FINDING A FUTURE FOR OUR CHILDREN

Education is the most powerful weapon which you can use to change the world. ~ Nelson Mandela

Now that the super-committee's decision-makers (what an oxymoronic phrase that is) have thrown in their towels and declared failure (blaming everyone else), the rest of us are left facing a probably bleak fiscal future to be dictated at some point by international bond markets. These 12 politicians now have been added to my growing list of cowards – afraid to solve pressing problems, like our lack of adequate growth and economic imbalance, with solutions that may either go against their rigid political orthodoxy or upset folks that fund their campaigns. I'm convinced members of Congress and virtually every other politician no longer have any idea about what really constitutes the public interest. They don't care; they only seek to serve narrow, private interests, not the broader, longer-term public interest. Our children are ultimately going to suffer most from this breakdown.

As I've said before, everyone of us 312 million US residents has a stake in resolving the over-riding issue of getting our country back in balance with equitable growth. However, as a parent with a son now in college, I have a particular concern about what can be done to prevent his generation (the Millennials) from becoming lost in the undertow of our persistent recession and political dysfunction. The Millennials' welfare is vital if the rest of us want to realize a sustainable future.

His generation has begun to show the rest of us how upsetting the lack of equitable opportunity can be; most clearly in venues with the Occupiers. In my view it's principally set off by three inter-related trends – the lack of sufficient economic growth, the unswervingly ideological basis for politicians' hypocritical non-decisions and the consequences of crony/predatory capitalism.

These trends have considerably weakened the axiom held by generations of Americans, "Going to college will guarantee you a good job." The table below shows the steady rise in the proportion of young adults who have received a college B.A. degree since the beginning of the 20^th century, based on Census data. College has been an intimate part of realizing opportunity and achieving "the American Dream." As parents we've promised our kids that by working hard and graduating from college, they will prosper by having a good job and an adult life better than ours. This promise is the same one my parents, and their peers, offered me and countless other young people.

Year	Proportion of Young Adults with a College B.A.
1905	2%
1930	4%
1950	5%
1960	10%
1970	11%
1980	20%
1990	24%
2000	24%
2003	27%
2009	30%

Except now it isn't working out that way. Our children have been graduating from college in ever-increasing numbers, but real wages have been stagnant and "good jobs" have become an ever-distant prospect. I'm feeling the very disturbing prospect that my promise about post-college success may turn out to be baseless.

Here's my family history regarding college. I grew up in a household where there was never any doubt what I would be doing after graduating from high school: I was going to college. Beginning more than 50 years ago, many parents like mine have spoken this mantra to insure their kids' hopeful triumph as adults. Our kids are the fourth generation of my family who have gone to and graduated from college. When my grandfather graduated in 1905 from what would later become the University of Massachusetts, less than 2% of young adults – YA's – (then meaning almost exclusively men) got college degrees. When my mother and father graduated from their colleges in the early 1930's (not an especially propitious time), less than 4% had college degrees. The B.A. my mother received in 1932 truly distinguished herself, only 1% of females graduated from college. My, have times changed; last year more women attended college than men and received nearly 60% of the B.A.'s awarded.

I received my B.A. in 1967 when about 10% of YA's had college degrees. In the 1990's, when our daughters finished college, 21% of YA's had a college degree. By 2010, about 33% of high-school graduates entered college. Currently, more than one-half of children from higher-income families complete college, up from one-third 20 years ago. As the table shows, college-graduating has steadily broadened in the US for a long, long time. This has been a very good thing from many perspectives.

But now that 30%+ of YA's have college degrees there may be some downside consequences, especially when macro-economic growth is woefully inadequate. Unemployment rates of teenagers (16-19 yrs old) and young adults (20-24 yrs old) remain alarmingly high: the Oct 2011 rates are 24.1% and 14.0%, respectively.

In the moribund labor market, having a B.A. no longer assures young people of the "meaningful" jobs we parents (and their teachers) have been promising throughout their lives. Instead, more and more newly-minted B.A.'s are under-employed, waiting tables, selling shoes, flipping burgers or whatever – if they find a job at all. Competition for jobs by college graduates has become more intense. Thus, employers have become increasingly demanding about who they hire, even among college graduates. This naturally creates deep distress and resentment – a likely contributing factor to the advent of Occupiers.

In effect, having a B.A. is becoming the "new normal" minimum requirement for a broader number of jobs, some of which may not really require this skill level at all. This requirement wasn't present when a smaller minority of job market entrants had B.A.'s until the 1990's, when the US economy was growing strongly, and when roughly one-in-five young adults were college educated. But now things are different because having a B.A. is less distinguishing.

Does it remain true that an individual receiving a B.A. is a good thing when applied to ever more young adults? Most certainly, the US has long benefited from having more YA's receive B.A.'s. and will continue to. Nevertheless, from a macro perspective, the relative value of completing college is probably diminishing. The law of diminishing returns holds for B.A.'s as well as virtually every other good or service people purchase. This is in part why employers can be more choosy about job requirements – continued high unemployment magnifies this further.

