South By North Strategies, Ltd.

Higher Education Math

Policy Shop does some simple math and notes that “cuts to higher education lead to rise in student debt,” even in North Carolina.

Even states such as North Carolina, long recognized for their generous investments in higher education, have begun to follow the national trend of disinvestment.  A brief by the North Carolina Justice Center found that public postsecondary institutions in North Carolina sustained a $917.2 million cut in the 2011-13 state budget, reducing appropriations for post-secondary education as a share of the North Carolina economy to a 40-year low.
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Yet last week a Congresswoman from this state could not understand why students are going into debt.
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U.S. Representative Virginia Foxx (R-NC) said she has “very little tolerance for people” with a lot of student debt. Congresswoman Foxx believes that because she put herself through college without debt in the 1960s, others must be able to do the same today. She fails to understand, however, that when she graduated from the University of North Carolina at Chapel Hill in 1968,tuition and fees were 228 percent lower than they are today ($2,221 per year in 1968-69 vs.$7,313 in 2012-13, adjusted for inflation).

Around The Dial – April 24, 2012

Economic policy reports, blog postings, and media stories of interest:

• Robin Wells asks what Eurozone developments mean for the US.
• Peter Diamond & Emmanuel Saez argue that “high tax rates won’t slow growth.”
• Paul Krugman call Mitt Romney “the amnesia candidate.”
• Economist’s View points out that “fairness matters.”
• Calculated Risk previews this week’s FOMC meeting.

The State Of Social Security

Monique Morrissey of the Economic Policy Institute analyzes the latest projections from the Social Security trustees report.

If nothing is done to shore up the system’s finances, the trust fund will be exhausted in 2033, three years earlier than projected in last year’s report (p.3). When the trust fund is exhausted, current revenues will still be sufficient to pay 75 percent of promised benefits (p. 11). Even in this worst-case scenario, future benefits will be higher than current benefits in inflation-adjusted terms, but because wages are projected to rise over time, these benefit levels will replace a shrinking share of pre-retirement income.
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The projected shortfall over the next 75 years is 2.67 percent of taxable payroll (0.96 percent of GDP). This is 0.44 percentage points larger than in last year’s report (p. 4 and Table VI.F4 on p. 197). Slightly more than one-tenth of the deterioration (0.5 percentage points) is due to the changing valuation period, and the rest is due to updated data and near-term projections and changes in longer-term assumptions.
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The single biggest factor is the weak economic recovery, which has a significant impact on the short-term outlook (slower growth in average earnings, low interest rates, and high unemployment)….

“No End In Sight” For The Unemployed

Writing in The New Yorker, James Surowiecki points out that there is “no end in sight” for the millions of unemployed Americans, especially the long-term unemployed. And to make things worse, policymakers refuse to act.

You’d think that Congress and the Federal Reserve would be straining every sinew to avoid such a fate. It isn’t as if they’re out of tools. A more aggressive monetary or fiscal policy, or both, would help put lots of Americans back to work. We could also follow Germany’s example and subsidize job-sharing programs, which have helped Germany bring down its long-term unemployment rate despite the recession. Sadly, there’s little sign that policymakers have much interest in using these tools. The inertia can be chalked up, in part, to ideological hostility from those who are opposed to more government spending or to anything that might increase inflation. But the bigger obstacle may be psychological: the longer unemployment stays high, the likelier people are to get used to it. Five years ago, an unemployment rate of seven and a half per cent would have seemed outrageous, but it’s possible that five years from now it will seem not so bad. A long-term crisis, after a certain point, no longer seems like a crisis. It seems like the way things are.

Around The Dial – April 20, 2012

Economic policy reports, blog postings, and media stories of interest:

• The New York Times reports on student loan interest rates.
• Scott Shane argues that “small businesses don’t choose low-tax states.”
• Jared Bernstein thinks about debt deleveraging.
• Robert Skidelsky worries about the weight of debt.
• Mark Thoma graphs “the shrinking government sector.”