Debt

Consider two forms of debt:

Debt A totals around 1.6 trillion dollars, with the average debt in the 30-40 thousand dollar range. The level of A-debt in society has grown at substantial and alarming rates, more than doubling the past decade. Interest rates vary considerably, largely based on the point in time at which the debt was incurred. Average interest rates are around 5-6%, and usuriously high interest rates make up only a very small portion of the total debt load. While it’s possible some accounting trickery is involved, there’s some evidence the default rate for these types of loans may be decreasing.

Debt B is somewhat lower, totaling around 1.2 trillion. Upward trends are similar; total debt has not quite doubled in 10 years, but it’s very close. Typical debt load for consumers is roughly similar for A and B debt; around 30 thousand dollars is also typical. As with A debt, interest rates vary considerably for B debt as well, but in a more traditional way; interest rates for B debt closely track credit rating scores, a measure that plays essentially no role in debt A. Usuriously high interest rates are considerably more common for debt B than debt A, but average debt rates are similar. The evidence for increasing rates of delinquency and default for debt B, unlike debt A, is substantial. Ownership of the product debt B is used to acquire is more universal than that of debt A, as such owners are a clear majority of adults, while owners of product A are squarely a minority.

Some further similarities exist between debt A and debt B. In both cases, debt is incurred by a little more than two thirds of total purchasers of the product. Both products are widely celebrated and romanticized in popular culture. In both cases, it is common for teenaged children to orient their life-plans around the future acquisition of these goods, and for their parents to do the same on their behalf. In both cases, failure to possess the product in question might be the kind of thing many would be embarrassed to admit on a first date. In both cases, the underlying product purchased is a product widely considered to be necessary for the project of living a successful adult middle class life, and that most people living without them will be assumed to have a lower quality of life for it. These assumptions has some real evidence to back it up: while there are important exceptions and qualifications, it nonetheless remains broadly accurate that possession of both underlying goods, for most people, significantly enhances their employment options. Another difference worth noting is that debt incurred to acquire good B is almost always ‘successful’ (in the sense that either good B is acquired, or the attempt to secure a loan is not successful, but not both), although the good depreciates quickly and can be rendered useless through ordinary use. Not so for good A, as attempts to acquire it are routinely unsuccessful (although the debt remains).

At present, the level of debt A currently owed is widely viewed as a major public policy problem, if not full-blown crisis. Several candidates for president have proposed costly plans to radically reduce, if not fully eliminate, the current debt burdens, while reducing the cost of good A for future purchasers. Even the squishy moderates not proposing direct debt relief recognize the level of debt as unsustainable and unjust, and offer their own proposals for reducing the need for debt for future purchasers. Debt B barely registers as a political problem. No candidate proposes direct debt relief, and for good reason: the idea would likely strike most members of the public as patently absurd. (Debt A relief polls pretty well.)  What could explain this disparity?

As astute readers have by now likely surmised, Debt A is student loan debt, and debt B is car loan debt. Setting aside the question of whether these *should* be treated similarly as a public policy problem, the empirical question of why they aren’t remains interesting. (My personal view is that of course they shouldn’t be treated similarly, but I’m a known anti-car extremist who holds the radical view that driving should be made more expensive and inconvenient, not less, so it’s highly unlikely my reasons explain anything about broader public opinion.)

One obvious difference is that these forms of debt are moralized differently. If, for example, we encountered a minimum wage earner who, somehow, had managed to secure a loan for a new Lexus, most people would hold them (and, of course, the foolish lender) squarely accountable for the mess they’ve made. A similarly extreme case for student loan debt might be a weak student who barely managed to earn a BA taking on six figure debt to earn a JD from a fourth tier program. (Paul has of course provided in gruesome detail on the staggering folly of such a decision, here and elsewhere.) As a cultural matter, reactions to this individual would vary; some might treat his choice as foolish, but many others would admire his effort to work hard and better himself. (This perhaps helps explain why the foolish lender, in this case, is effectively all of us, as we’ve decided to guarantee this loan and millions of others like it.)

Another important difference is how we think about price sensitivity. Buying a cheap car when your income is low is viewed as common-sense, but similar price sensitivity is not so strongly ingrained with education. Attending high-status colleges isn’t universally viewed as conspicuous consumption, but as a valued accomplishment.

But perhaps another possible story about the gap relates to whose voices are amplified in our national political discussion. Journalism skews heavily toward recent college graduates, and probably graduates of more expensive colleges. Furthermore, they’re more likely to be concentrated in a small and unrepresentative handful of locations where car ownership is far less important and valuable than anywhere else. Understandably, from their perspective, it makes sense that at least some of the costs of their risky self-improvement wager should be socialized. But is the difference a product of blinkered class blinders?

My own effort to square the circle works like this: I’m attracted to the case that access to education and mobility should be treated as public goods, provided freely or nearly so to all who want them. But I’m more comfortable (if not entirely comfortable) with the case for using “institutions of higher education” as a primary delivery vehicle for the former than I am using “cars” as the primary delivery vehicle for the latter, for all the obvious reasons—cars cook the planet while killing  their users and innocent third parties at staggering rates, and even if those substantial downsides could be mitigated, they simply don’t scale to dense urban environments which provide a host of other sociological, economic, and environmental benefits over other built environments. Insofar as making cars more expensive and inconvenient reduces their use at the margins, it’s arguably a price worth paying, even if it generates some short-term middle class pain. Some of this is necessarily zero sum: the mobility benefits of giving 14^th Street and Market Street to other, safer and more efficient transportation modes have proven substantial. The share of public ROW given to a form of transit as spatially inefficient as cars is often staggeringly inefficient. The only way to provide mobility, the underlying good car buyers seek, or at least the one that’s arguably a public good, is to reduce the extent we rely on cars to provide it. Andre Gorz (in a brilliant essay everyone should read) saw this almost half a century ago:

The worst thing about cars is that they are like castles or villas by the sea: luxury goods invented for the exclusive pleasure of a very rich minority, and which in conception and nature were never intended for the people. Unlike the vacuum cleaner, the radio, or the bicycle, which retain their use value when everyone has one, the car, like a villa by the sea, is only desirable and useful insofar as the masses don’t have one. That is how in both conception and original purpose the car is a luxury good. And the essence of luxury is that it cannot be democratized. If everyone can have luxury, no one gets any advantages from it. On the contrary, everyone diddles, cheats, and frustrates everyone else, and is diddled, cheated, and frustrated in return.

As Gorz notes, we’ve spend the 20th century trying to square this circle with one desperate solution after the next; massive sprawl, ever-wider roads that degrade the quality of the built environment for anyone not in a car, and of course giving over a staggering amount of extremely valuable land to the purpose of storing cars. Enough; if we’re going to effectively democratize and subsidize mobility, as we should, we should probably try something new. Climate change heightens the case, but it would be strong enough without it.

That’s the story I tell myself, anyway, about why one form of debt is demands a relief and another does not. I’m pretty sure I’m at least partly right, but of course the whole point of ideological blinders is that you’re rarely cognizant of the full scope of the work they’re doing.