President Obama went to Denver yesterday, where he talked about steps he's taking to help make student loans more bearable, and where he asked for young people's support. He was introduced by a college senior who owes $30,000 and hopes to become a teacher. She described herself as part of "Generation Debt," and she may be stuck there for a while.
Since the time of President Reagan, the richest one percent of the country has seen exponential income growth. Everyone else, including the people who most need to have their incomes grow, have not done nearly so well. The main reason for that is tax policy, as Rachel said on the show last night. Congress decided to shift resources from the less-well-off to the well-off in the form of tax breaks and tax burdens. The result is the kind of chart Rachel showed, where the American dream no longer holds.
Some of our taxes are obvious, like sales tax and income tax. Other policy choices quietly impose a cost for having less. Years ago, I started thinking of student loans as a kind of hidden, regressive tax. Yes, student loans make it possible for you to get an education and hopefully a livelihood. But because you end up dragging them around for so long, student loans act as a tax on your ambition. The lucky kids can get an education without borrowing. For everyone else, there's the ambition tax -- you pay it every month, in some cases for decades.
I persuaded Brendan Koerner to write about the ambition tax for a series that came to be known as Generation Debt. Today, when I went to look at it, I realized that his fundamental source for "The Ambition Tax" was Harvard Law professor Elizabeth Warren. Brendan wrote:
Pursuing the relatively modest dream of doing better than the generation before requires serious capital—up front in the form of tuition and loans, and hidden in the form of lost opportunities. Call it the ambition tax—the money you've got to pony up if you want a college degree and a shot at middle-class bliss. But it's really more of a gamble, as there's no guarantee those tens of thousands of dollars will get you where you want to go."The next generation is starting their economic race 50 yards behind the starting line," says Elizabeth Warren, a Harvard Law School professor and author of The Two-Income Trap. "They've got to pay off the equivalent of one full mortgage before they make it to flat broke, in order to pay for their education. They can never get ahead of the game, because they're constantly trying to play catch-up."And once you've got accumulated debt, the debt takes on a life of its own. It demands to be fed, and it takes that first bite out of the paycheck. And it means the opportunity to accumulate a little, to get a little ahead, to maybe put together a down payment—it's just never there. It's just staggering to me that this is not a part of our national debate right now."
"The Ambition Tax" was published in 2004. Seven years later, we've got only limited reforms in student debt, the debt itself just keeps growing, and income inequality has only gotten worse.