The State Of The Union: Reality Check
After last years State Of The Union address shared optimism resounded all through Washington. Only to be very short lived. The harsh realities of our dysfunctional congress reappeared soon afterward. Discord, distention and total lack of cooperation by the powers that be in both the Senate and the House proved once again that our "Wizards" in Washington are incapable of dealing with the many crisis that plague the American public. The debacle of raising the Debt Ceiling proved once again that continued infighting and total disregard for anything the President tries to implement continues to bewilder the American public.
The infrastructure development for this country that was outlined in last years State Of The Union address has yet to have a real impact all across America. Meanwhile as our duly elected officials in Washington wile away the hours in constant rebuttal the exodus of middle class wage jobs continues to disrupt the economy. Not to mention, just take a real close look at the prices in the local supermarkets where one comes away in astonishment, aghast, and a sense that our way of life is ebbing away. A real case of sticker shock will succumb the most avid shopper.
Today, one year latter the United States continues to be mired in a world of foreclosed homes, shuttered stores, and 50 year old former middle managers flipping hamburgers and feeling lucky to do so. Where the Republicans continue to blatantly ignore the harsh realities of so many millions of Americans. It is as though the biggest gap in the disparity of wealth in the history of this country is completely irrelevant in all the rhetoric that keeps spewing form our illustrious legislators. That time honored theme from the Nixon and Reagan years of the "trickle down theory" as the only way to cure our economic ills doesn't, can't and won't work.
The President outlined some specifics in new policy proposals. The creation of a new international minimum tax on U.S. companies making profits overseas; the launching of a new trade enforcement unit that would target unfair trade practices in countries around the world, including China; and a plan to shift federal aid away from colleges that don't keep down tuition costs. He also announced that the Defense Department will make history's largest renewable energy purchase. These are indications that the White House is headed in the right direction toward economic forward momentum. Though the real specifics of how everything will fall into place has yet to be defined.
The reality is the United States continues to buy foreign oil that cost billions of dollars each year. To date our largest export is refined raw crude oil. Over 90% of all are domestic refined oil and by products of our refined oil production is exported. Of that now refined oil the by products such as diesel, gasoline, jet fuel and other petroleum products don't make it to our consumers but are shipped to other countries for more profit than they would have made if all that oil was refined for domestic consumption. Another disturbing factor in our energy policies where Nuclear Energy that is supplied by current reactors poise a very critical and real threat. This imminent danger can be avoided altogether by using the technology that was designed when the first Nuclear Energy Commission was formed. We have to make the investment to switch from the solid-field uranium reactors that this nation relies on to the liquid fuel thorium reactors. The big difference is that with any uranium reactors on line are so really inefficient, they over heat and need uranium that produces Plutonium-239 the most harmful waste by product of all. Most of the nuclear reactors that are currently on line today keep spewing out plutonium 239 which costs so much for storage facilities where eventually man and our planet will not be able to handle all this waste. Had the reactors in Japan, Chernobyl and Three Mile Island been using thorium instead of uranium based reactors a much better outcome would have taken place. So far the only country that is currently switching and using thorium for nuclear energy is China. An investment in all other renewable green energy sources such as Wind, Solar and Hydro will offset our energy needs while at the same time reduce the cost for all American consumers. With the mention of Natural Gas that is so abundant right within the United States is a symbolic gesture at least. The real fact of the matter in our energy policy has been all along the dependency of oil, coal, and uranium based nuclear power. We have to move away from our dependency of these very destructive forms of energy if this nation is to thrive and prosper.
When Thomas Jefferson was president there were two political parties. Two parties with different views on how to govern. But they all had one general ideal that enabled both to reach a compromise for the greater good of the whole country. Today our two party system is view as two opponents that differ entirely on almost every issue. The term opponent is used so frequently by all especially the media where just a little over 50 years ago Democrats and Republicans were cast as just two separate parties and not viewed as a direct opponents. When the term opponent is used antagonism, and animosity resonates and keeps our political process from ever reaching any real compromise where unity of purpose is the common denominator. It has been only in the last 50 years or so that after a President's State Of The Union address that a member of the opposite party counter with their own rebuttal. Today this rebuttal constitutes that what ever a President proposes during the State Of The Union will be vehemently opposed without any chance of compromise ever taking place. A virtual logger jam is the result. This is what happened in 2011 and will most likely happen in 2012.
To really implement the "Buffet" rule the President now has to outline further steps to initiate that any hope of compromise by the staunch Republicans will occur. This by stipulating that the Capital Gains tax be eliminated and instilling a flat 10% tax across the board. When mentioning the current economic situation where millions of Americans are faced with unprecedented amount of foreclosures occurring daily individual credit scores are the greatest deterrent and threat against home ownership and staving off foreclosures. This is because banks and financial institutions have set the bar in regards of the numerical value of each person credit history too high so that instead of granting a loan modification or a direct mortgage people are denied. It is much better for the economy, the homeowner and the community to keep homeowners in their homes rather than outright foreclose on them and force eviction. To that end compromise to where credit scores are relaxed or even discounted all together when one seeks to re modify their existing home loan is in the best interest of all. To use that time honored tradition of granting loans before there were credit bureaus would also prove most beneficial.
