Getting Americans mired in debt: Capitalist con game
By Dave Ransom
Americans are getting blamed for going into debt by the same people that are profiting by putting them there.
The country's up to its eyeballs in debt, and guess who's getting blamed? Are you looking in the mirror? Common, everyday America is being targeted by the media for supposedly not saving enough and, instead, going on a holiday "spending spree" in the malls of Christmas past.
Truth is: plant closings and the big downdraft on wages have left a lot of folks living off their credit cards and taking every last penny out of their house in home-equity loans. And that has become big business for the banks.
If the above doesn't describe you, maybe a credit card is just a convenience, and your mortgage payment has dropped along with the mortgage rates. But many of even the thriftiest families fear they are just a crisis away -- a major illness, a lost job, a divorce -- from the slippery slope that leads to bankruptcy.
Bankruptcy expert Elizabeth Warren calls it the "debt trap." In her book, "The Two-Income Trap: Why Middle-Class Parents Are Going Broke," Warren debunks the myths being used to blame the victims.
"The Over-Consumption Myth" -- Rather than shopping till they drop, today's average family spends 21 percent less than in the 1970s -- even though both husband and wife must work to do so.
"The Myth of the Immoral Debtor" -- Some 90 percent of those going into bankruptcy in recent years have been solid, middle-class citizens. Rather than "taking advantage" of the bankruptcy laws, they are 250 percent more likely to get laid off today than in the '70s and 49 percent more likely to be without health insurance. They are forced into bankruptcy.
So why are people going deeper and deeper into debt? "They are trying to buy their way out" of the debt trap, says Warren. The financial industry is happy to lead them on. And Congress, too, has been happy to oblige, pulling a good part of the bankruptcy rug out from under those who need it most.
Warren once addressed senior executives at Citibank, the country's largest credit-card issuer, suggesting that they simply stop lending to people in financial trouble. When she finished, the big boss rose. "We appreciate your presentation," he said. "We really do. But we have no interest in cutting back on our lending to these people. They are the ones who provide most of our profits."
Does the image of a drug dealer come to mind? Under the new bankruptcy law, people like you may be forced to pay off all debt, pyramiding late-fee after late-fee, until you die. It's a major transfer of wealth from everyday Americans to the corporate capitalists, says Warren.
But why would capitalist America do that? Simply out of greed? True, the iron law of capitalism is to maximize profits. Eat or be eaten. But that's not the whole answer. Today's technology replaces labor with computer-driven machines. Yet labor alone creates profit. So it's harder and harder for capitalists to make a profit by actually producing anything.
Instead, economists today talk about "excess liquidity sloshing around the world" (that's money) in search of something, anything to invest in. So, is it a surprise that corporate America is sucking every last penny out of our pockets, dragging the American Dream in the dust?
As a solution, Warren suggests re-instating the bankruptcy laws, re-instating limits on the rates that banks can charge for loans and credit cards, re-instating downpayment requirements for mortgages, so that housing prices will drop, monthly mortgage payments with them.
All good ideas, if they were feasible. But in today's changed world, they are not. We can't go back. Instead, everyday, working-class America must learn that its terrible debt is not a family-by-family failing but the failure of the capitalist system.
And, as victims of this failure, the responsible thing to do, indeed the necessary thing to do, is to abolish the system and replace it with something that works.
