The Law of Averages

Let's take an average new grad. He's making $50,556 a year because he's average. he's got $40k in debt because he's average. He's paying $10k a year in federal tax because he's average. He's paying $3100 in FICA and $750 in medicare. His student loan at 5% is $438 a month ($271 if he's doing income-based repayment).

Every month he pulls down $2800 or so. $1000 of that goes to rent because he's average. $300 of that is groceries because he's average. Let's say his average-ness continues and his $4200/year transportation costs come down to $350/month. If he has no phone, no internet, no Netflix and no other joys in his life, he's got about a thousand dollars a month left.

Of which his student loans are between a quarter and a half of that.

Let's say he's gonna retire that damn debt - loan forgiveness be damned! If he wants the median house, he's gotta sock away $40k for the down payment. That's gonna take him about four and a half years of spending absolutely nothing that isn't essential and then he's gonna be paying out 75% of his remaining income on a mortgage payment, leaving the poor bastard $250 a month. I guess he can finally afford that cell phone.

he sure can't afford kids.

If he's smart he goes income-based repayment. Then he saves $150 a month. Of course he'll pay it forever, wink wink, nudge nudge, although really he's banking on forgiveness after 360 payments. The government, of course, is not doing this - income-based repayment is supposedly temporary so they're accounting for that as if it's debt that they'll get to collect. So now here we are - the government is planning on paying for money that isn't even there as much as they think it is. The Olds are planning on selling their houses to people who can't afford them, and on their retirements being paid for by workers who don't exist.

It amuses me that "debt forgiveness" and "debt jubilee" are good things we should all get behind without recognizing that they're euphemisms for "bankruptcy." Our system is built on IOUs and just because the money doesn't exist doesn't mean nobody's dependent on it. The Olds are dependent on selling their house for three times what they paid for it so they can retire. The Youngs are dependent on the old people retiring so they can afford to buy houses. And it's not going to work out.

There's going to have to be some serious seizure of wealth from those top brackets and it's still not gonna cut it. There's $210T in unfunded liabilities and $93T in household wealth. Our average new grad with the $50k salary? The US government has $100k in unfunded liabilities just for him.

I don't see a graceful unwinding for any of this. I've been looking. I think there's gonna be a lot of ramen and vans and I think the higher your income decile, the better off you'll be.