Pulse of the Peninsula: Today’s grads face difficult future

Karen Rubin

Many of our community are celebrating a milestone this month: we call it “graduation” – a word that connotes the end of something. We also call it “commencement,” – a new beginning.

I am quite sure that your graduates did not hear this from their commencement speaker: the American Dream died long ago. Your future is not bright. You will not achieve your potential. You will not have the success you imagine. You will struggle to keep your head above water and retire without living in the street.

Yes, mercifully, the job situation has improved for this year’s crop of graduates, thanks to wresting the American economy from the throes of complete collapse. But the historic highs of the stock market have not translated into significant jobs creation or income growth, except for a small fragment of the population.

Indeed, 93 percent of all the increase in income earned since the Great Recession ended in 2009 went to the top 1 percent of Americans. CEOs today earn 300 to 400 times what the average worker earns – compared to 30 times in 1980, the start of Reaganomics, Voodoo Economics and Trickle Down, and the beginning of the war on unions and the middle class. That means that in just one year, a CEO rakes in more than the lifetime  earnings of 10 families.

Now that the economy is rebounding, how many companies have restored wages and benefits or shared the record-breaking profits and cash accumulated with their workers? 

The gap between rich and poor is just appalling and growing larger. 

The United States has a higher degree of income inequality than almost any other developed country, according to the Gini Index. In fact, the most recent data compiled by the Organization for Economic Cooperation and Development shows that Chile, Mexico, and Turkey are the only OECD member countries that rank higher than the U.S. in terms of inequality. And it’s only getting worse.” 

The top 1 percent now own 40 percent of all the wealth of this nation; the “bottom” 60 percent (which includes the entire middle class) own just 5 percent.

Instead of being the country with the highest mobility, the United States has become one of the worst for enabling a youngster born to a certain “class” rise up to where their talent and drive can take them.

Maybe our community doesn’t care much, because there is the expectation that our kids, who have come out of a privileged community with all the advantages and a significant number now graduating prestigious schools, might think their “birthright” is to  be in that 1 percent – by hook or by crook (hence the SAT cheating and the recent insider trading  scandal at SAC Trading, founded by Steve Cohen who grew up here in  Great Neck). 

But that is not a strategy, and no way to build a society.

The college diploma isn’t the automatic ticket to success it once was, two decades ago, but it is increasingly the ticket required even to get on board the journey. No ticket, no travel.

For two decades, I have been questioning and criticizing the high cost of college tuition – after all, most of the most expensive colleges are also the so-called Ivy League, places that have been on their property for a hundred years, whose buildings are paid for by generous and grateful alums, and who continue to amass enormous endowments. 

The term is short, the classes are enormous, so how do they justify $40,000 tuitions (and yet, people balk at the notion that their secondary schools spend $20,000 per pupil). 

Part of the answer is that some schools use the tuition as status – you can’t have a Yale, Harvard or Princeton charging less than University of Michigan or University of Wisconsin, could you? And increasingly, now, they are using high tuition as a way of being able to pick-and-choose their student body, because they actually endow students who are worthy.

More than half of this year’s graduates will start off their lives burdened with student debt amounting to tens of thousands of dollars – the amount of outstanding college debt exceeds consumer debt. It is akin to indentured servitude.

Seven million people are in jeopardy of seeing their interest rate on their federal student loans double on July 1, from 3.4 percent to 6.8 percent, unless Congress (that is, the Republicans) pass the Students Loan Fairness Act (introduced by Sen. Elizabeth Warren) keeping the rates low. 

I would seriously doubt whether the Republicans allow it to pass, because it suits their purpose to keep loan rates high, to keep students in a state of submission (cash is speech, after all, and if you take away the cash, young people don’t have the same access to political expression), while they do some song and dance about the deficit. They have no problem, though with the Big Banks being able to borrow money through the Federal Reserve discount window at 0.75 percent. – that is, virtually free.

Student debt becomes a shackle. It factors into what jobs graduates can accept, what careers they can pursue. It means that young people can’t afford a house, so remain perennial renters, delay starting a family, don’t have the ability to save for their own children’s college or their own retirement.

Ah, retirement. There is a connection between retirees today and our newly minted graduates who will be the retirees of tomorrow, whose futures are being decided now.

