In a conversation relating to one of my previous posts, my man Spedy mentioned the bankruptcy bill. Shouldn’t people learn to pay for their mistakes? If people can’t learn to be efficient with their money instead of spending it on XBox 360s and the like, then perhaps bankruptcy can teach them a valuable lesson.
Only it doesn’t work like that.
The three most common reasons for bankruptcy are job loss, death of a spouse (or divorce), or health issues. Get a heart attack and can’t work? Those bills still have to be paid. Your father dies while working on the job? Those bills still need to be paid. And even in the case where you have insurance, it might not cover everything…and what it does cover it might cover late. Our children got into a car accident over two months ago, and we’re just getting the checks this week.
This is one of those issues where the politics are fuzzy in some ways. Because there is the politics of the legislation itself, but there are also the politics of victim assessment. How do we think about people who have gone bankrupt? Are they worthy victims that we should aid, or are they unworthy victims that should be punished, or perhaps given tough love? Those thoughts are the product of politics as well.
Bush state of the union address did not mention Katrina or its recovery plan,who are the lobbyist for the consumer?
I suspect there’s good data for this out there somewhere, but I think one big difference in likelihood of things like going bankrupt, being homeless, or not getting needed medical care is whether you have a family that can act as a safety net. I’ve been out of work, and it was depressing and scary. But the worst plausible outcome wasn’t “move the family into a homeless shelter” or “declare bankruptcy while working three jobs to try to feed everyone,” it was “move the family into my mother’s or in-laws’ basement” and “swallow my pride and mooch off my parents for awhile.”
It’s easy to miss this difference in official statistics and comparisons of people on paper.
Now, that said, the people I know who’ve gone bankrupt had both bad situations and bad planning/choices. You’d like to encourage better choices without permanently screwing over anyone who fails to make them, or who just gets overwhelmed by bad circumstances.
You’re likely right. I know that I would have been staring bankruptcy in the face if it wasn’t for my network. But my central contention wasn’t that bankruptcy was an equal opportunity ailment, but rather than those who had to declare bankruptcy (largely working class folks or perhaps first gen middle class folks) don’t do so because of consumption.
I’m not sure that’s really true. If I’d gone bankrupt when I was out of work, the proximate cause would have been the layoff, but the long-term cause would have included some really dumb financial decisions, like having credit card debt and not saving much money back when we had more than enough to spend. This seems true for the two people I know who’ve gone bankrupt, too. I don’t know how representative this sample is, though. And it’s probably always possible to do some retrospective judging of bad decisions. (“See, Frank, you wouldn’t have had that heart attack if you’d taken up the Ornish diet and marathon running thirty years ago, so it’s all your fault.”)
having credit card debt is the norm, as is not saving enough.