I think the problem with the polarization of America is just along these lines:  People take the either/or not realizing that often times both are correct.  The bankruptcy bill and other Bush policy initiatives have been terrible for the working man, but people also must take personal responsibility and stop spending beyond their means.  Personal bankruptcy following medical bills, etc. (All those things spelled out by Prof. Warren, et al on TPM) is no fault of the individual and those people should be protected.  However, bankruptcy caused by reckless spending probably should be curtailed.

One of the things that doesn't  get discussed enough is the impact of employment on spending.  Outside of certain large urban areas, one needs a car to get  to a job, and often having a car is a requirement of the job itself.  Employers may be willing to reimburse employees for mileage, but the are rarely willing to provide company cars.  Having a dependable, insured car is a necessity, not a luxury.

Many employers also require that certain dress standards be met, and that can be expensive as well.  The most egregious practice, however, is that most employers require employees to lay out their own money for company expenses, and then wait to get reimbursed, meaning workers must make constant interest-free loans to their emplyers.  This makes having at least one credit card mandatory, and if you aren't liquid enough to pay off the balance out of your own funds while you wait to get reimbursed, you accrue interest and finance charges that employers emphatically *will not* reimburse.

I have had to lay out thousands of dollars for hotel suites and meeting rooms, caterers, plane fare, car rentals, and expensive business meals for 10-16 people, and then wait 4 to 6 weeks for reimbursement, and then only IF I have documents everything property and provided original receipts.  God help you if your luggage gets lost by the airline and it held your reciepts, or your wallet or briefcase gets lost or stolen, because if your employer is like mine, it will be months before they will grudgingly accept reprinted bills or photocopies of receipts.  The first time I ever bought a discount "e-ticket" for a plane, I saved my employer hundreds of dollars on airfare, but they refused to reimbuse me because my only receipt were a printed-out e-mail and some ticket stubs.  You better believe I don't buy discounted airline tickets online any more.

I earn about 70k a year, and I try to live within my means, but unexpected expenses come up and the only way I can confidently avoid credit card finance charges is to keep several thousand dollars in a low interest checking account that I can tap to pay off my employers' expenses that I have had to front. It must be unbearable stress for people who earn less or are supporting familes. I think there should be laws against this type of exploitation  but I'm not holding my breath.

I see nothing wrong about talking about personal responsibility and policy.  Life isn't all politics; it involves making the right choices and taking some responsibility for your life.  But this doesn't absolve the society from responsibility either.  If I walk home through a dangerous neighborhood at night and get mugged, I have to take some responsibility for making a bad decision.  But that doesn't mean that the government also bears some fault for not providing better security. 

The same thing with financial issues.  Before the last Super Bowl, I read a story about a Philadelphia Eagles fan that took out a home equity loan to finance a $4000 trip to the game.  This was not a working class person, but some kind of professional so he presumably had a decent income.  Two things about that struck me, first, why is the guy taking out a loan to go to a football game?  Second, why did he need a loan to raise $4000?  Clearly, this was someone who did not save and didn't see any problem with frivolous expenditures.  (And, yes, I would dearly love to see my favorite team in the World Series or Super Bowl, but not to the point of mortgaging my house.)  It seems to me that the ethic of instant gratification has consume the country, fed partly by advertising, but even more, I think, by a sense of entitlement.

Now, this has nothing to do with policy issues that contribute to financial problems of the middle class.  It does not absolve the government from responsibility for the uninsured, etc.  But I also think this issue of entitlement has a political correlation.  (I'm making very broad generalizations obviously.) People simply are unwilling to feel any responsibility to society as a whole because they see themselves  as entitled to the "good life" regardless of the costs to society.  And that is often reflected in their politics.  (I'm not saying, by the way, that Democrats are good people that feel a sense of responsibility and Republicans are greedy bastards.  I think plenty of Democrats feel a sense of entitlement and believe that government should protect them against their own stupid decisions.)

Elizabeth talked about the sense among evangelicals that anything bad that happens is their own fault.  My impression is that this was a very common attitude at one time in this country; in fact, during the Depression, many people blamed themselves for their woes.  I certainly don't advocate the extreme version that says society has no responsibility for problems, but it seems to me that a little more of this ethic would be salutary today--at least compared to the idea that NOTHING that happens is my fault.

What about the small policy choices of our institutions?  For example, a graduate student--or worse a professional student with no income --at Harvard who gets sick can still face significant out-of-pocket expenses if they get sick.  Couple that with high rents, and there's barely money for food.
If someone needed hospitalization or long-term physical therapy, they could be up a creek, and unable to fight for better policy, because they're so worried about their own problems.
Professor Warren, what are you doing to make Harvard's student health plan more generous?  

