By: Joe Lazauskas
The Great Recession of the late 2000’s delivered the biggest blow to the American economy since The Great Depression. Today, a slow-recovering economy and stagnant job market is a colossal concern for millennials — some days, it seems like the best chance for employment is to become a reality TV star. If JFK were alive today, he’d probably say, “You have nothing to fear…but a nation of Kardashians.”
How bad is the job market for millennials? The non-partisan Economic Policy Institute describes it as “grim,” as 9.4% of college graduates under the age of 25 find themselves unemployed, and an additional 19.1% are overqualified for their jobs. Making matters worse: college grads now owe more than a trillion dollars in student loan debt.
Still, they should feel thankful for their diploma, as the job market is much more bleak for high school graduates. A Rutgers University study of 544 high school graduates from 2006 to 2011 found that nearly half are still looking for full-time work, and only 3 in 10 are employed full-time. Many feel that high school graduates are hit the hardest by the outsourcing of labor overseas, and in fact, outsourcing increased by over 40% during the recession.
Luckily, Bieber and Miley are picking up the slack to inflate our average earnings; they combined to earn over $100 million in 2011. Little help, Biebs?
+ Wait, how did we get in this mess?
In 1933, Congress passed the Glass-Steagal Act to ensure the separation between commercial banks (which lend money and hold savings accounts) and investment banks (which gamble through the sale of bonds and equities). The 1980’s saw a strong push towards deregulation – and a weakening of Glass-Steagal — that accelerated through the 1990s. When President Clinton signed the repeal of Glass-Steagal in 1999, investment banks and commercial banks began merging. The newly-merged banks promised that they’d keep the investment bank and commercial bank operations separated; however, the investment bank culture spurred the previously-conservative commercial banks to take more and more risks throughout the 2000s – particularly by giving housing loans to low-income folks.
At the same time, subprime lenders were targeting people (mostly minorities) with bad credit and convincing them to accept loans with unusually high interest rates; in most cases, people would use the equity of their homes to back up the loans. The subprime lenders would then resell these loans to investment banks that would package these loans as mortgage-backed securities. The practice led to thousands of foreclosures nationwide, but many have argued that the people accepting the loans knew the risk they were taking.
When the housing bubble popped and the value of homes plummeted, millions of homeowners lost hundreds of thousands of dollars in equity overnight. Those with subprime loans lost their homes, banks gambling with more money than they had lost their bets, and the economy shifted into a sharp decline. In response, George Bush signed a $170 billion stimulus package in 2008 as a stop-gag measure, which was followed by President Obama’s more robust $787 billion stimulus package, signed into law just weeks after his inauguration in February 2009.
+ Whew. So how is the economy doing now?
Back in February, the economic recovery appeared strong, as the country added 200,000 jobs for the third straight month and many economists expected the unemployment rate to drop below 8% by fall. Unfortunately, the recovery soon slowed, and the economy gained just 80,000 jobs in June – just enough to keep up with population growth.
Many economists are predicting that we’ll see new small-scale stimulus measures soon. Many economists are calling for another robust stimulus package — similar to the one passed in 2009 — that invests in things like building new public transportation systems, fixing roads and green energy initiatives; however, the current political deadlock in the run-up to the election makes that unlikely.
+ How do the candidates propose we jumpstart growth?
The President proposes stimulating the economy by the federal government “investing in education, energy, innovation and infrastructure, and by reforming the tax code” to extend cuts for the middle class while raising taxes on those who make more than $250,000 a year. Particularly, he proposes helping tech startups and new green energy companies grow, as young companies drive the majority of job growth.
Mitt Romney’s “plan seeks to reduce taxes, spending, regulation, and government programs” and “increase trade, energy production, human capital, and labor flexibility.” Romney believes that a decrease in financial regulation, environmental regulation, and taxes will kickstart economic growth by creating a more “business-friendly environment.” In other words, if companies weren’t bogged down with regulations and taxes, they would be more likely to expand their businesses and hire more people.
As the Bush-era tax cuts are set to expire, Republicans are calling for eliminating some middle class tax cuts while extending cuts for those making over $250,000; Democrats are calling for the opposite: extending all middle class tax cuts while ending cuts for those making over $250,000.
+ What does this mean for me? What can I do?
All this grim economic news luckily isn’t getting our generation down. Nearly half of millennials surveyed by a Gallup Poll said that their chances of becoming rich were at least “somewhat likely”; yes, almost half of us believe we can someday – like Drake – be part of the Young Money crew and have waterfalls, a waterslide, unlimited wine spritzers, and bronze animal statues in our backyard.
So don’t get down, get informed and get involved. Click to learn more about President Obama and Mitt Romney’s plan for the economy, and to learn more about each party’s proposed tax cuts and increases, click here. Always make sure you’re registered to vote, so you can put this new knowledge to good use in November.
If you have an opinion about what our lawmakers should do, get in touch with your local Congressman or Senator, and let them know what you think.
And if you’re interested in starting your own business, check out the Young Entrepreneur Council.
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