I think we as a nation should consider this an issue of national security. This type of financial instability in such a large percentage of the population could lead to making short-sighted or bad decisions in tough times, increased violence, increased rates of incarceration (both of those increasing the cost of government for all), among many other things. The reasons for it are multi-faceted I'm sure. I hope voters and politicians recognize statistics like this as an opportunity for reflection and change.
Your post is optimistic to the point I choked on my coffee.
Our economy is predicated on consumer spending; we have a whole set of industries built on the backs of poor financial decision making and being near-broke (payday loans, credit cards, overdraft charge reordering, debt collectors, etc.) all of which pull power away from desperate people and give it to others (now your landlord/phone company/ISP/etc have legal grounds to kick you out, terminate your service, etc.) Never mind the difficulty of making use of a court system stacked against the poor...
> I hope voters and politicians recognize...
Actually, it appears that voters and politicians have zero interest in improving this situation, seeing as the current administration is making every effort to demoralize and defang the CFPB[0], which was literally created to do some of the things you're interested in.
I especially like how Mulvaney is moving everything into "financial education", as if an agency with 500M budget is going to make a dent against the billions spent on marketing related to financial "services".
We should but you know personal responsibility and all that jazz. The wealthy only care when the pitchforks come out. The biggest achievement of the wealthy has been to convince the middle class to eat itself.
Overall, which one of the following best describes how well you are managing financially these days?
14 (0.1%): Refused
893 (7.2%): Finding it difficult to get by
2,395 (19.2%): Just getting by
4,930 (39.6%): Doing okay
4,215 (33.9%): Living comfortably
There's just so many ways Americans are getting wrecked. College debt, housing crisis, terrible public transit, ruinous health care prices, and looming pension crisis that the government will have to print its way out of.
Wealthy investors are happy to tell founders that a smaller percentage of a bigger pie is a better deal, but then seem not so happy to make their percentage smaller in order to increase the size of the pie for society at large.
Investors have to fight hard and endure a long time for every % of return. Society on the other hand will never be satisfied with their piece, they will always need more, and sooner not later.
There's a lot of negativity in this thread and the title is very sensational. The point that should be highlighted in the article - "The bright side? That's an improvement from half of adults being unable to cover such an expense in 2013. The number has been ticking down each year since."
The negativity in this thread is justified, and the headline is correct to highlight the darkly absurd desperation of the average citizen's situation. To attempt to look on the bright side here would be analogous to a commenter on a news article in 1918 saying "well, 50,000 people will die of Spanish flu this month, but let's look on the bright side: 75,000 people died last month!"
Furthermore, even the statistic that 40% of people can't cover a $400 expense is lowballing the severity of the situation, because who says that $400 is anywhere near the average financial cost of an unexpected emergency? What percentage of Americans can't cover a $500 expense (we know it's more than 40%)? What about a $1,000 emergency expense (which in my estimation is closer to the median deductible for a health insurance policy (assuming that one has health insurance in the first place))?
I wonder if that's tracked to inflation. A $400 medical expense from 2013 is likely closer to $500 today, which might account for the difference from 50% to 40%.
I had a coach that when I'd ask about how to get out of tricky situations he'd often respond with something along the lines of "Bro, you f'd up a long time ago"...
I don't think 40% is some magic number to begin hysteria. Neither is $400. Selling something to cover your expenses might be a blessing in disguise if the thing you sell is a liability in the first place (ex: a car you cant really afford).
My observation of America is that for a whole lot of people we F'd up a long time ago... These people need financial education, they need to be taught to not buy things they dont need, they need to be taught delayed gratification and to not be consumerists.
"Selling something to cover your expenses might be a blessing in disguise if the thing you sell is a liability in the first place (ex: a car you cant really afford)."
In that specific case, no. In the US today, a car is damn near mandatory. Otherwise you'll be spending hours commuting on a bus, and that's if you're lucky enough to be somewhere with decent bus service. And that's assuming you have the type of job schedule where you can have that kind of time.
