My husband, Bob U., wrote a series of articles, which I think are really insightful. This is Part 28, the last of 28 parts. I invite your comments.You can visit Bob at http://bobuhlar.gather.com/
A study[i] by a Harvard Law Professor Elizabeth Warren and former McKinsey consultant Amelia Warren Tyagi debunked all the Republican talking points about why bankruptcy is skyrocketing.
Warren and Tyagi say that today's families are spending more in five areas - health care, housing, transportation, childcare, and middle-class taxes.
So, what does this mean for the average family?
Because so few people paid for child care in 1973, we need to extract child care costs to compare an average family from 1973 to 2003. Let's take a look at the basic four - housing, transportation, health insurance and taxes. The average family in 1973 spent 54 percent of its income on the basics. Now it spends 75 percent.[ii]
When you add in the child care costs, you see why so many families are dancing on the edge of a financial crevasse.
Today's families (two-income) have 75 percent more income than the families (one-income) of one generation ago. But after making payments on their mortgage(s), health insurance, transportation, child-care and education, today's families have less disposable income.
For 24 million families, baby-boomers have the added "care cost" of at least one sick parent who has moved in with them forcing them to care for their children and parents at the same time.[iii]
We haven't even addressed skyrocketing college costs at our public universities or retirement savings!
In 1975 a federal government Pell Grant covered 84 percent of your college tuition at your closest state university. After 30 years of Reaganomics, a 2006 Pell Grant covered 36 percent.[iv]
In 2003, 48 percent of all American families have NO money saved for retirement, 79 percent of families have NO money invested in the stock market, and 82 percent have no mutual funds of any type.[v]
And consider that the 1980s deregulation of credit card companies, mortgage bankers, and other financial services allow financiers to charge much higher interest rates. People who miss a mortgage payment found themselves being contacted by offers to refinance their homes (at a much higher interest rate).
Warren and Tyagi found that 85 percent of bankruptcies were due to loss of a parent (or divorce), medical bills, and/or loss of one parent's income.
Oddly, they found that the highest risk factor for bankruptcy is being a middle-class couple that decides to have children. As we've already seen in the "Living Wage" section (part 19), families don't have the same buying power as their parents did.
One of every three U.S. families with an average annual income of at least $35,000 reports having medical bills they cannot afford to pay.
Now, factor in the loss of job security between 1973 and 2007. If one parent gets sick, disabled, or loses a job, the family is on the road to ruin.
This is why the bankruptcy law of 2005 is so disgusting. Here are some of the provisions of the bankruptcy law:[vi]
- It increases legal paperwork forcing lawyers to charge much higher fees to those seeking to file. In other words, the people who most need a bankruptcy lawyer can't afford one.
- It ties the hands of bankruptcy judges with deadlines that will force many cases to be kicked out of court unresolved.
- It forces debtors to pay creditors a higher percentage of the debt, keeping them in bankruptcy longer.
One more thing. People who file for bankruptcy are too embarrassed to admit it to loved ones or neighbors. In doing so, they surrender the political clout that could come if people realized that the problem is widespread and has touched somebody close to them.
With the harsh penalties now heaped upon individuals, Congress took no action against corporations despite the bankruptcies by Adelphia, Enron, Polaroid, United Airlines, US Airways, TWA, and Worldcom.
These bankruptcies led to the gutting of those companies retirement and health plans, setting even more individuals up for financial hardships.
As we've seen in these 28 posts, Conservative ideology led us into this mess. And when they now claim that they can lead us out of this mess, I don't believe them.
This is the last in the series of 28 posts.
To read all parts: http://bobuhlar.gather.com/ Then click on "posts" above the photo.
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[i] See www.yale.edu/law/leo/052005/papers/Warren.pdf (Also see The Two-Income Trap: Why Middle-Class Mothers and Fathers are Going Broke by the same authors).
[ii] ibid
[iii] NBC-TV Nightly News, January 24, 2006
[iv] The Al Franken radio Show, January 15, 2007
[v] See www.yale.edu/law/leo/052005/papers/Warren.pdf, page 22
[vi] Elizabeth Warren, talkingpointsmemo.com, March 6, 2005
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Comments: 14
It seems outrageous that a teacher, a middle class (well, probably lower middle class now) worker cannot afford college for her children. And PLEASE do not get me started on how many people cheat the system.
Blessed be,
Wilka
The orginal intent of banckruptcy law was to encourage people taking risks to start new businesses. IF, after an earnest effort, the business failed, the law allowed the owner to get a second chance at getting it right.
Yes, there has been class warfare for most of the last two decades but from the wealthy directed upon the middle class. They can afford to buy the weapons. i.e.:the media, the legislators, the lobbyists. Furthermore, the concept of trickle down economics does not work. Money only trickles up. The one object capable of defying gravity
Actually, it was to protect individuals who made an earnest attempt to start a business and failed. Why throw them into debters prison. Give the individual another chance to get it right and become a productive taxpayer.
Reagan started the tax cutting revolution in the 1980s. His own Vice-President, who had previously given us the term "Voodoo Economics" when running against Reagan raised taxes when he became president because he had to. Bush II went back to cutting taxes and turned a multi billion dollar surplus into a multi trillion dollar deficit. Well done.
But conservatives still want tax cuts, still believe that tax cuts will make them richer when the evidence of a generation has proven that tax cuts have helped ruin the American economy and impoverish the country.
Not sane.