Bradford Plumer on Savings and Debt

From a post by Bradford Plumer

Looking at the BLS’s 2003 Consumer Survey, the people who save in this country are overwhelmingly wealthy. The bottom income quintile pulls home $8,201 a year before taxes, and spends $18,492. Meanwhile, the top quintile hauls home $127,146 a year before taxes, and spends $81,731. The poor are borrowing to the hilt and the rich are happy to oblige them. At the end of 2004, the amount of after tax income that went towards debt service was roughly 16 percent, and those numbers are much higher for low-income families. Bankruptcies are skyrocketing. So why are these families borrowing so much? Robert Pollin of EPI put out a study in 1990 arguing that the bottom 40 percent of Americans were borrowing to compensate for stagnant or falling wages. More recently, Elizabeth Warren and Amelia Tyagi’s Two-Income Trap compiled similar evidence…the 6,000 percent increase in credit card debt between 1968 and 2000 didn’t come about because people were buying frivolities; they’re simply trying to tread water, pay for health care, that sort of thing.

Now obviously if you’re in the creditor class, this state of affairs looks pretty damn good. Not only do you earn interest on your surplus funds, but mass borrowing among low-income Americans reduces pressure for higher wages, by letting them buy stuff they couldn’t otherwise afford, and it certainly makes America look like a middle-class consumer society, thus staving off the angry hordes from rioting.[...]

The downside, of course, is that among the lower classes, very few people have much wealth to speak of. The richest 10 percent of Americans own 79.8 percent of all financial assets. The bottom 40 percent, collectively, own as much in liabilities as in assets. (Average wealth among the bottom 10 percent has been consistently declining since the 1960s.) Among minorities, especially African-Americans and non-white Hispanics, the disparities are even worse. In 2001, the average black household had a net worth equal to about 14 percent of the average white household.

Here’s what I always wonder about fundimentalist Christians: Why aren’t they interested in putting an end to predatory lending practices? The Bible is very clear about the matter, and yet – at least here in Oregon – the party of right-wing Christian politicians firmly oppose proposals to reign in predatory lending practices.

I’m frankly terrified by how little wealth low-income Americans have, especially when you consider how little most people have put aside for retirement. A TV report I saw this morning claimed that the typical American has less than $20,000 put aside for retirement (in an 401K or the like), and even among Americans over 55 the average is less than $100,000 (and presumably much, much lower among low-wage workers). Social Security is going to survive – but Social Security is meant to be a suppliment, not an entire retirement. And for everyone but some firefighters and cops, “pension” is becoming an obsolete concept, like churning butter or sewing your own clothes.

Elder poverty is going to be huge in 30 years time.

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53 Responses to Bradford Plumer on Savings and Debt

  1. 1
    Josh Jasper says:

    Cheer up, if Republicans retain control, they’ll just end public subsidization of health care, so elderly people will die sooner, and be less of a drain on the economy. The libertarians are for it too.

  2. 2
    Rachel Ann says:

    Because people have a new god named mammon? I think, especially in the USA but all over the world people honor money and those who have it.

    Well, that’s me.

  3. 3
    wookie says:

    Maybe this is why the US health care system is so poor for the poor… the government apparently has a huge vested interest in making sure that the elderly population just isn’t around to get too elderly, particularly if they aren’t self-supporting.

    I’m also wondering what this means for the current generation of 20 and 30 something workers, being put in the position of being physically and financially responisble for their aging parents in a couple of decades. This is very much a self-perpetuating cycle.

  4. 4
    RonF says:

    Is it or is it not true that in most cultures the world has seen up to this point, it is expected of children that they will help support their parents once they become elderly?

    I’m not asking this to start an argument over whether that’s right or wrong or desirable, but to get a picture of how our culture compares to history. In our current culture, mobility is very high and no one expects their children to live nearby, never mind in the same house. Even back when Social Security started, I’d guess that it was not usual for children to move across several states once they reached maturity. But I don’t want to make an assumption.

  5. 5
    RonF says:

    Here’s what I always wonder about fundamentalist Christians: Why aren’t they interested in putting an end to predatory lending practices?

    What is considered to constitute predatory lending practices? I am unfamiliar with the bill.

    More recently, Elizabeth Warren and Amelia Tyagi’s Two-Income Trap compiled similar evidence…the 6,000 percent increase in credit card debt between 1968 and 2000 didn’t come about because people were buying frivolities; they’re simply trying to tread water, pay for health care, that sort of thing.

    This, of course, flies in the face of the stereotype that poor people’s poverty is partly caused by their blowing money on unnecessary expenses ($150 sneakers, large TVs, booze, etc.). Has this study been publicized? Has there been any reaction to it?

  6. 6
    Jake Squid says:

    RonF,

    In Oregon there are no usury laws at all. You can charge any interest rate that you please. I did some work for a credit company in Oregon – their standard interest rate for a loan (usually used to buy a car) is 55%. If your credit rating isn’t good, it goes up from there.

  7. 7
    hf says:

    Because people have a new god named mammon?

    Pretty much. Read this if you haven’t already. Part 2 explains the deal with Satan.

  8. 8
    La Lubu says:

    RonF: I just looked up the median household income for my census tract in 1999—-$14,874. That probably looks “worse” than it really is, as there are two elderly high-rises and three homeless shelters in this tract, but if you go to “household income”, you can see that 90% of the households have incomes of under $50,000.

    So, how does the typical working-class family support elderly parents with healthcare issues in addition to supporting themselves and their children? Really! If you know any secrets, let me in on them. I’m an only child, and I have a very limited ability to assist my parents. My mother is already on a fixed income (over half of which goes to insurance and medical expenses), and my father will be retiring next spring.

    I was unemployed for the lion’s share of 2005. I ran out of unemployment benefits in March, and lived off a combination of savings and my one credit card. And it was scary. My insurance bank hours ran out in April, and I couldn’t afford the $700 monthly COBRA payment. We went without insurance till September, and I crossed my fingers and hoped nothing would happen. I’d cross my fingers every time I sent off the bills, hoping that a job would materialize. It wasn’t easy. Around 120 people in my local were doing the same, with similar numbers in other trades. The economy is the shits. You can’t base an economy on the selling of household stuff (cars, clothes, electronic goodies, whatever), to unemployed people. And a helluva lot of us are either unemployed or underemployed. Or, just reluctant to spend money because we know we’ll be unemployed or underemployed. Or, there’s just no disposable income—it’s all devoted to making ends meet.

