TIME

Unemployed and in Debt, Young Americans Ask Congress for Help

Five years after the end of the Great Recession, America's young adults are still facing economic challenges.

For many millennials, the future looks bleak. “We don’t just face dreams that are deferred, we face dreams that are destroyed,” Emma Kallaway, executive director of the Oregon Student Association, told the Senate Subcommittee on Economic Policy Wednesday. But if they were hoping for answers from Congress, Kallaway and other young adults across America facing frustrations with student loan debt and the sluggish job market will have to wait.

Senate Democrats convened the subcommittee hearing entitled “Dreams Deferred: Young Workers and Recent Graduates in the U.S. Economy” to highlight youth unemployment and heavy student loan debt after Sen. Elizabeth Warren’s (D-MA) student loan bill stalled in the Senate earlier this month. Warren’s bill would have allowed an estimated 25 million people with long-existing student loan debt to refinance at lower interest rates.

Just 63.4% of youth aged 18-29 are employed, Keith Hall, senior research fellow at George Mason University, reported in his testimony. The unemployment rate of workers under the age of 25 is 13.2%, more than twice the overall rate of unemployment.

As joblessness remains high, the cost of college continues to rise, compounding already hard-to-manage debt levels for many young Americans. Student debt in the U.S. now tops $1.2 trillion, according to Rory O’Sullivan, deputy director of the non-profit group Young Invincibles.

“It sounds like perfect storm in a way,” said subcommittee chair Sen. Jeff Merkley (D-OR) of the snowball effects of the Great Recession on young adults.

Youth unemployment also affects overall spending in the broader economy because young adults cannot afford to move out of their parents’ house, buy big items like cars and homes, and get married. Taxpayers bear some of that burden. Youth unemployment deprives the federal government of over $4,100 in potential income taxes and Federal Insurance Contributions Act taxes per 18-24 year old every year, and almost $9,900 per 25-34 year old, according to a recent study by Young Invincibles. That translates into an additional $170 of entitlement costs per taxpayer in the federal budget.

If the problem is clear, the solution is not. Witnesses at the hearing variously suggested state disinvestment in higher education, simplifying the federal aid application and repayment process, offering relief for existing borrowers, and holding institutions more accountable for providing affordable, quality credentials to graduating students.

Merkley asked the panel for their opinions on the merits of the “Pay It Forward” Guaranteed College Affordability Act, which would allow students to go to college without paying up front. Instead, students sign a contract to join an income-based repayment plan for a designated period of time after graduation. Several states are considering versions of the grant plan; Oregon signed one into law in 2013.

Although Kallaway and O’Sullivan said the plan would possibly circumvent the debt-to-income trap, both agreed it was not a long term fix. Kallaway believes the solution is to tackle the problem at the root, in high education costs, and not at the repayment level. “More affordable education upfront is what’s right,” Kallaway said. “Federal student loans should not be a form of income for the government.”

Hall believes that student debt and rising tuition are just symptoms of a larger disease. High unemployment numbers aren’t just an issue for young adults, he pointed out. The problem, he said, is a poorly functioning economy. “Until you solve this labor market problem […] this problem is not going away,” he said. “You’re going to have these continuing symptoms.”

TIME energy

U.S. Oil Could Rescue Iraq

A satellite image shows smoke rising from the Baiji refinery near Tikrit, Iraq, June 18.
A satellite image shows smoke rising from the Baiji refinery near Tikrit, Iraq, June 18. U.S. Geological Survey/Reuters

If civil war engulfs all of Iraq, oil prices are likely to skyrocket. But U.S. exports could change the game

Even though the conflict in Iraq still rages, with forces from the Islamic State of Iraq and Greater Syria (ISIS) just an hour outside of Baghdad while the Syrian military is reportedly bombing the insurgents, global oil markets have mostly calmed. Prices for Brent crude on June 26 had fallen below $114 a barrel, and have dropped more than 1% since hitting a nine-month high on June 19. The violence in Iraq’s north and west—including fighting around the country’s largest refinery in Baiji—hasn’t yet seriously affected oil production in the Shiite dominated south. Iraq’s Oil Minister Abdul Kareem al-Luaibi even promised in an interview with Bloomberg that the nation’s oil exports—which have averaged more than 2.5 million barrels a day—will actually accelerate next month. “Oil exports will witness a big increase, as recent events didn’t reflect negatively on Iraq’s crude output and exports,” al-Luaibi said. “International oil companies are working normally in Iraq.”

