Student Debt is Crushing Consumer Spending

Student Debt is Crushing Consumer Spending

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We’ve heard a lot about how mounting college debt is forcing young people to delay the American dream of  getting married and buying a home and a car. Overall college debt totals roughly $900 billion to $1 trillion, and a startling 43 percent of 25-year-old were saddled with repaying student loans last year, compared to just 25 percent in 2003.

According to a new study by the Federal Reserve Bank of New York, this phenomenon is beginning to hurt the larger economy. Home and automobile ownership rates among 30-year-olds with a history of student debt have both plummeted by ten percent since 2008. 

The study says this drop in consumer spending by an important segment of the population has “broad implications” for the housing and automobile markets as well as for consumer spending more generally. -  See the report here

REINHART AND ROGOFF DON’T  ‘EXCEL’  A provocative new research paper from economists at University of Massachusetts claims that groundbreaking research that has fueled global calls for government austerity was incorrect due to simple calculating errors. The study now called into question was conducted by Harvard economists Carmen Reinhart and Kenneth Rogoff in 2010. After crunching centuries of government and economic data, Reinhart and Rogoff found that countries with debt loads equivalent to or greater than 90 percent of annual economic output, experienced a median growth rate reduction. The new paper says “the average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not –0.1 percent.  -  See more at The Fiscal Times

IMF SAYS LIGHTEN UP ON AUSTERITY MEASURES    In its semiannual report on economic growth, the International Monetary Fund counseled  the United States to ease up on austerity measures – warning that an “overly strong” budget belt-tightening will slow growth this year, potentially harming the fragile global recovery. The IMF also used its report to (again) criticize U.S. lawmakers for sequestration, saying the across the board cuts were  the “wrong way” to shrink the budget deficit.  -  Read more at the Wall Street Journal

LEW: RAISE THE DEBT LIMIT ASAP     Treasury Secretary Jack Lew warned lawmakers on Tuesday that if they fail to raise the debt ceiling again  before next month, the Treasury will once again have to take extraordinary steps to  stave off a government shutdown.  “Remove any uncertainty so we're not in this place where people wonder how many days or weeks that we have,” before the government defaults on its borrowing,  Lew said at a House Budget Committee hearing. He added that that this year's tax increases and spending cuts significantly complicate efforts to gauge how much time the Treasury has before a possible default.  -  Read more at The Wall Street Journal

THE BIG PROBLEM HIDDEN WITHIN OBAMA’S BUDGET   “For all of the president’s calls for major stimulus spending and job creation for the middle class, the economy may never return to its top speed,” The Fiscal Times’ Josh Boak and  Eric Pianin     write.  “The fiscal 2014 budget plan estimates GDP growth of 2.3 percent this year and 3.2 percent in 2014. It anticipates a slower growth rate between 2013 and 2017 than the previous budget.” -  Read more at The Fiscal Times

THE REAL COST OF IMMIGRATION REFORM? The bipartisan Senate “Gang of Eight’s” ambitious immigration reform plan is projected to cost taxpayers $7 billion by some senators. But Republicans are challenging that estimate—saying the true cost of legislation could be in the trillions of dollars  if you take into account how much the government will have to provide in benefits and social services to the millions of immigrants who receive green cards or gain citizenship in the coming decade. In 2007, the Heritage Foundation, a major Washington-based conservative think tank, estimated that a previous immigration reform bill would cost the government $2.6 trillion.  -  Read more at The Fiscal Times

Brianna Ehley is the former Washington Correspondent for The Fiscal Times. She is currently a reporter on Politico's health care team in Washington, D.C.