Now that I got your attention with that title, it actually may be something to consider.  Christians who actually believe the bible, read it regularly, and live it, understand what it means to be a good steward (trustworthy with money).  However, there are probably few of them.  I know because I only recently went to the bible for guidance on money.  What I found was astounding!  There are more verses in the bible that deal with money than any other subject except "love."  The bible has a lot to say about "personal responsibility" in terms of wealth.

We must pay our debts (better yet avoid them in the first place), and we must keep our promises.  We shouldn't make promises we can't keep.  However, the complexity of our laws has come to the point where we all make oaths we can't keep.  We sign credit card agreements we haven't even seen yet.  I am guilty of this myself.  We think the disclosures are the agreement, NOT.  What is worse, they are so carefully crafted that it would take an attorney to unravel them to make it clear what you have agreed to.  In fact, many financial services agreements are like this.  We can't vote with our feet because all financial institutions have these complex agreements.  We are forced to decide whether to waive our constitutional rights, or open a bank account, savings account, or take out a loan.  So where does personal responsibility stop, and public responsibility start?

What has happened is that we Americans have been asleep, and allowed our system of government to be corrupted from its original intent.  Now we are subject to a corrupt system of leadership.  Our constitution has been changed, and is being changed everyday with case law and new legislation like bill HR 1528.  This bill requires citizens to become spies on our neighbors under penalty of jail time if we fail to report a crime and give full assistance to law enforcement - which sounds like what was done under Stalin.  What about the implications of Real ID and our constitutional right to privacy?  We as citizens have to take the personal responsibility to take action, as a group, or it will continue.  Yet, at the same time, I realize that we may be seeing the fulfillment of biblical prophecy.  This may be what is part of God's plan that ultimately leads to a "One World Government" as prophesied in Daniel 7:23,24 and Ezekiel 38:1-39:16. (I'm not trying to be alarmist, just seeking truth.)

So who's fault is it?  Everyone's.  We all have a sin nature, and are ultimately self destructive in that sense.  The only thing we can do as individuals is do what we think is right, and follow God.  If we do that, the outcome will ultimately be that good wins.

I blog about this on www.thetruthaboutcredit.com

This issue is actually oddly bipartisan - the "it's my own fault if I spend beyond my means" is mirrored on the left by "you shouldn't want so much stuff anyway". Both are unpleasantly preachy - who the hell are either of those people to tell me what's my fault or what I should want?

However, I strongly agree that we need a national narrative that encourages people to "forward" save - that is, accumulate substantial amounts of money before making expensive acquisitions like cars and real estate, rather than buying them and building the assets by repaying the debt. At the root of this is a misplaced application of the business tactic of leveraging assets now for repayment later.  Ask someone if they saved up enough to make a 25% down payment on their house, or even to buy it outright, and most people really consider that a waste of all the "opportunities" afforded by carrying debt.  Same goes, to a lesser extent for cars, remodeled kitchens.  The big differences with businesses are a) if a business runs out of money it disappears, making its present uses for money much more pressing than future uses, and b) by dint of incorporation, businesses' obligations largely disappear when they do, c) business typically employ (numerous) people specifically to manage their finances and their debt.

Another part of this mentality shift has been the explosion of financial tools available to individuals (most formerly available only to businesses, and big ones at that) to manage their money.  Some of this expanded access is for better and some for worse, but it frequently comes accompanied by the mistaken expectation that the tools themselves will allow small investors or debtors to realize the kinds of returns that big investors do.  Saying outright that poor and middle class people simply are not going to get the kinds of returns on their money that rich people do seems to have been become anathema to people of all political stripes (shades of the entitlement mentality that others have talked about), but it is no less true.

 I think we need to re-enshrine the idea of incrementally saving as common sense.  That goes hand in hand with teaching children the consequences of spending all of ones' money, and with making sure that people are protected from financially devasting events like medical emergencies.  Dems can make this approach a winner by bringing the debate back to opportunity.  Modest, real-life sized opportunities provide the means for modest, real-life incremental saving and modest, real-life improvements in standard of living.  But somebody has to be willing to say it.

I agree with Cayce that we are inundated with advertising that makes it hard to resist buying.  But I think the fundamental problem goes much deeper.  Our much vaunted capitalist system depends on constant growth to maintain itself.  The first thing W told us to do after 9/11 was to go out and spend money to keep the economy going.  Hey, buying things is a patriotic duty!  The more we buy, the bigger the economy gets, and the more we all win!  (Winning being clearly defined in our culture as having the most and best stuff.)

The right wing has so thoroughly trashed the idea of the public sphere, devaluing the possibility of spending on public goods-- better public education, good health care for all, parks, clear air, etc.  As W says when he cuts the taxes of the rich, individuals know how to spend money better than the government.  Of course, this eliminates the possibility that the best use of our money is spending in the public realm, for the common good.

So, yes, I do think we have individual responsibility to control our spending (and I taught my kids to ridicule advertising from the time they were small, with excellent results).  But when the whole system is built on the value of individual acquisition, American consumers are getting a very mixed message indeed.