That doesn’t seem to be quite true, though—international oil majors like BP and ExxonMobil have already evacuated some of their foreign workers from Iraq. And if things do get worse, oil markets might not react so calmly. A recent report from the nonprofit Securing America’s Future Energy found that the loss of just a third of Iraq’s oil output could be enough to push global oil prices up as much as $40 per barrel. Even if production from Iraq stays steady, political turmoil in countries like Libya and Nigeria have helped remove some 3.5 million barrels a day of oil production capacity. That doesn’t leave much room for more trouble in Iraq, the world’s third-largest exporter of crude oil. And with Iraq projected to be the biggest single contributor to new oil production over the coming decades—at least before the ISIS insurgency revved up—what happens in the country will matter at the pumps for a very long time.

But it’s not so easy to predict the future of energy and oil. Case in point: the fracking revolution in the U.S., which has unlocked vast amounts of previously inaccessible crude, and which few experts saw coming. Between 2008 and 2013, U.S. oil production increased by 2.4 million barrels a day, to more than 7.4 million. And the growth hasn’t stopped—production hit 8.3 million barrels a day in April. Most of the new global oil production brought online over the past few years has come from the U.S. While the U.S. doesn’t export raw crude—aside from a few small exceptions, U.S. oil exports have been banned since 1975—more oil at home means fewer imports, which in turns leaves more oil on the global market for everyone else. Take away the fracking revolution, and global oil markets wouldn’t have been able to so easily shrug off the violence in Iraq.

In the years to come, the U.S. could play an even bigger role. As the Wall Street Journal and Reuters reported earlier this week, the Obama Administration has begun taking steps towards allowing U.S. crude exports. If that wording sounds confusing, well, it is. What seems to be happening is that the U.S. Commerce Department will allow a pair of oil companies to begin exporting what is known as ultra-light condensate to international markets, with only minimal refining. (The U.S. has long allowed exports of refined oil products.) That doesn’t mean U.S. oil companies can begin exporting all the crude they want; in fact, both Commerce and the White House, reflecting the political sensitivities around allowing domestic exports at a time when gasoline costs an average of $3.68 a gallon, have insisted that there has been “no change in policy on crude oil exports.”

But with domestic oil production approaching the capacity of U.S. refineries—and the oil industry putting all its considerable pressure on the government—it seems likely that U.S. oil will eventually be sold abroad. What effect that will have domestically is uncertain. A recent report by Goldman Sachs found that the ban on exports was a net economic positive for the U.S., at least until domestic refineries could no longer handle growing production of oil. But it seems clear that lifting or at least modifying the ban would likely lead to more production, as oil companies wouldn’t have to worry about their product being landlocked in the U.S. A report by the research firm IHS found that lifting the ban would lead to more than $700 billion in additional investment in oil extraction between 2016 and 2030, and would increase oil production by an average of 1.2 million barrels a day. And given that global crude demand is expected to rise by about that much over the next several years, that oil could be very useful indeed—especially if today’s fighting in Iraq is only the beginning.

TIME Business

Coalition of the Unwilling

The far right and far left increasingly agree (to hate) Wall Street, tax rates and trade

Election results always have business impacts. But rarely are they as stark as the drop in Boeing stock that followed the defeat of Republican House majority leader Eric Cantor in the Virginia primary on June 10. Cantor, an ally of Big Business in Congress, was defeated by David Brat, an economics professor who has been called the Tea Party’s Elizabeth Warren, an outsider pledging to make capitalism fairer for the little guy. He’s also a proponent of cutting federal subsidies to firms like Boeing–hence the one-day stock drop that wiped out its gains for the year–as well as ending “special tax credits to billionaires.”