The mobility that should have been injected into the system by the Baby Boomers, 10,000 of whom reach retirement age each day, isn’t happening to open up opportunities for our graduates. 

Part of the pressure on jobs has been that people who are old enough to retire – if they haven’t been “excessed” and now winding down their savings –  can’t afford to retire. They saw their own retirement savings slashed by the banking debacle, and even though the stock market has hit record highs, somehow those retirement funds don’t seem to have recovered as much. What is more, retirees rely a lot on interest on their savings and bonds, which now are near zero. 

Social Security isn’t the problem – it is the only thing standing in the way of the United States plunging into being a Third World Country.  The average senior lives on less than $20,000 a year and the average payment from Social Security is $15,000; 98 percent of retirees depend upon Social Security wholly or for most of their retirement. 

“Fifty-eight percent of American workers are not even in a pension or 401(k) plan,” Steven Greenhouse wrote in the New York Times, May 14. “How They Do It Elsewhere. “One-third of America’s retirees get at least 90 percent of their retirement income from Social Security, with annual benefits averaging a modest $15,000 for an individual. And just ask any participant in a 401(k) plan about the scary roller-coaster ride of the last six years.”

There are additional strains on mature workers and middle class. Like the college loans which will revert to artificially high rates, homeowners who have done everything right, have been prevented from refinancing to take advantage of historically low rates. Do you think it a coincidence that Republicans blocked Obama’s “Built to Last” legislation that would have paved the way for thousands of homeowners to cut their mortgage payments by $3,000 a year?

You can go down the list of jobs initiatives that aren’t happening, while everything is in place to keep wages down while people pay through the nose for necessary services, like health care (kept artificially high), energy costs (perpetuated by Big Oil), tax policy which continues to reward companies that off-shore and outsource jobs. Infrastructure Bank? No way. But you know what will force the rebuilding? Disasters. We have an economy increasingly based on disaster recovery. 

Meanwhile, three stories last week are revealing/define the course we are on (and I don’t mean IRS,AP or Benghazi): the deficit is coming down faster than expected, indeed faster than is “healthy” for the economy; the retirement crisis (“Dow 15,000 and the retirement crisis ahead,” Washington Post, May 8, while the New York Times, May 15, extolled “How They Do It Elsewhere.”) and the permanent jobs crisis  (7.5 perecent unemployment may be the new normal), as the New York Times explained May 3, “The Idled Young Americans.”

The net effect of the dual Jobs and Retirement crises is that earnings and career aspirations will forever be stunted. Our kids are graduating to a lower rung on the career ladder than they might have in more vibrant times (the 26-year old billionaire being as common as Powerball lottery winners).

One can argue that wages and income are low because of market demand – lots of people (something like 22 million who are either unemployed or underemployed) all competing for jobs, so no one can afford to stand up and say, “Please, Sir. Can I have some more?”

And now, even Immigration Reform (the way the Republicans are fashioning it) promises to punish our college graduates. The so-called reform wants to give an automatic visa stamp to professionals who seek to work here. Well, the interesting thing is that it is professionals and managers who are finding it hard to get jobs, even engineers and science workers (especially with Sequester). It’s ironic because the 11 million so-called undocumented workers – the ones who are taking the jobs that Americans won’t do – are not the skilled professionals at all. They are laborers, landscapers, domestics. So how is this Immigration Reform discussion going to help our kids?

Solutions

There are solutions to restoring mobility for our graduates, eliminating the financial insecurity of BabyBoomers, and reducing the gap between Rich and Poor (that is, restoring the middle class) that begin with:

A living wage – immigration reform, minimum wage and paycheck equity legislation should be implemented with the ultimate goal that workers are not pitted against each other to artificially depress wages and income, and workers can take home enough income to support a family and have enough to set aside for education, college and retirement by working fewer hours, instead of two and three jobs each.

Reining in out of control CEO compensation – tax policy and SEC rules should take away the tax incentives for CEO compensation wildly out of whack with wages and shareholder dividends.

Social Security and Medicare – should lower the age at which people can access retirement benefits (Social Security) and Medicare (by allowing people to pay in). This will promote financial security, open up jobs for younger workers, and lower (not raise) social safety net spending, ultimately reducing the nation’s deficit and promoting economic prosperity. 

