Ever feel like your parents’ “career advice” doesn’t align with the real world? Maybe they’re baby-boomer-era optimists who chirp that queasy “follow your dreams” trope as your student debt balloons to the size of a small mortgage. Or maybe they insist you “ride out the recession” in graduate school, driving you straight into debtors’ prison.
Things have changed since their time. The economy is bleak. About 50 percent of today’s college graduates can’t find jobs. Politics are bleak, too. But some politicians’ ideas are still better than others. If either candidate can promise you the same shot in life your parents had, it’s Mitt Romney.
Let’s start with the unemployment rate — 7.8 percent as of last month. Here’s something darker: the loss of construction and manufacturing jobs that aren’t likely to return will probably mean a long road back to full employment.
Manufacturing shrunk from 31 percent of employment in 1950 to 4 percent today. This is because new technologies allow us to produce much more with far fewer workers — the same reason we don’t all farm anymore. Construction was fueled by the housing boom. We now have more houses than we can buy.
These workers need to be retrained for new industries like healthcare and technology services. That’s Romney’s plan. Obama proposes a $447 billion “American Jobs Act” designed largely to subsidize construction. He also claims he’ll add 1 million manufacturing jobs.
This is nostalgia. And it overlooks the next generation — us — who have no intention of working in these industries. Most of us want upwardly mobile, professional jobs which actually can bounce back.
They would do so more rapidly if America didn’t have a 39 percent corporate tax rate — the highest in the world. Romney wants to lower it to 25 percent. This would increase government revenues by encouraging firms to invest in America and would help college grads start careers.
But a job won’t do you much good if 71 percent,the number projected by economists Alan Auerbach and Laurence J. Kotlikoff projected for future generations in 1994, of every dime you make for the rest of your life pays for Medicare, Medicaid and Social Security. No kidding. If these programs aren’t curbed, your future is ruined.
Today, roughly half of the taxes taken from your paycheck go to just those three entitlement programs. Meanwhile, healthcare costs keep rising and hordes of baby boomers are retiring, all of whom are living longer and all of whom left fewer kids — us — to foot the bill. If taxes stay fixed, only 1 percent of revenue will be left for discretionary spending — like education, the environment, food stamps and infrastructure — by 2020. By 2052, all money will go toward entitlements. To avoid this, your lifetime tax burden must increase to 71 percent.
We must reduce these programs’ costs. But Obama champions security for seniors, meaning he will leave entitlements unchanged. Romney is our advocate on this. He proposes raising the retirement age, which could close 70 percent of Social Security’s funding gap.
After paying your new taxes, check your health insurance bill — it’ll cost one third of your income by 2030.
That’s because, currently, insurers are almost monopolies. Why? People who accept their employer’s health insurance receive tax credits, while those who shop around don’t. Employers, in turn, can only choose from the handful of insurers licensed by their state.
If consumers could shop for good insurers at low prices, competition would drive down insurance costs. Insurers could restore profitability by pressuring hospitals to lower prices. Hospitals have the tools: Philly’s life sciences industry churns out cost cutting innovations each day. But only competition spurs frugality.
“Obamacare” proposes to solve a problem of costs by spending more — roughly $1.7 trillion between 2014 and 2024. Romney addresses the problem directly. He will end employer tax credits and allow us to purchase insurance from any state.
Math quiz: After cutting your income 71 percent then docking one-third of what’s left for health insurance, how much is left to repay student loans — currently $26,000 worth on average?
Answering “not enough” isn’t an option, since student loans can’t be cleared by bankruptcy. That’s why federal Pell Grants and Stafford loans aren’t doing us a favor.
Since the higher education industry can’t quickly scale-up — new college dorms are expensive — handing college students $65 billion in tuition subsidies simply inflates prices. Private schools raise tuition 80 cents for each $1 of new Pell Grants. Public schools cut aid by 60 cents.
Obama doubled Pell Grants from $18 billion in the 2008-09 school year to $36 billion in 2011-12. That equals roughly $11.5 billion in tuition hikes and lost aid — or about $4,000 per U.S. student.
Tuition subsidies were meant to help the poor. Now federal aid reaches families making up to $200,000. Romney will help curb tuition subsidies — and thus tuition — by refocusing aid on the needy, lowering student loan burdens for the rest.
The Next Four Years
Your student loans should buy more than a future spent nobly repaying your parents’ Social Security debts while your headaches go untreated by Gucci-priced healthcare monopolies. Policies matter. Vote for good ones.
Carl O’Donnell can be reached at email@example.com.