Friday, March 17, 2017

The Future of the Democratic Party

The Future of the Democratic Party

I understand that many of my readers are really tired of politics.   I am also tired of politics.   Since the election I watched all six seasons of Breaking Bad, otherwise known as the centerpieces of the Ryan/Trump health care plan.  (For those who are unfamiliar with the show, the main character Walter White becomes a meth dealer in order to pay for lung cancer treatments not covered by his insurance.)

I am committed to presenting at most four purely political posts in 2017.   This post was motivated by analysis presented by Foz News Contributor and former Clinton aid Doug Schoen.




Doug Schoen’s Analysis:

In the article above Doug Schoen, a former Clinbton advisor argues that the Democratic party is in an extremely perilous position for the 2018 election.   He specifically cites Joe Donnelly of Indiana, Heidi Heitkamp of North Dakota, Joe Manchin of West Virginia, Claire McCaskill of Missouri, and Jon Tester of Montana as the senators at higher risk of losing their seat in 2018.  He argues that the party needs to move away from Sanders/Warren positions and back towards the centrist views of the Clinton wing.   He argues that the nation as a whole supports many of Trumps policies., specifically siting immigration, tax reform and abortion.  He does not include trade policy on this list. 


Comments:

Comment One:  Tbe Democrats prospects in 2018 are actually far worse than depicted by Schoen. Incumbent Democratic Senators will face stiff challenges in Florida, Ohio, Wisconsin, and Michigan all states that Trump won.  Republicans have a clear advantage in three of these states – Florida, Ohio and Wisconsin – where they own the governorship and the other Senate seat.  It is possible the Republicans will have sixty seats in the U.S. senate after the 2018 election.

Comment Two:  The Democrats did not get in their current position by moving too far to the left towards the views of the Sanders wing of the party.   Hillary Clinton was the standard bearer in 2016.  It was under her leadership that the Democrats lost key Senate races in Ohio, Pennsylvania, Wisconsin and Florida. Donald Trump won the state of Ohio and Iowa by a lot in 2016 and both of these states should be classified as leaning red in 2020.   This new reality is on the Clinton camp and the decision by the DNC to discourage active political debate in 2016.

Comment Three:  It is possible, in my view likely, that a leftward drift of the party will hurt chances of future Democratic candidates in 2018 and 2020.     I believe Bernie Sanders and his wing makes a lot of compelling points about problems but his proposals do not appear to be fiscally feasible.

Comment Four:  Framing future intra-party contests as a choice between the Sanders and Clinton wings of the party is not a recipe for future success.  Issues like Social Security and retirement security are really complex.   Democrats argued for an expansion of future Social Security benefits while ignoring the fact that under current law Social Security benefits will be automatically cut once trust fund reserves are reduced.   Neither Clinton nor Sanders were able to articulate consistent feasible solutions to student debt or problems with the ACA.   Clinton simply moved towards Sander’s views once she trashed him to get the nomination.  Going forward the Democratic Party needs more strong voices that will examine issues in more detail.

The decision by the Democratic Party to coalesce around Clinton in 2016 and not have a robust debate is the reason why the party is where it is.  

Comment Five:  Schoen does not mention trade, the key issue Trump won Pennsylvania, Michigan and Wisconsin by a very thin margin.  I believe that the world may be much worse off if Trump implements protectionism but as Trump says he represents America not the world.  Many Democrats in the Sanders wing of the party voted for Trump because their views on trade were closer to Trump’s views than to Clinton’s views. Hillary Clinton’s reversal on the Trans-Pacific Partnership did not appear genuine and may have cost her the election.   The Democrats need to do a better job explaining how their trade policies will help people in the Midwest.

Comment Six:  The Democrats cannot get votes by moving towards Trump’s immigration policy.   People who share Trump’s views on immigration and vote because of this view will not vote for the Democrats.   Democrats need to appeal to Trump voters through other issues -- retirement security, health care, student debt, and education quality.

Comment Seven: Schoen argues that the American people agree with Trump on abortion.   Which view?   I am not persuaded.   Remember Obama was pro-choice and won twice. 

Comment Eight:  I am concerned that the Democratic party’s antagonism against charter schools cost them a lot of voters in Michigan, Florida, Ohio, and Wisconsin and that this stance will influence future elections.

Comment Nine:  Right now Democrats and liberal pundits continue to spend a lot of time on Trump’s tax returns, Trump’s misogyny, wiretaps, and Russian involvement in the election.    No one in the Democratic Party and the supporting media is spending time creating an alternative agenda.    For example, the Democrats have not offered a practical alternative to the Ryan Health Care approach.   Sander’s has a single-payer proposal with no path forward in the foreseeable future.  Trump and Ryan own the airwaves.  

Concluding Remark:

The Clinton campaign spent far more time characterizing Trump as a pussy-grabber corrupt man who was refusing to show his tax returns than in explaining how they would solve America’s problems.   The Democrats are still focused on the tax returns.   Trump is correct that the American people don’t care about this issue.

Trump won in 2016 because a lot of people were attracted to his views on trade and he was able to peel off voters who lean Democratic but had kids in charter schools. 

The characterization of the Democratic Party as being divided into a Clinton and Sanders camp is not very useful.  The new leaders of the party – Klobuchar, Wyden, Warren, Kaine, Warner, Booker and Gillebrand --- need to step up sooner rather than later.   