    Wait till the banks start foreclosing on all those “get out of debt” second mortgages. Then it’s gonna get real ugly, folks.

  9. 9
    Robert says:

    Social Security is meant to be a suppliment, not an entire retirement

    So you are saying that you expect the working poor to be taxed at 15 percent of their gross income AND set aside money for their own retirement? Seems a bit of a stretch for the guy pulling tags at Wal-Mart, don’t you think?

  10. 10
    RonF says:

    Yeah, Robert, that is a stretch. But that’s the premise. SS was not and has never been intended to fully fund retirement. The guy pulling tags at Wal-Mart needs to find a way to get a better job. If he or she can’t, then they are going to be in trouble.

  11. 11
    carlaviii says:

    >Now obviously if you’re in the creditor class, this state of affairs looks pretty damn good.

    Except that the people you’re loaning to will never be able to pay, so you lose some of your profits to a collection agency and then they declare bankruptcy and you might get something, you might not.

    Then again, I’ve read articles claiming that the poor really, truly need their cable TV and their cell phones… but I’m still not convinced those are life necessities.

    Then again, I’m a weirdo.

  12. 12
    RonF says:

    So, how does the typical working-class family support elderly parents with healthcare issues in addition to supporting themselves and their children? Really! If you know any secrets, let me in on them.

    I’d like to know myself. Hell, I’ve got an upper middle class income and I’m limited in what I can do for my parents.

    What I’m wondering is whether we’ve got a system designed for one societial structure that hasn’t been, or even isn’t, adaptable to the current societial structure.

  13. 13
    Ampersand says:

    Robert, it’s not 15% of gross income for the guy pulling tags at Wal-Mart, who probably makes minimum or close to minimum. Let me explain this in right-wing terms, so you might understand: his wages have already been artifically inflated by the minimum wage laws. Since he’s already making more than the unfettered market would pay him, the market won’t force Wal-Mart to give him a 7.5% raise if the 7.5% employer kick-in were repealed. So you can’t honestly include that 7.5% employer kick-in as a tax he’s paying; it’s not paid by him, it’s paid by Wal-Mart.

    I’d certainly be in favor of raising SS payments for the working poor, paid for by a progressive tax on all income.

    The larger point, however, is that as a society we don’t get something for nothing. If you’d like to tax the working poor less, then you either have to cut SS payments – leading to an increase in elder poverty – or you have to tax someone else more.

    Privatizing everything is no solution, either. There is no theory of marketplace investment which leads to no one getting burned in the market, ever; nor is there any reason to think that 100% of people will invest enough (or at all) in retirement funds. Marketplace-based retirement plans mean that we either have to leave some folks out in the cold, or have taxpayers pay for those folks’ retirement.

  14. 14
    Ampersand says:

    Except that the people you’re loaning to will never be able to pay, so you lose some of your profits to a collection agency and then they declare bankruptcy and you might get something, you might not.

    The fact that people remain in the business of giving loans indicates that the losses are more than made up for by the profits.

    Then again, I’ve read articles claiming that the poor really, truly need their cable TV and their cell phones… but I’m still not convinced those are life necessities

    You really can’t get a job without a phone of some kind, and a cell phone can cost less than a non-cell phone, depending on the specifics.

    As for cable, I’ve never seen any research on what percentage of the lowest quintile of earners has cable TV, and how much it costs them on average. If you know of such statistics, please link to them.

    Your comments seem to me to be more about dodging the issues than addressing them.

  15. 15
    Krupskaya says:

    Here’s a drift, but I just wanted to say that it’s not just the cops and firefighters that’ll get a pension. The carpenters union in this area manages its own pension, and retirees most often receive more a month than they did when they were working.

  16. 16
    Josh Jasper says:

    Just wait until the first city declares bankruptcy and defaults on pension payments. Every private industry is doing it, public service is just a whisker’s width from following down that path.

  17. 17
    Robert says:

    Here’s a good article on poor folks and luxury goods. I don’t know about the “bottom quintile”, but among people the Census Bureau calls “poor”, 62% have satellite or cable TV. As for what it costs, check your cable bill; cable costs what it costs, I don’t think they give you a break for being broke. ;)

    And Amp, I bow to you for using the minimum wage argument in that clever fashion.

  18. 18
    La Lubu says:

    The carpenters union in this area manages its own pension, and retirees most often receive more a month than they did when they were working.

    That’s not going to happen for the upcoming retirees. Part of the reason those retirees you speak of are making more, was because their wages were lower—then the pension payments were raised, due to fairly recent “good years” and they are locked in to those “good year” rates. Since then, most pensions have cut back because of more recent bad times in the market. The guys who retired after the nineties boom aren’t getting more than they were when they were working.

    Thing is, the future trends for trade pensions look pretty abysmal. The lack of jobs mean fewer members contributing. That, combined with the sluggish market is going to mean ever-decreasing pension payments, if the damn thing doesn’t go belly-up completely. The baby boomers are retiring now. When the IBEW (electricians) pension was started, there were eight working (and contributing) for every one retiree. Now we’re damn near on a one-to-one basis. Not pretty. The jobs aren’t there, so the workers aren’t there.

    Some locals have a defined contribution plan rather than a defined benefit plan—thank NOTA mine isn’t one of them! You can outlive your money if you have a defined contribution plan! Some of the Laborers I know who took early retirement (they had a thirty-years-of-service-and-out option) have since gone back to work; not being old enough to qualify for Medicare left them unable to afford health insurance and medical expenses.

  19. 19
    La Lubu says:

    Robert, basic cable service in my area gives you 23 channels for 12 bucks a month—cheaper than a weeks’ worth of bus fare. If you want more frills, you can get an expanded cable package with 48 channels at 30 bucks a month. That’s cheaper than the monthly family rate at the “Y”.

