WHEN WILL THE COLLEGE BUBBLE BURST? PART ONE

The bursting of the housing bubble was the unquestioned cause of the Great Recession. After years of unprecedented growth in the housing market that saw home ownership and home values rise dramatically, the collective bad decisions of homebuyers, banks, and government finally caught up to the economy at large.

The supply of easy money that led to the ersatz prosperity –- financial institutions foolishly gave, and government foolishly backed, mortgages for almost everyone, whether or not they were actually worthy candidates – proved to be the bane of the same. It didn’t take the new homeowners -- or owners of an investment property -- long to figure out that easy money really wasn’t so easy; their exorbitant mortgage payments weren’t sustainable, especially if the slightest hiccup appeared in their personal finances – such as the small scale recession fueled by high gas prices that pre-dated the heart of the Great Recession. With their family budgets hit hard, they had to choose between paying for their mortgages or their survivability (food, utilities, and transportation). That choice not being so difficult, they defaulted on their loans. Housing prices plummeted and the financial sector suffered immensely.

Our economy still hasn’t recovered a half-decade later and likely won’t before the decade closes. If the ship is ever righted to the heights that we remember, it won’t be long before another bubble is ready to burst; on the horizon is one that has numerous characteristics eerily similar to the housing market’s -- It’s none other than the college bubble.

Easy access to money defines the modern college experience. Such is to be expected when you consider the federal government has been one of the largest lenders in the college loan market. From 1965 to 2010, it issued subsidies to lending institutions to fund their student loans while assuming all the risk. In 2010, Congress acted to eliminate the middle man and now the government deals directly with the debtors.

So, whether being the lender indirectly or directly, Uncle Sam has always demanded and/or strived to give out funds ad nauseam under that wanton desire to be benevolent that drives Big Government, especially since government has what is believed to be unlimited backing (the taxpayers and Federal Reserve) to make good on bad lending decisions. The federal government currently backs 90% of new student loans.  

With the ability to borrow the capital necessary to fund their degrees, Americans have taken to the classroom in numbers. In 1965, at the start of the government’s lending efforts, only 23 percent of the middle class had received any education beyond the twelfth grade. Now, more than 3 in 10 have a degree, while a whopping 70 percent of young Americans enter college within 2 years of their high school graduation. 20 million Americans -- 1 in every 15 -- attend college every year. Just like it seemed as if everyone in 2006 was a homeowner (prior to the bursting of the housing bubble), it seems like everyone is college student.

And, just like construction firms, realtors, resellers and the like fed off of a freewheeling mortgage market at the turn of the century, driving up housing prices (it was not uncommon to see 80% to 150% increases across the country from 2000 to 2006), universities are capitalizing on the freewheeling student loans and the widely-held misconception that everyone needs a college education. Knowing that everyone – the poor, middle class, and rich – all have access to funds and will buy their product, they are charging what they want and whatever the market can bear.

Because of these factors, education costs have grown at a rate beyond inflation. Tuition and fees at public universities rose 4.8 percent in 2012 to an average of $8,655, while allegedly-nonprofit private colleges increased tuition and fees by 4.2 percent to $29,056. That’s par for the course: Since 1985 the college education inflation rate has risen nearly 500%, more than 4.3 times the amount of all other consumer prices.

As it was with housing in the Great Recession, the financing of and demand for higher education isn’t a sustainable economic model – easy money creates more demand, but said easy money ultimately creates unaffordability and less demand.

So, how, when and why will this college bubble burst? That will be the topic of next week’s column. 





Gasport resident Bob Confer also writes for the New American magazine at TheNewAmerican.com. Follow him on Twitter @bobconfer 

This column originally appeared in the 20 May 2013 Greater Niagara Newspapers

U.S. SLOW TO ADDRESS HONEY BEE DEATHS

You might recollect the buzz of recent years regarding the precipitous decline in honey bee populations. Since 2006, most apiaries have seen their bee colonies decrease by 30 to 90 percent per year. Some hives have been totally wiped out.

25 percent had once been the maximum rate of mortality in northern states that had significant cold-weather die-offs. But, the recent deaths have been occurring everywhere and during the spring and summer when temperatures are perfect and food is plentiful.