Tuesday, March 7, 2017

An Overview of Growth of Student Borrowing 2004 to 2012

An Overview of Growth of Student Borrowing 2004 to 2012

Question:   How did annual undergraduate borrowing of federal student loans, undergraduate PLUS loans for parents, and undergraduate private loans change between 2004 and 2012?

How did the change in the annual use of these loans vary for public colleges, private non-profit colleges and private for-profit colleges?

Data:  The analysis presented here is based on data obtained from the National Post Secondary Student Aid Study.   The data was obtained on-line using POWERSTATS software sponsored by the Department of Education

Department of Education POWERSTATS lab:

Analysis:

I provide separate charts and discussions on undergraduate borrowing in three areas – (1) total federal loans excluding PLUS loans,  (2) PLUS loans for parents, and (3) total private loans.

The sample studied involves all undergraduates on the 2004 and 2012 NPSAS Secondary Student Aid Study.

Statistics are presented on the percent of students taking out a particular loan and the average dollar value of the loan for all borrowers.

Separate statistics are presented for all undergraduates, undergraduates in public schools, undergraduates in private non-profit schools and undergraduates in private for profit schools.

Results for Federal Student Debt:


Total Undergraduate Federal Student Debt (Excluding PLUS loans for Parents)
Percent of Students Taking Out a Federal Loan
Year
2004
2012
% Diff.
Public
23.9
31.0
29.7%
Private not-for-profit
53.4
60.0
12.4%
Private for-profit
75.7
71.1
-6.1%
Total
32.5
40.2
23.8%
Average Loan in $
Year
2004
2012
% Diff.
Public
4,273
6,012
40.7%
Private nonprofit
4,797
7,095
47.9%
Private for-profit
4,693
7,029
49.8%
Total
4,481
6,467
44.3%

Discussion of Federal Student Debt Results:

The most profound change in federal student debt involves the 29.7 percent growth in students attending public schools that took out a federal student loan in 2012 compared to 2004. 

The growth rate of students who borrowed at private non-profit schools was 12.4 percent.

In 2012, private school students remained almost twice as likely to borrow as public school students.

The proportion of students at private for-profit schools with federal student debt fell a bit but remained over 70 percent.

The average annual federal loan amount increased by around 44 percent, a bit more in private schools than in public schools.


Results for Parent PLUS Loans:

PLUS loans For Parents
Percent of Students with PLUS Loan for Parents
Year
2004
2012
% Diff.
  Public
2.4
3.2
34.9%
  Private not-for-profit
8.1
11.9
47.0%
  Private for-profit
6.1
4.6
-24.9%
Total
3.5
4.5
28.1%
Average PLUS Loan For Parents in Dollars
Year
2004
2012
% Diff.
  Public
7,616
10,902
43.1%
  Private nonprofit
11,021
14,622
32.7%
  Private for-profit
8,591
10,265
19.5%
Total
8,919
12,089
35.6%


Discussion of PLUS Loans for Parent Results:



Around 4.5 percent of undergraduates had a PLUS loan for parents in 2012 up from 3.5 percent in 2004.

The incidence of the use of PLUS loans for parents is much higher in private non-profit schools than in in any other sector.

Note that there are roughly 5.6 times more people in public schools than in private non-profit schools.   Even though the incidence of the use of PLUS loans for parents is highest in private for-private schools there are more PLUS loans for parents among public school students than private non-profit school students.

In 2012, the average PLUS loan ranged from $10,265 for private for-profit to $14,622 for private non-profit. 


Results for Private Loans:


Total Private Loans
% of Students with Private Loan
Year
2004
2012
% Diff.
  Public
3.0
3.9
28.7%
  Private not-for-profit
11.0
12.1
9.6%
  Private for-profit
12.5
11.6
-6.9%
Total
5.0
6.0
20.5%
Average Loan in Dollars
Year
2004
2012
% Diff.
  Public
4,749
4,768
0.4%
  Private nonprofit
7,672
7,716
0.6%
  Private for-profit
5,500
5,836
6.1%
Total
5,873
5,826
-0.8%

Observations on Private Loans:

The incidence of the use of private loans is much more pronounced in private schools than in public schools.  However, remember around 70 percent of students are in public schools.  Even though the share of students in public schools using private loans is small this represents a lot of students.






Some Notes:


Note One:  It would be very useful to have information on number of students and borrowers for each loan type and each sector.   This could be calculated easily in SAS or STATA if I had access to actual micro-data file but there is no public use file and I don’t have access to the restricted file.

Note Two:  The variables in this file pertain to annual loan use and amounts.   A more relevant measure of the financial burden imposed upon students is cumulative debt when they leave school.   I have one post on the growth of cumulative federal loans at time of graduation.


I have another post on how number of years it takes to complete an undergraduate degree impacts debt. 



Note Three:  Many financial analysts are very concerned about the use of PLUS loans for parents because lenders often fail to fully evaluate whether the parent’s have the ability to repay the loan and these loans are seldom forgiven even in bankruptcy.  A discussion of some issues pertaining to PLUS loans can be found at the following site.



Concluding Remarks:

Multiple forms of student debt increased substantially in a short eight-year period between 2004 and 2012.   The current generation of students and recent graduates is leaving school with more debt than previous cohorts.  This debt burden will transform our society impacting marriage, family formation, real estate markets and retirement saving for the future generation of workers.

Some politicians support free college.  This proposal may not be feasible.  However, the numbers presented here indicate that the increased use of student debt will impose real economic burdens on recent graduates and current students.  Clearly there is room for a policy proposal that provides some student debt relief going forward.