What Brat’s victory really highlights is a quirk in our politics that is bringing the far right and far left into a series of unexpected alignments. In addition to being anti-Establishment, Brat’s speeches are often anti-immigration and antiglobalization. But when it comes to such economic-policy issues as taxes, free trade and corporate welfare, a lot of Democrats are, more or less, in agreement with him. (Brat’s office did not respond to interview requests.)

Brat, along with many members of the Tea Party and plenty of people on the far left, would like to see some bankers thrown into jail for their role in the financial crisis. These critics argue that corporations benefit unfairly from government subsidies. (Cantor was a booster of the Export-Import Bank, which Boeing’s foreign customers can tap for U.S. taxpayer–subsidized loans.) They believe the rules of free trade are no longer working when China and others can flout them without consequence. And they’d like to see a tax code that doesn’t explicitly favor the superrich.

To be sure, the philosophical underpinnings of Brat and Warren are vastly different. Populists on the left are against measures like fast-track authority for President Obama–which would allow him to bypass Congress when negotiating trade deals–on policy grounds. They believe that such deals in the past sped the offshoring of America’s industrial base, which ultimately erodes our economic competitiveness. Some on both sides of the aisle argue that trade agreements that used to be about tariffs and quotas increasingly focus on domestic issues such as taxes, financial-services regulation, patents and food- and product-safety rules. Says Michael Stumo, who runs the Coalition for a Prosperous America, an advocacy group that represents agriculture and manufacturing businesses across the U.S.: “Modern trade deals are more about globalizing domestic policy and offshoring our jobs, our industries and our governance.”

On the right, members of the Tea Party are skeptical of free-trade deals because they see them as threats to national sovereignty. As Representatives Michele Bachmann and Walter Jones and a number of other conservatives in Congress put it to President Obama in a letter opposing fast track, “For 200 years of our nation’s history, Congress has led our nation’s trade policy,” and conservatives aren’t interested in giving up that privilege.

These aren’t extreme positions. A recent Gallup poll found that 38% of Americans see foreign trade as a “threat to the economy.” A majority of Americans also support tax reform, in particular higher taxes for the wealthy. Part of the momentum around that issue is, of course, driven by an American economy in which the rich have gotten ever richer since the financial crisis while everyone else has struggled. That’s another topic that the flanks in both parties largely agree on–the people who caused the pain of the past six years still haven’t paid for it. “Those guys [meaning financiers] should have gone to jail,” said Brat in the run-up to the Virginia primary. “Instead of going to jail, they went into Eric Cantor’s Rolodex.”

What could this unlikely alliance mean in political terms? Not much in the short term. In some ways, the coalition of Occupy Democrats and Tea Party Republicans is a Coalition of No. Bipartisan opposition has so far stalled fast-track authority for the President’s trans-Pacific trade deal. Coming up with a new trade agenda that could actually reshape policy is a (slow) work in progress. Republican Dave Camp’s tax-reform plan, reflecting popular anger over plutocrats, includes higher rates for hedge funders and private-equity titans, but it faces long to impossible odds against Big Business lobbyists and their lackeys on both sides of the aisle. Still, the Coalition of No is just getting started. If this year’s midterm elections put more Tea Party Republicans in office, it could increase the number of legislators, like Brat, who have something in common with the left: an anticorporate bias. That, in turn, would make for a very different 2016 presidential election than anybody currently imagines.

TIME Economy

Economy Takes Biggest Hit Since End of Recession

Polar Vortex drops over United States and Canada
People bundling up in their coats walk outside in New York City, United States, January 7, 2014. Bilgin Sasmaz—Anadolu Agency/Getty Images

GDP contracted by 2.9% in the first quarter

The U.S. economy shrank by 2.9% in the first quarter of 2014, according to newly revised government data Wednesday, its biggest contraction since the end of the recession in 2009.