Given this, you might argue that to really distinguish themselves YA's now need to get a post-graduate degree (a masters or OMG, a Ph.D.) – the way Boomers like me did with a B.A. in the 1960's and 1970's. Predictably, applications to graduate schools have been progressively increasing. In 2009, almost 8% of adults had received master's degrees; almost 3% have Ph.D.s. I'm not saying your typical YA needs to get a post-graduate degree to get a job; I am saying that as more and more YA's receive B.A.'s the relative value of this achievement will diminish as a distinguishing part of a resume.

Nevertheless, the formidable education industry still shouts from the tops of its classroom buildings, "You need a college degree to get a good job." And YA's and their parents understandably believe it, because there are a myriad of statistics that back this claim up. As an example, household income is strongly correlated to educational attainment; 2009 median weekly earnings for a college graduate were 64% more than that for a high-school graduate. But this increased expected income is now paired with much increased costs of getting that degree.

How can we adults help our children's generation secure a satisfying, remunerative future and not become "lost"? In the most general sense, we can do everything possible to increase macro-economic growth. [This week the Dept of Commerce reduced its estimate of 3^rd quarter GDP growth to an abysmal 2.0%, from the previously-stated 2.5%.] With higher growth, more jobs will be needed and more Millennials will be hired. Growth of at least 3.5% will do wonders for everyone's economic well-being.

We also can invest in them, provide opportunities for them and insist that spending more funds on prisons than higher education is not a recipe for social or economic progress. Boomers must pressure politicians to increase the availability of Pell Grant and other federal and state college- and vocational-training funding. I don't have much issue when college tuitions increase at the same rate as inflation, but recent increases at the University of California and Cal State campuses (and many other public and private colleges) are up to four (4) times as great as inflation. This level of unjustified tuition increase has been all too normal and illustrates the significant inefficiency (and audacity) of many higher-education institutions.

Boomers should adopt an uncharacteristically magnanimous approach to insuring more balanced growth by agreeing to lessen our public retirement costs (see my Nov 11 post) as a means of funding the Millennial-targeted benefits discussed above. Why should we do this? Because Millennials will soon be paying for our public retirement and Medicare expenses. And because Millennials are our future; the better off they are, the more secure we Boomers (and the rest of the US) will be.

GETTING TO BALANCE

"Action is at bottom a swinging and flailing of the arms to regain one's balance and keep afloat." ~ Eric Hoffer

What actions can we take to get the Bottom 50% (or even up to 80%) of our citizens back afloat and to put our nation more in balance?

The dictionary defines balance as: a state in which various parts form a satisfying and harmonious whole and nothing is out of proportion or unduly emphasized at the expense of the rest. Sign me up for balance. It seems like a utopian goal, and totally divorced from what has been and still is happening in our political realm.

A Greek citizen was recently quoted as saying, "The politicians are playing games with the people." This applies to us as well. Our politicians are not telling us the truth about the current and future state of our economy – that due to too slow growth, our aging population and crony capitalism, soon we won't be able to afford the fiscal commitments we've promised ourselves and others. It's not just the politicians though; it's us as well who refuse to acknowledge (and accept) these eventualities. We seem all too content to keep treading in the river of denial. What we need is more balance, perspective and unselfish action.

Although it seems next to impossible now, what can we do to renew and regain balance? Could each side – the Distracted Democrats and Ranting Republicans –come in from the cold and somehow cast aside their narrow, petty vituperativeness and become harmonious enough to create economic policies designed to move the nation forward towards higher growth with more genuine opportunity for 100% of US citizens? Impossible? Hopefully not.

Here's my suggestion for how this could happen with the following 6 actionable steps.

1.      Each political party and its members agree to behave reasonably with each other. This represents a colossal change from current manners, I admit. Why would they change their negative behavior? Because we would have the nation's political leaders be required to meet with their young children under 12 years old (or their grandkids). The children, having purer hearts and minds than their parents/grandparents, would look them straight in the eye and demand the leaders (the dads/moms and grand-fathers/grand-mothers) pledge, promise and cross their hearts to start acting as responsible grown-ups, be nice to everyone and don't hold grudges or pick fights. In other words, stop throwing sand in the sandbox making life difficult for others, and start doing their jobs (making difficult decisions to serve the broad, long-term public interest). Am I being woefully naive that our politicians would lie to their own children or grandkids? I hope not. In this sense, our leaders need to be K-5 children-like humans with a natural, unadorned sense of fairness and cooperation. They immediately need to stop acting like feckless, self-righteous middle-school bullies. As re-emerged children, Congressional leaders and the President agree to be bound by the decisions made in the following 5 sets of activities. If they don't agree to be harmonious to each other and pass the 2012 New Balance Act (see below), they will receive the following "fiscal timeout": salaries of Congress members and the President will be immediately reduced by 6.4% (the same reduction that US median household income has fallen since 2007). In the future, these leaders' salaries will continue to be adjusted yearly by the change in median household income, not the cost of living.