For some time, the reasons for this frightening extirpation remained unknown, and the moniker of “colony collapse disorder” was placed upon it as a catch-all for what could be either natural or man-made causes. Those days of uncertainty are gone:  It was determined over the past couple of years, by independent studies released in prominent journals like Science and Nature, that the root cause of honey bee deaths was the family of pesticides known as neonicotinoids. Last year, those findings were affirmed just across the border by Ontario’s Ministry of Agriculture, Food and Rural Affairs which discovered that 70 percent of the dead bees across the province showed exposure to neonicotinoids.

These insect nerve agents have been used in increasing abundance on corn since 2005, after entering the market in the 1990s (it is now used on most all commercial corn in the United States). That timeline of pervasiveness aligns perfectly with the sudden decline in bee populations. Produced by Bayer, neonicotinoids are applied directly to the seed and thus become a part of the adult plant, including the nectar and pollen upon which the bees feed. The chemical doesn’t kill bees outright, but it seriously impairs their development and behavior, which accounts for the inability of the bees to feed properly (they waste away), maintain their colonies and replenish them through adequate reproduction.  

Other countries are taking steps to combat this scourge. In Canada, Ontario officials have encouraged farmers to inform beekeepers when they are planting, because the dust associated with planting can carry neonicotinoids to wildflowers in adjoining hedgerows as well as lawns and pastures even a few miles away. This would allow the beekeepers to move their stock to another area when planting is underway. But, it does nothing to address the longer-termed problems associated with pollination once the plants grow. 

A more powerful means of suppression is taking place in the European Union. Starting December 1^st of this year and lasting through 2014 and 2015, the use of three specific types of neonicotinoids will be totally banned in the EU. This 2-year moratorium will see a return to 20^th century insecticides and a likely resurgence in honey bee populations.

Germany and the United Kingdom passed on the ban and will allow for the continued use of the offending compounds. That’s not any different than what is happing here in the US. Even though federal studies link neonicotinoids to colony collapse, including a report released by the USDA and EPA earlier this month, the government has no immediate plans to limit or ban the use of neonicotinoids -- a major study on the impact of neonicotinoids won’t be made available from the EPA until 2018.

2018 could likely be too late, especially if a ban is determined to be necessary; that in itself could take a few more years. American farmers (especially fruit growers whose trees need more help from bees than field crops do) – and those who consume their produce -- need answers and actions now. If bees were wiped out, or something close to it, fruits and vegetables wouldn’t get the pollination they need. Estimates show that the total loss of crops would approach $15 billion per year. 

Neonicotinoids are certainly proving to be a bane to the health of the environment, the economy, and the people.





Gasport resident Bob Confer also writes for the New American magazine at TheNewAmerican.com. Follow him on Twitter @bobconfer 

This column originally appeared in the 13 May 2013 Greater Niagara Newspapers

CELEBRATE YOUR TAX FREEDOM DAY

Monday, May 6^th is a holiday of sorts for the workingperson – it’s Tax Freedom Day in New York. It’s the day that you can finally go about working for your own personal needs and interests like feeding your family, paying your mortgage, saving for your retirement, or helping your kid through college. Prior to that, every day that you worked this year covered your tax obligations and nothing else.

Tax Freedom Day is an annual study that determines when personal financial freedom is achieved. It is the brainchild of the Tax Foundation, a nonpartisan educational organization that focuses on tax policy and the burdens they impose on Americans. The Foundation analyzes the entire tax burden shouldered by a state’s residents, looking at all taxes big and small, from income to property to sales to excise taxes. That bundle is then applied to the average wage for that state and from there the number of workdays required to meet that burden is calculated.

The study is a good gauge for the competitiveness and quality of life for each state. New Yorkers, long known as some of the highest-taxed folks in the US, have the second-latest Tax Freedom Day in the US. Only Connecticut comes later (May 13^th). The average American spends less time working for the government than we do – they become free on April 18^th. Not surprisingly, some states have over a month on us: Residents of Louisiana and Mississippi can start working for themselves on March 29^th.

