No Country for Pension Geeks

Perhaps expecting meaning from work is a bad idea

Photo by Logan Isbell on Unsplash

Hello,

Welcome to Known Unknowns, a newsletter that won’t give your life meaning, but may help you find it somewhere.

Student Loans

I’ve written before that student debt forgiveness is bad economic policy. I don’t say that lightly. Usually, there’s some merit to any economic policy. Even if I don’t think it’s the right choice, I can make an argument for it. But this is shockingly bad, even if we knew it was coming. I still didn’t believe it, but it seems like once a bad policy idea gets into the ether, it necessarily comes to be.

There are reasons economists on the left and right (except for the extreme left) are all horrified. I don’t think it’s fair, but fairness is not how I judge an economic policy—because fairness is subjective. I hate it because it is inefficient.

I operate under the assumption that someone has to pay for a $300–$900 billion giveaway. I think many people genuinely believe we don’t have to pay for it, or the only potential cost is inflation (Modern Monetary Theory still lives in the minds of the naïve). I think it will be inflationary—not in a big way, but in a way we don’t need right now. If you thought the IRA reduced inflation by lowering the deficit, then you should think forgiveness is inflationary because any deficit reduction is eliminated—twice over. Inflation will probably decline over the next year for other reasons, but now it will be higher than it otherwise would have been. So, people will probably assume forgiveness was costless.

I judge policies based on their efficiency. By efficient, I mean this thing will cost something, and what are we getting out of it? It will cost something by increasing the national debt, which will mean higher interest rates and/or taxes one day. Generally, for that cost, you want the policy to do one of two things: boost growth or help the needy. This does neither. You can quibble about overall inflation, but it will make education inflation worse and distort incentives, which is bad for growth: so are more debt and higher rates. And there’s an opportunity cost. Think of the better ways we could use that money: climate change, K–12 education, anything. And the benefits go to the well-off. Most graduates earn less than $125,000 right after they graduate, but graduate salaries grow quickly. And so, we’re giving a big, big bailout to the highest earners who don’t need it. It’s the most inefficient policy I can think of, and we’ve had some very inefficient policies.

Economists also take institutions seriously. Good institutions are critical to growth and prosperity. And the fact that the president used the pretext of a “COVID emergency” to hand hundreds of billions of dollars to his favored political constituency and more than double the generosity of an on-going entitlement is really disturbing. I don’t love every economic policy, but when Congress passes a spending bill, I figure, “Well, it’s the will of the voters, and whoever passed it will be held accountable in a local election in a few months.”

Spending bills are supposed to go through Congress for a reason. And the fact that some Democrats, who are facing an election this fall, are critical of forgiveness suggests this would not have passed Congress. The whole thing degrades our institutions and changes how we spend; what’s next when Republicans are in office? This is a banana republic–level policy and economic malpractice.

The fact the White House says they don’t even know what this will cost and then mocked businesses who took PPP grants is shameful. We can quibble about all the COVID-era policies, but we came out of the pandemic with one of the best jobs market in a generation (at the cost of inflation) for new graduates; why do they get a bailout on top of that?

I agree there are problems with student debt, especially for borrowers who did not graduate or went to for-profit schools. But we can deal with that by allowing debt to be discharged into bankruptcy filings and reforming the income-based repayment program to something sane and meaningful (not 5% of income).

Does anyone pay a market price for anything anymore?

I spoke to Arpit Gupta on my latest podcast. We discussed why the housing market is so messed up. One reason housing is so expensive is that we subsidize demand with tax and mortgage policies and restrict supply with zoning. I am totally in camp YIMBY (except for the high-end condo that’s currently being built 8 feet away from my window—I think they should turn the lot into a park [preferably a keyed one]; are you really a NIMBY if you oppose high end condos?), as all are enlightened people are. That’s an easy one.

But what gets less attention is this: why do we subsidize demand? It is also a regressive policy. The regressiveness may explain this figure.

And why do we encourage people to put all their money in an illiquid, single asset?

Finding meaning in all the chaos

I also wrote about finding meaning at work for Bloomberg. Apparently, lots of people are either quitting or shirking their jobs because they don’t feel meaningful. This is especially the case with younger people who want their jobs to have a higher purpose.

I don’t think younger people are necessarily more idealistic, but they are most prone to feeling frustrated because jobs early in your career tend to be tedious. Learning skills is hard and often boring. But for a variety of reasons, there is an expectation that all jobs should feel meaningful.

I argue this is not what you should look for in a job. Meaning comes from within. Jobs that promise to make the world a better place tend to have nasty cultures because people in these organizations take everything way too personally and are underpaid. This is why nonprofits have such high rates of attrition.

And two things make you feel satisfied with a job: a path forward for advancement and the chance to use your skills to solve problems—big problems and more often small ones. That’s why people who report high levels of satisfaction aren’t always at the fancy job that promises to make the world a better place. These are people who are just good at what they do. But getting good at what you do usually means some grunt work along the way.

But hey, now that young graduates don’t need to worry about their debt repayments, maybe they’ll learn some other kinds of skills in their search for meaning.

A moment of Zen

There’s a lot of terrible economic reasoning out there. Zvi sent me this video, which is such a breath of fresh air…

Until next time, Pension Geeks!

Allison

---