Tuesday, May 1, 2012

Paying the bills

Student debt is a big topic these days.  President Obama recently put on a show where he slow jams the news to talk about keeping interest on student loans low and Quebec has a big protest going on where students are freaking out over tuition increases.  Students obviously feel like they should not have student debt for years and years after they graduate; naturally their self interest lies in having minimal possible debt.  The trouble is that student debt has to be supported one way or another as we can't just wish it away with no consequences; somebody always has to pay the bill in the end.

In the same way there is real concern that pension plans and healthcare costs for our elderly are going to rise completely out of control over the next decades as our population ages.  We have come out of a time period where many people expect to retire at 55 and are looking at most people wanting to enter the workforce somewhere around 25.  If those people who start work at 25 with student debt don't want to pay much interest on it then they are simply going to have to put up the difference in taxes to the government anyhow.  There is no free lunch.  This panacea of graduating from years of university education, entering the workforce with minimal debt, retiring early and being supported by the government from age 65 to 85 just doesn't add up unless we are all happy paying enormous amounts of taxes throughout our working lives.

It is a tricky sort of topic.  Clearly there are benefits to retiring early and being very well educated but as my Econ 101 prof used to say, what is the cost?  The cost is that the people taking advantage of both of these things have a fairly small part of their life where they are contributing money into the pot and many years where they are taking it out.  It just isn't sustainable as a model for all citizens.  Of course any given person can potentially manage this, especially if they are particularly careful with finances, but to believe that the population at large can all get university educations and retire early is irrational.  That is, it is irrational given our current standard of living.  We can easily survive on a fraction of our current incomes if we pare down our lifestyles and that would have lots of great environmental effects - humans using too much stuff is the driving factor behind our climate change issues and nearly all other environmental challenges.

That isn't the sort of line the government can deliver though.  Students don't want to hear that the government won't support their debts, workers don't want to hear that taxes will go up and retirees don't want to head back to the grind nor give up their benefits.  At some point though we are going to have to address the unrealistic expectation of leisure and wealth combined that people have.  You can have leisure (like I do, say) or you can have wealth (like most people do, say) but there is no way to do both.

1 comment:

  1. Darn! I was hoping there was a way....