The revised figure was nearly one percentage point worse than previous estimates, taking into account a more complete set of data that revealed a sharp downturn in exports and a deceleration in consumer spending. Health care spending fell by 0.2%, reversing previous estimates that it would grow as the health care reform law took effect. Exports dropped off by 8.9%, down from 9.5% growth in the previous quarter.

The good news? This is the third and final revision to a quarter in which the economy was walloped by blizzards and crippling cold, and leading indicators point to a rebound in the second quarter.

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TIME climate change

Climate Change Report Warns of Economic Tidal Wave in U.S.

Climate Change And Global Pollution To Be Discussed At Copenhagen Summit
The coal fueled Ferrybridge power station as it generates electricity on November 17, 2009 in Ferrybridge, United Kingdom. Christopher Furlong—Getty Images

Study backed by former Treasury Secretary Hank Paulson and former New York mayor Michael Bloomberg warns that rising seas and extreme heat could cost billions in lost property, crops and labor productivity

Rising seas and extreme weather could lead to billions of dollars in economic losses, according to a new climate change report that strives to reframe the debate in economic terms.

The study was commissioned by the Risky Business Project, a research organization chaired by a bipartisan panel of former officials, including ex-Treasury Secretary Henry M. Paulson, former New York mayor Michael Bloomberg and hedge-fund billionaire turned climate change advocate Tom Steyer.

The study estimates that climate change will have a disparate impact across different regions and industries. Rising seas could swallow up an estimated $66 to $106 billion worth of coastal properties by 2050, the report estimates. Rising temperatures, particularly in the South, Southwest and Midwest, could reduce the productivity of outdoor workers by 3 percent. Absent a change in crops, yields could decline by 14 percent.

“We still live in a single integrated national economy,” Kate Gordon, Executive Director of the Risky Business Project, said in a statement, “so just because it’s not hot where you are, doesn’t mean you won’t feel the heat of climate change.”

 

TIME Food & Drink

Your Caffeine Fix at Starbucks Is About to Get Pricier

Customers will be paying more for their coffee starting this week

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Starbucks coffee customers might have a hard time looking at the cup as half full after the company announced price hikes starting Tuesday.

The coffee giant said customers can expect to pay 5 to 20 cents more on some—but not all—drinks, and that the price of packaged coffee sold in grocery stores will increase by $1, from $8.99 to $9.99 for a 12 ounce bag.

A drought during the rainy season in Brazil—the world’s largest coffee producer—meant that many coffee companies raised prices this year. But a Starbucks’ spokesperson told Fortune that coffee costs historically account for less than 10% of operating costs, so other factors, like fuel, energy and labor costs, were considered in the price hike.

For caffeine lovers who just can’t stop grumbling about the onerous price of coffee, here’s another fresh brewed reason for you to complain.

 

TIME Money

Americans Still Aren’t Saving for a Rainy Day

Lesson from the recession not learned

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Families in the U.S. still don’t have a substantial amount of cash tucked away for a rainy day despite the beating the economy took in the Great Recession, according to a new survey.

The Financial Security Index from Bankrate.com shows half of American families have no savings or less than three month’s worth of expenses saved for emergencies. The survey’s findings, analysts note, haven’t changed since 2011, when the company first began inquiring about the saving habits of American families.

“Americans continue to show a stunning lack of progress in accumulating sufficient emergency savings,” said Greg McBride, Bankrate’s chief financial analyst.

Analysts say the recession—during which Americans lost about $16.4 trillion in household wealth by 2011—should have been a learning experience, but the struggle of juggling household expenses has left many without extra funds to put away.