    TVs, stereos, VCRs, DVD players, etc. can all be had pretty cheap at the pawn shop or garage sale—-they won’t have all the newest bells and whistles, but they’ll work. What’s your point?

  20. 20
    Robert says:

    Amp asked for a citation on how many poor people have cable. I provided one.

  21. 21
    carlaviii says:

    I found an interesting bunch of numbers here: http://www.pff.org/issues-pubs/books/050118usfreport.pdf#search='cable%20subscription%20low%20income‘ (warning: slow loading pdf)

    >You really can’t get a job without a phone of some kind, and a cell phone can cost less than a non-cell phone, depending on the specifics.

    No argument about the necessity of a phone – and hey, if a cell phone’s cheaper then by all means toss the land line and go wireless. But according to the PDF above, an average of 94% of households have a telephone and an average of 43% of households “even at the lowest income level shown (less than $25,000),” have cell phones.

    And looking at the cable TV rates in my area (near DC) I find the most basic package is $12.50/month. Dang! I could swear I’ve never heard that number in their advertisements… next lowest is $46, which is more like what I was expecting. The PDF says 57% of households making less than 25k have cable. But if they got a cheap package comparable to what I’m looking at, I suppose it’s affordable. Standing corrected.

  22. 22
    La Lubu says:

    Robert, I posted the prices because most of the time I’ve been in discussions that brought up “what poor people have” (like cable or even a TV to begin with), it is to infer that they “aren’t really poor.” Twelve dollars is pretty affordable even for a poor person in the U.S., but when folks say “oh, the poor have cable!” the tendency is for the listener to flash on “damn! I pay over a hundred bucks a month for cable”, not realizing that’s not the package the poor folks have.

  23. 23
    RonF says:

    Jake Squid, surely you don’t mean that the standard interest rate for a car loan in Oregon is 55%? Competition for loans hasn’t driven it lower? Perhaps I misunderstand.

  24. 24
    RonF says:

    I still need information regarding what defines predatory lending practices.

  25. 25
    Robert says:

    That’s easy, Ron. It’s predatory lending if you loan money to someone the person accusing you of predatory lending doesn’t want you to loan to, and charge them the interest rate indicated by their credit history.

  26. 26
    Jake Squid says:

    RonF,

    I mean that the company, which makes huge profits, has a standard rate of 55% for a loan. No joke. I was horrified because I grew up in NY where the maximum interest rate is (or, at least, was) capped by law at 25%. I saw plenty of loans (for people judged a higher credit risk) for over 70%. This is a legitimate, above board business in Oregon. They do have a scam (it may be legal, but it sure looked like a scam to me) involving selling vacuum cleaners for 10′s of times more than they’re worth & loaning the mark the money to buy it at 55% or above.

    I don’t believe that is the “standard” rate in Oregon. In part, it is because they target people who are higher credit risks (mainly Hispanic immigrants). But, my lord, 55% is obscene. There are many “PayDay” loan companies that charge interest rates at 1000% and above. I believe that is taking advantage of desperate people and the reason that usury laws exist (or, in the case of Oregon, should exist).

    But I never see the fundamentalist Christians making this a big part of their public image. WWJD? Didn’t he boot the money-lenders out? Perhaps, Robert, he thought that they were practicing predatory lending.

  27. 27
    Krupskaya says:

    This area has always been a strong one for jobs — and will continue to be for quite some time — and the fund managers are amazing. I get what you’re saying, though, La Lubu, and you’re right.

  28. 28
    Mary Garden says:

    I don’t think poor people should have to prove to the rest of us that they spend their money with peerless virtue before we acknowledge they aren’t getting their share and that there’s a problem that needs to be fixed.

    In America, the baseline expectation of what you should possess in order to be “respectable” is incredibly high, and does include cell phones, cars, cable tv, “new” looking clothes and beautiful teeth, among other things. Not having these items can have a tremendous negative effect on how others treat and perceive you and what your opportunities are, in every arena from job prospects to dating to the bus driver letting you ride “free” when you forget your bus pass.

    Though comfortably well off, I don’t own a car and ride a bike everywhere I go, and I am blown away at how many people have questioned my responsible adulthood because of it (I’m 34).

    Having cable tv and a cell phone, just like everyone else you know, can be even more important to someone with a low income than to someone who can easily afford it.

    MG

  29. 29
    MSKing says:

    Mary Garden wrote: “I don’t think poor people should have to prove to the rest of us that they spend their money with peerless virtue before we acknowledge they aren’t getting their share and that there’s a problem that needs to be fixed.”

    Considering that it’s my money that I worked hard for that they’re getting, I think they do. Except I’m not asking for “peerless virtue” as you put it. That makes it sound like I’m asking for more than proof that they’re not taking my money to pay for necessities so they can use the money they earn to buy luxuries.

    I live in America and my baseline expectation of what it takes to be “respectable” is that someone is neat and clean in appearance, has a job and pays their own bills, as well as being well-spoken and honest in their dealings with me and others. What does this have to do with cars, cable tv, and beautiful teeth? A cell phone is not going to convince the bus driver you forgot your pass. A smile, a polite explanation of what happened, and a clean and neat appearance will do far more to convince him of your honesty. Plus the fact that he’s seen you before and you’ve not acted like a jerk to him.

    I’m not interested in giving anyone money because they make less than their friends and feel like they have to keep up with the Joneses. If they have the time and energy to worry about that, they ain’t poor.

  30. 30
    La Lubu says:

    A cell phone is not going to convince the bus driver you forgot your pass.

    No, but a cell phone can definitely be the difference between whether you get a job or not. The expectations have changed when it comes to how long people are willing to wait for a response when making a call. When I was a child, the “phone manners” commonly taught included not hanging up until the seventh ring—this was when all phones were land-lines and cord connected. First answering machines, then cordless phones, then cell phones changed that. When a business agent from a union hall calls, you damn well better be there to answer the phone, or the job will go to someone else. Employers in other fields look at cell phones the same way they look at car ownership—the person who has a cell phone, just like the person who owns a car, is saying to them, “I’m responsible, available, and prepared to work!” The person who doesn’t may or may not be. Guess who will get the job? When I was poor (before I enter the trade), it was before common folk had cell phones. I was turned down for several jobs I applied for simply because I didn’t own a car. I didn’t own a car because I couldn’t afford to own a car—but not owning one severely limited my job options, because being carless told potential employers, “deadbeat”.

