More signs that the dynamism that once characterized the American economy is waning:
This year’s college graduates will enter the work force carrying a heavy load of debt. As Phil Izzo of the Wall Street Journal reports:
This kind of debt obviously disinclines one to a) assume more debt, even where lenders are willing, and b) take big risks.
So the indebted new grads will not be in a hurry to marry, start families, and buy homes. Assuming they could get mortgages. So, as Andrew Flowers of Fivethirtyeight.com reports:
Home building spurs more ancillary economic activity than the building of apartments. More construction jobs. More people going to Lowes for home improvement materials. And, then, there is the imprecise but real effect of an ownership mentality. Homeowners have a greater stake in the health and growth of the economy than do renters.
And, then, there is the likelihood that this generation of debtors will be a generation of risk-avoiders, accelerating a troubling trend. As Ben Casselman of Fivethirtyeight.com reports:
And:
Americans started 27 percent fewer businesses in 2011 than they did five years earlier, according to data from the Census Bureau. As a share of all companies, startups have been declining for more than 30 years.
Among the theories put forth to explain this trend are
Whatever the cause – or causes – more young people, more heavily in debt does not seem like the route to more innovation and startups. Already in a hole, they would probably not be inclined to dig deeper.
