these transfer payments and political promises. Well “here’s Johnny” Funny enough that the answer is what libertarians have said all along. No force or fraud or theft and freedom to pursue your own dreams at your own expense. But politicians just cant fathom that concept. It’s just not what they do.

  22. “Oh, and you’re on the hook for trillions in federal debt racked up by your parents and grandparents.”
    ^I love hearing this assumption presented as an inevitable truth.^

    How bad is it going to sting when young people expatriate to avoid subsidizing the bloated police state and ponzi schemes of the federal government?

    You’d be surprised at the proportion of the American youth that is already considering/planning to leave.

  23. future of crushing debt, persistent underemployment

  24. future of crushing debt, persistent underemployment

  25. be grim, whether or not you get that sheepskin. Oh

  26. big bipartisan show of cutting student loan rates to 3.4

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