How many read Professor Paul Krugman’s rant this morning in the NYT Degrees and Dollars? Here I quote:
….. But there are things education can’t do. In particular, the notion that putting more kids through college can restore the middle-class society we used to have is wishful thinking. It’s no longer true that having a college degree guarantees that you’ll get a good job, and it’s becoming less true with each passing decade. So if we want a society of broadly shared prosperity, education isn’t the answer…….
Based on this argument, money spent on education is not money well spent. The Federal Reserve issued its Consumer Credit G.19 report for January 2011:
Consumer credit increased at an annual rate of 2-1/2 percent in January 2011. Nonrevolving credit increased at an annual rate of 7 percent, while revolving credit decreased at an annual rate of 6-1/2 percent.
The Federal Reserve’s headline uses seasonally adjusted data. The majority of revolving credit is from credit cards, while non-revolving credit includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations.
Sounds like the consumer is at it again – NOT. What the headlines and the data do not say unless you dig a little is that consumer credit would be down – in total and in all parts – if it was not for the Federal Government handing out student loans.
The government has handed out $167 billion of student loans since the end of 2009, while non-revolving credit has risen only $37 billion. Without the student loans non-revolving credit would be much lower, declining even more than revolving credit. The implication is that current non-revolving credit outstanding would be about $1.44 trillion, well below the level at the end of 2009.
The credit unwinding cycle remains intact even with the seasonal rise during Christmas.
Is the government trapping youth with loans? Are they becoming snake oil salesmen? Professor Krugman implies they are.