Back in 2005, a then-little-known Harvard professor and bankruptcy law expert named Elizabeth Warren was feverishly doing all the media she could, telling everyone who would listen (and not many people were) that the "Bankruptcy Abuse Prevention and Consumer Protection Act" being considered in Congress would be a disaster for middle- and working-class Americans. The bill made it harder to file for bankruptcy, on the premise that banks and credit card companies were being massively scammed by profligate Americans who overspent their means and then declared bankruptcy to escape their ill-accrued debts.

I distinctly remember the distressed tone of Warren's voice; the bill was headed inexorably toward passage, and she had years of data and research demonstrating that its premise was false. In fact, the vast majority of bankruptcies are caused by medical catastrophe, job loss and other phenomena outside the control of those who file for it...and the bill made it harder for those people to escape crushing debt as well, not just the handful of scofflaws.

But Warren (who fortunately for all of us now chairs the Congressional oversight panel for the financial bailout fund, or TARP) and her evidence were up against one of the most surefire political platforms we have in this country: keeping rewards out of the hands of the undeserving. Wrote Warren after the bill was passed:

Senator Orrin Hatch (R-UT) has said that millions of Americans are bankrupt or near-bankrupt because "they run up huge bills and then expect society to pay for them." He is joined by the federal judge Edith Jones--long rumored to be a potential Bush appointee to the Supreme Court--who has written (with the law professor Todd J. Zywicki) that "bankruptcy is increasingly seen as a big 'game,' with the losers being those who live within their means, while the bankrupts pursue more interesting and carefree lives."

This notion - that most people in financial trouble have brought it on themselves - is resurfacing to some extent in the current discussion over the Obama administration's foreclosure relief and prevention plan. The public radio program Marketplace last week was among many outlets to note the outburst from CNBC's Rick Santelli while reporting from the Chicago Board of Trade. After complaining that Obama's plan rewards people who took out mortgages they knew they couldn't afford, Santelli shouted to the traders:

How many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills? Raise their hand!

A big chorus of "No!" was the reply.

 
Marketplace also quoted a Chicago homeowner named Mare Runge, who can't sell or refinance her home in the current climate and isn't eligible for government help:

Those of us who did buy within our budget and bought something we could afford, we're the ones who are getting screwed now.

"Screwed" strikes me as a bit of a stretch. I mean, if I was always prudent with my food budget, and now because of the sinking economy I can't eat all the kinds of food I want, I hardly think the government is "screwing" me by giving food stamps to people with no food, regardless of why they're hungry. But I digress.

Many of us, perhaps especially in this country, seem hard-wired to hate the idea of society helping those who don't "deserve" it. Ronald Reagan's welfare queen still looms large in our national consciousness. And behavioral economics experiments bear this out - the New Yorker's finance columnist James Surowiecki describes the principle of "strong reciprocity":

Apparently, people would rather throw away money than let someone else walk away with too much. ... Essentially, people are willing to pay to punish those they think are free-riding or acting unfairly, even when doing so brings them no material benefits.

Even though it has been noted time and again that foreclosures will affect everyone in their neighborhood and, by extension, everyone in the nation (President Obama has repeatedly invoked the analogy of the fire at your neighbor's house - you help put it out even if they started it by smoking in bed or being careless with the stove, because the fire could spread), many are made profoundly uncomfortable by the idea that the government may help people who caused their own misfortune.

Indeed, some people clearly feel so strongly about this that, whether it be welfare under Reagan or foreclosure help under Obama, they appear ready to deny help to everyone, rather than risk that anyone might exploit the system or be unfairly rewarded. They don't articulate it this way, because it sounds heartless, but that's the only airtight way to prevent all unfair help. It's like refusing to grant any sick days to employees, because some of them might call in sick when in fact they're at the beach. One of the philosophical differences in approaching the needy - a difference that doesn't always fall neatly along party lines, as evidenced by the overwhelmingly bipartisan approval of the bankruptcy bill - is between "Better that some people who genuinely need help are denied in order to be sure the unworthy aren't rewarded" versus "Better that some unworthy people are rewarded so that all the genuinely needy have easy access to aid."

