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Is Brazil is”getting an American” ??

09/20/2014

Typical of their sophomoric humor, the current joke circulating among economic students is that President Obama “needs a Brazilian.”

Normally, an improving job market reflects an improving economy.  If you can make GDP increase, then you can make unemployment decrease.  Right now, the Brazilian economy is slowing down, from 2.1% to 1.0%.  Job creation has decreased from 2.1 million per year to only 536 thousand.  Yet, unemployment just hit a record low of 5.2%  The president, Dilma Rousseff, is enjoying rising popularity, despite a falling GDP.  Jobs matter more!

In the U.S., the economy has certainly been improving, growing over 4% last quarter. Regular unemployment has decreased but is nowhere near a record low, while the long-term employed has remained stubbornly high.  Economic students say President Obama should increase student aid as well.  That would be “getting a Brazilian.”

How does this apparent inconsistency exist?  President Rousseff took a page from President Clinton’s playbook in the 1990s, i.e., making massive student loans possible, which takes young people out of the unemployed.  It is estimated that 9.6% of the workforce between the ages of 15-24 have gone back for higher education.  That worked well for holding down U.S. unemployment during the 1990s.

Unfortunately, the best of intentions can lead to hell, and that is the case for the U.S.  Easy financing
fueled the rise of for-profit “failure factories,” producing graduates with questionable degrees who cannot find work.  To make it even worse, they have to repay loans taken to earn these questionable degrees.  There is now more total student debt than credit card debt in this country!  This is also making young people ineligible for mortgages to buy their first home, especially hurting the housing industry.

At some point, Congress will have to deal with this debt that is crushing the economy, such as 50% discounts for students becoming firemen or nurses or relocate somewhere.  However, with ISIS, the Ukraine, Ebola, China, climate change, and the $17.7 trillion national debt, the plight of those, who believed a college degree leads to good things, will suffer from a lack of attention.  I hope Brazilian students are spared the plight of American students.

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