    Cell phones are also touted as personal safety devices for women. Women who do not own cell phones are warned about the danger they are in, because they won’t have 24-7 access to the police. I’ve been told that not having a cell phone is “just asking for trouble”.

    Considering that it’s my money that I worked hard for that they’re getting

    Bullshit. The vast, overwhelming majority of poor people in the U.S. are not on welfare. They are the working poor. They aren’t getting any of your money. Corporations are getting a far bigger chunk of your tax dollars.

  31. 31
    Mary Garden says:

    MSKing:

    I find it interesting that you concluded I meant all poor people should be handed a blank government welfare check.

    What I was saying was that, in a country this wealthy, there’s no reason everyone shouldn’t be paid well enough to afford a cell phone and cable tv (for a grand whopping total of $24 a month), and it’s insulting for us to nitpick over stuff like that before we admit someone making $14,000 a year is getting a raw deal and that something needs to change.

    Also (thank you, La Lubu), most Americans do think of cars, cell phones and even basic cable as ‘needs,’ or at least baseline items that no civilized person goes without, and that DOES affect how people treat you. The poor kid in the funny homemade clothes (however neatly maintained) is often picked on and ostracized at school, and even nice people who don’t pick on the poor often treat them differently in subtle ways (the way “nice” white people often behave subtly differently toward black people, for example).

    Also, the appearance thing is BIG when it comes to getting jobs that pay more than minimum wage, especially for women. Women applying for desk or sales jobs are generally expected to project a look that says, at the very least, “I have dental insurance, and I didn’t have to take the bus to get here.” Not looking expensive (meaning made up, well-groomed, hair styled, nice clothes, good teeth, educated speech, not rained-on etc) severely limits your chances of getting a job that pays more than minimum wage.

    I agree that many of the things the average American thinks s/he “needs” are actually luxury items, but that’s the way things are here. Just because someone is poor, that doesn’t mean they are suddenly going to adopt the values of a more austere culture. I can’t imagine not being tempted to run up my credit cards if I were making $8/hr so I could have a few of the luxuries everyone else seems to have. Our economy absolutely depends on people believing they need luxuries, and in some cases, our corporations have directly manipulated things to make it harder to do without (auto and steel companies in the 50s buying up and scrapping municipal transit systems, etc). That’s why laws against usury are so important here.

    And anyway, as Ampersand said, most people are putting medical care and groceries on their charge cards – not luxury items.

    Criticizing how the poor spend their money sounds like “if they really don’t like being poor, they can work harder and they won’t be poor anymore.” Do you really think that’s true? If all the poor people in the US just started working harder, would that solve the gross alterations in distribution of wealth over the past 30 years?

    MG

  32. 32
    Aaron V. says:

    Considering that it’s my money that I worked hard for that they’re getting, I think they do. — MSKing

    Oh, so you’re assuming that every poor person is on welfare, SSDI, or another government program? You might be surprised to find out the number of people who work full-time who make $8 or $10 an hour, and have to support children on that salary.

    Somehow, I don’t see people complaining about the lifestyles of the rich and famous whenever they have to pay $9 for a movie ticket, or the bloated salaries of Big Oil executives when they have to pay nearly $3 a gallon for gasoline that cost 85 cents in February of 1998.

    I live in America and my baseline expectation of what it takes to be “respectable” is that someone is neat and clean in appearance, has a job and pays their own bills, as well as being well-spoken and honest in their dealings with me and others. What does this have to do with cars, cable tv, and beautiful teeth? — MSKing

    Yes, and people don’t judge you on appearance? Would you give someone a job who says they’ll work hard and appears interested, but wears old clothes to the interview and has bad teeth? (Dentists are expensive – a filling or even a checkup and teeth cleaning could be worth a week or two of food, let alone a root canal.)

    Methinks a number of people either want to see poor people suffer or want to begrudge them things that were formerly luxuries, like cell phones. As was said, cell phones are often cheaper than land lines, and aren’t just carried by Big Bidness-people anymore. Cable TV can be cheap compared to other forms of entertainment. I’m surprised vegetarians aren’t criticizing poorer people for buying meat with their money (whether work-earned or food stamps) instead of 24-packs of Kraft Dinner.

    Oh, and for LaLubu – I lost the first job I was offered in Portland because I didn’t have a cell phone – I went out to a store and got a call from a temp agency – by the time I returned, the job went to someone else.

  33. 33
    mythago says:

    Is it or is it not true that in most cultures the world has seen up to this point, it is expected of children that they will help support their parents once they become elderly?

    It is not. There are so many qualifiers to this statement that it’s pretty much meaningless.

  34. So, how does the typical working-class family support elderly parents with healthcare issues in addition to supporting themselves and their children? Really! If you know any secrets, let me in on them.
    Outsource them to asia. No, really. Asian cultures tend to respect the elderly and things like housing and servants are cheap (ymmv.)

    What I found interesting about the article was it shows, if I read it right, that while the American poor don’t make much, they spend enough to be considered rich in most of the world. They have toys which were status symbols for the rich in 1968. Credit cards as redistribution of income.
    The bible isn’t perfectly clear about usury; there are a wide variety of views on among christian thinkers. There’s a long tradition of being hostile to “rich jewish moneylenders.” There are other groups, like the mormons, that focus on thrift and mutual aid.
    My own lifestyle of voluntary simplicty borrows a lot from the quakers, or maybe it’s just an OCD quirk. No cable, no cell phone, no health insurance, but no job, no mortgage, currently debt-free, i try to live in the online post-scarcity economy. I did spend $3 on a cup of coffee today, and $25 for a bike, so I’m not completely outside the money economy, but still working on it.

