NEW YORK (TheStreet) -- Politics in the U.S. is getting uglier by the day, which is a shame, because our problems aren't going away. In fact, any problem that involves interest will grow worse as long as we fail to address it. Such is the case with our national debt -- an "unprecedented" issue that is actually quite precedented: Powerful empires that overspent have historically collapsed and "American Exceptionalism" won't save us from the laws of mathematics.Consider the debate surrounding the "Buffett rule."
|The debate surrounding the Buffett rule has cost the U.S. 75 times more in borrowing than the law would generate in taxes (in comparable periods).|
End Student LoansAmerica's biggest " budget busters" are essentially tied to an aging population in failing health. This is a tough pill to swallow for the nation's youth: The income divide between young and old is growing appreciably wider. And while millennials are struggling to get their own life started -- paying off student loans, getting a decent job, getting married, buying a house and starting a family -- the elder generations are making greater demands on their kids and grandkids. Some call this generational warfare -- others might call it a Ponzi scheme of sorts. But if we're committed to having a social safety net, then America needs its working generations (youth) to be equipped with the best skills and education possible to compete in a global marketplace. Only then can we generate the tax revenue to keep the system in place. At first blush, it may seem that the government should invest more in education. I think this is misguided, at least, if we do more of the same. If you look at the history of educational costs, the price of undergraduate tuition went completely off-the-rails when the availability of federal student loans increased (overtaking grants as the primary source of aid).
Part of the problem here is supply and demand imbalances -- as the government steered more students toward higher education, prices would naturally increase. But the prevalence of loans worsened the situation by providing a non-collateralized (bottomless) pool of debt, oftentimes granted to unqualified borrowers (if this sounds familiar, that's because a similar phenomenon created the housing bubble).