College student debt has risen dramatically in the last few years and now totals about $1.1 trillion dollars. Three years ago student loans passed credit card balances as the largest form of consumer (non-mortgage) debt. While interest rates on student loans tend to be much lower than the interest rates on credit cards, they cannot be reduced through bankruptcy.

Student debt has gone up as financial aid in the form of grants has failed to keep up the soaring tuition at colleges. Over the last 30 years college tuition has been increasing at three times the overall rate of inflation. Public colleges and universities have seen some of the largest percentage increases in tuition as state governments have cut back on educational spending, especially in the last five years with the deep recession and financial crisis.

These increases in student debt have weighed the most heavily on working class students and African American, Chicano and other oppressed nationality students, who have fewer financial resources to pay for college. Many have to work more hours while in college, which makes it harder to do well and makes it take longer to graduate.

College graduates, and especially college students who don’t get their degrees, are more and more weighed down by student loan debt. With the terrible job market for recent college graduates, with half either out of work or working jobs that don’t require a college degree, more and more college students are moving back home after finishing school and are putting off buying a car, a home, or getting married because of the need to pay off the heavy debt load.

One of the ironies of student loans is that the federal government can actually profit off of student loans. With U.S. government borrowing costs averaging close to 2%, loaning money to students at a subsidized rate of 3.4% or even more, the unsubsidized rate of 6.8% can make money for the federal government. For example, in the last fiscal year (2012), the federal government spending on higher education was actually negative $19 billion, meaning that the government took in more than they spent.

But with all the pressure for austerity at the federal level, from raising the payroll tax to cutting spending – including spending on education – allowing the interest rate to rise on federal student loans would help to cut the budget deficit (which is already falling rapidly) even more. This is just another way that working class and oppressed nationalities are being hit the hardest by today’s government budget cuts and another way that our opportunities tomorrow are becoming more and more limited.

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Pero la realidad es que lo mas prosable es que 2002 traiga mas problemas para familias de la clase trabajadora en lugar de regresar al año próspero de 1999, como sueña Wall Street. Hay un problema fundamental: La larga jornada de prosperidad de los 1990 produjo el resultado de que en el mundo entero, industrias como de acero, autos, computadores, telecomunicaciones, etc. expandieron su producción mucho mas allá de lo que pueden vender con ganancias. Ahora esas corporaciones están cortando producción y cesando a cientos de miles de trabajadores.

El intento por parte del Banco Federal de Reserva de re-animar a la economía por medio de tazas reducidas de intereses, simplement no ha dado resultados. Mientras que las tazas de intereses de corto plazo han caido en este año (2001) desde 6.5% a solo 1.75% en comparación con 2000, las tazas para hipotecas de hogares quedaron casi iguales. Muchos negocios, tanto grandes como pequeños, encuentran que es muy dificil conseguir préstamos, no importa la taza de intereses.

El gobierno no ha podido, tampoco, estimular a la economía mediante cambios en sus politicas de impuestos y gastos gubernmentales. La primera fase de la reducción de impuestos instalada por el presidente Bush no hizo casi nada para aumentar los gastos del pueblo, ya que casi la todalidad fue ahorrado por hogares de ingresos altos y medianos que recibieron re-embolsos de impuestos. El presidente y el Congreso no pudieron ponerse de acuerdo sobre un paquete para estimular a la economía antes de Navidad, por razón de la mucha oposición que surgió en contra del plan de los Repbuulicanos de dar grandes concesiones presupuestuarias a las corporaciones y para adelantar los recortes de impuestos para hogares ricos.

Recesión mundial

En la mayoría de las recesiones en el pasado, el crecimiento fuerte de las economías de otros países hizo posible que se recuperara la economía norteamericana porque los otros países compraban mas mercancías y servicios de los Estados Unidos. Pero la actual receción afecta al mundo entero, con las economías de Alemania y Japón, la segunda y tercera economía en el mundo, también en recesión. La caída de miestros exportes tambien arrastra a nuestra economía.