Many times, not being able to keep your car, even if it's expensive in maintenance costs, means you could lose your job.
"They" need to be taught to demand a degree of rights, protections and subsidies in line with the rights, protections and subsidies afforded the already-wealthy.
I bet a lot of the people with little savings would argue that they didn't F up, they just were born into a poor family.
If you are poor, it's much harder to take risks and try to get ahead. You are always on the hook for your rent and can't just go ask your parent for a 0% interest loan to help you out for a couple months.
Yes, a lot of Americans have bad financial habits and buy unnecessary things. But some of these people with little savings are doing everything they can to stay afloat and just don't have the luxury of doing an 8 week data science boot camp to get a better job (or they would miss rent and get evicted).
Unfortunately if we did this we would be in a much deeper hole than the great depression. The economy only works because people have been trained for 80 years to buy things they don't need, throw them out when they shouldn't and replace them with pretty much exactly the same thing they got rid of.
This might be a bad state of affairs to be in, but before we go trying to change people we need to change the system. Else we will be looking at Hitler as a moderate who had some reasonable national policies.
Wow, everything in this thread is "those evil rich people, fleecing the poor." Quite aside from the fact that the target audience of this site can expect to make around 2X the median income of the US--meaning that we are those evil rich people--surely the problem isn't this one-sided.
The poverty rate in the US is about 13% [1]; we would expect those people to not have any savings. That leaves about 33% unaccounted for. It looks like 42% of workers in the US make less than $15/hr [2], which does fit the figure fairly close. However, some of those are teenagers, so they don't count as they aren't living on their own.
I'd like to see some analysis of spending. How many people don't have any savings because they aren't spending wisely. This girl [3] discovered that she could actually save for a deposit for a house in London, despite making under £40k (about $53k). That's less than the median US income and presumably doesn't go all that for in London. She was simply spending a lot of money on food, drinks, and specialty coffee.
Now back to the headline: $400 in available readies? You do have to start measuring somewhere when looking into poverty but it is harder than it seems on the face of it. Many people will drain their balance regardless to zero or below, (nearly) no matter how well off. I recall being a youngish lad with an income of £30 per hour - let's realistically say ~£50,000 per annum (gross, pre IR45). At that point in my life, I too would often qualify for "can't find £350" right now. My real point is that you have to be really careful how you measure this sort of thing, ie trying to quantify bits of people's lives with simple pithy statements.
No surprise that low income consumers choose to consume rather than save as saving account with a low balance has no direct impact on generating additional wealth.
We can’t improve the money situation without improving the “free time” situation too. For people with 2+ jobs and hours of commuting, when is there time to do anything that would remotely fix their financial situation? Exhaustion for starters. No time for more school or other improvements that might net a better job. No time to even research where a better place to live might be. Heck, even voting for someone to help change your situation takes a lot of time, if you want to figure out which candidate is truly in line with what you want.
People wonder why payday loan companies are becoming more popular. It might be kicking the can down the road, but when $400 is a killer then people will kick the can.
> Those who don't have the cash on hand say they'd have to cover it by borrowing or selling something.
Be careful about concluding that these people are poor. I'm not poor, and I have no cash. Everything is invested. Piling up cash in a savings account just means it'll get eaten away by inflation.
This is hardly uncommon. If you've got a house with a large payment, you aren't poor, even though you may not have any cash. Your money is invested in the house.
I do not believe this. Even when I was flat broke starving I could always scrape up 400 somewhere and that was decades ago. Credit cards, friends and family, pawn shops. There's a way. This is a VERY misleading headline.
This makes it clear why our current capitalism doesn't work. The ruling class / rich and wealth people and businesses could extract more wealth out of the middle and lower classes than they do now, if the lower classes were more stable and secure.
In the US especially, but nearly everywhere, there are hoards of people trying to lower or eliminate social services, basic science research, etc, with the dog-whistle claim that those things are not necessary and should not be provided by the state or using state funds. This line of thinking is extremely common in conservative circles, where they claim that societal prosperity would come from hurting the poor as much as possible in order to extract the greatest amount of wealth from them.