Not all Americans are failing to save. About 23% of those surveyed have savings that will last them six months or more in case of a financial emergency—the recommended stash amount. What’s more, the majority of those saving big have larger incomes, though only about 46% of those making $75,000 or more have over six months worth of expenses stored away.

The website notes that while three to six months worth of savings may sound like a lot, starting small and increasing the amount being put away over time can pay off quickly.

TIME stocks

Stocks Hit Record Highs

Dow Jones Industrial Average Approaches 17,000 Milestone
Traders work on the floor of the New York Stock Exchange (NYSE) on June 20, 2014 in New York City. Spencer Platt—Getty Images

The records cap a week of growth

Stock markets again hit record highs Friday, with the Dow Jones Industrial Average nearing 17,000 points and the S&P 500 above 1,960. Both indexes were up more than 1% in trading for the week.

Friday marked the third day in a row that the S&P 500 hit an all-time high, following gains earlier in the week. The index is up more than 6% this year. The Dow is up more than 2%.

The 17,000-mark would be an historic milestone for the Dow, which has seen a steady rise since it hit a 6,600 point nadir during the financial crisis.

TIME Economy

Bank Of America Wants Meeting With Attorney General Holder

It looks like Bank of America is looking for a deal.

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Bank of America is apparently done talking to Justice Department attorneys and wants to go straight to the top dog. CEO Brian Moynihan has asked to meet with Attorney General Eric Holder to discuss a deal on mortgage fraud litigation, Reuters reports.

This type of request is unusual as meetings are usually brokered between law enforcement officials and company lawyers. It looks as if Bank of America is following in the footsteps of JPMorgan Chase, which settled a big case for $13 billion shortly after meeting with Holder.

 

TIME Auto

10 Cars Americans Simply Don’t Want to Buy

10 Cars Americans Don't Want To Buy
A Volvo S60 at the 2013 Geneva Motor Show in Geneva, Switzerland. Harold Cunningham—Getty Images

247-LogoVersions-114x57
This post is in partnership with 24/7 Wall Street. The article below was originally published on 247wallst.com.

The American auto industry nearly collapsed during the recession as car sales plummeted and companies struggled to stay afloat. Since then, U.S. car and light truck sales have steadily increased, reaching 1.6 million in May, up 11% from the year before.

Despite the general recovery, demand for some vehicles continues to underwhelm. According to figures from TrueCar, an auto industry information and technology platform, 15 models spent an average of at least 90 days on dealers’ lots before being sold. No car took longer to turn over than the Volvo S60, at an average of 155.5 days.

Click here to see the ten cars Americans don’t want to buy

Days to turn is useful metric for gauging inventory levels, Eric Lyman, vice president of industry insights at TrueCar, explained in an interview with 24/7 Wall St. “The clock starts when the car lands at the dealership,” Lyman said. This levels the playing field, he added, because production facilities for various carmakers are located at different points across the U.S. or even in foreign countries.

According to Lyman, several factors may contribute to rising inventory levels. Some of these are temporary factors, such as the switch to a new model year. Because TrueCar data for 2014 covers cars in their 2014 model years, it makes sense that turnover rates are lower for models such as the GM’s (NYSE: GM) GMC Yukon, Chevrolet Tahoe, and Cadillac Escalade, all of which have released newly overhauled 2015 models.

In other cases, Lyman added, “high inventory is going to be [due] to a disconnect between the sales goals of the manufacturer and the retail demand for those units.” In some instances, manufacturers overestimate demand for their brands and ship too many units to their dealers. This results in high inventory and turnover levels for the brands.

Many of the brands that take the longest to sell are unpopular with customers, Lyman explained. Both Mitsubishi and Scion have car models that take the most days to turn. Both were also two of the nation’s lowest rated car brands, according to J.D. Power’s 2013 Automotive Performance, Execution and Layout Study, which measures brands’ appeal with car buyers.