Una recesión que continua el año que entra tambien aumenta las probabilidades de una crisis econónica de escala grande. Argentina ya se encuentra en medio de una crisis. Durante los últimos diez años, ha seguido las políticas económicas conservadoras impuestas por los Estados Unidos, de mercado libre y moneda fuerte. La Argentina ligó su dinero al dólar norteamericao y eliminó a las barreras de comercio internacional. El resultado: La industria argentina ha sido aplastada, el desempleo argentino se ha subido a 20%, y tanto la empresa privada como el gobierno han acumulado una deuda enorme en dólares. Luego el gobierno cortó los salarios, congeló a las cuentas bancarias, y al fin se apoderó de las cuentas de jubilación para intentar pagar sus deudas, pero en vano. Protestas masivas en contra de estas políticas le obligó al gobierno argentino que se renunciara.

Japón va rumbo rápido a una crisis económica. En los 1980, la fuerza industrial de Japón produjo una ola de prosperidad. Los precios de acciones y bienes raíces subieron al cielo mientras que las corporaciones se endeudaban grandemente para especular en estos mercados. Cuando se rebentó esta burbuja en los 1990, le fue necesario al gobierno japonés apoyar a la economía cada vez mas con gastos gubernmentales. Ahora el mismo gobierno está alcanzando al límite de conseguir préstamos y gastar dinero, mientras que las exporaciones japonesas están cayendo. La economía japonesa va de mal en peor.

El desempleo es mas que nunca desde la Segunda Guerra Mundial, se van aumentando las quiebras de corporaciones, y la banca acumula perdidas cada vez mas grandes en préstamos que no se pueden pagar. El Yen japonés va bajando en valor, trayendo en cadena amenazas a las economías de otros países asiáticos por la probabilidad de que los productos japoneses resulten mas baratos.

Hay cada vez mas señales que la economía de los Estados Unidos podría correr la misma suerte que la de Japón. Nuestra prosperidad económica de los 1990, aunque fue dirigida por empresas de alta tecnología, tambien fue construído por medio de medio de préstamos 'record' a compañías que deseaban crecer mas rapidamente. Ahora los Estados Unidos se encuentra en plena recesión y aquella deuda viene a perjudicar a la economía.

El derrumbe de Enron bajo una montaña de deudas puede ser el primer señal de una catastrofe que nos acerca. Enron representaba tanti alta tecnología con sus prácticas de comerciar en energética por medio del internet, hasta de miles de millones de dólares cada día, y la desregulación de la industria energética que era parte de la política conservadora del gobierno. Basado en Texas, Enron era la corporación que mas apoyo financiero daba a George W. Bush y había hecho much cabildeo a favor de la desregulación.

Pero Enron no era la única compañía que acumulaba deudas. Tras la quiebra de Enron, nos estamos enterando de otras compañías de energética y hasta de alta tecnología como Solectron que en encuentan en un estado raquítico por razón del doble golpe de recesión y deuda. Los bancos norteamericanos que le prestaron montón de dinero a Enron, van a sufrir perdidas enormes, cortando sus préstamos como resultado y afectando aun mas negativamente a la economía. Si la economía norteamericana emipiece a tambalear en 2001, lo mas probable es que el punto central de la crisis económinca no sea ni el “Valle de Silicon” ni de las Torres Gemelas, sino en Texas.

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The August job market report that came out on Sept. 7 was a shocker. The Department of Labor reported that businesses reported a net loss of 4000 jobs, the first loss in four years. Even worse, a survey of households reported that 316,000 fewer people were working in August as compared to July. This report demolished the Bush administration and Federal Reserve’s reassurances that the housing bust was ‘contained.’

Reports on the housing and mortgage markets have gone from bad to worse. Both the number of permits for new housing and the start of new home construction fell again in August from July. New home construction, a major source of jobs, is now down 42% from its high in January of 2006. Late mortgage payments also rose again in August, to 3.56% of all mortgages. The rate of increase of borrowers behind on their mortgages is rising rapidly, as 2 million mortgages with low-interest ‘teaser’ rates and monthly payments made in 2005 and 2006 are resetting now to much higher interest rates and payments. The secretary for Housing and Urban Development reported to Congress that a half-million of these borrowers will end up in foreclosure.

Financial markets around the world have remained jittery. The latest sign of this came on Sept. 14 in England, where one of the largest British mortgage lenders, Northern Rock, had to get emergency loans from the Bank of England (Britain’s central bank, like the U.S. Federal Reserve Bank) and faced a run by depositors who lined up to withdraw their money.

