Archives: Reg Murphy Pubs

Updates on Black Representation in Economics

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

Today marks the beginning of Black History Month. In February 2021, I wrote about the lack of Black representation in the field of economics, especially among economists working for the Federal Reserve (the Fed). As I wrote then, increased representation in Economics will improve our chances of producing accurate and useful results across studies of any focus, and especially those focused on issues of importance to minority populations.

The most recent diversity data from the American Economics Association (AEA) and from the Fed come only from their 2021 reports, but they do show some improvement from the 2020 report data in my previous article.

According to the AEA’s most recent data, among degrees awarded in Economics in 2019-2020, 5.18% of Bachelors, 5.93% of Masters, and 4.31% of PhDs went to Black or African American candidates. These are somewhat mixed results when compared with data from 2018-2019, when Black or African American economics graduates made up 5.16% of Bachelors, 7.43% of Masters, and 2.8% of PhDs. Economics still lags behind STEM fields in percent of minority graduates at all degree levels.

In December 2021, the Fed employed 945 economists. Twenty-eight percent (269) of them identified as a race other than White. Only 14 economists (1.5%) identified as Black or African American single-race, and 7 (0.7%) identified as two or more races, races not specified. This is a slight improvement from 1.3% Black single-race and 0.7% two or more races reported in early 2021.

I started writing this with hopes of finding more recent data and greater improvements. I am encouraged to see even these small improvements in just one year, though. Except for in economics Masters programs, Black/African American representation in each of the categories I reported on in early 2021 had improved by the end of 2021. I am especially excited to see the relatively large jump in the percent of Black/African American Ph.D. graduates. Clearly, though, with about 14% of the U.S. population identifying as Black, the economics profession – and especially the Fed – have a lot of work yet to do to recruit, graduate, and employ Black economists at a rate that compares with national demographics.

I am proud that the AEA is doubling down on its efforts to recruit Black students into the field. In 2022, they awarded the honor of Distinguished Fellow – for the first time posthumously – to Dr. Sadie Alexander, a scholar who would have championed this work of improved diversity, equity, and inclusion in economics.

Dr. Alexander graduated from University of Pennsylvania in 1921, becoming the first African American to earn a Ph.D. in economics. She was the second Black woman to earn a doctorate in any discipline in the U.S. Because of her race and gender, Alexander was denied employment in economics, so she went back to school and became the first woman to graduate from the University of Pennsylvania Law School. She worked in law for the remainder of her career, was the first female secretary of the National Bar Association, and served as the first national president of the Black women’s sorority Delta Theta Sigma.

Through all her accomplishments in law and service, Alexander was always an economist at heart. Until her death in 1989, Alexander advocated publicly for inclusion of women and minorities, especially in the workplace, as a necessary component of a successful capitalist democracy.

I end with her words, an appropriate reminder to us all:

“We must provide the hope and the certainty of productive employment to everyone, and especially to Negro young people. The basic purpose of this comprehensive design, this total process, is the development of the deprived, the neglected — the discriminated against — the minority — to its full potential. This is necessary not only to meet the ends of social justice and morality, to fulfill the guarantees of our constitution and laws, but because in this era of automation, when tens of thousands of unskilled and semi-skilled jobs are being eliminated, it becomes an economic imperative which is basic to our very existence as a free society.” — Sadie Alexander, 1963

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

Thanks from the Murphy Center

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Contemplating one’s blessings is a good way to bring in a new year – or better, a new day, if you can swing it.

Our From the Murphy Center column in The Brunswick News is into its sixth year.  My Murphy Center colleagues – Drs. Heather Farley, Melissa Trussell, Roscoe Scarborough and Skip Mounts – and I are enormously grateful to Mr. Buff Leavy for granting us the column, Mr. Buddy Hughes for his patience with us, and the folks in Glynn and beyond who read us.

Being part of the community through this wonderful space every Wednesday is a privilege, and a ton of fun.  We do not take it for granted.