To some (specifically government officials) the Tax Foundation’s study may be a gimmick. It’s not; it’s a unique way of demonstrating just how much effort goes into making one’s annual payments to the government. Due to payroll tax deductions and mortgage escrow accounts, very few people really know how much they pay into the system. There are a lot of numbers for them to track. This helpful study makes it easy for the layman to understand his contribution.

Think about how damning the study is. For the past four-plus months, every hour that you’ve spent at work, sweating or stressing while dealing with customers, coworkers, or machines - not to mention the bad economy – has not been for the money that you need to pay the bills or set aside as discretionary income. Every one of those hours -- 720 of them if you work a 40 hour week -- has been dedicated to the bureaucracies that manage your town, school, county, state, and nation, and who, more often than not, recklessly spend your hard-earned dollars on social and corporate welfare, bloated public-sector payrolls, and wasteful pork. Nearly four months of your life were toiled away, just to make sure you paid the price of being a "good citizen" in 2013; four months spent working for everybody else, whether they deserved it or not.

Now, with a third of the year behind us, you can find what comfort you can in knowing that your next 8 months on the job can be dedicated to you and your family. But then, the vicious cycle starts all over again. And, who really knows when your next Tax Freedom Day will come? New York’s 2013 Tax Freedom Day is 10 days later than it was just 4 years ago!

This kind of makes you hunger for real tax freedom, doesn’t it?

Gasport resident Bob Confer also writes for the New American magazine at TheNewAmerican.com. Follow him on Twitter @bobconfer  

This column originally appeared in the 06 May 2013 Greater Niagara Newspapers

CHOOSE A TRADE OVER COLLEGE; PART TWO

When I was in high school some 20-plus years ago, BOCES was considered a dumping ground; those who pursued the vocational arts were looked at – by school administrators, parents, and peers alike - as sub-par students, kids who weren’t bright enough to hack the standard path of high school education, let alone the rigors of college. Times have changed and vocational education has become more acceptable to mainstream education but, still, a lot of today’s parents who were educated during that era still carry some long-held (and totally unacceptable) disdain for the program.

I would argue that today’s BOCES students – as well as those of my time – are some of the very brightest that we have. It takes a special collection of intelligence, common sense, and learning ability to excel in the breadth of knowledge and skills required by machining, mechanics, nursing, computers and the like.   

They are also some of the brightest because they understand the future and their role in it.

As I mentioned in last week’s column, a lot of their college-interested friends have a troublesome future ahead of them because the job market has seen a saturation of college educated workers and it cannot accommodate them, leading to underemployment, unemployment and the unfortunate situation in which college-educated adults face a lower standard of living than their college-educated parents before them. On the other hand, teens and young adults who develop vocational skills see immediate rewards, long-term gain, and stability through even the worst economies because they are marketable, in demand, and in relatively low supply.     

A perfect example would be machinists. Their prospects are overwhelming: Numerous studies have found that in upwards of a half-million manufacturing jobs across the United States remain unfilled due to the lack of qualified candidates. As for being “qualified”, a college degree doesn’t cut it – but a certificate from a trade school does. High school seniors who took machining at BOCES are guaranteed a job immediately upon graduation and, in most cases, were claimed by area machine shops and factories in their junior year. A BOCES machining graduate, fresh out of school, could command a starting pay in the range of $15 to $20 per hour throughout the northeast, more if he left the area.

Teens who pursue nursing at BOCES, either in high school or afterwards, in effort to become Licensed Practical Nurses, also face a welcoming job market.  Due to the aging Baby Boomer population and the stress it places on the health industry, there will be a nursing shortage over the next decade and beyond when demand is expected to outstrip supply. According to the Bureau of Labor Statistics, LPNs at the lowest 10% of the wage scale earn $14.89/hour, while the median wage rate is a smidge under $20. Those wages are expected to rise as the health sector changes. Plus, the role of LPN is often used as a stepping stone for those looking to become Registered Nurses, who bring in a median wage in excess of $31.

