The Progressive Ensign

insights and analytics to build an economy that works for all

Category: Household Debt

Building Economic Independence Can End Hopelessness

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Image: operationhope.org

The greatest threat to a civil society are people without hope.  They are angry, feel the system is rigged and look for scapegoats as the cause of their poor economic standing. This group left out of the economic mainstreams is located in rural regions where globalizations has taken jobs, and in inner cities where companies have fled to the suburbs. These people that John Hope Bryant calls, The Invisible Class, are off the economic grid, and largely left out of the political mainstream as well except when they demonstrate on the streets when a policy has gone too far.

Economic independence is crucial if we have an economy that works for the 99 % not just the 1 %. To build economic opportunities our governmental policies and programs must ensure a level playing field for all people and support a high quality education for all income levels.

It is about building our society for the common good. It means enabling building enterprises, non-profits and organizations that serve people. Our policies should be about enabling the ability of people to build. We need to rethink our framing of labor from a cost to an asset which it always was. Capital means in the Latin root ‘knowledge in the head’ derived from the capital end of a column at the top in a building.  Poverty is not about money so much as a dearth of relationships and know how to build the skills toward a productive life, where money is a indicator of success.

Somehow the early accountants leading to the Venetians who invented double entry accounting systems with debits and credits called assets money, land and equipment while labor was labeled an expense.  Labor is viewed as an expense to this day because the owner-entrepreneur has to pay employees to work.  Workers have had the ‘cost’ yoke around their necks ever since.  Yet, are employees really a cost?  The staff are the ones doing the work, creating the product or service and solving the problems – money does not create the product or service only people do. CEOs are often heard to say that employees ‘are our key asset’ but then treats them like second class citizens in making policies in the company, gaining a fair share of the profits or enjoying job hours flexibility. Today, Wall Street applauds wages being stagnant for the 80 % while profits go up and wealth accumulates for The Elite.

We need to change our perspective about people and their labor. How do we build an economy that works for all? One way is to focus on enabling, The Invisible Class with economic independence.  Bryant points out that most of these people have credit scores at 550 or below, so they can’t get jobs, buy automobiles, or purchase a home.  In short they can’t participate in the economic mainstream. Bryant’s Operation Hope program teaches those in poverty how to increase their credit scores, start businesses and strategies for accumulating wealth.  By bringing them into the economic mainstream they can begin to feel more confident about their lives and the future. Operation Hope has partnered with Bank of the West who invited Bryant to locate Operation Hope offices inside their branches. Bank of the West in a far reaching vision understands educating prospective customers on the good use of credit and finance will make them better customers and likely to come back for additional services.

We need to learn from programs like Operation Hope, understand its key elements and see how to implement its tenets and power on a major scale like the Marshall Plan if we are to make a dent in the level of poverty in the Heartland or cities.  The only way we are going to increase the size of our economy in a fundamental way is to empower millions of workers who are out of the economic mainstream.  We have more companies going bankrupt then new businesses being started for the first time since WWII. It  is time to recognize we have people who are assets with innovative skills to can build an economy that works for all.

Household Debt Continues to Mount – Students Staggered by Debt

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab.)

Photo: commondreams.org

U.S. household debt is up as families are caught between soaring debt and stagnant wages.  We have noted how wages have been wiped out by inflation in the latest Bureau of Labor Statistics report comparing July of 2017 to July of 2018. The Federal Reserve of New York and Equifax have tallied the last figures on household debt in the charts below.

Sources: Federal Reserve of New York, Equifax, The Wall Street Journal, The Daily Shot – 8/15/18

Student Loan debt continued to increase while credit card, auto and other debt held steady.  The reduction of financial support by state and federal government to higher education is appalling.  Before the Great Recession public funding for higher education was at 50 % still a drastically less then funding in the 1970s.  Now, public funding for higher education is at 35 % leaving universities with no choice but to raise tuition.

Source: kypolicy.org

Public college tuition and fees costs (in 2015 dollars) have almost tripled since 1975, so students needed to borrow money to complete their education.

The student loan predicament is a national disgrace.  It exemplifies how poorly we as a society have supported the higher education.  Our young people are looking to start families and looking to purchase homes yet, they are not moving ahead.  The birth rate is at the lowest level it has ever been in this nations’ history and the number of millennials purchasing homes is a the lowest level it has been since before the Great Recession. Without the younger generation purchasing homes the second stage economy supported by new household formation fades.  The markets for appliances, furniture, home repair and remodeling, carpeting and many other household product sales will fall.

Next Steps:

We said in our blog of May 29th the student debt problem is so great that it is hurting the formation of new households:

In 2003, 42 % of people under age 35 owned a home now only 35 % own a home.  The dream of owning a home is slipping away as our society allows the rich continue to enjoy huge tax reductions in the most recent tax bill, with continuous lack of state funding for colleges and universities and then a paucity of forgiveness programs for graduates.”

Sources: Federal Reserve Bank of New York, US Census Bureau, New York Times – 5/29/18

Further we outlined some recognition of the student debt problem but much more needs to be done.

“As part of the spending bill that Congress passed last month, $350 million was allocated for a fix it forgiveness program for some types of student loans.  Senator Elizabeth Warren has been surveying the issue and individuals trying to take advantage of the provisions where she found that it was quite complex, answers were in complete from the Department of Education and work still needed to be done to setup the process. She found many firefighters and teachers having a difficult time getting into the program.  Prior to passage of the spending bill Senators Whitehouse and Kaine wrote a bill to setup a student debt forgiveness program and get it funded, their bill set the stage for Democrats to push for provisions of the bill to be included in the omnibus spending bill.

This solution is still not enough compared to the huge issue of $1.49 trillion outstanding placing an anchor of debt on our young people when they need to be investing in starting their families and careers and buying homes. In blog of February 16th in our archives, we review an idea to cancel all student debt.  We like the idea moving forward, yet recommend that forgiveness be done in stages, by reducing interest rates, offering Heartland Service, providing a universal national service option and corporate sponsorship of an internship by the student.”

It is unacceptable that our Congress and Executive branch are focused on how to give more money to Corporate Nation States and The Elite, they should be representing us and focusing on how to solve the student loan crisis and create opportunities for our young people and our country.

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