Post secondary education is really big business today. Big, really doesn't even come close to describing the enormity of profits that are being made in the way how higher education is financed. Our financial institutions are recouping billions of interest on the ever increasing number of student loans that are not only being offered but in so many cases are necessary for the majority of students entering college. It also propels millions of students into a life filled with tension, anxiety and even depression because paying back all those student loans which have reached epidemic proportions is almost impossible now.
Student loans or educational loans as there called today are all forms of financial aid that must be paid back with interest. Federally guaranteed student loans rate of interest varies between 6.9% and 8.5%. These are the Stanford and Perkins Federally sponsored loan programs for students. Parent loans and private student loans are other sources of financial aid that students can also look to. The real problem today is confronted with the ever increasing cost of tuition and other rising costs of a college education like books, room and board, and all the other miscellaneous costs involved. About 95% of college enrolment today are using student loans to pay for their education. That is an increase of over 35% from just tens years ago. The amount of debt involved in obtaining a college education has also risen substantially within the past decade. Every year of those 95% of students their debt has increased by over 7% so that today each student upon graduation are already in debt of over $30,000. When students are enrolled in for profit schools the debt ratio is over 30% higher than those students enrolled in state or non profit institutions.
In no other time in our history has a sector of our society been set back so far financially just so they could obtain an education in order to advance financially in life. It's like students are taking a step in the right direction by continuing their education but are thrown back so many steps just to get that education. What is making student loans becoming so necessary lies in the overall deterioration of our whole economic structure in our society today. Back in the 1960's upon high school graduation the majority of students that went on to college were enrolled in state or non profit universities. Sure many went to places like Harvard or Yale but by in large Universities like Illinois or Michigan were more appealing for most. Financing higher education during those times seemed much less complicated. Loan programs were offered but not like they are today with the way financial institutions use predatory lending. Scholarships were more available back then as well. All a student had to do to qualify for what we used to call a "free ride" [that's a four year all expense paid tuition and all other expenses] was maintain a high school grade point average of over 3.5, and excel in either arts, music, or athletics. A far cry from today. The whole economic demographics of our society has shifted from one where disposable incomes in households all across the United States during the 1950's thru the mid 1970's were more abundant and contributed to the financial ability of parents whose child went on to college to now practically every household is so hard pressed financially the only option left is to borrow money. Banks now realize this and are capitalizing on golden opportunities to reap billions of profits from all those who are now forced to go in debt just to pay for their education. Another set back is for all those students who are now steered toward private lenders because of government sponsored scholarships have been dried up are now more prone to be in financial deep water upon graduation.
The total amount undergraduates can borrow from the these two categories, direct loans and federal loans has been frozen since 1992. Meanwhile, average college costs have reached astronomical heights. More students today have to turn to private lenders to augment their tuition or to outright pay it. Amounts borrowed from private lenders soared 1,201% between the 1995-96 academic year. In 2005-2006, according to the College Board, the amount borrowed rose from $1.3 billion to $17.3 billion. The amount tripled in the past five years alone. And the trend is only accelerating
Private loans can be a worthwhile investment when they help students pay for educations that will enhance their lifetime earning potential. But because there are few limits, such loans also pile up massive amounts of debt. In so many cases students whose majors are in fields where upon graduation the employment opportunities are no longer available only exasperates this whole crisis. This is the scenario today, the jobs are no longer available to accommodate not only graduates but for millions of other Americans seeking employment. A recent report stating the true very bleak unemployment figures are our young adults under 25 especially for Afro-Americans the unemployment rate hovers at over 40%. In what jobs there are is another very bleak one concerns the vast underemployment of our young adults in America Today. This all translates to more debt in our society only to be capitalized by financial institutions who continue to profit on the misfortunes of our youth and our college students but do nothing to improve the total economic picture. All of this makes graduates very limited in their ability to pay back their loan obligations. Many times we have all heard of students upon graduation have amassed six-figure debts only to find work at jobs paying $10 per hour. There is no possible way these individuals will ever pay off that debt.
