Personal and Political Debt, Inequality, and the Pursuit of the American Dream

Overall economic inequality has been a topic I've tried to address in the past few months, but I am continually shocked at how drastic the reality really is.

Not only are companies posting record profits (not just Exxon), but many companies aren't really suffering, but seeing incredible growth.

This article from the New York Times spells out research done by Thomas Picketty and MacArthur Genius Prize finalist Emmanuel Saez in a pretty clear sense:

"(Picketty & Saez's) study on economic equality showed that the rich have gotten richer — income for the top 1 percent rose by $261,930, or 30 percent, from 2002 to 2008 — while the bottom 90 percent saw their incomes drop by $1,170, or 4 percent, on an inflation adjusted basis.

The economists concluded: “We need to decide as a society whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional reforms should be developed to counter it.”

Disproportionate income distribution is a major economic problem,and the concentration of wealth may only get worse with the horrifying rise of political 527s and the atrocious and morally bankrupt Supreme Court decision in Citizens United v. FEC (strong words for strong feelings).

At the same time, personal debt is adding up. College loan debt has overtaken credit card debt as the number one outstanding obligation, and it's going to total $1 TRILLION this year.

On the one hand, a lack of financial literacy may be to blame in the situation, with some students taking out absurd amounts of money in order to finance a degree that won't return nearly nearly enough to avoid serious debt trouble over 20 years. It may also be misleading expectations on the part of universities, or the decreasing return on the value of a degree. Furthermore, it can be seen as a political issue, with the parties splitting on how to even protect (or not) consumers. As a nation, debtedness is not just for the poor--it's becoming universal, with serious effects on our political debate.

So what do we do? I'm not saying that we need to have the richest rich be taxed at outrageously high amounts or that college needs to be free. This is all creating an imbalance in the amount of savings that not only the poor, but college graduates, are able to accrue. That has dangerous ramifications for our nation.

I don't think a government solution will work in this situation--the government is owned by those with enough money to change the political landscape(not just the wealthiest Americans, but corporations and, increasingly, labor unions). An obvious example of this at work here.

Meanwhile, those that are poor or in debt--can't do much other than vote. Sadly, that doesn't mean much. This problem of becoming a "debtors" nation--both in personal and governmental finances--will further inequality.

But I think we can realize our potential to change the system. We could end the ability for for-profit universities, the predatory lenders of higher-education, to get away with robbery. We can invest in college students' success. But we also have to educate our young people to realize that $80,000 for an art degree isn't worth going into debt, having to pay well over that amount back over our lifetimes. We need to teach financial literacy in schools, and entrepreneurship as well. I've promoted the Generation E Institute as an example of that kind of education. Return-On-Investment needs to be an essential educational tool.

Not only is our education system supposed to teach people mathematics, English, and other essential skills, but we should be teaching our young people how to be GOOD CITIZENS: how to find out if a charity is reliable, if a college degree is REALLY worth the cost, how to be good environmental stewards while lining our pockets, and how to create our own jobs and businesses.

My Grandpa Ben was never in debt in his entire life--he was a lifetime renter in the Bronx, and never owned a car. That is unthinkable and nearly impossible in this day and age. Our civic psychology takes a hit with debt and inequality rampant.

I'm not a 'GUNG-HO' business kind of guy, but realizing that nonprofits are businesses, and that the lines are blurring between nonprofit, mission-driven groups and for-profit ones, we have to do a better job. Our debts and a concentrated distribution of wealth will kill us, otherwise.


The full Picketty/Saez study is here, and I'd encourage comments. I'm interested in seeing how other people feel about this!