Government is shortchanging young people on everything from education and healthcare to employment and retirement, according to Manhattan Institute senior fellow Diana Furchtgott-Roth and policy analyst Jared Meyer, co-authors of the forthcoming book Disinherited: How Washington Is Betraying America’s Young.
“This betrayal is not intentional,” they begin. “In this book we lay out the scope of the problem and what will be necessary to solve it. Plainly stated, Washington is robbing America’s young. Our country is facing a crisis, and change is essential in order for young people to achieve the future they deserve.”
In retirement, Millennials will be at a dismal financial crossroads, relative to their parents and grandparents, according to the author pair.
“They can either pay substantially higher taxes than their parents do, while not receiving any more benefits, or they can pay the same rate as their elders and receive far fewer benefits,” the write. “Both outcomes are grossly unfair … If trends continue, workers could be paying a combined employer-employee payroll tax rate of 32 percent in 2050 just to cover Medicare and Social Security payments.”
The book also examines state pension and healthcare expenditures, which are massively underfunded in many states (in part due to unrealistic investment return assumptions and various accounting sleights of hand), leading the authors to wonder whether the bankruptcy of a state would require a federal bailout from future taxpayers, e.g. today’s young.
On education, Furchtgott-Roth and Meyer give evidence of the effectiveness of charter schools in states ranging from New York to Arizona and Louisiana, where the Obama administration’s Department of Justice (DOJ) sued to block school vouchers in the name of fighting desegregation. However, the pair points out, “Desegregation expert Christine Rossell looked at Louisiana’s voucher program and found that in most districts, voucher programs actually reduced racial imbalance. The DOJ has since withdrawn the suit, but the fact that it was filed at all on such spurious grounds underscores the extreme hostility of the federal government to state initiative to improve education.”
Disinherited takes a harsh stance against secondary school administrators who push students into four-year college degree programs, eventually leading them to be saddled with an average of $25,000 in debt that cannot be discharged in bankruptcy. Yet many of these degrees have little value in the marketplace, with the New York Federal Reserve estimating 44 percent of recent graduates work in jobs that do not require a bachelor’s degree. And Wells Fargo found that one-fourth of millennials do not think college was worth the cost.
“I have to go back to school. But to go back to school, I would have to add to my debt.”
“It’s both absurd and terrifying how the costs of college have shot up,” the authors quote from an interview with a Millennial woman in her 20s with $70,000 in student debt. “Why is it that college costs keep climbing so much faster than prices in the rest of the economy? My student loan bills are nearly $900 a month. I see a quality-of-life-difference between myself and my friends who do not have student loan debt. I’m at my capacity. Saving is really hard when living expenses are added to my student loan payments. I know this is already setting me back in terms of retirement savings. My future options are limited since, in order to advance my career, I have to go back to school. But to go back to school, I would have to add to my debt.”
Federal lending policies, which do not differentiate or incentivize borrowing for economically useful degrees, inflate the cost of school – tuition has increased by 1,120 percent since records began in 1978, yet food costs have risen just 250 percent over the same period. College presidents have given themselves substantial pay raises over recent decades, even when adjusted for inflation, and payrolls have ballooned for non-faculty members.
The authors recommend that students consider education as a consumption good rather than an investment in many ways, since school administrators have raised costs through various amenities ranging from rock climbing walls to colossal sport stadiums. This perspective would empower students to think more carefully about their post-high school career.
“A multitude of community colleges, innovative new financing models, cheaper online access to high-quality education, and the strength and diversity of American higher education all offer chances at successful reform that would go a long way toward turning around students’ crushing debt burdens,” they suggest.
The book is a slender volume but dense, full of useful academic data, economic analysis and personal interviews showing how Millennials and other young Americans lag behind previous generations in employment, educational outcomes, wealth accumulation and life milestones like marriage and home ownership. They argue this is due in part to flawed policies ranging from union protectionism of weak teachers and inflated college tuition prices to occupational licensing and minimum wage hikes. Additionally, the Affordable Care Act spiked insurance prices for younger Americans and discourages entrepreneurship and full-time employment among young people. And while liberals call for increased government redistribution, Furchtgott-Roth and Meyer point out that our friends across the pond have tried this, with deleterious effects.
“Countries in Europe have higher taxes, free or subsidized education, heavily subsidized health care, and ample leave for vacation, sick leave, and childbirth,” they write. “Yet youth unemployment is even higher in Europe than in America. The unemployment rates for Greek and Spanish hover above 50 percent, and the average for the European Union is close to 25 percent.”
It appears that the Left will try to make income inequality a driving issue during the 2016 campaign. Furchtgott-Roth and Meyer’s book arms the Right with evidence showing this issue in many ways is a misguided one to prioritize. Perhaps the better question is whether we as a society should allow such gross generational inequality. According to Disinherited, the answer is a resounding “no.”