When borrowers can't pay, lenders can get aggressive. Sallie Mae, the largest student lender, has transformed itself into the country's largest collection agency as well. If private lenders can't get borrowers to pay, federal student loans can be turned over to the U.S. Department of Education, which has extraordinary powers to seize tax refunds, garnishee wages and pursue other collection paths typically closed to private lenders. What is so frightening is that private and even non profit universities are using less ethical tactics in luring students and parents alike in granting student loans through private lenders. Many times credit scores are altered or overlooked in favor of qualifying for a student loan only to be denied credit anywhere else. So common is this practice today that any tuition reduction would be negated and the more money needed would be included in those student loans. Just another predatory lending practice for financial institutions much like the way these same institutions manipulated prudent lending practices that led to the sub-prime mortgage crisis that continues to undermine our whole economy,
The way student loans are now structured today has far reaching economic implications that only continue to undermine our whole economy. Today the default rate on student loans is almost triple that of the sub-prime mortgage default rate. This is a major factor in why this country is having an almost impossible task of improving our economy while increasing the profits of major financial institutions. It works like this: When banks like Bank of America, Citibank and JPMorgan Chase make federal student loans the United States Government guarantees to repay them 98 cents on the dollar if the borrower defaults. When these banks make private loans they charge interest rats of over 20% compared to federal interest rates of only 6.9%. In either case the only ones winning are the financial institutions. Students and our own government continue to loose out.
When the federal government continues to ignore the plight of so many today in refusing to raise the amount equal to the costs of higher education those students have no choice but to seek the private sector financial institutions to procure the extra needed funds. In doing so they have while the cost continues to escalate only encourages the financial industry to capitalize and vigorously pursue students with promises of guaranteed acceptance in acquiring the loans needed to secure the financial obligations in their college education.
With so many defaulting on their student loans obligations today much like when banks foreclose on a home these same financial institutions are finding it more profitable for students to default and home owners to undergo foreclosure rather than work out payment plans. A double edge sword is now a focal point in that if persons wanting to apply for a loan re modification to reduce their mortgages are now being denied because banks have purposely set the credit criteria higher now just to deny that loan modification. The same scenario is taking place with students who are now forced to default on their student loans.
This is a national crisis. One that has been overshadowed by the mainstream media and our elected officials. The economic impact of this crisis is so huge that if not addressed and rectified now will only reduce our competitiveness in today's economic markets and the foreseeable future.
It boils down to jobs. Living wage jobs, and the federal government to equate federal student loans to the true cost of higher education today. The rhetoric of today's politicians and our illustrious legislatures proves that they really still don't understand the big picture of how those many jobs were lost and the way our financial institutions continue to manipulate rules and procedures just increase their profit margins. Until the implementation of total National Economic Reform is implemented our students will continue to wallow in massive debt probably for the rest of their lives and our whole economy will continue to also, wallow in economic deprivation.
There are other concerns that the President needs to focus on where compromise results within our two party system. It lies with the American voter. An example is where over 65% of the population favor legalization of medical marijuana and straight marijuana and imposing a 5% sales tax. Today over 90% of our legislatures nation wide oppose any sort of legalization. This blatant disregard for the public shows that our democratic process really is in trouble. Just think of the financial windfall from the sales tax alone would bring to city, state and federal budgets. Back before World War I marijuana and heroin were actually legal. All one had to do was go to the neighborhood drugstore and buy whatever amount they wanted or needed. By the way all the crime that is now associate with drugs today, in 1910 nobody was incarcerated because of marijuana or heroin possession. Just think of al the tax payers money wasted on minor drug possession today.
Social Security is another contentious issue. But, to fix this government entitlement program designed for the financial protection of millions of our senior citizens is two fold. One is to roll back the cap on earnings when one files for Social Security at age 62. This is even though he or she are still working they would be contributing more into Social Security by the more earnings they make. Resulting, in the more income one continues to make the more funding that flows into the Social Security fund. The other reality of saving Social Security hinges on the actual reduction of unemployment that today still hovers at over 10% nationally. Of that 10% over 80% of those still unemployed use to make middle class wages. To reduce these numbers is paramount to the continue solvency of Social Security.
One of the most contentious issues that was not really mentioned in the State Of The Union is the continued crisis in our health care systems. Both Medicaid and Medicare are riddled with cost over-runs and fraud. Now in Florida as in most states the medicaid allotment is being gutted to pay for other services including public education. This is leaving our nations poor at greater health risks which will eventually cost this country even more. It is time that everyone realizes that our for profit healthcare systems don't work, cost more, and actually endanger more of our citizens to exposing them to greater health risks. The only industrialized country in the world with-out Universal Health Care puts the United States in greater jeopardy.
When the President remarked about playing by the same rules has to apply directly to our electoral process. Last years Supreme Court ruling on campaign finance only solidified the reference that the all might dollar will only continue to sway elections. Until this decision is reversed and real campaign finance reform takes place fair play and equal representation won't happen. The continued reality of power, wealth and control will always play the most significant role in American politics.
The State of The Union is not as strong as the President suggests, at lest not yet. The world is sitting on a powder keg of tension where at any moment one spark could ignite a cataclysm of events that will hurl the world toward chaos. Will the United States be able to survive when that spark ignites? The enormity of all these issues that have evolved into major crisis is demanding cooperation and diligence to solve. Within National Economic Reform's ten articles of confederation are concise steps that will create the atmosphere to regain the desired results that every American hopes for. The actual fulfillment of the American Dream and harmony among nations.