(As further evidence of the corruption of our culture by rampant materialism, I could cite the fact that we think of ourselves as "American consumers" as much or more than we think of ourselves as "American citizens".  The interchangeable use of these two terms makes me crazy.)

I am both middle class and evangelical.

The economic problem is just that - economic.

We are in a massive global economic transition, neither of our political parties have a clue, and the transition is extremely painful, especially in the old economy states.

Hard work used to almost guarantee something, but now a work ethic is almost meaningless in the face of the transition.

And I'm coming to the sad conclusion that honesty may be a hindrance in the work force these days (the higher the density of MBAs, the lower the density of ethics?). 

I love your post. We can have a discussion about personal choice and government policy.

I work in the affordable housing/homeless field and prior to that I worked on workforce development with a small amount of welfare policy mixed in.  My experiences is that personal financial choices are made due to upbringing and how an individual handles money. Every story I hear regarding a working poor individual making a poor financial decision-I want to run back to my parents and thank them for teaching me how to be fiscally responsible and oh by the way thanks for paying for college as well.  So, just as individuals need to be taught that Dorittos and a Coke does not constitute a healthy breakfast for a child--they also need to be taught how to manage finances and avoid predatory lending.

As someone whose family members are "me generation" Republicans, who see the poor as making poor decisions because they are stupid or lazy--I think we need policies that teach and help the working poor to save that are politically palatable to "me republicans " who only care about themselves and there small suburb.   And fortunately those policies are out there.  Individual development Accounts--are a match program that many states have to encourage the working poor to save and these programs teach financial management.

Also, first time home buyer programs also teach personal financial mangement.  These programs need to be expanded to Community College campuses and workforce development centers. 

There is an asset gap in America that is much worse than the wage gap.  People need to save and own homes and make proper financial decisions, but how can the do that if no one tells them how or that it is even neccessary?  We need creative policies to expand the middle class, because right now the middle class is taking a beating.

the last people to take responsibility for their actions.  In fact, I don't know any who don't think that everything that happens is "God's will." 

I don't really see much of an association between these two.

Personal choice, as a statement, specifies a broad range of possibilities and as a general element of human behavior may mean many things to many people.

Financial choices of individuals encompass many variables. The variable of most consequence is a base level of knowledge or information and the expertise to utilize it. The fact is most people are lost when it comes to finance in general and personal financial management as a particular. Frankly, the financial products available to consumers are so diverse and so complex in their fine print, it is virtually impossible for the average citizen to identify the pros and cons of all of them.

Take for instance three competing credit card offerings from three different providers. It would take hours to sift through the fine print of each one and precisely identify the advantages and financial exposure of each and assign a 'score' to each one. Not to mention that with every instance of an offering you may not even receive all the fine print contractual details with the offering. In some instances those details are provided after the fact. This all assumes the individual can read and fully understand all the language in the proposal, understanding each and every line and what it means in the framework of the aggregate agreement. And what of catchall statements that permit the provider to change features or terms at any time during the course of the agreement?

In a broader context the notion of personal choice in financial matters may be a misnomer of monumental proportion. The choice of provider is the extent of the choice afforded. Individuals are in no position to negotiate terms and financial institutions aren't about to open that can of worms. It is mostly a take it or leave it proposition.

As far as governmental policy is concerned, at present there is no policy. Issuers of credit have lobbied for removal of many restrictions over the years and what we have now with outrageous charges for late fees etc is the result. Basically, the industry has been deregulated. They charge whatever they want because the laws have been changed in their favor. And in exchange for the lax regulation of the industry our elected officials have gotten millions in campaign contributions in return. It is simple and undeniable corruption typical of the Washington D.C. of our time. The suport of major financial institutions in political campaigns always has a price and every elected official that denies that statement is a liar. The power of business has completely displaced the electorate in the day-to-day legislative process no matter what promises may have been made on the campaign trail.

thepeoplechoose

Once long ago, when I purchased a house and applied for a mortgage, certain ratios applied.  No more than 36% of my household income could be applied towards debt such as a house mortgage, car loans, and credit card debt.  Only 28% of my household income could be used for mortgage repayment, real-estate taxes, insurance, and other housing costs.   

The last time I applied for a mortgage on a new house, those limits didn't seem to apply anymore.  When I asked how large a mortgage I could afford, the lenders would ask me "How big a one do you want?"

Yes, I have more economic freedom to borrow money.  I also have more economic freedom to be overextended financially.  Personally, I've been prudent, living within my means but the siren call to spend, spend, spend gets ever louder.   I would welcome a return to a world where there were clear reasonable limits on how much I could borrow.

Whatever happened to saving money to buy a house? 

The juxtaposition here is if you spend freely (and beyond your means), you've  bought the message of the commercial culture, back by W's exhortation to spend and fuel the economy;  only those who can reject the siren song of the consumer society or are rich enough to both save and spend are "good citizens".  Crazy making...