A new GI Bill

New, improved GI Bill passes overwhelmingly in the Senate. This is Senator Jim Webb's initiative, which I wrote about in one of my first Yahoo! Finance columns.
The $51 billion measure pays for four year's tuition at the highest-priced public institution in the veteran's home state. Current benefits have eroded with the growing cost of college.
According to Paul Rieckhoff of the Iraq and Afghanistan Veterans of America:
"These 75 Senators stood with Senators Jim Webb and Chuck Hagel in favor of a new bipartisan GI Bill that actually covers the cost of college. As these Senators return home to honor troops and veterans during the Memorial Day recess, they can proudly point to their vote this week as proof of their commitment to our troops. IAVA thanks each and every one of them."

Yahoo! Finance Advice for New Grads

My latest Yahoo! column gives some advice for new college grads. It's based on some things I've talked about with my sister and her friends.
There's a real challenge in writing for a beginner audience about personal finance. I think Ron Lieber did a great job with his new Your Money column in the New York Times of being simple but not simplistic, and readers seem to agree since it's on the most emailed list.

Here's his Michael Pollan-ized version of investment advice: "Index (mostly). Save a ton. Reallocate infrequently."

Or maybe even simpler: Do Less. Save More.

Next week I'll be answering economic questions from recent grads. I've been getting some great emails lately with all kinds of questions and personal dilemmas and responses.

Also, my most recent Huffington Post blog post sparked an awesome discussion with 46 comments. One of my favorites:

"This generation is going to have a much more difficult time of it. The are coming of age in a period in which America is a declining power. It is good to see that a swing toward a more progressive political stance is the outcome. It is a good thing that they want a new deal. The problem is in the 1980's the shift toward free market economic models meant that few colleges taught anything other than the free market model. There is a whole generation of economists who nothing nothing of Keynsianism. Fashioning a new deal will require some knowledge of economic models that recognize a legitimate role for government to play in the economy. Where are the architects for this new deal going to come from?"

Jon Stewart is our Nice Dad

Jon Stewart, College of William & Mary, May 2004
"I know we were supposed to bequeath to the next generation a world better than the one we were handed. So, sorry.

I don’t know if you’ve been following the news lately, but it just kinda got away from us. Somewhere between the gold rush of easy internet profits and an arrogant sense of endless empire, we heard kind of a pinging noise, and then the damn thing just died on us. So I apologize.

But here’s the good news. You fix this thing, you’re the next greatest generation, people."

"And the last thing I want to address is the idea that somehow this new generation is not as prepared for the sacrifice and the tenacity that will be needed in the difficult times ahead. I have not found this generation to be cynical or apathetic or selfish. They are as strong and as decent as any people that I have met. And I will say this, on my way down here I stopped at Bethesda Naval, and when you talk to the young kids that are there that have just been back from Iraq and Afghanistan, you don't have the worry about the future that you hear from so many that are not a part of this generation but judging it from above."

Millennials: Downtrodden or Just Dumb?

Bob Herbert in the NYT today:

"The landscape is changing before our eyes. Younger voters struggling with the enormous costs of a college education, or trying to raise families in a bleak employment environment, or using their credit cards to cover everyday expenses like food or energy costs are not much interested in hearing that the government to which they pay taxes can do little or nothing to help them."

Studies show that this is the most progressive generation in decades. We want a new New Deal.

On the other hand, maybe a wholesale transformation of government seems too difficult or out of reach. Instead, we can all indulge in a nice round of Blame the Victim.

Some scoldy English prof in the Boston Globe:

"The ignorance is hard to believe ... It isn't enough to say that these young people are uninterested in world realities. They are actively cut off from them."

Would that it were true! Many of the young people I talk to would love to be cut off from realities like the war in Iraq (who do you think is fighting over there, John McCain?), student loan and credit card debt, low-wage jobs, lack of access to health care, & high housing costs.

Unfortunately, it's a pretty common pattern to label an economically disadvantaged, politically disenfranchised group as being dumb. You can see it in racism, sexism, and now ageism.

Where Are We?

"The fact that the government hasn't managed "to clear debris and restore basic services like water and power in what is the country's wealthiest city" is an illustration of how slow the recovery process will be, says the NYT."

Gee, I kind of remember New Orleans residents waiting a little more than five days for basic services and debris clearing after Katrina.

Where Does the Debt Snowball Stop?

From my email inbox:
Anya, I just wanted to say I’m a big fan of your articles on yahoo finance.
You seem to be on the same page that I’ve been on since the 90’s about debt.

I’ve managed to remain debt free with the exception of a mortgage.

I think it’s insane to keep up with debt your whole life.
I wanted to get your opinion…
What is happening to our country with debt? How can this keep up?
Many American consumers riddled with debt and are keeping up with the joneses.
How does it continue to sustain and what happens to us, the people that have kept out of debt?
If, and, or when the bottom drops out and people with debt start to collapse, will they take us with them?

Hi Scott,

These are great questions.
I think that what happened to our country with debt is a complex and fascinating topic that will be discussed by historians for years. Here are some factors:

We went from a manufacturing economy to one based on marketing goods and ideas and moving money around. The financial sector got very large relative to other parts of the economy, and innovative in new ways to lend money. Consumer banking was deregulated state by state, allowing for such things as payday lending and 30% interest rate credit cards. Because of our financial power and because the dollar was until recently the global currency, a lot of other countries were willing to lend us money. Our wealth depends on growth of consumer spending, yet median incomes have barely risen in the last 30 years, so borrowing made up the difference.

Unfortunately, there will be a large cost to society from so many people having gone into more debt than they can afford. This cost can already be seen.

--The economy may go into a prolonged recession because the consumer spending that has been fueling its growth was coming from people spending beyond their means and they are no longer able to do so.
--If the victims of the housing crunch are bailed out, everyone will pay higher taxes as a result. Also, it may take a long time for housing to become affordable again. Prices were bid up by people who got mortgages they could not afford. (On the other hand, if you have good credit there are more opportunities now to buy a home in foreclosure for a good price.)
--The cost of borrowing will go up. There has been a trend of cheaper and cheaper credit, supported by the fees and penalties paid by those who are seduced into borrowing more than they can afford. If people start defaulting on their loans, creditors will raise their interest rates and become more selective about lending.
--One of the effects I'm most worried about: People who have been spending beyond their means have not been saving adequately for retirement. And the government which has been spending beyond its means is not prepared adequately to fund Social Security.

-- After all this is over, America may have to reconstitute its economy in such a way that we are not the consumer market of the world. What will we do if we are not marketing useless stuff made in China to ourselves?

New Yahoo Column: ABCs of IRAs

Only 55 percent of Americans working full-time had a 401K in 2006. And part-time workers, freelancers, independent contractors, and those with lower incomes are the least likely to have a 401(k). That means it's vitally important that workers in their 20s and 30s, who are most likely to fall into all of these categories, understand the basics of the Individual Retirement Account (IRA).

We Can Do It

Hall, 18, and Gillard, 20, are part of a surge in voters under 30 that has changed the composition of the primary electorate and could at last turn young people into political players with clout.

Good story pointing out it's more than the Obama factor, it's a generational shift. Cheers to Neil Howe & Bill Strauss for correctly calling Millennials a "civic" generation.