Thanks to Kevin Drum's blog at the Washington Monthly website, I saw this article in the LA Times, about the increase in economic risk faced by the poor. It's the second in a series of article about economic insecurity in America, and it's a very good article.
I for one have tried to wrap my head around why it's different to be poor now then it was to be poor 25, 50 or 100 years ago. In the early years of our nation many could count on the assistance of family, friend or their community when stricken with financial turmoil. More recently, they could look to the government to provide for their basic needs during difficult times. But now, though the may do well during good times, bad times seems to lurk just around the corner(personal experience with my family will testify to this.) The explanation in these article is that economic risk has shifted from government and business to not only the poor, but to the average middle class family, and that they can look forward to drastic changes in their life style when faced with job loss, unanticipated medical expenses, or other fiscal disasters which they are unprepared (and frequently cannot be prepared) to face.
I for one believe in a social safety net that people can take advantage of when unexpected disaster strikes them...and for poor families, even the smallest of unanticipated events can mean disaster. Loss of a job can mean loss of health insurance, which means any illness or injury can result in thousands of dollars of medical bill debt, making it even harder for them to work themselves out of the hole that they're in. I believe in a nation that protects people from that sort of financial disaster, and allows them to pull themselves back out of the hole and into prosperity, or at least, security.
Anyway it's a good read, and I recommend it.
Tuesday, December 14, 2004
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9 comments:
Hungry, homeless figures have increased.
http://story.news.yahoo.com/news?tmpl=story&cid=519&e=1&u=/ap/hunger_homeless
"The conservative Heritage Foundation called the report unreliable and exaggerated. It issued a statement saying it is implausible that the hunger rate could grow by double digits nearly every year for 20 years and cited Census Bureau surveys showing a relatively small increase in the use of food banks since 1995."
Implausible that ever since conservative retook the government there's more homeless? I daresay that's craziness!
I think this article goes a long way towards explaining how it is that poor people can both manage to afford big screen TVs one month, and then be unemployed and struggling to pay medical bills the next. Shifting the risk to the average American family has proven to be profitable for these companies and corporations. The problem of course is that they can, for the most part, afford the risk whereas the average American family, cannot. The fact of the matter is that this would probably be acceptable if we were a nation of careful planners and savers wehn the times are good, but we're not. As the article said, most people when they have the money, us it to boost their standard of living, not save for a rainy day. Of course, that's what these corporations and our government want too. If we stayed at home saving our money, it might be somewhat less profitable to do all this risk shifting in the first place.
Ah, so capitalism actually makes people less conservative with their money! ;)
I think in this case an anecdote would be useful to illustrate exactly what's happening.
Recently my mom's fridge went out and we had to get a new one. Because mom is unemployed right now, her only option was to go to one of those rent-by-month places where it would have been about $80 for 18 months. If you do the math, you get $1440, for a fridge that if she could afford to straight out buy it would be about $300. But she didn't have the means to buy it, no way, no how. Instead of letting that happen, I told mom I'd put a brand new one on my Discover card, so we went and got one (way better than that crappy one she was going to rent) for $540.
So the moral of the story is, either we end up without a fridge (hardly a luxury) or we end up in debt. Anybody who's ever needed a car and been short on cash is familiar with this story, I'm sure. So what's the answer, don't extend poor people credit? What would hurt people least?
On another point, do we blame rich people for spending their riches instead of doing smarter things with them? Or do we only blame poor people for not being smart enough to be rich?
That anecdote is illustrated in the article as well. Like they said, credit can be a good thing. Poor people without much savings can use credit to buy things they normally wouldn't be able to have, or use it to get by in tough times. Unfortunately, either assumes you're going to have the same income coming in after you get a new job, or after you get out the hospital, or after you get your car fixed...and that's simply not a safe assumption to make these days. So yes, poorer or lower middle class people go into debt to afford the things that they need, but the reason they have to put it on a card in the first place-the loss of a job for example-doesn't go away. So the hole only gets deeper. Clearly the ability to use credit cards isn't a problem(although there are problems specifically with how and who they're issued to.) The real problem is the volatility of the average American's income, and our economy premised on consumption as opposed to saving.
And on your other point, yes I do think that many succesful people regard poverty as a moral failing. That's why cold-hearted conservatives find it so easy to condemn poorer people for daring to buy big-screen TVs, while glossing over the fact that our economy works because the system demands that as many people as possible be able to purchase such items. They say that poorer people should save, not spend, but our society is one of conspicuous consumption and consumerism, and people living on the edge to afford a lifestyle that they want. These same people would moan and groan at the downturn of our economy if poor and middle class people started saving their money, instead of using it to be more and more goods so as to keep the economy growing.
Plus, those who are wealthy don't face this sort of risk; they can sink millions into a bad investment, but it doesn't change their fundamental wealth because they have the security of still having reserves to invest or live on.
That's true, but I didn't say that the informal safety net of family and community was adequate even then. Rather, our standards as to how we expect people to fare in economic crisis have changed. After all, being able to help your mom buy a fridge is hardly going to solve the underlying problem, which is the disappearance of jobs in her field and lack of opportunity for someone her age, as well as the inadequacy of unemployment benefits or alternative job traning. Those things must be provided by local municipalities, the states, or federal government.
I do agree that credit is a good thing. However, deliberate extension of credit to people targeted for their ability to pay the minimum but not their ability to pay off their debt, in a society that values credit as a means to obtain material goods and not as a back-up for hard times, is a bad thing.
I don't really blame this situation on anyone in particular. Corporations do what they do, which is try to make a buck, and it's the nature of our economic development, and I have a feeling we're going to find out sometime in the next ten to twenty years whether it's the most effective system and/or sustainable. I do blame those in power who wish to reduce the government's ability to provide this safety net to people in need, with nothing to offer in return except hollow phrases about "compassionate conservatism" and donating more to charity.
Let me just go back and point out that the "social safety net of family" I am providing is not that of real money, but rather the ability to extend credit. After all, now I'm in debt for that fridge. If my car goes bust and I lose my job, I'm utterly screwed.
No, I agree. This is mostly a ridiculous PC war that people need to drop. But Xanth is also right that conservatives are making what is a little issue a big issue.
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