We can’t forget truck drivers, either. Although commercial driver licenses aren’t offered as a part of curriculum to high school students, most BOCES offer them to adults. A high school graduate who invests just $2,500 to $4,000 into a CDL will find himself with opportunity: there are currently 400,000 openings for CDL drivers nationally and that mismatch of supply versus demand will be in favor of the licensed drivers for the long haul as a good portion of truck drivers are entering their retirement years.  Because of that, the starting salary for truck drivers ranges from $38,000 for local work to $45,000 for over-the-road haulers. Experienced long-distance drivers net $75,000 and many top out at $100,000.

So, it’s not surprising that the trade certificates earn just as much as – and, in most cases, even more than – college diplomas. Recent college grads earn an average of $16.81/hour, a value that has remained relatively flat over the past decade. Ongoing salary growth is restrained as well.

And, mind you, the College Board said that average cost nationally for an in-state public college is $22,261 per year. What did BOCES cost the high school pupil? A fraction of the cost of college, if anything at all. Even the CDL class ends up being one-eighth the cost of one year of college.

It should be obvious to teenagers and parents that vocational education shouldn’t be considered an afterthought. It’s arguably a better choice than college. 



Gasport resident Bob Confer also writes for the New American magazine at TheNewAmerican.com. Follow him on Twitter @bobconfer  

This column originally appeared in the 29 April 2013 Greater Niagara Newspapers 

CHOOSE A TRADE OVER COLLEGE; PART ONE

A conversation that I regularly have with parents of high schoolers centers on the job market that their children will enter. The post-recession economy is tough enough for mom and dad, so they can’t help but wonder what might be the best path of study for their kids to pursue in college and, in turn, what sort of career should they prepare for to ensure a comfortable adulthood.

It’s to the point now that in those conversations I deemphasize the importance of college and suggest that parents inspire their teens to go after a career that is not predicated on a college degree. Economic and employment trends are showing both immediate and long-term needs for skilled tradesman. A teenager would be far better off by abandoning the college preparatory, general education tract in high school and, instead, entering BOCES and/or preparing for trade school after graduating.

It’s an outcome of supply and demand; there’s just too much competition for a finite number of job openings that require college degrees to warrant an investment in a diploma.

This wasn’t always the case. Just a generation or two ago, the college-educated were at a premium and, accordingly, could fetch a premium. Following World War II, only 5 percent of Americans could claim a college degree. In 1970, only 26 percent of the middle class workforce had received any education beyond the twelfth grade. Now, more than 3 in 10 have a degree, while 70 percent of young Americans enter college within 2 years of their high school graduation.

Due to this glut of educated workers, employers either can’t match candidates to jobs for which they became enlightened (over-qualification) or they can command lower wages paid for college graduates than one would have assumed just a decade ago or what one expects based on the size of the post-secondary investment (those are the outcomes of over-supply).

Not a day goes by that this isn’t proven across America.

Newspapers have been chock full of reports of college graduates having to accept what they perceive to be menial jobs since businesses in their career field aren’t hiring while many more have had to move back into their family’s homes to make ends meet, inspiring the title of the “Boomerang Generation”. 

There is truth to be had in those anecdotal reports. The Center for College Affordability and Productivity says that roughly half of college graduates are working jobs that don't require a degree. The Census Bureau’s American Community Survey shows that 21 percent of college graduates up to the age of 34 live with their parents, an increase of 62 percent versus the findings of 2001’s survey.

To think, all of this misery for degrees that parents, teachers, guidance counselors and popular culture have painted as “must-haves”, which end up leaving the average college graduate with $27,000 in debt. Without the job opportunities to make good on the potential they have – or they alleged potential that they bought – they are saddled with the burdensome debt for the long haul, which is why total college debt in America exceeds $1 trillion. In comparison, total credit card debt in the US is “only” at $800 billion.  

While the reality of the economy paints such a grim picture for young college-educated Americans, that same economy paints a rosy picture for their peers who instead opted for tax-payer funded training as machinists or paid a nominal fee to develop their skills as truck drivers.

More on this next week.



Gasport resident Bob Confer also writes for the New American magazine at TheNewAmerican.com. Follow him on Twitter @bobconfer  

This column originally appeared in the 22 April 2013 Greater Niagara Newspapers