About Me 0083: foreclosure statistics

A CBS poll shows that only 6% of the public is concerned about budget deficits or taxes. The rest of us are more concerned about jobs and the economy, with very good reason. The Washington elite are insulated from the pain the rest of us and are focused on the deficit instead of jobs and the economy. This post looks at the consequences of that divide.

In yesterday's post, The Six Percenters, Richard (RJ) Eskow’s lays out the extent of the divide between the DC elites and the rest of the country.

Only 6% of Americans think Congress should concentrate on reducing the deficit or changing the tax code, according to the latest CBS News poll. Nearly ten times as many people, 56%, want it to focus on creating jobs and fixing the economy. Guess which set of policies is the center of attention in Washington right now?

Pick up any newspaper or turn on any news channel and you'll hear a lot of talk about the deficit. But creating jobs and spurring economic growth? Nobody's even discussing it.

Only 6% of the public is concerned about the deficit. The only thing Washington elites are concerned about is the deficit. The rest of us live on the other side of the planet from the people in DC who make the policies. Maybe the other side of the solar system.

You can see how this divide affects policy. There is a “deficit commission” but no jobs commission. There are millions of people needing jobs and millions of jobs that need doing, but Washington won't "spend," even on badly-needed infrastructure investment. People over 50 (laid off because they were paid more or their health care was expensive) can’t find jobs but the DC elite discuss raising the retirement age to 70. The deficit commission proposes cutting back the already-meager “safety net” while cutting tax rates for the really rich even more.

And while all of this goes on the rest of the people in the country are worried about jobs, foreclosures, bills, jobs, wages, jobs, and jobs – the things that matter to regular people. And they are feeling the consequences of the DC/rest-of-us divide.

Unemployment

According to the Bureau of Labor Statistics 14.8 million people are just plain-old unemployed. (Of those 6.2 million people have been out of work six months or more.) Another 2.6 million persons were "marginally attached," meaning unemployed and wanting a job but had not looked in the previous 4 weeks. And another 9.2 million are employed part time but want full-time work.

That is 26.6 million people, 17% of the workforce. Just a stunning number.

On November 30 unemployment benefit extensions expire, unless Congress acts. That means that all state unemployment programs will revert back to no more than 26 weeks of benefits for anyone, no matter their circumstances or the unemployment rate in the state. A Hart Research Associates poll released Nov.15 found that by a majority of 60% to 37%, registered voters support Congress continuing unemployment benefits for workers who have exhausted their state unemployment benefits but still cannot find a job. 63% of independents but only 38% of Republicans support extending benefits. Only 24% of registered voters say that deficits are a reason to cut back unemployment benefits. (Chart source.)

Foreclosures

A record 102,134 homes were seized by banks in September, according to RealtyTrac Inc.

Foreclosure filings, including default and auction notices, rose 3 percent from the prior month to 347,420. One out of every 371 households received a notice.

Fewer homes were seized in October, but only because banks had to stop foreclosures because the records fraud scandal came to light.

One in four home mortgage holders is “underwater,” meaning they owe more than the home is worth.

The Greenlining Institute warns that unless immediate action is taken to stem the tide of foreclosures 10-13 million more foreclosures can be expected over the next four years.

Homelessness

According to 2009 figures gathered by the National Coalition for the Homeless, many gathered pre-recession, 3.5 million Americans experience homelessness in a year and on any given night, over 7-800,000 people are homeless. 1.6 million people use transitional housing or emergency shelters.

Food Security/Hunger

According to the U.S. Department of Agriculture 17 million American families had trouble putting enough food on the table at some point last year. Of those 5.6 million had trouble throughout the year.

This has more than tripled since 2008.

Poverty

According to the Census Bureau,

The nation's official poverty rate in 2009 was 14.3 percent, up from 13.2 percent in 2008 — the second statistically significant annual increase in the poverty rate since 2004. There were 43.6 million people in poverty in 2009, up from 39.8 million in 2008 — the third consecutive annual increase.

... As defined by the Office of Management and Budget and updated for inflation using the Consumer Price Index, the weighted average poverty threshold for a family of four in 2009 was $21,954.

Health Care

According to the CDC, 59.1 million Americans were with no health insurance in the 1st quarter of 2010, up 3 million from 2008. 30.4 million of those were without health care for an entire year.

These numbers are from before the Congress cut off COBRA subsidies for the unemployed.

Marriages

AP: Recession Rips at US Marriages, Expands Income Gap,

The recession seems to be socking Americans in the heart as well as the wallet: Marriages have hit an all-time low while pleas for food stamps have reached a record high and the gap between rich and poor has grown to its widest ever.

… In America, marriages fell to a record low in 2009, with just 52 percent of adults 18 and over saying they were joined in wedlock, compared to 57 percent in 2000.

Income Gap

AP: Recession Rips at US Marriages, Expands Income Gap,

The top-earning 20 percent of Americans — those making more than $100,000 each year — received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent made by the bottom 20 percent of earners, those who fell below the poverty line, according to the new figures.

… At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, the data show. Families at the $50,000 median level slipped lower.

On each side the divide is so wide you don’t know how things are on the other side.

The media has been so preoccupied with acute symptoms of the debt crisis – sliding home prices, foreclosure abuses, ongoing Euromarket bank/sovereign debt stress, ongoing battles over financial regulation implementation, unhappiness over the Fed’s QE2 – that lingering problems are not getting the attention they deserve.