  35. 35
    MSKing says:

    I apologize if I was unclear. This talk of “fair share” makes me think of programs like welfare that take my tax dollars and give them to people who are deemed poor. In such a case I believe one should have to prove that one is genuinely in need. (btw, La Labu, very good point about what we instantly think when someone says “poor people have cable.” I fell for it, but never again so…thanks :))

    If we switch from possessions that equal respectability to hiring considerations, you are right that there is a growing demand for instant communication these days as well as the slightly older expectation that an employee has reliable transportation (becauses buses are not reliable and most people don’t live close enough to work to walk or bike). I say “instant communications” and “reliable transportation” instead of “cell phone” and “car” because I believe them to be the issue here. If a potential employee can demonstrate that they have both without the cell phone or car, it won’t matter that they don’t have them.

    For example, if you lived in a city with pretty good public transportation, employers might be delighted that you didn’t have a car because then they wouldn’t have to provide you with a place to park. In addition if you lived close to your workplace, that is smashing because you’ll get there faster if they need you right away. And if bad weather closes roads, you may still be available.

    Yes, if you’re job hunting you better answer the phone as soon as it rings, but that doesn’t mean it’s a cell phone. And having a cell phone doesn’t mean you’re always available, Aaron. You would have lost that job just the same if you’d been too busy to answer your cell. Plenty of people turn them off, forget to charge them, etc. It’s not just owning a cell phone that can communicate to the employer that you’re responsible, ready, and willing to work. I don’t know why I’m bothering arguing on this anyway since it’s also true that sometimes a cell phone is cheaper than a land line. ;)

    Although…a cell phone is a personal safety device? Hah! Like you can get a signal wherever you are. Like it can’t be taken from you. Like there’s an infinite number of police and they can instantly teleport themselves to where you are as soon as you call. A woman would do better to take self defense courses and look alert and confident. I hope you laughed at whoever told you that, La Labu. :)

    Aaron V: Of course people judge based on appearance! But you act like poor people have no control over theirs. Old clothes can still be neat (clean and unwrinkled) and appropriate for the job. Taking care of your teeth by flossing, brushing, and eating few sweets helps to prevent bad teeth for little money. They can even take a shower at a friend’s place or clean up in a public restroom if they don’t have access to running water. All things a poor person can do for themselves. The answer is, yes they’d get the job if I thought they were the best person for it. It would be stupid to hire someone less qualified, wouldn’t it?

    Anyway, to be more on topic about savings and debt. I know a lot of people who don’t have any savings and lots of debt. From talking to them, it’s pretty clear why it has happened too. It’s not predatory lending that’s the problem. It’s their attitude that they can live beyond their means. People who get the same pay as I do are living from paycheck to paycheck. Some live with their parents rent free. Some finished paying off their house, turned around and sold it and bought/built an even bigger house. Some insist on living by themselves instead of sharing costs with a roommate. As a whole they are constantly making stupid choices with their money even when they know better. These are people who make twice minimum wage, often with spouses who work too. Knowing this, am I surprised by what the tv report said? Not in the least.

    “The downside, of course, is that among the lower classes, very few people have much wealth to speak of.”

    Um…isn’t this why they’re called the lower classes? I mean, it’s not like we’re talking about music and decorating tastes here. “Wealth” and “low-income” don’t belong in the same sentence unless you’re saying they don’t have wealth. It kinda goes with the territory. And may I point out that they don’t need as much savings because they’re life style is cheaper?

    And look at how the report took Elizabeth Warren and Amelia Tyagi’s Two-Income Trap out of context. Zero mention of how they said middle class people were trying to live beyond their means and the problem was the mortages, etc that they used to stay where they were. That’s a fancy way of saying living in a bigger house than you can afford doesn’t count as a “buying frivolities”.

    If I were giving the report, it would go something like this:
    Predatory lending practices are a problem because people use them to live the way they want to instead of admitting they have less money and changing their life style. People who live beyond their means or just within them don’t have cash to put away for retirement or emergencies. People are their own worst enemies when it comes to money trouble. What’s the solution? People need to develop long-term money strategies and stick to them instead of spending money like they don’t have to live in tomorrow.

  36. 36
    Charles says:

    MSKing,

    You left out:

    “And stagnant median wages and falling fourth quartile wages over the past 3 decades are simply the result of non-rich people becoming lazier and lazier. If they’d all just work harder, they could see their wages rise with those of the top quartile. Silly poor people.”

  37. 37
    MSKing says:

    I wouldn’t say that, Charles, because it isn’t true. The first sentence is wrong. The second is only half true. And the third should be “Silly people.” :)

    I did leave out that the Two Income Trap ladies say that their statistics prove that fewer and fewer people can afford to live a middle class lifestyle. But that only raises the question of when does a middle class lifestyle become a lower class lifestyle.

  38. RonF,

    Wikipedia tells me that predatory lending has no strongly accepted meaning, although it does list a lot of scenarios.

    Personally, when I think about the term, I think that the key notional difference is between lending as a service, on the one hand, and lending as a business that uses borrowers as consumable resources.

    I can build a business model based on either, but I don’t know where to find the actual bright line between them from the outside. It’s probably a bad sign if late fees are a major part of the company’s planned income.

    Rebecca
    still planning to get back to you on the Alito discussion at some point; I’ve had the flu.

  39. MSKing,

    > Old clothes can still be neat (clean and unwrinkled) and
    > appropriate for the job. Taking care of your teeth by
    > flossing, brushing, and eating few sweets helps to prevent
    > bad teeth for little money. They can even take a shower
    > at a friend’s place or clean up in a public restroom if they
    > don’t have access to running water. All things a poor person
    > can do for themselves. The answer is, yes they’d get the
    > job if I thought they were the best person for it. It would
    > be stupid to hire someone less qualified, wouldn’t it?

    I venture to assume that, if you have not led an enormously privileged life, then you have overcome a set of fairly difficult obstacles with pluck, virtue, determination, and smarts, and wound up more or less okay. (Legitimate guess, not sarcasm.)

    In this regard—it is not quite so simple as you being correct or incorrect. To put it another way, the attitude you put forward is necessary and useful but not sufficient. Basically, every day in every person’s life is a measure between the fire in them and the amount of mud dragging at their feet. It doesn’t take much extra mud to make the difference between “Ha! I can overcome anything” and “another day falling just a little bit behind.” I know this as a person who has lived both states, and experienced the characteristic success of each.

    Sometimes people fail not because they’re not as cool as you think they should be but because the deck is more stacked against them than you think. Sometimes the deck-stacking aggravates their personal flaws in a feedback loop—I’m certainly a better person when things go well in my life.