2.      Both political parties each agree to provide numeric values for three macroeconomic objectives; (1) the US's nominal GDP growth rate for 2012Q4 (It should higher than this past quarter's 2.5% rate), (2) the overall unemployment rate for 2012Q4 (Hint: it should be lower than October's 9.0%), and (3) FY2013 federal deficit, as a percent of expected 2013Q4 GDP, (Hint: it should be no higher than the 8.6% level, now estimated by the Congressional Budget Office - CBO). A 5-person Panel of Expert Economists (PEEs) – 2 named by each party, 1 by the CBO – will "arbitrate" these GDP growth, unemployment and deficit numbers and will decide the numeric value of these 3 objectives within 2 weeks (after all these people are practicing, knowledgeable economists; they've been thinking about this for a long time).

3.      The PEEs decision about these 3 objectives will be submitted to a 12-member Jury of Citizens (JoCs), picked at random from people who voted in the 2008 Presidential election (with 3 members from each of the 4 Census regions and an equal over-all balance between registered Republicans, Democrats and Independents/Other parties), for their review. The JoCs will meet with the PEEs in either Winnemucca, NV or Weed, CA [Because they're way far away from Washington, DC, have cool names and (based on personal experience visiting and/or staying in each) are typical, small (less than 10,000 population) American cities where real folks live.]. The JoCs will have 1 week to prepare their review comments to the PEEs, the Congress, the President and the public.

4.      After receiving the JoCs review at the retreat's conclusion and within 1 week, the PEEs will provide their concluding decisions regarding their final assigned growth rate, unemployment rate and deficit objectives to the President, the Congressional leaders, both political parties, the JoCs and the public.

5.      Once these objectives have been specified, the PEEs will utilize the nonpartisan CBO's macroeconomic forecasting model to run a series of simulations assessing annual forecasts over the next 3 years for GDP, unemployment and deficit and related parameters. The PEEs will report within 2 weeks describing these detailed results. Their final report will be submitted to Congressional leaders, the President, both political parties, the JoCs and the public within 2 weeks.

6.      Within 2 weeks, the Congressional leaders from both parties will jointly submit for passage the 2012 New Balance Act, which presents economic policies to achieve the agreed-upon economic objectives consistent with more balanced growth.

I would hope Congress (with the President's active support) will include at least the following 9 initial actions within the 2012 New Balance Act. These actions will get the US moving in the "right direction" and will spread the pain sufficiently broadly so no germane interested groups are excluded from realizing that moving together towards balance means everyone must make changes and sacrifices.
1. The Bush income tax cuts will be ended; on Dec. 31,, 2011 (as now planned) for folks making more than $200,000, and on Dec. 31, 2012 for the rest of us. The social security (FICA) tax will apply to all earned income, not capped at $106,800 as it is now. The carried-interest loophole will be closed, effective Jan 1st, 2012. Other tax loophole closings are welcome, as long as income tax progressivity is strengthened.	2. Medicare/Medicaid and Social Security benefits-payments beginning in December 2012 will be reduced by 4% for all people earning more than $70,000, by 2% for people earning less than $70,000. Qualifying retirement age will be increased to 67. These entitlements will become fully means-tested in 2013. State and local governments will re-balance their under-funded pension and health-care programs (by reducing benefits, increasing employee contributions and raising the qualifying age), if they want to continue receiving federal funds for other programs.
3. Investment tax credits will be increased by 10% for firms who have 500 or less than employees and 5% for firms who have more than 500 employees, provided each firm increases its full-time work force by at least 3%.	4. The Dept of Defense budget will be reduced by 8% each year beginning in Oct 2012 for 3 years.
5. The Food Stamp program benefits will be increased by 5% for qualifying participants for up to 2 years.	6. Federal subsidies to the private sector (e.g., agriculture subsidies, energy company subsidies) will be cut 8%. Any other cuts in government spending (beyond DOD and subsidies) cited in the Act will require an 8% cut in Congress' operating costs (including staff salaries) and an 8% cut in the Office of the President's expenses (including staff salaries).
7. Payroll taxes for employees and independent contractors with incomes less than $70,000 will be cut by 4% for up to 2 years.	8. Home-owners with "underwater" mortgages will be allowed to reduce their outstanding principal by up to 25%.
9. All financial institutions with more than $500M in assets and/or have received government bailout funds (even if they've "paid" them off) will be required to increase personal and small business loans by 10% at non-usurious rates within 2 months, and will reduce yearly total bonuses and deferred compensation to no more than 2% of deposits for "small-ish" banks (less than $500M in assets) and 0.02% of deposits for larger banks.

After passage, the President will execute the Act into Law within 24 hours of receiving it.

Will passage of such an Act cause concern and upset? Certainly. Nevertheless, our fingers will be collectively crossed in hopes of a more balanced, productive, and growing future. Onward…