High on the list is the how the weak job market is affecting new college and advanced degree program graduates. We have an unspoken social contract: young people who get an education, particularly a “good” education (which means more elite universities, more serious courses of study, graduate degrees) are supposed to be rewarded by higher lifetime earnings. And the prospect of higher lifetime earnings in turn makes it rational to borrow to invest in education.

But this whole premise has started to go awry, and the huge uptick in unemployment has started to make matters worse. A guest post at Baseline Scenario by UMass-Amherst students Mark Paul and Anastasia Wilson outlines the grim conditions facing new graduates:

Currently, even after a slight boost in jobs growth, unemployment for 18-24 year olds stands at 24.7%. For 20-24 year olds, it hovers at 15.2%. These conservative estimates, using the Bureau of Labor Statistics U3 measure, do not reflect the number of marginally attached or discouraged young workers feeling the lag from a nearly moribund job market.

The U3 measure also does not count underemployment, yet with only 50% of B.A. holders able to find jobs requiring such a degree, underemployment rates are a telling index of the squeezing of the 18-30 year old Millennial generation.

Take note: half the recently-minted college grads are in jobs that do not require a college degree.

Now if these graduates were going to college for the mere love of learning, and didn’t mind working at Home Depot because they could work on a novel in their garret, this picture might not be quite as terrible as it looks. But I sincerely doubt that anyone in the US goes to college to become a working class intellectual.

But the economic (as opposed to social and personal) value of higher education is exaggerated. The widely-touted College Board claim that lifetime earnings for college grad outpace those of mere high school grads by $800,000 does not stand up to scrutiny. The author of the 2007 study which the College Board relied upon disclaims that estimate and says $450,000 is a better figure. Mark Schneider, a vice president of the American Institutes for Research, who used actual earnings data of graduates ten years after college, and allowed for other factors such as taxes, pegged the difference at $280,000.

And these estimates are averages. Students who are drawn to fields such as architecture, which require advanced education but are not terribly well paid, will fare less well.

In addition, the value of a degree is premised as much on its scarcity and credentialing value as it is on actual gains in skills. If college educations go from a sign of achievement to a mere social norm, do they really provide that much income benefit to the recipient? James Galbraith, in The Predator State, argued that encouraging more people to get college degrees actually lowered its value, but also served the useful social function of delaying entry into the job market, and hence reducing employment pressures.

But students and their parents have been sold on the value of education as an investment, and it isn’t hard to see why. As higher education costs have skyrocketed, more and more students need to borrow to finance their schooling. The Economist gives an overview:

For decades, college fees have risen faster than Americans’ ability to pay them. Median household income has grown by a factor of 6.5 in the past 40 years, but the cost of attending a state college has increased by a factor of 15 for in-state students and 24 for out-of-state students. The cost of attending a private college has increased by a factor of more than 13 (a year in the Ivy League will set you back $38,000, excluding bed and board). Academic inflation makes most other kinds look modest by comparison.

In the stone ages of my youth, many middle class parents could afford to send their kids to Ivy League schools. A year at Harvard, with room and board, is now over $50,000, on a par with median household income.

And perversely, student loans are the only form of consumer debt that is virtually impossible to discharge in bankruptcy. Per FindLaw:

Thanks to a provision the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act signed into law by then President George W. Bush, the current law only allows the discharge of private student loans in bankruptcy after a showing of “undue hardship,” the same requirement that is made for federal or non-profit backed student loans. Undue hardship requires a separate showing to a bankruptcy judge proving, in essence, that the borrower would never be able to pay off the loan. This is an extremely difficult legal standard to meet.

New graduates are, or at least should be, very attractive to employers. Someone who can’t find a good job right out of school will face even higher hurdles down the road. Paul and Wilson describe how high unemployment rates for young people represent a an economic and ultimately a social problem:

Recent college graduates, those in the labor force with the freshest batch of knowledge and skills, are currently underwater and sinking fast with unprecedented student loan and personal debt. Average student debt for the class of 2008 was $23,200, an increase over four years of about 25%, meaning that students are knee deep in negative equity between their educational investment and actual earnings.

Between inflated student debt and the lack of available jobs for qualified graduates, students are defaulting at an all time high level of 7.2%. From 2008 to 2009, student debt defaults jumped about 30% to $50.8 billion. This earning-to-debt gap not only hurts lending institutions, but also may affect students’ future abilities to borrow – a significant hurdle in our credit driven economy.

If student debt and job stagnation continue, younger workers will face real structural unemployment (as opposed to the fake kind that had been suspected by some economists, but was recently debunked by the San Francisco Fed). The more time these young workers spend unemployed and underemployed, the greater chance for future structural unemployment due to deteriorating human capital.

High debt, high defaults, and low family earnings will prevent many students from finishing college at all. High unemployment for those who do manage to graduate with a degree will create barriers for those unable to start their careers.

This is a slow motion train wreck. Optimistic estimates of economic recovery project unemployment reverting to pre-bust norms by 2015; more realistic forecasts put it at years later. And the more students drop out of college, the worse job market pressures become.

At the end of their piece, Paul and Wilson make a persuasive case for action:

In order to solve future structural problems in the United States and ensure a future for the sandwich generation, fiscal policy focused on educational and job growth is crucial. While deficit hawks may squawk about the costs, the burden of repayment is on younger people. Without adequate education and careers for students, we will never be able to balance the budget. In the long run, it makes more fiscal sense to create jobs and collect tax revenue than to rely on a model that merely waits for the private sector to invest.

But the “long run” and “fiscal sense” don’t count for much in deficit debates. Sadly, the very real plight of this cohort is certain to be ignored unless they can find a way to make their needs heard.

eric seiger do

Wednesday, December 1, 2010

foreclosure statistics

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