5 economic myths of 2015

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4 Myths About Budgeting Your Money

A lot of people think they're a financial expert just because they read the "Wall Street Journal", watch CNBC or peruse the Internet. Financial misinformation gets circulated around the media, by politicians and repeated ad nauseam, but that doesn't necessarily make it true. Here are the five biggest economic myths of 2015.

1. Rich people create jobs. This is a favorite of certain politicians, but it's not really true – unless you count the hiring of a few butlers and gardeners. The people who create jobs are middle class consumers.

Stock market speculators pass a lot of money around, but they don't start many businesses. Investors and entrepreneurs do create small companies. But even with all the capital in the world, a small company will not succeed without customers to buy its products. The largest portion of customers are the middle class, which spend most of what they earn, as opposed to the superrich, who save a lot of their moneyand store it in banks and non-productive assets like art or real estate.

2. Social Security is dead. Now that the baby boomers are retiring, Social Security has started paying out more than it takes in from the payroll tax. But according to the 2015 government annual report, Social Security will be able to pay all of its obligations for the next 20 years. After 2034, it will still be collecting enough funds to pay approximately three quarters of scheduled benefits, and that's assuming no change to the system. Congress has almost two decades to make adjustments that will keep the system whole, such as raising the retirement age, increasing the salary cap on the payroll tax or changing inflation adjustments.

Medicare is a slightly more complicated situation. Part A, which pays for hospitals, is fully financed until 2030. Part B, which pays for doctor bills and outpatient services, "will remain adequately financed into the indefinite future," according to the Social Security and Medicare Boards of Trustees.

3. College is too expensive. Tuition has climbed over $50,000 a year at many private universities, leaving students deeply in debt. But, on average, college graduates earn almost twice as much money as those with only a high school diploma, and those with advanced degrees earn even more. Graduates of the most expensive universities also tend to earn more. One survey of ivy league students from the 1970s and 1980s found that graduates earned 15 to 40 percent more than their counterparts from less competitive, and less expensive, schools.

But plenty of state university graduates earn just as much or more than those of prestigious private colleges. The bulk of a person's earning power depends not on the size of their college tuition, but on their choice of major. Students majoring in computer science, engineering, business and finance are the top earners. Those majoring in physics, math and nursing also do well. Students who major in social work, religious studies or the arts earn a lot less. College is only "too expensive" if you go to an exclusive private school and major in a subject with little economic value.

4. Saving the environment costs jobs. Some economic research claims that environmental regulations will make production more expensive, thus reducing demand and costing jobs. However, studies have also shown that environmental technology actually creates even more jobs, ranging from blue collar construction jobs to high paying scientific research jobs.

One study from the University of California concluded that solutions to climate change, including investing in renewable energy sources, building out high speed rail and creating a smart-grid infrastructure, could generate over 1 million jobs. Other research has concluded that our continuing efforts to develop and sustain energy independence will bring jobs from overseas back to America.

5. The U.S. economy is in decline. Despite recent financial problems, the U.S. still boasts the largest economy in the world, accounting for a quarter of the globe's economic activity. The U.S. is the largest trading nation in the world, provides the most reliable reserve currency and is home to more major international corporations than any other country. The U.S. also ranks near the top in the global competitiveness index produced by the World Economic Forum.

Experts project that China's economy will catch up to the U.S. by 2020, but not because the U.S. economy isn't growing. It's because China has more than four times the population of the U.S. So even then, the average American will be a lot richer than the average Chinese person.

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