While the U.S. corporate media trumpeted the interest cut as helping distressed home-buyers, the fact is that the interest rates on standard 30-year fixed rate mortgages actually rose slightly after the Federal Reserve rate cut. The biggest benefits of the rate cut will go to banks and other financial institutions who will be able to pay lower interest rates to their depositors while charging higher rates on the longer-term loans that they make. It was no surprise that the stocks of Wall Street firms rose as much as 10% in one day when the news of the interest rate cut broke.

Working families are now facing growing layoffs, declining home prices and higher interest rates on their mortgages. The Fed interest rate cut will further weaken the U.S. dollar, as foreign investors see less need to buy dollars to invest in the United States. This is likely to increase inflation, making it harder for workers to make ends meet. One sign of future price hikes can already be seen in record-high oil prices, which broke $80 a barrel after the interest rate cut.

Caught between a rock and hard place, working people will have to struggle even harder to maintain their standard of living and keep their homes – not mention the need to struggle to make the rich pay for the crisis that they have brought on the economy. The Bush administration has proposed to help about 80,000 mortgage borrowers. Much stronger action, beginning with a moratorium on all owner-occupied homes facing foreclosure, is needed. Ultimately we need an economic system where housing is a right, not just another market driven by greed and profit.

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Today, Argentina's economy is in a deep depression, a legacy of the last ten years of free market economic policies. One third of Argentina's workers are without jobs and prices have gone up 37% since the beginning of the year. Many of the unemployed are trying to make ends meet through peddling, barter, scavenging at garbage dumps or crime. But, at more than a hundred companies, workers have seized the business when it tried to close down or when it stopped paying wages. While these new collectives employ only 2% of workers with jobs in Argentina, they are growing rapidly as thousands of businesses declare bankruptcy or simply close down.

Crisis Spreads to Brazil and Uruguay

During the 1990's, Argentina was the poster child for the free-market economic policies of the United States and the International Monetary Fund (IMF).

However, the Argentine government's policies of privatization, free trade, and fixing the value of the peso at one U.S. dollar led to foreign takeovers of banks and businesses, a flood of imports and massive debts. After four years of recession, last December, Argentina's government had to default on its debts, devalue the peso and freeze bank accounts. Since then, the peso has lost almost three quarters of its value.

The crisis in Argentina has spread to Uruguay, with which it shares a border. The Uruguayan peso has lost half its value this year, unemployment has risen to more than 15% and inflation is almost 40%. In August, the Uruguayan government followed Argentina by shutting down the nation's banks to stop depositors from pulling their money out. While the government was able to reopen the banks after getting more loans from the United States and the IMF, it is planning severe cutbacks in healthcare and other government services to try to pay down the ever-mounting debt.

But what worries Wall Street the most is that the economic crisis is spreading to Brazil. Big U.S. banks have loaned more than $25 billion to Brazilian businesses and governments. Worried that the growing crisis will force Brazil to default on these loans, the United States is backing a $30 billion loan by the IMF to Brazil. Another purpose of the loan is to force the next president of Brazil to follow U.S. and IMF economic policies. They want Brazil to keep interest rates high to attract more foreign capital, and to cut government spending and raise taxes to pay back foreign loans. But it is these policies of high interest rates and government austerity that contributed to the crisis in the first place!

When a recession hit the United States last year, the U.S. government cut interest rates, increased spending and cut taxes in an attempt to bolster the economy. But today, the IMF is telling Argentina, Brazil, and Uruguay to do the opposite – while short-term interest rates are 1.75% here in the U.S., they are 17.5% in Brazil. In fact, if the IMF imposed the same conditions on the U.S. that it the IMF is imposing on Brazil, the U.S. government would have cut spending and hike taxes by about $250 billion! How would we in the U.S. feel if the IMF imposed these conditions on the United States, leading to cuts in government services, higher taxes, growing unemployment and the bankruptcy of many small and medium-sized businesses? Taking more loans from the IMF just pushes a country further into debt. And when Argentina mentioned the possibility of not repaying the IMF, the IMF threatened to cut off international humanitarian aid to the country.

The people of Uruguay and Brazil are rejecting these free market policies, along with the resulting economic turmoil and government austerity. In Uruguay, workers and opposition parties are organizing strikes and other mass protests. In Brazil, much of the attention is focused on the presidential elections, where the front-runner is the Workers Party candidate da Silva. While da Silva has a strong record as a trade-union leader and as an opponent of Brazil's past military government, he is also trying to win over Wall Street and the Brazilian business community. Da Silva chose a conservative vice-presidential running mate and says that he may continue much of the current government policies of privatization, limiting government spending and high interest rates. Thus, no matter who wins the election in October, the struggle of the Brazilian people is bound to continue.