Cars from Cadillac, Ford’s (NYSE: F) Lincoln, Jaguar and Volvo, all of which ranked in the bottom half of premium brands, according to the study, also made the list. Only one of the cars with the highest days to turn, the Chevrolet Tahoe, was manufactured by one of the survey’s 10 highest rated non-premium brands.

Although there are differences in how brands are perceived, Lyman added that disparities in actual quality among various brands is often relatively small. Five of the 10 cars requiring the most days to sell were made by brands with above-average scores on J.D. Power’s 2013 Initial Quality Study. Leading these brands was GMC, maker of the Yukon, which trailed only Porsche for fewest problems per 100 cars, according to the Survey. Only three models belonged to brands with scores considerably below the industry average, although one of these, Scion, was the lowest-rated brand in J.D. Power’s survey.

Based on figures provided by TrueCar, 24/7 Wall St. reviewed the car models with the highest number of days to turn. TrueCar turnover and sales data for each model reference a particular model year — figures for 2013 apply to cars in their 2013 model year, while figures for 2014 count data for 2014 model year vehicles. TrueCar also provided sales data for each of these models. Manufacturer’s suggested retail price (MSRP) data are from manufacturer’s website, and refer to the newest model year. We also relied on information from J.D. Power and Consumer Reports surveys, and the American Customer Satisfaction Index (ACSI). Safety data are from the National Highway Traffic Safety Administration (NHTSA) and the Insurance Institute for Highway Safety (IIHS). Sales figures are from The Wall Street Journal, as well as various company press releases.

These are the cars Americans don’t want to buy.

3. Cadillac Escalade
> Days to turn: 115.5
> Jan.-May unit sales: 1,498
> MSRP: $71,695

The Cadillac Escalade is one of three full-size General Motors SUVs among the 10 cars with the longest days to turn, alongside Chevrolet’s Tahoe and GMC’s Yukon. It is also the slowest selling American manufactured car, taking an average of 115.5 days to turn in the first five months of 2014. This is up from 61.2 days to turn between January and May 2013, as sales have dropped 14.7% year-over-year. However, this may not necessarily be an issue of quality. General Motors recently released a new Escalade, which may affect sales and turnover for the 2014 model year. In fact, Cadillac was one of the top-ranked makes in J.D. Power’s 2014 Vehicle Dependability Study, behind only Lexus and Mercedes-Benz. Consumers were also happy with the brand, awarding it one of the industry’s highest ACSI scores.

2. Mitsubishi Outlander
> Days to turn: 117.1
> Jan.-May unit sales: 3,788
> MSRP: $22,995

The Mitsubishi Outlander took dealers an average of 117.1 days to turn so far this year. This was actually an improvement from last year, when it took dealers nearly 128 days to turn an Outlander. Sales of the Outlander have also been strong this year, up 37% in the first five months of 2014 versus the year before. Overall, sales of Mitsubishi cars rose nearly 34% in that time. However, the carmaker still holds just a 0.5% share of the U.S. car market. Mitsubishi’s model competes in a crowded field against some of the nation’s best selling cars, such as Toyota’s RAV4, Honda’s CR-V and Ford’s Escape.

ALSO READ: Ten States with the Fastest Growing Economies

1. Volvo S60
> Days to turn: 155.5
> Jan.-May unit sales: 1,777
> MSRP: $33,300

Volvo’s S60 had the longest average days to turn of any car model sold in the U.S., taking an average of 155.5 days to turn in the first five months of 2014. This was more than twice as long as it took to turn an S60 last year. Sales of the S60 have slid as well, with just 1,777 sold this year through May, down 13% from the same period in 2013. So far this year, total Volvo sales are down roughly 10% nationwide. As a brand, Volvo has long been considered a carmaker in need of a turnaround. Ford sold it to Chinese carmaker Geely in 2010. The brand still maintains a reputation for safety, and the S60 earned a five star safety rating from the NHTSA and was an IIHS Top Safety Pick+ last year.

For the rest of the list, go to 24/7Wall St.

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Volkswagen’s Sales Disaster Continues

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