Marketplace followed up the segment above with a refreshing conversation with Randy Cohen, author of the New York Times Magazine's Ethicist column, who had the following to say about the outrage at perceived unfairness in government help:

It's an understandable feeling, but it's a poor guide to public policy. Once you start conjuring up this Victorian notion of the undeserving poor. Look, we help people who make mistakes all the time. When someone goes to the emergency room, the doctors don't question their moral worth, they make a medical decision. We send the fire department to someone's house without asking why did their house catch fire? What it is to live in a community is to shoulder the burden of responding to the needs of those around you, without making moral judgments.

One of the glaring contradictions of the conservative political and moral environment that's held sway in this country over the last three decades or so is that for all the talk on the right about the importance of "community" (especially "small towns") to the heart of America, the "culture of personal responsibility" or "ownership society" pushed by the Republican Party is at odds with the idea of community. Just look at the language from Hatch and Jones and Santelli and Runge: is there any question that the insistence that each of us alone is responsible for our own successes and failures in fact breeds suspicion, mistrust and bitterness amongst neighbors? As Randy Cohen articulates, you can't have a strong community if each person disavows any debt to his neighbors for his success and any obligation to them in their failures.

And community is hard work - it requires sacrifice and, as Cohen puts it, the will to push aside our lesser selves:

If I've played by the rules, if I've led a frugal life, it's hard not to resent the people who have [not] done so and are now people helped, at my expense, in part. We should recognize that those feelings are also not that which is best about us. We should look to the better angels of our nature.

Who better to get us to do that than Mr. Better Angels himself, President Obama? His "house fire" analogy for the foreclosure crisis is a good start - it gets us to consider the well-being of ourselves as a larger community.

But to circle back in conclusion to Elizabeth Warren and her data, the truth is that while over-consumption - i.e., living beyond one's means - is an issue, it is hardly the root of our woes:

The over-consumption story dominates every discussion of the financial condition of America's families, but when all the changes in family spending over the past generation are added up, a very different picture emerges. Families are spending less on luxuries and more on the basics of being middle-class. Even with two people in the work force, today's families trail those of a generation ago in the struggle to make ends meet--to pay for their homes, health insurance, transportation, and child care.

But the new family budget is notable for another reason: it is far more deeply leveraged. A generation ago, the one-income family committed about 54 percent of its pay to the basics--housing, health insurance, transportation, and taxes. That is, the one-income family spent about half its income to make the "nut"--the basic expenses that must be paid even if someone gets sick or loses a job. Today, these basic expenses, including child care so that both parents can work, consume 75 percent of the family's combined income. With 75 percent of income earmarked for fixed expenses, today's family has no margin for error. There is no way to cut back if one person's working hours are cut or if the other gets laid off. There is no room in the budget if someone needs to take a few months off to care for Grandma, or if someone hurts his back and can't work. The modern American family is walking on a high wire without a net; they pray there won't be any wind.

And Warren has a fascinating suggestion for one reason the over-consumption myth persists:

Politics and ideology help to sell the over-consumption myth, but perhaps it also survives because it is comforting. The families who fall into financial ruin are ordinary. Their circumstances are ordinary: job loss, medical problems, and family breakups are cited in nearly 90 percent of bankruptcies. Perhaps the over-consumption myth is a prayer. It nourishes the idea that families who have lost their financial footing are different from us. If we can believe that those in serious trouble are morally suspect, it is easier to glance away from the dangers of everyday life. Those of us who clip grocery coupons, who would never buy $200 sneakers, and who always buy in bulk are surely protected from the sudden jolt that sends people reeling out of the middle class. Thus we avoid that terrifying moment of connection with a person caught in a financial disaster, that frightening realization: there but for the grace of God go I.

This is the very heart of why we have communities, why we have a social safety net, why so many societies have decided to participate in a welfare state to a greater (Scandinavia) or lesser (the U.S.) extent: we accept our inherent vulnerability to the vicissitudes of life. It's counterintuitive, but the hope and the strength we need to weather America's current troubles may in fact come from embracing that vulnerability. For too many years, our nation has pursued a philosophy that we were better off not needing other nations...but we've been less noticeably adhering to a philosophy that each of us is better off when we don't need other people.

But if we want the things President Obama has promised us - peace, safety, health care, green energy - we're going to have to not just grudgingly accept that some of our hard-earned money will be going to other people and places and projects, but to celebrate and be liberated by that use of our money. Keeping every penny of our own money from those we suspect might be undeserving isn't going to save us in these tough times. But if we all put our pennies together, we can build a net to catch any and all of us - deserving or not - when we get blown off that high wire.