Underlying the growing economic instability in Latin America is a crisis of overproduction on a world scale. In the hopes of getting the lion's share of profits, big corporations expanded their capacity to produce goods and services. But there is a problem – people do not have the money to buy what they have produced. The result is layoffs and poverty. The economic and political life of Latin America is dominated by the United States – across the continent, a vast people's movement is coming into being to challenge this domination and the crisis it brings with it.

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But the reality is, 2002 is more likely to bring more hardships for working families than a return to the boom year of 1999 that Wall Street dreams of. There is a basic problem: the long economic boom of the 1990's led industries around the world – such as steel, auto, computers, and telecommunications – to expand their production far beyond what they can profitably sell. Now these corporations are cutting back and laying off hundreds of thousands of workers.

The Federal Reserve's effort to jump-start the economy with lower interest rates just hasn't done the job. While short-term interest rates have fallen from 6.5% to only 1.75% over the last year, home mortgage interest rates ended 2001 almost the same as the beginning of the year. Many businesses, large and small, are finding it harder to borrow, no matter what the interest rate.

The government has not been able to stimulate the economy by changes in spending and taxes either. The first installment of Bush's tax cut did almost nothing to increase spending, because the middle and upper-income households that received tax rebate checks just put them into savings. The President and Congress were not able to agree on a stimulus package before the Christmas break because of major opposition to the Republicans' proposals to give big corporations huge tax breaks and the Republicans' plans to speed up the planned tax cuts for well-to-do households.

Worldwide Recession

In most previous recessions, strong economic growth in other countries helped the U.S. economy recover, because those countries bought more U.S. goods and services. The current recession is worldwide, with both Japan and Germany – the world's second and third largest capitalist economies – in recession. The fall in U.S. exports is a further drag on the economy.

A continuing recession in 2002 ups the chance of a major economic crisis happening. Argentina is already in the middle of an economic crisis. For the last ten years, it has followed conservative economic policies, pushed by the United States, of free markets and a strong currency. Argentina linked their peso to the U.S. dollar and dismantled trade barriers. The result? Argentina's industry was crushed, unemployment rose to 20%, and companies and the government piled up a huge debt in dollars. Then, the government cut wages and salaries, froze bank accounts, and finally seized retirement benefits in a vain attempt to pay their debts. Mass protests against these policies forced the government to resign.

Japan is rapidly moving towards an economic crisis. In the 1980's, Japan's industrial strength sparked an economic boom. Stock and real estate prices soared in Japan as corporations went deep into debt to speculate in these markets. When this economic bubble popped in the 1990's, Japan's economy had to be propped up by increasing government spending. Now, with the government reaching the limits of their ability to borrow and spend, and exports falling with the global recession, the Japanese economy is going from bad to worse.

Unemployment is at a post-World War II high, corporate bankruptcies are rising, and Japan's banks are piling up huge loan losses. The Japanese yen is losing value, which in turn is threatening other Asian economies that would be hurt from the competition of cheaper Japanese goods.

There are more and more signs that the U.S. economy could meet the same fate as Japan. Our economic boom in the 1990's, while led by hi-tech companies, was also built on record borrowing by corporations who wanted to grow faster. Now that the United States is in a recession, this debt is coming back to haunt the economy.

The collapse of Enron under a mountain of debt could be the first sign of a coming catastrophe. Enron embodied both hi-tech, with its web-based energy trading which did billions of dollars of business each day, and the deregulation of utilities championed by conservative economic policy. Based in Texas, Enron was the largest corporate supporter of George W. Bush and has been a major lobbyist for the deregulation of utilities.

But Enron was not alone in piling up debt. In the wake of Enron's bankruptcy, we are learning that other energy companies, and even some hi-tech firms like Solectron, are in a precarious state from the double whammy of recession and debt. U.S. banks that loaned Enron billions of dollars will suffer big losses, and are likely to cut back on their lending, further slowing the economy. If the U.S. economy does stumble badly in 2002, it is likely that ground zero for the economic crisis will neither be here in Silicon Valley, nor in the ruins of the World Trade Center, but in Texas.

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