Our columns tend to be serious, but the history of the Murphy Center has some humorous twists. 

Dr. Skip Mounts became Dean of the College of Coastal Georgia’s School of Business and Public Administration in 2011.  Dr. Mounts is an exceptionally entrepreneurial Dean. 

A short time into his Deanship, Dr. Mounts came by my office and said, “The research you do on the local economy should have a home.  I am going to propose to the president that we create a center.  We’ll give it a name, and you’ll be the director.”

It sounded super to me, except for the director part. 

I have no personality, no leadership skills and no aptitude whatsoever for directing anything.  Should something arise that needs directing, I understand instinctively that I can best help the cause by hiding deep in some remote, forsaken area until the need for directing has passed.

“Who will I be directing?” I asked.

“Yourself,” he said.

Recognizing that such an arrangement would push my directing capacity to the breaking point, I hesitated, but then yielded to a rare spasm of daring-do.    

“Ok, deal,” I said.  “But if the center’s personnel roster gets any deeper, we’ll probably need to modify the managerial hierarchy.”  The Dean smiled.

Dr. Valerie Hepburn, another exceptionally entrepreneurial person I’m quite grateful for, was the college president at the time.  Dr. Hepburn liked the idea.  The three of us came up with a name for the center that was so long and awkward that I’ve forgotten it.

In the fall of 2012, Mr. Reg Murphy became the first Executive in Residence of our Business School.  He was still our Executive in Residence on October 8, 2015, when we changed the name of the center from whatever it was to the Reg Murphy Center for Economic and Policy Studies at a gathering in the College of Coastal Georgia’s Stembler Theater.

Mr. Murphy had an extraordinary career in journalism and business.  He had been a huge supporter of the College years before and after 2012.  But the Murphy Center bears his name for a different reason.

Reg Murphy is a person of great intellectual honesty, integrity and humility.  His name sets the standard for the research we do and the columns we write.

That means we do our homework.  We don’t twist or cherry-pick data.  We don’t misrepresent or caricature people or ideas.  We understand the danger of ivory tower hubris, so we stay off high horses.  We do careful, thoughtful, honest work.

Our personnel roster is now five deep.  Fortunately for me, the best way to direct thinkers of the caliber of Drs. Farley, Trussell, Scarborough and Mounts is not to direct them – to get out of their way, let each do their thing, then cheer each on to do more of their thing.

So, that’s how we operate.  “Explore what interests you, explore it full throttle and with Reg Murphy honesty, integrity and humility, then tell us about your exploration” is the crux of it.

Thanks again for reading our column.

U.S. Life Expectancy Falls to 1996 Levels

Written by Roscoe Scarborough on . Posted in Reg Murphy, Roscoe Scarborough.

Roscoe Scarborough
Roscoe Scarborough

Life is short, but it’s getting shorter for people in the United States. Life expectancy has fallen precipitously in recent years to levels not seen since 1996. This drop was largely due to deaths from COVID-19 and increased drug overdose deaths.

U.S. life expectancy fell for a second year in a row in 2021, according to a December 22,2022 report from the Centers for Disease Control and Prevention. The average life expectancy in the U.S. declined for a second year in a row to 76.4 in 2021, down from 77 in 2020, and 78.8 in 2019.

Both women and men saw comparable declines in life expectancy in 2021. As of 2021, the average life expectancy of women in the U.S. dropped to 79.3 years, while the average life expectancy for men in the U.S. dropped to 73.5 years.

The CDC’s list of top killers was largely unchanged from 2020 to 2021 with two exceptions. Influenza fell off the list. Meanwhile, liver disease and cirrhosis became the ninth leading cause of death.

COVID-19 has received a lot of media attention, but it was not the top killer in 2021. Heart disease, not COVID-19, was the leading cause of death in the U.S. The second leading cause of death was cancer. COVID-19 was the third leading cause of death in 2021, killing about 460,000 people in the U.S.