    It’s really easy to build a myth of others’ lives that minimizes their discomforts and maximizes their vices. It makes it really easy.

    But life isn’t about having it easy. Even people who are doing okay, whether by raw privilege or their own efforts, can look unflinchingly at the potential that’s being wasted and the people who are suffering. They can accept a little discomfort when looking at the world and find new exercises for compassion and honesty instead of new ways to prove that things are already okay. These are all things that people who aren’t poor can do.*

    * But it really isn’t easy.

    Rebecca

  40. 40
    Polymath says:

    even a conservative like george will admits that poverty is regressive: the less money you have, the harder it is to get more: harder to get a job that will pay for the stuff (cell phone, car) that you need to get a job. harder to get a job that will be flexible enough (in case of illness, bus failure) that will allow you to keep your job. harder to take the daily risks (parking where you might get a ticket, carrying cash instead of credit cards) required to live a more stress-free existence.

    poverty is social cycle, not a personal condition. let’s please treat it that way.

  41. 41
    RonF says:

    WWJD? Didn’t he boot the money-lenders out? Perhaps, Robert, he thought that they were practicing predatory lending.

    Hm. Perhaps you need to read your Bible a bit closer. What happened in the Temple was bad, but had nothing to do with loans.

    In order to satisfy some of the requirements of Jewish Temple worship, one had to sacrifice animals of various types at the Temple in Jerusalem at different times of the year, or for different life events. If this meant you, then what you would do is travel from wherever you lived to Jerusalem, show up at the Temple, and make your sacrifice.

    However, the animal sacrificed had to have no blemish, and the Temple priests had to certify this. Corruption set in at this point. If you brought your own animal that you had raised yourself, you would find that the priests would find a blemish on it that made it unsuitable for sacrifice to the Lord. Now what? Well, oddly enough, you would find vendors outside the Temple that would be happy to sell you an animal that the priests would find suitable. This would present more than one problem. First, you had to have the money. Then you had to have the right money, for only certain types of money would be accepted by the animal sellers. If you were from the provinces and didn’t have the right money, there were money changers (not money lenders) who would handle currency conversions so that you could then buy your animal. None of these services had competition, so the rates for them were above market rates.

    Guess who approved what vendors could perform these services? Right, the priests. And apparently they got their cut. What was supposed to be a demonstration of faith by the nation of Israel to the Lord was turned into a commercial enterprise that profited the Temple and those who ran it or were favored by it. Jesus objected to this with both word and deed.

  42. 42
    RonF says:

    I’m going to chip in on cell phones here. Not so long ago I would have said that a cell phone is a luxury. But IMO that’s changed in just the last 2 or 3 years.

    The state has no right to take the money I’ve earned from me and give it to someone that hasn’t earned it without a strong justification. In this case, I think that doing so to enable someone to have a phone is justified. For what it costs, I figure (with absolutely no data to work from, this is a supposition on my part) that it helps the person with the phone be better able to get a job and stop taking my money.

    As far as cell phones for safety go, my wife and I just bought a cell phone with a year’s basic fees for my 78-year old parents. Dad still drives (O.K., too, I drove with him a couple of months ago), and we figured that if their car breaks down they should have a phone with them. Dad’s on oxygen, Mom’s got Parkinson’s, and having them sit there for an hour or so hoping some passerby happens to stop and help could turn an incident into an emergency. Especialy if Dad decides he’s going to try to change a tire or something. He doesn’t have the strength or endurance anymore, but that might not stop him from trying, especially if he’s worried about Mom. A cell phone for safety doesn’t necessarily mean that you figure you’re going to whip it out and dial 911 if you’re about to be mugged.

  43. 43
    Emmetropia says:

    The state has no right to take the money I’ve earned from me and give it to someone that hasn’t earned it without a strong justification. In this case, I think that doing so to enable someone to have a phone is justified. For what it costs, I figure (with absolutely no data to work from, this is a supposition on my part) that it helps the person with the phone be better able to get a job and stop taking my money.

    RonF-

    I get the impression that some posters here still buy into the whole “welfare queen” myth. There were in the past, some very few, extreme cases that got a lot of press. Those were the exception, not the norm. They were used to dismantle the exisiting welfare system under Clinton. And believe me, it has been gutted.

    Although I am socially liberal, I lean to the right in terms of fiscal accountability. I work in project development, capacity building and funding for the nonprofit sector, and have worked on community development, healthcare, social service, and educational projects in several states. From a fiscally conservative perspective, there’s still a lot of programs to be concerned about — projects that are riddled with corruption, staffed by incompetent and greedy people, and poor, and often “doctored” performance outcomes — that continue to be funded year after year. Projects promoted by both the Republicans and Democrats. Medicaid deserves a good going over, and that whole Federal Empowerment Zone program has proved to be a dismal failure in Mississippi (so badly in fact, that the funding was EXTENDED for yet another period.)

    I would be the first one to complain about the welfare system if I saw that it was being misused. I don’t. In fact I think it’s underfunded. Moreover, there’s a whole lot of irrationality built into the system, that keeps people from finding work, and punishes them for their circumstances.

    A couple of years ago, I spent a year as a full-time volunteer at a woman’s shelter in NY. Women could reside there for six weeks while they were getting approved for benefits, and had found permanent housing. Single women living in emergency housing were automatically eligible for Medicaid, about a $350 – $400 a month housing expense, $140 – $160 in food stamps, and a $40 cash stipend to pay for toiletries, cleaning products and necessities that can’t be purchased with food stamps.

    Let me introduce you to the life of a typical welfare recipient, from the lowest rung of the socio-economic ladder, in one northeastern city, trying to live within her means. You show up at the Dept of Social Services to enroll for benefits, and your saga begins.

    You will be asked by your worker to provide various forms of identification and proof of assets, which you may or may not have. You will make several bus trips around the county to get social security cards and wage slips, etc. Hopefully, your worker has given you enough bus tokens to make all the necessary trips. If they sent you to see someone at say, the Social Security administration office, and when you got there the person was out, you might have to make another trip back to your worker for a couple more tokens. Once you have provided all the documentation, your case will be officially opened.

