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David Brooks: The Great Seduction (re: Debt)
Brooks' column today happens to coincide with a HuffPo highlighted piece by the AP called "How Debt Stress Makes You Sick." Overall, Brooks gets most of it right. Debt is destroying our social fabric. He's no Elizabeth Warren, so he doesn't understand the true depth of the problem, and his constant need to suck-up to conservative ideologists gets him into trouble, but at least he's admitting there's a massive, massive problem here. (I love when his Chicago Sociology background wins out in his columns...)
Here are some questions for people that care about fixing this "Debt Culture":
1. Does household debt decrease active citizenship? (I tend to think people are less likely to get involved or to protest unfair corporate practices or gov't policies if they're under a mountain of debt and struggling to keep their families intact.)
2. Do Credit Card companies really produce a "good" for society? I don't think so. Sure, they "lubricate" the wheels of transactions and help consolidate wealth at the top quicker, but in the end, there's nothing to put a "Made in America" tag onto. Brooks says Bill Gates made a "socially useful" product, but not hedge fund managers. I agree.
3. How could a public relations campaign be set up to deglamorize debt, as Brooks suggests? Who would pay for it? Can it start soon, or would it have to wait for a settlement against VISA?
4. "Usury laws could be enforced and strengthened", Brooks says. I don't know of any usury laws anymore. Do you? I thought they were destroyed in the late 70's.
5. Ever notice that wealth began to consolidate in 1980 and the gap between rich and poor became unbridgeable since then? Sure, a lot of it has to do with the Reagan Revolution and movement conservatism since then, but I gotta think a lot of it coincides with the creation of Credit Cards in the mid to late-70's.
6. The best prescription I've seen for this "Debt Culture" is the author/Radio/TV host Dave Ramsey. I'm also encouraged by the new book "The Great Risk Shift" which recommends Americans "Get Mad, Get Wise, and Get Even."
I like the <b>Get Even</b> part best. Hopefully someone will find the smoking gun memo out there by VISA / Mastercard / CapitalOne / Providian, et al. which proves they actively plan to trap hardworking families into debt for life.
Comments (13)
I highly recommend Kevin Phillips's book: BAD MONEY.
Private debt in this country is about to kill us... including the ones responsible enough to live within our means.
Thanks for bringing up an important -- and uncomfortable topic.
June 10, 2008 3:53 AM | Reply | Permalink
clearthinker: Will definitely check out "Bad Money" - Thanks! http://search.barnesandnoble.com/Bad-Money/Kevin-Phillips/e/9780670019076/?itm=1
Also, "Uncomfortable" is a keyword re: personal finance. There's a psychology behind how we act with money. We get very defensive and stand-offish over it. Therefore, the "it's an individual responsibility" line-of-defense for the industry is so strong because of it.
That's why the "Get Mad and Get Even" battle cry is so good. You can take individual responsibility to help everyone in your family cut their credit cards and kill other life-sucking debt.
June 10, 2008 4:04 AM | Reply | Permalink
"There's a lot of shame and a lot of guilt attached to the issue of money mismanagement... Everybody feels like the other couple has a perfect marriage and a perfect everything... Turns out, I've met Ken and Barbie and they're broke." ---Dave Ramsey
June 10, 2008 4:08 AM | Reply | Permalink
"Including the ones responsible enough to live within our means."
How so? Just curious.
June 10, 2008 10:34 AM | Reply | Permalink
By spending less than you take in.
This means not getting cable TV, not spending on electronic gadgets, not getting into a mortgage you can't afford, not spending lavishly on presents at holidays, etc.
June 10, 2008 10:48 AM | Reply | Permalink
PS Credit cards have been around for a while (first ones issued in the 60s). They used to be hard to get -- that was before the banking rules changed and you could practice usury legally.
One of the inconvenient truths of this story is that the Clintons contributed to it as well. The Clintons are tied to the Financial Sector of the economy just as the Bushes are tied to the Oil Sector.
June 10, 2008 3:55 AM | Reply | Permalink
Professor Warren tells the story in MaxedOut (The Book) of how Hillary originally killed the Bankruptcy "Reform" Act when Bill vetoed it. Then, when running for President, she got close with CC CO's and the finance industry and ended up supporting it and allowing Bush to sign it.
June 10, 2008 4:07 AM | Reply | Permalink
Classic. I will keep that specific story in my arsenal.
June 10, 2008 10:49 AM | Reply | Permalink
clearthinker - My retelling doesn't even do it justice (I wish I could find a good description online, but can't). Basically, Hillary spoke to Prof. Warren at a conference. Hillary was convinced by Warren that the "reform" act was bad for women and children, and went back to DC to "inform" Bill that he wasn't signing it. I guess Bill was perplexed, but lost the argument. It was really touching and was a great weilding of power for the forces of good (until she flip-flopped come election time, of course...).
June 10, 2008 3:59 PM | Reply | Permalink
Private debt enslaves the public, so the government can do anything it wants. That's why the government promotes private debt.
June 10, 2008 10:14 AM | Reply | Permalink
Nice conspiracy theory. Wrong and not well thought out, but nice.
The government encourages spending for the same reason they encourage you to have kids: it grows the economy.
June 10, 2008 10:50 AM | Reply | Permalink
George Bailey Won't You Please Come Home
Thrift died in the '70s and for two reasons:
1. Inflation killed the thrift institutions as instruments of middle class savings. What is the point of saving if you're going to be earning negative real interest rates? Spend now before everything becomes more expensive.
2. The "Great Compression" in income levels (an anomaly?) ended. After sending the wife to work (if she's not already working) credit is the sole mechanism remaining to keep the family in the middle class.
And now Bernanke has set real interest rates below 0% and the government is sending out checks for the middle class to spend, spend, spend. And whether it's owed by the individual directly or indirectly as a taxpayer, it's still debt.
Credit? Can't live with it; can't live without it.
June 10, 2008 3:30 PM | Reply | Permalink
Subvert the current paradigm. We can live without debt. I admit, I've had Student Loans and 2 small installment loans in my life (before I got on board with Dave Ramsey), but I've never had a credit card or a car loan or lease. It's hard, and your friends may make fun of you (you should see my car [youtube.com/watch?v=OF7u_9yPPuE]), but it's a tough choice that I think makes sense.
For me, I want my leisure time back in a few years. I'll give up the appearance of being middle class so I can live with true freedom in 10 years (ie - to travel and volunteer more).
Speaking directly to your Point #1, I think you're right: "Spend now before everything becomes more expensive." But, if you don't want or "need" everything (like silly electronic gadgets and video games) then it makes sense to save for the future.
June 10, 2008 3:54 PM | Reply | Permalink
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