Multiple surges of COVID-19 cases guarantee that COVID-19 will be a leading cause of death for 2022 as well. Natural immunity from past infections, improved treatments, and vaccinations are reducing the death rate from COVID-19. That’s good news for 2023.

The recent CDC report shows another significant change. Overdose deaths in the U.S. continued to increase in 2021. In 2021, there were 106,699 drug overdose deaths in the U.S. By comparison, there were 91,799 drug overdose deaths in the U.S. in 2020.

Synthetic opioids, such as fentanyl, accounted for a lot of the increase in overdose deaths. Drug overdose deaths involving synthetic opioids increased 22% from 2020 to 2021.  

There is some good news related to overdose deaths. According to CDC data, U.S. overdose deaths peaked in March 2022. Every month since has shown a decline. Additionally, the rate of drug overdose deaths from heroin decreased 32% from 2020 to 2021. These are good signs, but there’s a long way to go.

What’s in store for 2022 and 2023? COVID-19 and overdose deaths are guaranteed to be featured on the 2022 CDC report. Recent trends suggest that deaths from COVID-19 and overdose deaths are on track to decline in 2023. After falling off the top ten killers list in 2021, influenza is likely to return to the mortality report due to a severe flu season this winter.

Several institutional solutions can help the U.S. to raise life expectancy, including funding public health, expanding access to addiction treatment programs, and encouraging vaccination against viruses like the flu and COVID-19. Effective health and physical education in schools can prepare children for a lifetime of healthy decision-making. It is possible to increase access to medical care by expanding Medicare eligibility and promoting enrollment in the government-sponsored Marketplace health insurance plans created by the Affordable Care Act.

It is likely that U.S. will see life expectancy begin to increase once again. A declining death rate from COVID-19 and decreasing overdose deaths place the U.S. on a trajectory to see increases in life expectancy in 2022 or 2023.

Roscoe Scarborough, Ph.D. is interim chair of the Department of Social Sciences and associate professor of sociology at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at rscarborough@ccga.edu.

What is the only acceptable solution to our student debt crisis?

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

This year, my son and I hosted a holiday pie party at our house. Each guest brought a pie and then chose an assortment of slices from all the pies to take home. It was a delicious blast.

Now, back at work, my thoughts turn to the proverbial pie of economic lore. Economics is often defined as the study of the allocation of limited resources to satisfy unlimited wants. In other words, it’s the study of how to slice the pie.

Modern economic theory focuses less on who gets how much pie and more on making sure that the pie is large and that the entire pie is enjoyed. This is the economist’s definition of efficiency—no pie is left on the table.

In our current education market, pie is being left on the table due to inefficiencies in the way education is financed. In a previous column, I proposed reprivatizing the student loan market to improve the way the education pie is sliced. Private lenders have more incentive than the government to account for the value of one’s education their risk of default. They would set interest rates and availability of funds accordingly, and this market information would guide students in making choices they could reasonably afford.

The market solution would fix the debt problem and would get us closer to consuming the whole pie in the education market … in theory.

But, such a market solution is unlikely to work. There is too much uncertainty in estimating the returns to education for a given individual, and unlike with a mortgage or car loan, there is nothing to repossess when someone defaults on an education loan. This is part of why the government stepped into the student loans market in the first place. It is not practical to expect private lenders to get into such a risky business. There would be very few education loans at all if they were not at least guaranteed by the government.

Moreover, even if it would work to fix inefficiencies, the market solution wouldn’t – and doesn’t claim to — fix inequities. See, under the market solution, fewer people would have student debt because fewer people would get educated. It’s exactly the point that those who could not afford education would not get it. They’d understand market signals and stay out.

Even to a devoted free-market economist, though, it raises moral red flags to advocate for a system in which higher education is only accessible to the affluent. The only solution to our current student debt crisis that makes both ethical and economic sense is publicly funding higher education for all. There are many options for shaping such a policy. Funding for each student could be partial or in full, but it should be without expectation of direct repayment.