    Now despite the fact that you are automatically eligible for benefits, DSS has been told to cut clients from their rolls. They are under pressure from the fed’s to demonstrate that fewer people are using welfare. Now due to your circumstances you are automatically eligible, so they can’t deny you outright. What does DSS do? Come up with some arbitrary stipulation, you can’t possibly meet. Women were told that they had 3 days to find an apartment or their cases would be closed. Now it might take another couple of weeks to get an appointment with a DSS worker, so you’re hustling your butt around town to find a place.

    You call every phone number listed for apartments in your price range.
    Many are already rented. You take buses all around town trying to meet up with landlords. The city has had 60 inches of snow that month, which makes travel difficult. Of course the only apartment you can find in your price range, is in the middle of crack alley. As a recovering addict you want to avoid environmental triggers that make you want to use again, so the fact that there are dealers clustered at the intersection by your prospective home, which makes you a little nervous. No matter.

    So you and the landlord meet and he agrees to rent to you. You give him a form to fill out, but there are some questions he has that you can’t answer. You leave a dozen messages with your worker who doesn’t return your calls. You turn the form in, but it’s filled in incorrectly, or maybe the landlord ends up being on a list that DSS keeps of nonapproved landlords. Maybe, if your worker is in a good mood, and you’re sufficiently contrite and pitiful, they’ll extend their arbitrary deadline a few days. Maybe not.
    So you have to start the process all over.

    So you’ve found your dream apartment in crack alley and everything’s moving along smoothly.

    No. Wait. Turns out that last year, during your slow ride into homelessness, you accumulated a $600 heating bill. You got emergency funding through DSS, but it’s a loan, not a gift. If you ever apply for welfare benefits, they can deduct this from your benefits. That $400 housing voucher is now reduced to $350 for the next year. Will the landlord accept that? No? Well maybe someone in your family will subsidize the difference. Not possible? Well, you’ll have to find another cheaper apartment then.

    Oh, and by the way, your three days has lapsed, so we’ll give you an appointment in 2 weeks so you can start the process all over again.

    So you’re finally settled in your dream apartment. How are you getting around town to look for that job that you’re not trained for and that probably won’t pull you out of poverty anyway? Well your worker can give you a monthly bus pass. She only gives out bus passes on Thursday afternoons, between 2 – 4:00 in the lobby of DSS. Miss her and you’re dead in the water until next Thursday. So you show up but the worker’s not there. You call upstairs and find out that she had a meeting that day and won’t be giving out passes. Of course you have no way of knowing this. It’s not like she calls her clients, and even if she did, you can’t stretch your $40 stipend far enough to cover soap, toilet paper, tampons, AND a telephone.

    Of course, you could sell your food stamp benefit card for .50 on the dollar, and have enough money to get a phone. But then you’d have to spend a lot of time waiting at lines at food pantry’s around town. You also have diabetes (a high likelihood with this population), and your Medicaid doctor has told you to eat a lot of protein, and to avoid starches. Eighty-percent of food you get at a pantry is going to be pasta, rice and day-old baked goods -little tuna or peanut butter. Now you were raised on a diet heavy on processed foods, and no body ever taught you budgeting, or food economics. You don’t know that dried legumes are a cheap source of protein and fiber that will stretch your food dollor, and help keep your sugar in check. Or that the farmers market is a good way to stretch your food stamp allocation. You don’t know and no one’s gonna teach you.

    So now you have housing and 3 days worth of food in your cupboard, which will last long enough until the Catholic Worker pantry gives out food on Monday. How’s that job search going?

    Well before you begin the job search, you have to donate time to DSS — part of the work for food program. You’re told that you will be performing volunteer work that will help you develop skills, but that never really happens. You don’t have the most rudimentary skills, and no one has time to teach or supervise you. So you’ll sit in a room with other people like you, until you’ve done your time. In other cities you might be required to pick up trash on the side of the road, but that hardly helps you in terms of vocational training.

    And on and on it goes…….

  44. Thank you, Emmetropia. Well said.

  45. 45
    wookie says:

    Would it be more accurate to suppose that DVD players, cell phones, etc, are merely the affordable extras that people have today, as opposed to 100 years ago, where your extras were pretty butter molds, drawing pencils, perfume, extra petticoats, or embroidered suspenders? How about 500 years ago, or a thousand?

    I’m not denying that we have become an incredibly decadent and disposable society compared to 100 years ago. But I think it might be relevant to compare the “frivalous spending” of all classes today with the same idea 100 years ago, to have an idea of wether what we have is a new phenomenon or simply a continuation of patterns that are potentially thousands of years old.

  46. 46
    natural says:

    I feel that it is a matter of personal fiscal responsibility for most people. This culture encourages people to spend as much money as possible. It is not a matter of socioeconomic class – everyone is susceptible to the pressure. To have a big house and new (fill in the blank) are things everyone is told to want. Notice how family size has shrunk in the past few years but the size of a typical house has increased? It is just a matter of how much a person can fight these urges. Poor people have less (or no) disposable income, so their individual choices happen to make more of a difference.

    Case in point. My brother and his wife make twice as much as my sister and I do (although we all do quite well). My mom makes considerably less than any of us at this moment. My brother brags that he spends more “mad” money per week than many people earn. My brother has more credit card debt and less savings in his IRA than my both my sister and I. He and his wife have caved into the pressure of always keeping up with the Joneses. My sister and I are more immune. My mom is another story. Her house is falling apart because she “doesn’t have the money” to fix her plumbing or roof. However, she does have the money to go out to eat and buy flowers every season to spruce up her yard. Her choices are clearly not always in her best interests, but she still wants to live decently. (BTW, my brother is the only one who constantly lectures her about her habits.) Her finances are such that she has a tougher decision to make with every dollar she brings home.

    I find it difficult to make sweeping judgments about how people spend their money. I am sure most people would like to save more, no matter in what class they belong. Our society teaches people to always want more and to want the best. Our economy is partly driven by those people who “wastfully” spend. The simple answer is to try to save a little for retirement and for a rainy day. But life is not always that simple.

