What We Read Today 28 June 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary “reading list” which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number included.

• That Big Study About How the Student Debt Nightmare Is in Your Head? It’s Garbage (Choire Sicha, The Awl) This is a much more complete critique of a report that we criticized ‘behind the wall’ two days ago (26 July). Our previous discussion is repeated below. This critique looked at the data selection criteria of the study and found that it was constructed so that only student debt of the wealthy was included, a sample of 1,711 households and then only included approximately 1,200 that were current on their student loan payments. This appears to be an even more egregious abuse of cherry picking that our previous discussion addressed. This atrocious piece of “research” should be withdrawn. It is an embarrassment to the reputation of the Brookings Institute.

• Is a Student Loan Crisis on the Horizon? (Beth Akers and Matthew M. Chingos, Brookings Institute) The where 14% of households in which the average age of adults is between 20 and 40 which had college debt for one or more members in 1989. In 2010 that had risen to to 36%. The size of the debt burdens also rose (see graph below). The study concludes there is no growing student debt problem:

Despite the widely held belief that circumstances for borrowers with student loan debt are growing worse over time, our findings reveal no evidence in support of this narrative. In fact, the average growth in lifetime income among households with student loan debt easily exceeds the average growth in debt, suggesting that, all else equal, households with debt today are in a better financial position than households with debt were two decades ago. Furthermore, the incidence of burdensome monthly payments does not appear to have become more widespread over the last two decades.

This report does not include data after 2010. As of Q1 2012 the average student loan debt outstanding per capita was up 40% from the number in this report to $24,301. Just 21 months later in December 2013 the average was up 70% from the 2010 number to $29,400. It has been estimated that the impact of the high level of student debt on the demand for first-time home purchases could reduce demand by 2 million units. A study by Liberty Street Economics (New York Fed) found that the percentage of 27-30 year olds with college debt also having mortgages fell from nearly 34% in 2008 to 22% in 2013. Another recent report from the New York Fed found a significant drag from student loan debt on the use of other forms of credit. Econintersect suggests that releasing a report now that has data stale by 3 1/2 years in such a rapidly changing environment is less than useful and possibly duplicitous. If the 2011-2013 data were added to the graph below the slope would be rising parabolically over those three years.

• Starting Strong: Modi’s First Month (Teresita and Howard Schaffer, South Asia Hand) Modi has been remarkably successful in creating excitement about his initiatives, and an air of inevitability about his determination to follow through. His challenge will be to maintain focus and discipline in his exuberant party, and to deal with soaring expectations. It is clear the new government will be highly centralized, more so than any other government since Indira Ghandi. Modi has met with the Secretaries from all over the India government and told them “they would be “empowered” to act decisively and do what was right.” Modi is operating with a ten point list for the first hundred days, which is centered on economics with emphasis on “e-governance, efficiency, and infrastructure“.

• What the crap? Neanderthals had a taste for vegetables (Renaud Joannes-Boyeau, The Conversation) Fossilized feces (caprolites) from Neanderthals 50,000 years ago clearly established a significant amount of vegetable matter. Theses results do not repudiate the theory that Neanderthals’ diets were rich in animal sourced protein, just that the diet may have been more complex than heretofore thought.

Today there are 11 articles discussed ‘behind the wall’.

Included is a video presentation that analyzes the economic woes of Venezuela.

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