Indeed, the educated individual does repay society indirectly, through their contribution to economic growth. The social benefits of higher education are too high for us to accept a student debt solution like privatization, which leaves so many out. Higher education is a classic example of an activity with positive externalities; third parties benefit from an individual’s choice to go to college. Education improves productivity of individuals and raises standards of living for us all. A well-educated workforce not only shifts us toward a more equitable distribution of the pie, but it increases the size of the pie for everyone!

In summary, our current system of funding higher education through federal loans is broken. There are two potential fixes: 1) re-privatize student loans, or 2) publicly fund higher education for all.

The former may fix the debt problem but is unlikely to work and would create inequities in educational opportunity that are both morally unacceptable and economically lacking.

The latter fix—public provision of higher education – is recognized even by the father of modern economics as a moral imperative and is the only solution to our student debt crisis that grows the pie rather than simply redistributing it.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

Food Insecurity in the U.S.

Written by Roscoe Scarborough on . Posted in Reg Murphy, Roscoe Scarborough.

If you are gathering with family and friends on Thanksgiving, there is no need to look further than your full plate to find a reason to be thankful. 1 in 10 households in the U.S. experienced food insecurity in 2021. If you have visited a grocery store in the past year, you know that food prices are way up. Higher prices for food and other commodities promise to force more U.S. households into a state of food insecurity in 2022 and 2023.

10.2% of U.S. households were food insecure at some point in 2021, according to the “Household Food Security in the United States in 2021” report published in September by the United States Department of Agriculture, Economic Research Service. This means that 13.5 million U.S. households, or 33.8 million people, “were uncertain of having or unable to acquire enough food to meet the needs of all their members because they had insufficient money or other resource for food.” Households with low food security cope by eating less varied diets, participating in food assistance programs, or getting food from community food pantries.

Even more concerning, 3.8% of U.S. households experienced “very low food security” in 2021. That’s 5.1 million households in which “normal eating patterns of one or more household members were disrupted and food intake was reduced at times during the year because they had insufficient money or other resources for food.”

Children are at a heightened risk of food insecurity in the U.S. 12.5% of all households with children experienced food insecurity in 2021. Food insecurity only impacted adults in about half of these households. In the other half of households with children present, some 5.0 million children in the U.S. experienced food insecurity directly. Even more tragic, 521,000 kids in the U.S. lived in households where children experienced very low food security. In other words, more than half a million kids in the U.S. had their normal eating patterns and food intake disrupted at some point in the year. Food insecurity was especially pronounced in households with children that are headed by a single mother, which experienced a food insecurity rate of 24.3% in 2021.

Food insecurity is higher in the South than in other regions of the U.S., but Georgia is close to the national average. 9.9% of Georgian households experienced food insecurity and 3.9% experienced very low food security based on Department of Agriculture data from 2019-2021.

Food insecurity promises to be on the rise in 2022 and 2023.

Prices for food and other essentials continue to increase due to inflation. Though there are signs that inflation may be cooling, the cost of food continues to increase. According to the October 2022 Consumer Price Index report from the Bureau of Labor Statistics, food prices in the U.S. were up 10.9% in October 2022 compared to a year earlier. Eggs are 43% more expensive than they were a year ago. Chicken is up 14.5%. Flour is up 24.6%. Dairy products are 15.5% higher compared to this time last year. These increasing food costs will exacerbate food insecurity. Higher costs at the cash register force many households to choose less nutritious options or skip meals altogether.

If you are interested in addressing hunger in our community, consider getting involved with or donate to Manna House of Brunswick, FaithWorks’ Sparrow’s Nest, or America’s Second Harvest of Coastal Georgia. Meanwhile, Blessings in a Backpack works to prevent hunger among children. These organizations mitigate food insecurity that already exists in our community. On a larger scale, broad institutional reforms are needed to address the root causes of hunger, including lifting families out of poverty, getting capable folks into jobs that pay a living wage, and addressing social problems in the family.

Roscoe Scarborough, Ph.D. is interim chair of the Department of Social Sciences and associate professor of sociology at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at rscarborough@ccga.edu.

