Current reporting values total US Student loan debt at approximately $1.5 Trillion and rising steadily. It is already more than half of what US mortgage debt was in 1996 and more than 10% of the value of current US mortgage debt, which may give you some idea of how much debt overall has ballooned in the last two decades, but it is also quite telling about the problem Millennials in particular are facing.
With the tail end of Millennials already reaching the age of 18 last year and the leading edge of Generation 9/11 which is considerably larger than even the Millennials starting to turn 18 this year, as a voting block that generation is now already larger than the Baby Boomers. The sandwich generation, AKA Generation X won’t surpass the size of the Boomers until 2028 based on most demographic projections and actuarial tables. It will of course remain smaller than the Millennial generation for the remainder of its days. Like the Silent Generation before it, Generation X is a small generation, and like the Silent Generation before it has subtly shaped the thinking of the generation following in its footsteps.
The Silent Generation gave us Rock & Roll, the Beats, many of the leaders of the Desegregation and Civil Rights Movement and more than a few leaders of the late 1960s Anti-War Movement, Abbie Hoffman, born in 1936 for example was squarely a member of the Silent Generation. Generation X gave us Grunge Rock, Gangster Rap, and most of the Internet as we know it. Generation X built the Dean campaign online in 2004 with the help of the leading edge of the Millennials, and built the online progressive alternative media that helped empower the Obama campaign in 2008 and which has been largely responsible for the success thus far of the Sanders campaign.
In the current campaign Xer’s and Millennials have been relatively unified in their support for Bernie, 84 percent of Millennials AKA voters under 30 chose Bernie in Iowa according to exit polls. Democrats between 30 and 44, the leading edge of the Millennials and the trailing end of Generation X voted 58 percent for Sanders. The leading edge of Generation X and the trailing edge of the Boomers those 45 to 64 voted 58 percent for Clinton. Seniors including Boomers, the Silent Generation, and the last of the World War II generation voted 69 percent for Clinton. There are no breakdowns for voters between 45 and 50, but I suspect Xers in that group likewise broke for Bernie.
Why do I suspect that? Because Xers who are voting in primaries are tuned in politically to what is happening in the country and as a sandwich generation are the most likely to be significantly harmed by the next looming political wedge issue that Bernie’s campaign may stave off, while the Clinton campaign ignores the wedge issue that could turn the overwhelming majority of Millennials into Republican voters unless Bernie’s revolution is successful.
Having said that 40 is the magic number in terms of the breaking point for a change in the national zeitgeist. In 1996, when those turning 40 this year were turning 20, the total value of the US Mortgage debt was $2.5 Trillion, Credit Card Debt peaked as a percentage of US Household debt, and from 1966 when it began until 1996 only $239 Billion had been borrowed from the US Student Loan Program, only about $150 Billion in Student Loan debt was outstanding, and fully 1/3 of that Student Loan borrowing $78 Billion had occurred in FY ‘94, ‘95, and ‘96. The people turning forty this year were 18 and starting college in the summer of 1994. Today the total value of US Mortgage debt is $12.5 Trillion, the total value of US Student Loan debt is $1.5 Trillion, and Credit Card Debt has continued its decline as a percentage of Household debt, but is valued at approximately $900 Billion. In the decade preceding 1996 economic growth was fueled with a rise in credit card debt. From 1996 until today, economic growth has been fueled with an environment that has encouraged increased borrowing against artificially inflated home values, while economic weakness has been hidden by funneling an ever increasing percentage of the population into higher education where they are saddled with debt that is non-dischargable in bankruptcy.
While Student Loan debt has grown to 10 times its 1996 size, US Mortgage debt is now 5 times its 1996 size, but those numbers are meaningless without context. In 1996 the US GDP was $8.1 Trillion, and mortgage debt represented about 1/3 the value of the US economy. In 1996, Student Loan debt represented about 2% of US GDP. In 2015 US GDP was $17.9 Trillion, which means that US Mortgage debt represented about 2/3 the value of the US economy, and Student Loan debt represented nearly 10% of the US GDP, which had doubled and then some during the same period debt had ballooned to 5 and 10 times their previous values. It seems obvious that unsustainable debt growth has fueled the US economic growth for the last four decades, especially when government debt growth is factored in. In 2000 the US National Debt was only $6 trillion, about 2/3 of GDP. Today US National Debt is more than $19 Trillion, in excess of 100% of US GDP. In 1980, US National Debt was LESS THAN $1 Trillion in 1980 US GDP was $2.86 Trillion, so the National Debt only represented about 1/3 of GDP.
Republicans are well aware that racial and sexual orientation wedge issues will not resonate with Millennial voters. They won’t, and they don’t resonate with Xer’s either. The Republican’s primary voting block is Seniors which has served them well, but the Millennials today have the numbers to out vote the Boomers, but not the Boomers AND the Xer’s. The Boomers need to pay particularly close attention to the Xer’s right now because of this reality.
