A new generation of Democrats is angry at the rich. But their anger includes an expansive view of who’s rich: not just billionaires like Jeff Bezos, but also the hidden millionaires of older Americans. The albatross of student loans causes many younger people to see a future of downward mobility; they don’t expect to be better off than their parents. This burden makes them risk-adverse and delays household formation. As conservatives offer no solutions, the young look to the left for answers.
Not long ago, university students could earn enough money via a summer job, or part-time work to graduate without much debt. Today, there are only two groups who seem immune from the debt problem: students from wealthy families, and those at elite institutions who can glide into well-paying jobs at financial institutions.
High student loan debt crowds out activities normally associated with workers in their twenties and thirties. Examples include purchasing a home, buying home furnishings, getting married, and having children. It also causes risk-adverse behavior among former students. Instead of recent grads moving to growth areas (such as Austin, Texas), they remain stuck in their parents’ home. Their hometown may have had job opportunities decades ago, but probably less so now.
The resentment factor erupts when younger generations encounter the wealth accumulated by many who are older.
Let’s use a family Thanksgiving as an example.
Zarah, age 25, lives with her parents. She works as a contract employee for a consulting firm in New York City. As a contract employee, she has to buy her own health insurance and (if she can afford it) pay into her individual retirement account. Plus she must repay her student loans.
Sitting across from Zarah is Aunt Sophie. Sophie worked for New York City’s public school system and retired with a generous pension and health benefits for life. She had a federal student loan, but as higher education cost less for her generation, Sophie was able to repay her loan in a few years. Further, she bought her one-bedroom condo in Manhattan in the 1970s, when crime was high and real estate cheap.
Sophie happily recounts how she just sold her condo for a cool $1.5 million, and is moving soon to Florida, where’s there’s no income tax.
Meanwhile Zarah is getting angrier by the minute. Why is Aunt Sophie rich? Why did she never have to be on a constant job search? And why is she getting those free benefits? It’s so unfair!
Yes, there is unfairness in Aunt Sophie’s story. New York City and other older cities (such as Chicago) are saddling future generations with the costs of their retirees’ benefits. The typical city lifetime tenure system protects its teachers from being fired. This worked out great for Sophie.
Regarding her condo purchase in the 1970s, what Sophie could not know was how successful the future Mayor Rudolph Giuliani’s crime control efforts in the 1990s would be — with the side effect of ever-higher real estate prices.
Plus, Sophie also benefited from a university mindset that was focused on affordability. Even though she attended a private university, the president’s salary was under $100,000 per year. Today, the president is paid seven times as much, with alumni donations supplementing his/her salary, instead of assisting students’ financial burdens.
Zarah is not a spoiled brat. She’s hardworking, but very stressed out. Her employer could disappear tomorrow. She would love to move to a growth region, where she could have more job security. However, job search and moving expenses are out of her reach — paying off her student loans comes first.
No wonder Zarah and her friends find wealth-redistribution policies attractive. Republicans and conservatives are mute. Their 2017 tax reform legislation is irrelevant to her generation.
Meanwhile, others are puzzled at the stagnation in the new housing market and its wider negative effects in the U.S. economy. They’re unaware of how student loan debt is immobilizing younger cohorts who otherwise would be on their own, forming their own households, and spurring economic growth.
The politics of resentment are real and they’re a mobilizing force among younger voters. If Republicans want to retain and gain power (not just in 2020 but in the long-term), they must address the forces that are keeping the American dream out of reach for millions of younger Americans. Or it can shrug off these voters and march firmly into irrelevancy.
Joanne Butler was an international trade specialist at the Office of the U.S. Trade Representative and at the Foreign Agricultural Service at USDA in the George H.W. Bush administration. In the George W. Bush administration, she was a senior adviser and speechwriter at the Department of Labor.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.