Leisure and Hospitality Industry Faces a New Challenge

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Leisure and hospitality is Glynn County’s leading industry.  Let’s get to know it a little better.

The leisure and hospitality industry is a collection of many industries, from hotels, restaurants and bars to the performing arts, spectator sports, museums, zoos, golf courses and fitness centers.  That collection of industries is on track to produce $740 billion in goods and services this year, about 4.2% of U.S. private sector GDP.

Leisure and hospitality’s importance as an employer has increased over the decades.  In 1950, leisure and hospitality employed 7.1% of U.S. private sector workers.  By 2000, it employed 10.6% of U.S. private sector workers.  In February 2020, the month before the pandemic hit, it employed nearly 17 million workers – 13.1% of U.S. private sector workers.

In Glynn, leisure and hospitality’s employment stats are mind-blowing.  In 2000, leisure and hospitality accounted for 17.5% of total employment and 21.7% private sector employment in Glynn.  In 2019, the figures were even higher: 22.1% of total employment and 27% of private sector employment.

Leisure and hospitality’s employment growth did not come easy.

In the U.S. from 2000 to 2019, leisure and hospitality employment grew by 39.8%, while the labor force grew by 14.7%.  In Glynn from 2000 to 2019, leisure and hospitality employment grew by 32.3%, while the labor force grew by 11.4% — and all of that 11.4% occurred between 2000 and 2005.

Workers have plenty of employment options, so every business must compete with other businesses for workers.  The competition intensifies when the demand for workers in a growing industry increases at a faster rate than the labor force.  Businesses in a growing industry must draw workers away from businesses in other industries, which might also be growing.

Such a situation, though not uncommon, is certainly challenging, and the leisure and hospitality industry clearly met the challenge.

Things have changed since the pandemic.

The U.S. economic recovery from the pandemic recession has been truly remarkable.  Current employment exceeds February 2020 employment in nine of eleven major industries.  The two industries with employment losses since February 2020 are health services and leisure and hospitality.  The employment loss in health services is modest: 0.4 percent.  The loss in leisure and hospitality is not modest: 7.2 percent.

In accommodation, an industry within leisure and hospitality, the employment loss since February 2020 is 18.8 percent.

Why the exodus of workers from leisure and hospitality?

I put that question to Dr. Matt Mosley, Professor of Hospitality and Tourism Management at the College of Coastal Georgia.  His explanation runs as follows.

Most workers view their skills too narrowly.  They consider their skills to be highly specialized, of value to employers in their current industry but of little or no value to employers in other industries.  Consequently, when searching for a better job, they confine their search to the industry in which they are currently employed.

The assumption that one’s skills are of little or no value to employers in other industries has long been prevalent among leisure and hospitality workers, says Dr. Mosley.

The pandemic changed that.

The shutting-down of so many leisure and hospitality businesses during the pandemic forced many Leisure and Hospitality workers to search for jobs in other industries.  Those workers soon discovered that not only do employers in other industries value their skills, employers in other industries are willing to pay more for those skills than employers in leisure and hospitality.  Word gets around.  Hence, the exodus.

Dr. Mosley’s economic reasoning is sound, and his explanation and the data fit hand-in-glove.  If he’s right, then, as he puts it, “It’s a wake-up call to the industry.”

Why we should re-privatize student loans

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

In my last column, published here on October 12, I argued that our current student loan market is different from other types of loans. Unlike with other loans, government intervention in the student loan market has distorted loan prices (interest rates) and quantities (available funds). This, I believe, is a major cause of the student debt crisis facing Americans today and is why I am in favor of the government cleaning up its own mess with debt forgiveness.

But, the administration’s current plan for debt forgiveness is only a temporary solution. It is a short-term bandage on a market with broken bones in need of a long-term reset.

As I wrote in my last column, I can think of two very different ways that we could accomplish a real, lasting fix for our student debt problem: 1) re-privatize the student loan market or 2) fully publicly fund higher education. For this column, let’s focus on the former. I will address the latter approach next time.

