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No taxes for schools ==> Bank Bailouts Ahead

April 30, 2012

Paul Krugman’s NYTimes column discusses the economy’s effect on those under 25… which is horrific! In Spain 50% of that cohort is unemployed and in Ireland 33% are. Here in our country, the figure is better (16+%) but hardly heartening… and it evidently makes no difference if you went to college: the college graduates have many PART-TIME jobs but not many full time ones.

So… what are governments around the world doing? Cutting back spending on education as part of their “austerity” plans! So here’s how this is creating (or in the US reinforcing) a vicious circle: we cut funding for schools and colleges; schools lay of people– thereby reducing jobs— and colleges increase tuition— thereby forcing students to borrow; students graduate and can’t find jobs (the government cut them and the private sector doesn’t want to or can’t hire) and so they can’t pay back their loans. Here’s where the story takes a perverse twist: when the banks can’t make their balance sheets work because the students aren’t paying them back, the government that WON’T raise taxes, the government that ELIMINATES jobs decides banks are “too big to fail” and uses taxpayers money to bail them out.

What’s wrong with this picture? Austerity doesn’t work, it never has, it never will… but our fixation on avoiding inflation is creating a death spiral that we need to get out of soon.

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