The only voting block that can protect the Social Security set from a Republican Party whose first vote during the current Congress was a vote to cut Social Security by way of a House Rules change requiring such cuts, need to understand that if Democratic voters who support Bernie in Generation X and Millennials stay home this fall, which is likely if Clinton is the nominee, then Social Security will not survive the next decade as a program.
Fleming v. Nestor a US Supreme Court case from 1960 held that Social Security benefits could be denied to anyone by the rules enacted by the government, regardless of tax payments made into the Social Security system. That’s right, in 1960, the Warren court held that Social Security was an income tax and a completely unrelated welfare benefits program that creates no property rights for the taxpayer. Social Security can end as a welfare program tomorrow.
What does Social Security have to do with student loan debt that started this article?
Well in 1996, the present value of today’s student loan debt would have been equal to about half the value of mortgage debt held in the United States. Today that student loan debt represents just 10% of the value of home mortgage debt in the United States. This means that primarily Millennials and Xer’s have student loan debt nearly equal to the mortgage debt their parents and grandparents faced 20 years ago, but the one-two punch of reality is that to purchase a home today, Millennials or Xer’s will likely need to take on mortgage debt equal to 5 times the mortgage debt their parents or grandparents faced.
The other startling reality is that youth unemployment is almost double the overall unemployment rate, and jobs in general have lost their value for Millennials and Xers versus their Boomer parents and grandparents. Real wages have steadily shrunk from 1979 until today. The buying power of Millennials and Xers as young people versus their Boomer parents and grandparents has eroded at the same age, while mortgage debt and real estate costs in both the form of rents and mortgage payments have ballooned. By 2007, the average middle class American family was earning $17,000 LESS than they were in 1979 in terms of buying power thanks to the rising inequality in US incomes. It has not improved dramatically in the intervening years.
At this point, Xer’s in their mid-thirties to their very early fifties have invested heavily through taxes into the Social Security system. Xer’s have a vested interest in Social Security, but with the retirement age already 67, and most Democratic members of Congress, Secretary Clinton, and even President Obama willing to negotiate away more Social Security rights, the size of the Millennial voting block and the current size of student loan debt should be very alarming for Boomers.
Again, why?
Because 50% of those student loan borrowers are in default on that student loan debt, and this fact is creating a significant wedge issue for the Republicans that may be exploited in this election against Secretary Clinton, should she become the nominee.
These Millennials and Xer’s in default on their student loan debt are not an insignificant portion of the population, and their influence on their peers should not be discounted. They are educated and the system is failing them. They are the canaries in the coal mine, but more importantly they are already divested from and disenfranchised from the Social Security system. Those individual in default on their student loans are ineligible to receive Social Security benefits. Yes, they can rehabilitate their loans and potentially restore their Social Security rights, but as the law is presently written these student loan borrowers have no incentive to contribute to the Social Security system as taxpayers.
What is more, these individuals in default are likely to fall at the lower end of the spectrum of earners and have extra incentives to minimize payroll deductions for ordinary income tax as well. These individuals in default are ineligible for tax refunds, including earned income tax credits they may ordinarily be eligible to receive. This problem has literally created a disincentive to pursue higher education. The current system means that the peers of Millennials who choose to avoid pursuing higher education and the debt that accompanies it for 60% of US students leading to a default for 50% of those borrowers will end up far better off economically than 30% of all those students who go to college. We have created an economic and educational system that incentivizes ignorance and the low wages that accompany lower levels of education.
Do you see the wedge issue yet?
With Xer’s already certain that the retirement age for Social Security means it is unlikely that they will ever recoup the taxes they have paid into the system, and a large portion of the educated, active and involved Millennials facing overwhelming student debt that disenfranchises them from the Social Security system, the Republican Party has created a ready made wedge issue that could allow them to win a majority by focusing on the needs of Millennials and Xer’s by promising to end the Social Security tax and phase out the Social Security welfare program. Hey Boomers, are you awake yet? Your only allies are Generation X, who has invested in the Social Security system, but who is already unlikely to see any benefits from those taxes. Only Senator Sanders is looking to expand Social Security benefits. Secretary Clinton has not supported expanding Social Security. Secretary Clinton has not supported repealing the tax cap on Social Security for high income earners. Senator Sanders has supported repealing the tax cap.
The Millennials already outnumber you, and there are enough Generation Xers who can potentially be peeled off by a Republican frontal assault on Social Security to end the program when you need it most. Do you understand now, why the Sander’s campaign is far far more important for your continued survival than it is for the Millennials?
Have you considered the possibility that ending Social Security is likely to increase defaults and foreclosures amongst Seniors, which will drive down home prices. This would also be a very good thing for Millennials. Ending Social Security, and student loan debt is the next great Republican wedge issue and an extra 12% in Millennial paychecks helping to pay off those student loans is better than the fat lot of nothing that Clinton is proposing. The reason Generation X is voting for Bernie is obvious, as a member of the Silent Generation, another sandwich generation stuck between two larger generations of Americans he can see the demographic risk to Social Security. If the current system continues it may survive for some Boomers, but it is gone for Generation X. There is no question about that because unless this government begins financing itself by taxing millionaires and billionaires rather than borrowing from them, it will be bankrupt.