The current-day direct federal student loan program was created in 1992 under President George H.W. Bush. The program began to be implemented in 1993 with Clinton’s Student Loan Reform Act. The federal government continued also loaning to students indirectly through subsidized private loans until 2010, when President Obama signed legislation requiring all federal student loans to be direct loans.

Now, Forbes reports that in 2022 almost all U.S. student loans are issued directly by the federal government; only 8% of student debt is owed to private lenders.

The problem with this is that the government does not face the same profit incentives that a private lender would, and so student loans are not issued with the same kind of careful consideration of risk that a private lender would undertake. As I discussed in more detail in my previous column, federal student loans are dished out willy-nilly, without regard for potential return on investment or risk of default. The result is that many students amass more debt than they reasonably can afford.

But, we can do better. And, given the profit incentive associated with avoiding loan default, a private loans market would do better.

Economists have studied returns to education at length, and they have found systematic differences in the value of college education for individuals of differing interests and abilities. A quick Google search turns up average starting salaries disaggregated by discipline or college major.

We have the tools to assess the value of what is being purchased with a student loan and to set interest rates and available funds accordingly, like we do through the property appraisal and income verification processes in the mortgage market. These market signals would give students the necessary information to make informed choices about the quantity and type of education they truly can afford.

A federal student loan market will never operate this way because who should and should not be able to access funds for education is not a comfortable or politically popular conversation to have. Our only options for permanently cleaning up the student debt mess are to let the private market hash this out or, on the opposite end of the policy spectrum, to eliminate the need for this conversation altogether by providing free access to higher education for all. We will dive into this second option in my next column.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

How Did Affordable Housing Become Unaffordable?

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Businesses have made fortunes producing products for people with modest incomes.

Amazon, Walmart, Target, Dollar General, Home Depot, Lowe’s and Best Buy come to mind, along with fast food joints and grocery stores.

Of course, that quick list barely scratches the surface. Amazon and all the big box stores and grocery stores are retailers. All the items they sell are produced by other businesses.

Further, for a vast array of products, from mustard to light bulbs to car batteries to sofas, low price options are readily available.

It’s no mystery why. Lots of people have modest incomes. That means lots of customers for businesses that figure out how to make a decent, low-priced product.

So, what gives with housing?

Home prices and monthly rents currently range from exorbitant to absurd. For instance, ApartmentList reports that the average monthly rent for a studio apartment in the U.S. now exceeds $1,100.

Long-standing financial wisdom maintains that a household should spend no more than 30 percent of its income on housing. Good luck with that if your income is modest and studio apartments are going for $1,100 a month.

Indeed, the U.S. Census Bureau reports that 46 percent of U.S. renters spend at least 30 percent of their income on housing, and half of those renters spend more than half of their income on housing.

Until the 1990s, the housing market performed like most any other market. Prices pushed higher by growing demand signaled “bigger profits can be made here.” Builders responded by building more; others saw the signal and became builders themselves. Prices, which rose from “affordable” to “not as affordable,” returned to “affordable.”

What prevents the housing market from performing that way now?

According to droves of housing market economists, it’s local zoning laws. Two in particular:  minimum lot size restrictions and single-family-only zoning.

Minimum lot size restrictions are self-explanatory. Single-family-only zoning means no buildings other than single-family homes are permitted in the zone.

Used sporadically before World War II, they began to proliferate rapidly in the 1970s. By the 1990s, they’re zoning staples.

The stated purpose of minimum lot size restrictions and single-family-only zoning is to preserve a lower population density. Many claim the rationale is thick smoke to hide the actual purpose, which amounts to “not in my backyard, and that includes riff-raff.”

Whatever the case, the clear consequence of minimum lot size restrictions and single-family-only zoning is a restricted supply of housing, especially housing for people with modest incomes.