To bolster Social Security, eliminate the cap on which people pay – it is arbitrarily set at $113,700 so that 98 percent of Americans pay payroll taxes on 100 percent of their income, while the 2 percent pay hardly any. Instead, payroll taxes should apply fairly to every dollar of earned income (then you might even see the payroll tax actually come down, bolstering consumer spending and unclogging upward mobility). 

Take away the shackles of our indentured servitude: Reform the tax code: It goes without saying that the tax code should be reformed so that the government can spend money to upgrade infrastructure, address climate change and renewable energies (which will cut down on government expenses for disaster aid), install a Smart Grid, promote jobs creation and manufacturing in the U.S. while disincentivizing outsourcing and off-shoring jobs and revenue. 

The tax code penalizes wages and rewards wealth. That is just wrong. It results in the budget deficit which becomes the rationale for sequester, the single most economically destructive policy implemented by Congress (and what can you point to that Congress has done to actually promote jobs creation or economic prosperity?)

Rationalize the costs of necessaries: including health care and energy. Health care is not a commodity subject to market forces, as recent investigative articles have to clearly demonstrated. And energy costs are manipulated so that they do not actually reflect supply and demand. Other countries are adopting feed in tariffs, whereby individuals who generate more energy than they use from renewable sources can sell back to the utility. Canada is doing it. China is doing it.

As far as graduation speeches go, I was struck, particularly, by President Obama’s speech to the graduates of Morehouse College, in Atlanta, one of the few remaining all-black, all-male colleges. It was profound and inspiring, where he urged these young men to take on personal responsibility not just in their professional lives but in their personal lives.

But I look, too, at his commencement speech to Ohio State University on May 5, a university whose motto is “Education for Citizenship.” If anyone has justification to be bitter and beaten down, it is Obama, but he rises above cynicism and takes from that seemingly inexhaustible well of hope:

“And where we’re going should give you hope,” he told the graduates.  “Because while things are still hard for a lot of people, you have every reason to believe that your future is bright.  You are graduating into an economy and a job market that are steadily healing.  The once-dying American auto industry is on pace for its strongest performance in 20 years – something that means everything to many communities in Ohio and across the Midwest.  Huge strides in domestic energy, driven in part by research at universities like this one, have us on track to secure our own energy future.  And incredible advances in information and technology spurred largely by the risk-takers of your generation have the potential to change the way we do almost everything.

“Still, if there is one certainty about the decade ahead, it’s that things will be uncertain. Change will be a constant, just as it has been throughout our history.  And we still face many important challenges.  Some will require technological breakthroughs or new policy insights.  But more than anything, what we will need is political will, to harness the ingenuity of your generation, and encourage and inspire the hard work of dedicated citizens.

“To repair the middle class; to give more families a fair shake; to reject a country in which only a lucky few prosper because it’s antithetical to our ideals and our democracy – that takes the dogged determination of citizens.

“To educate more children at a younger age; to reform our high schools for a new time; to give more young people the chance to earn the kind of education you did at Ohio State and make it more affordable so they don’t leave with a mountain of debt – that takes the care and concern of citizens.

“To build better roads and airports and faster internet; to advance the kind of basic research and technology that has always kept America ahead of everyone else – that takes the grit and fortitude of citizens.

“To confront the threat of climate change before it’s too late – that requires the idealism and initiative of citizens.

“To protect more of our kids from the horrors of gun violence – that requires the unwavering passion and untiring resolve of citizens.

 “Fifty years ago, President Kennedy told the class of 1963 that ‘our problems are man-made – therefore, they can be solved by man.  And man can be as big as he wants.’  

“We are blessed to live in the greatest nation on Earth.  But we can always be greater.  We can always aspire to something more.  That doesn’t depend on who you elect to office.  It depends on you, as citizens, how big you want to be, and how badly you want it.

“Look at all America has accomplished.  Look at how big we’ve been.

 “I dare you to do better.  I dare you to be better.

“From what I have seen of your generation, I have no doubt you will.  I wish you courage, and compassion, and all the strength you need for that tranquil and steady dedication of a lifetime.”

Whenever  I am depressed about where this country has been brought down  – which is daily – I will reread these lines.

More important, I will take them to heart: “I dare you to do better. I dare you to be better.”

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