One of the main reasons that the housing bubble grew unchecked is that major media outlets like the Washington Post refused to present the views of those trying to call attention to the unprecedented run-up in house prices and the disaster that would inevitably follow its collapse. Instead the Washington Post was obsessed with reporting on the budget deficit, following the lead of billionaire investment banker Peter Peterson and his dependents, even though the deficits at the time were very modest by any reasonable measure.
The Washington Post refuses to allow its catastrophic failure in its non-coverage of the housing bubble affect its reporting in the least. It continues to obsess on the budget deficit, relying almost exclusively for sources on “experts” who were unable to recognize the $8 trillion housing bubble.
It also continues to view the beneficiaries of Peter Peterson’s largesse as valuable sources. Today it ran a piece from the Peter Peterson funded Fiscal Times warning about the “debt bomb” from student loan debt. (The Post did not identify Peter Peterson as the funding source for the Fiscal Times.)
The piece manages to get just about everything wrong. To start with, the piece did not even get the rate of student debt accumulation right. It told readers:
“The amount of student borrowing skyrocketed from $100 billion in 2010 to $867 billion last year.”
The data show that student debt was around $800 billion in 2010. It was already near $200 billion in 2000. The incredible rate of debt accumulation described in this sentence should have raised eyebrows among editors at the Fiscal Times and Washington Post, if they have any.
Perhaps more importantly, the basic premise of the piece is absurd on its face. The third paragraph has a quote from William Brewer, the head of the National Association of Bankruptcy Attorneys:
” ‘This could very well be the next debt bomb for the U.S. economy’ — something akin to the housing mortgage loan crisis that triggered the U.S. financial crisis.”
This is an absurd statement and any serious reporter should have been able to recognize that fact instantly. At the peak of the housing bubble in 2006, the residential housing market in the United States was worth more than $22 trillion. It has since lost close to $8 trillion in real wealth, which is the basis of the current downturn.
As the article explained, the student loan market is now valued at $867 billion, less than 1/25th the size of the housing market at its bubble peak. Furthermore, all of it will not default and the defaults that do occur will be spread over many years. How is this supposed to have the same impact as the collapse of the housing bubble?
None of this should be taken as minimizing the plight of recent college graduates who face a serious debt burden in an economy offering few jobs and even fewer good paying jobs. However, it makes no sense to compare this situation to the housing bubble; there is no relationship.
This is like comparing every atrocity to the Holocaust. There are many horrible atrocities that have occurred in the last sixty five years but few, if any, can rightly be compared to the Holocaust and it is foolish to do so. The advocates for students should make their case in a more honest manner and competent reporters should know better than to fall for this sort of hyperbolic nonsense.
Economist Dean Baker is co-founder of Center for Economic Policy and Research and writes regularly on CEPR’s Beat the Press blog, where this post first appeared.