  47. 47
    LAmom says:

    Maintaining a lower standard of living than the people around you is doable, but it can be emotionally difficult at times.

    I remember long ago going to hang out after hours with some fellow students and their friends. I was broke, so I ordered nothing, ate nothing, and did not contribute when the bill came. I guess my understanding of hanging-out etiquette was poor, because they were uncomfortable with what I had done and didn’t invite me to hang out with them again.

    These days, our family income is pretty low, but we do OK if we keep to a tight budget (I do save 10% of my income; it’s not a lot, but it’s better than nothing). Pinching pennies comes pretty easily to me, but not to everyone in the family. I have to be careful that I don’t make the children feel like they’re selfish for wanting stuff.

    We do spend money on DirecTV and DSL, so I try to use those expenses to save money in other areas. The DirecTV can take the place of getting a gym membership, taking the kids to the movies, and even buying music CDs. The internet, of course, provides all kinds of information that I might otherwise have to pay for.

    My mother occasionally gives me money to participate in group dinners at restaurants, and she routinely buys birthday, wedding, and shower gifts for people in my name. If I didn’t have her to lean on, I would have to pass on the group dinners, leaving some people to think that I just didn’t want to socialize with them (unless I told everyone that the reason I’m not going is because I don’t have the money), and I’d have to give people cheap gifts or no gifts (I know, I know, if I spent less time on the internet and learned to do needlepoint or something, I could make people wonderful gifts without having to spend a lot).

    I’m trying to resist getting a cell phone, partly because I don’t want to make the necessary budget cuts to get one, and partly because I don’t like the mentality that’s developing where cell phones are seen as indispensable. But I have to say, using a call box on the side of the freeway is awful (it was impossible to hear most of what the operator was saying over the noise of the trucks zooming past) and pay phones are getting less user-friendly as they’ve become less needed by the majority of the population.

  48. 48
    mousehounde says:

    Natural, a question, just because I am curious: if your brother, yourself, and your sister are able to take care of yourselves, sock away money for retirement, and still have “mad” money, why is your mother’s house falling apart? It is a parent’s responsibility to see to their children’s care. It is a child’s responsibility, in turn, to take care of their parents as they age. Why haven’t you and your brother and sister seen to it that her roof and plumbing is fixed? Why would you let your mom live in a house that needs fixing if you could do something about it? Is it because you feel she spends her “extra” money on frivolous things rather than “needful” things and so you shouldn’t have to help her?

  49. 49
    natural says:

    mousehounde,

    My brother is finally fixing her roof. It will take a while, since he works a lot and there is a lot of work to be done. My mom doesn’t want to move because she likes the location of her house so much. She has 4 pets and cannot move to a condominium. I have offered her money to fix her plumbing, but she refuses because she owes me many thousands of dollars from the last couple of years (for pet care, groceries, and other house repair work). I would do more, but I am 90 miles away and work and go to school. My sister is self-estranged from the family, and she would not help.

    My point is that my mother does not have much “extra” money after food, health care, mortgage, and car care. The little money she has left should go to saving money for these extra expenses, but she would feel deprived of having a good life if she saved every penny. It is not that she blows a lot of money, but ten dollars here and twenty dollars there add up. Who is to criticize her for wanting to live a little? Her house may be a mess, but if something critical were to come up, she (with my brother’s and my help)could find a way to fix things.

    My brother, of all people, lectures her constantly about her finances. It is funny. He doesn’t feel the need to deprive himself of anything. He makes a lot of money, but he works at an automobile assembly plant. If his job were to be eliminated tomorrow, I know that he would do similar things.

    No one has the right to judge her or any other person with a less than stellar financial outlook for wanting to fit into this society. Those who think that they could deny themselves every little luxury like a nice pair of shoes or an occasional dinner out of the house so that they can save each penny for retirement or for a rainy day might be fooling themselves. It is harder than it looks.

  50. 50
    mousehounde says:

    Thank you, Natural. With the extra details I see what you were saying. And you are right. It is very hard to save money a few dollars here, ten dollars there. It is slow and seems fruitless. When after scrimping and saving and denying your self little things for months, you check your balance to find it just barely out of double digits and that you have made a whopping .03 cents in interest, there doesn’t seem to be much point in denying yourself little things that make the days or weeks better.

    It sounds like your Mom is lucky to have you. I appreciate you answering my rather impertinent question.

  51. 51
    Jake Squid says:

    Thanks to all of those who corrected me about my money-lender/money-changer mistake.

  52. 52
    Lee says:

    In high school, we did an exercise where we had to pretend we were refugees and were given a starter check to get our lives put back together. It was very interesting to see what my peers and I considered essential for a family of 4 starting out with nothing. We could use a Sears catalog and a grocery store inventory as our source of items. We “bought” only a card table, 4 folding chairs, a lamp, two mattresses and two sets of sheets (because the kids can share, you know), a couple of pots and pans, some toiletries, a couple of towels, and I think 2 changes of clothes each plus one heavy coat. No toys, no TV, no phone, no rugs, nothing beyond the most basic items were what we deemed necessary, and the cheapest versions of everything, at that. After we were done, we were asked if we could live like that for a year, and the answer was generally “of course not” – we weren’t buying for US, we were buying for THE OTHER, so of course they didn’t deserve anything nice.

    I think it was on the Suzy Orzman (sp?) show a couple of months ago that she pointed out that 80% of the average paycheck was dedicated to nonnegotiable, essential items like housing, transportation, food, and health care. No wonder it’s so hard for people to save when they might only have $20 a month that isn’t already dedicated to an essential item. It’s mentally exhausting to be so close to the edge all the time and know that if you make a (relatively small) bad decision you could doom your family to months or years of Really Bad Stuff.

  53. 53
    citygal says:

    Just want to point out that in urban areas, if you don’t have cable, you don’t get TV. It’s impossible in many areas (mine, for one) to get an antenna signal, so if you want to get the news you have to pay for the cable hookup. So a significant number of the statistics quoted are getting the rock-bottom cable package (basic networks+PBS), not 500 channels.

    It’s outrageous how the “myth of the welfare queen” continues to be perpetrated. Helps the latte-drinkers sleep better at night, I guess, to believe they’re somehow more deserving than the rest of us…