Consider these figures, courtesy of economist Jeffrey Zabel. Between 1960 and 1990, the number of housing starts per 1,000 households averaged 22.2 per year. Since 1990, the number of housing starts per 1,000 households has averaged 12.2 per year.

Small home construction has plunged. The plunge began in the 1980s. In the 1970s, economist Sam Khater reports, one third of new homes constructed were homes less than 1,400 square feet, an average of 420,000 small homes per year. In 1990, one fifth were homes less than 1,400 square feet, a total of 230,000 small homes. In 2019, 7 percent were homes less than 1,400 square feet – a mere 65,000 small homes.

Growing demand, sharply restricted supply. That’s how affordable housing became unaffordable.

Fortunately, local zoning laws can be changed locally. No need to wait for Congress or a state legislature to act. And many communities are changing their zoning laws to mitigate the housing problem.

I know nothing about Glynn’s zoning laws. But I do know Glynn needs workers and young families. More affordable housing would help attract them.

Unfortunately, we’ve been digging the housing hole we’re in for decades. It’s deep.

Student loans aren’t like other loans

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

Like many others wishing to take advantage of pandemic-induced low interest rates, I refinanced my home in 2021. I remember holding my breath while my lender checked appraisals to be sure that the value of my house was enough greater than the loan I was seeking that I could avoid paying mortgage insurance. In my previous mortgage, I had been paying for the insurance because, as a first-time homebuyer, I was not able to make a large enough down payment to increase the gap between the values of the home and the loan.

Each time I applied for a mortgage, my lender explained to me these policies, and I depended on their expertise to help guide my home-buying decision. I knew what homes I could afford to buy because the lender, trained in risk assessment and committed to protecting their own interest in the deal, would not loan me more than the value of the investment I was making with the loan.

I did not have to be an expert in housing markets to buy a house. As long as I was working with experts, and as long as we were all behaving in our own self-interest, I could trust the market to provide signals and boundaries – loan, loan with insurance, or no loan – that would inform my own, self-interested choices. (This is assuming we don’t have another 2007, but that’s for another column, and you get my point.)

The market for student loans does not work this way. In 2009-2010, I was one of the 141,720 recipients of a student loan in the University System of Georgia. I logged into my account on the school financial aid portal, clicked a few buttons, and I had a loan large enough to cover my tuition and fees and room and board for an entire semester. As long as I remained enrolled and made progress toward my degree, the loans kept coming.

Unlike with my mortgage, no one asked questions about my expected ability to repay the loans. The amount of the loan I qualified for was based on one thing only: what I was paying to attend school. Unlike in virtually every other loan market, education loans are granted without regard for the applicant’s expected ability to repay. There is a universal assumption that higher education is an investment that will always pay for itself.

It’s true the returns to the investment of higher education are positive almost across the board. But, the magnitude of the returns differs by location, field of study, individual ability, etc. Financial institutions are irresponsible not to consider these differences when issuing loans.

This is why in my last column I agreed with those who say Biden’s student loan forgiveness plan is not fair. I don’t mean that I wish student loan forgiveness were not happening for some. What I mean is that it should not need to happen because we should never have let so many people go into such great debt for education. This includes a lot of folks who have already paid off their education debts and who, unfairly, will never get back the money they should never have had to shell out.

Many on the “it’s not fair” side of the current policy debate are pointing fingers at the borrowers, saying they made their bed of debt and should continue to lie in it. I say that characterization itself is unfair. In other loan markets, we trust financial institutions to assess the value and potential returns of our investments and to loan accordingly.

What is not fair is that we expect college students, many of them teenagers and young adults, to be able to do for themselves what consumers are not expected to do in any other loanable funds market – fully assess their own default risk and make choices about their investment in education without the typical guidance from the market.

In my next column or two, I will write about two possible long-term policy solutions to our student debt problem: 1) return student loans to the private market, or 2) fully publicly fund higher education. These two options are on opposite ends of a spectrum, but I hope to demonstrate that either extreme would be better than the muddled middle in which we currently operate.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.