The Overconsumption Myth
After watching the news and reading various newspapers these past few days, one gets the strong impression that the economy is very strong, and/or a lot of dumb, greedy, materialistic people are running their credit card debt up very high. One powerful antidote to all this is an article discussing consumer bankruptcies in the Boston Review: "What's Hurting the Middle Class?" by Elizabeth Warren and Amanda Warren Tyagi. Below is a short excerpt that is part of the conclusion, but you should read the whole thing - it is well written and well supported.
.... "Why does the over-consumption myth persist? Why does a story of misbehavior and irresponsibility win out over a story of hard-working people who get caught up in job losses, medical debts, and family breakups? Why is there no acknowledgement that financial misfortune is often a matter of bad luck, and that the long lines at the bankruptcy courts and the high rates of credit-card default have little to do with irresponsible spending?
"One explanation is political. High-interest credit-card issuers and sub-prime-mortgage lenders operate only because a careful combination of deregulation and protective regulation permits creditors to charge fees and interest rates that would have landed them in jail less than 25 years ago. If millions of Americans believed that families were losing their homes because of deceptive marketing and oppressive contract terms, there would be a public outcry to change the regulations that favor banks over consumers. But as long as Americans believe that the only people in financial trouble are the spendthrifts, there is no reason to restrict the lenders. Everyone is getting just what he deserves.
"Here is how the political maneuvering over the bankruptcy laws has unfolded. For many families with extremely high unpaid debts, their only remedy is personal bankruptcy. When families declare bankruptcy, federal law requires that their credit-card issuers and payday lenders cease collection, and the debts will most likely be discharged. The credit industry drafted a long series of amendments to the bankruptcy laws, amendments that make it more expensive to file, exclude more families from protections, and scale back relief.
"The bill received widespread support in Congress, carefully couched in tones of moral condemnation. Senator Hatch, for example, insisted that individuals must “take personal responsibility for their debts.” ....