TPM Cafe: Opinion

Liberals have sparked conversations about poverty for generations, often making it the centerpiece of election campaigns or of their self-identify. But economic and political realities change. America’s middle class is under assault, and the conversation must change to match the new realities. The shape of the conversation of poverty may determine whether the middle class will ally with the wealthy, putting their faith in efficient markets and going it alone, or whether they may align with the poor to support policies that make economic life more secure for both?

I just returned from a conference at the Center for Poverty, Work, and Opportunity that John Edwards heads up at the University of North Carolina. Many of the people in attendance were long-time advocates on behalf of the poor — community organizers, community legal services lawyers, outreach organizers. These were hard-working, innovative, dedicated people, and I learned far more than I taught.

Because I spoke first at the Conference and because my research is on the middle class, I started with the question of why advocates for the poor should care deeply about middle-class economic issues. Here’s my list of reasons, but this issue is important and I’d like to invite more conversation about it. So I ask TPM Café readers to take issue with me or to add more reasons that I haven’t singled out.

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The number of American troops who have had their security clearances revoked because they are too deeply in debt has increased nine-fold in the past five years. The US government, desperate for soldiers to send into fighting, has decided that mountains of plain old consumer debt present enough danger that these people cannot be sent to fight.

The military says it has two fears: indebted soldiers selling secrets to the enemy or soldiers, although loyal, who don’t have their heads in the game. Why aren’t other American employers worried about the same issue? People deep in debt may do bad things to try to save their families or they just may not be able to concentrate on their jobs if they are worried sick about foreclosures or debt collection calls.

Andy Stern and the Warren Report bloggers have been laying the foundation for a realignment of interests in which employers recognize that they need a national health care system as much as their employees do. I want to go one step further: Employers also have a very real stake in the rising level of consumer debt.

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Jacob Hacker’s data show that the typical American family today is running a risk marathon. Some may make it, but every year more families are falling as the risks catch up with them.

Jacob explains that the predicted probability of a 20 percent or greater income drop among such average families was 4 percent at the beginning of the 1970s. By the early 2000s, it had more than doubled to 10.6 percent. See the graphic in the continuation.

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Jonathan Cohn has picked up on Matthew’s story for The New Republic. He recounts the details of the kinds of choices Matthew’s mom and dad have been forced to make as they decide whether to take Matthew for a particular medical treatment. They know that his frail medical condition means that delayed treatment could be dangerous, but they also know that every trip to the doctor or emergency room counts against the rapidly-approaching lifetime cap on his medical coverage medical coverage he will need later in his young life.

Cohn uses Matthew’s story as a grim reminder that even those with insurance are not fully protected. Lifetime caps mean that babies like Matthew or anyone with a truly awful medical condition could bankrupt a family when the insurance coverage runs out. For most of us, insurance actually means limited coverage, not protection when a family needs it most.

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The Boston Globe wrote a powerful expose of the dark underbelly of debt collection, complete with dozens of slimy tricks that debt collectors used to cheat people out of their property and drive up costs for those who are already having trouble paying their bills. Judge Carol Kenner wrote a superb op-ed, suggesting how the debt collection laws should be reformed to protect ordinary folks from the worst abuses.

Friday night Congress responded, sending a bill to the president for his signature. And what does the bill do? According to a headline in an online news outlet for the debt collection industry, the new law provides for industry approved changes to the Fair Debt Collection Practices Act. The industry group is celebrating. Just in case the debt collection industry hasn’t muscled enough out of people, Congress is offering to make the laws a bit friendlier for the debt collectors.

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Matthew’s mother sent an update. Remember that Matthew is the baby born with a defective heart. His daddy is a police officer in Las Vegas, and the family has good health insurance. But Matthew has enough problems that the family is now facing the limits on health insurance coverage, and they are scared.

Matthew’s mother is fighting hard for him, but look at the choices she is forced to make. Our government should be ashamed.

Here’s her email:

Hello Elizabeth …

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The Talent-Nelson bill to limit interest rates on lending to soldiers to 36% just passed the House-Senate Conference. When the House and Senate come back to vote on the Defense Authorization bill, the cap will be in there and there can be no more amendments. The only choices are to vote yes or no.

Mark this day on your calendar: We’ve been talking about it here on Warren Reports for months. Congress finally said, at least in this limited circumstance, “Enough is enough.” Lenders cannot prey on military families with tricky credit instruments that can result in interest rates in the 400% range. Credit issuers everywhere from payday lenders to credit card companies to home mortgage issuers felt a slight disturbance in the force.

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The Talent-Nelson Amendment to the Defense Authorization Bill is in play this week, and the dealing is going thick and fast. The amendment says that lenders cannot charge military families more than 36% interest. If it passes, this would be the first effective usury rate in the US since 1980. The amendment got a big boost in early August when the Department of Defense issued a powerful report calling on Congress to protect military families, citing the need to maintain troop readiness.

Talent, in a close race back in Missouri, doesn’t want to back down. He wants to look like a guy who stands up for the military, and the GOP wants him to look good. So the creditors are starting to get scared that the amendment will stick and that means the banks want to cut a deal. They are willing to toss over their unwaivering objections to any usury laws, evidently admitting some lenders engage in abusive practices. But they claim that those abusive lenders are the OTHER guys, not the banks, so they want a special exception for the banks even if they charge more than 36% interest.

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When Congress adopted the bankruptcy amendments in 2005, it was with the explicit purpose of making it harder to file for bankruptcy. But the supporters of the bill claimed over and over that honest, but unfortunate people would still have plenty of access to the bankruptcy courts. They were going after only those who could repay their debts — or so they said.

No one is surprised to discover that bankruptcy filings are down. Filing fees have increased, attorneys fees have increased, and people might reasonably be worried about the new counseling and disclosure rules. But the courts are still open, and most people have low enough incomes that many of the changes won’t apply to them. Jim Caher, an Oregon lawyer and the author of a really good book full of advice about bankruptcy (Bankruptcy for Dummies), gives another reason why filings are down: the debt collectors are lying to people. Here’s his story:

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Why do the rich go broke? The question is titillating a little like peeking in the bathrooms of the Rich and Famous. And for those purposes, Timothy O’Brien’s piece in the NYT this morning is perfectly suited. Lots of juicy details about how the once-rich ran through their money.

But there is an interesting tangle in the analysis. While the dominant chord of the piece is about the man-child and instant gratification (giggle, giggle), business reversals also explain why some of the high and mighty suddenly crash back to earth.

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Want to contribute to TPM Cafe? Email ideas for your pieces to us at talk@talkingpointsmemo.com

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