But when you look at statistics like these, it is clear that there is no more wealth to be extracted from the lower classes - they are all just merely trying to survive. Provide UBI or something like it, along with all other things necessary for a strong social net, and watch the rich get even richer while the poor grow into a stronger middle class.
It is especially confusing that this outcome seems to be hated by the rich, despite it certainly lifting their wealth. It makes me wonder if much of conservative policy is just as much about hating the poor as it is helping the rich - because conservative policies that hurt the poor are increasingly obviously hurting the rich. I just don't understand why it isn't taken for granted that we need a stable society to make more money over time. That seems clear to me.
Many of those in poverty today are there because of the systematic oppression of the poor across America for the last many hundreds of years. Blaming them for it isn't going to help - they aren't even being provided basic education, as that is also being cut in many places in the USA (so how do you expect them to become financially aware, anyway, if they are not taught that growing up in school? Parents raising children in poverty are in no place to teach their own kids financial management skills).
To lift people out of poverty we must change our attitudes towards class and capitalism and be more compassionate to create a more stable society.
The Shock Doctrine [1] described that idea that the rich could undertake disasters of various types in order to push unpopular policy in their wake. I don't think it was ever updated to the 2008 recession, but the bailout of the banks via buying poorly performing securities via quantitative easing follows that though with the same effect. The fed bought risky bank mortgage securities, while still allowing mortgage loan servicing continue to collect on loans and real estate parcels (and equity value) of individuals who didn't get a bail out - and now whatever survived will be sold back to the banks.
Even if not intentional, it's a question of financial buffers. The extremely wealthy can weather recession and do even better by buying distressed assets from any who don't have the buffer which they hold. It's not the absolute numbers of the wealth, it's the amount of growth in control of assets that matter in this model. Without the right public policy, the wealthy win on the backs of the poor on the downswing and upswing of the broad economy.
I’m not entirely sure why you’ve been downvoted, because this also seems intuitively obvious to me.
A long-term stable society, with a controlled income and wealth gap, seems to be in the general long-term best interests of everybody, rich and poor alike.
Isn't this similar to a prisoner's dilemma but on a large scale? If the society is optimizing for a global maximum then the few individuals would be better off by being selfish and optimizing for a local maximum.
> This makes it clear why our current capitalism doesn't work. The ruling class / rich and wealth people and businesses could extract more wealth out of the middle and lower classes than they do now, if the lower classes were more stable and secure.
The goal is not to maximize wealth, but to maximize power over others. Insecurity in the working class does not increase the maximum extractable wealth for the capitalists, but it does increase the power that the capitalists can exert over the working classes because security creates the practical freedom to not knuckle under.
The US is incredibly rich country. Every second teenager is carrying iPhone worth more than yearly income in a large portion of the world. It is all thanks to capitalism.
Problem is that most US population is not educated/smart and easy to manipulate into crazy consumption. UBI will not fix it, it will make it worse. Even putting more money into education is not really a clear solution.
You need to understand that middle class is gone. Beside 2-5% of highly specialised STEM workers everyone else job is already subsidized.
I am and know many conservatives. I don't see any "poor hate," though I don't argue it doesn't exist. Rather, it seems conservatives get upset at the idea of an unlevel playing field, i.e. creating policies that favor one group over another. Well-intentioned as any given policy may be, we are opposed to crafting government rules or benefits that apply to one set of people and not another.
I have yet to see a UBI proposal that provided non-trivial amounts of money and yet was not simply financially impossible.
For example, there are over 300M (300,000,000) people in the US. To provide $1000 per year would require $300B. But that's less than $100/month. If you're homeless, that might be enough that you don't starve. But it's not enough that you can go to a doctor and eat. It's sure not enough that you can pay rent so you can get off the street.
If you make it $1000/month, now it's enough money to actually help people. But it also costs $3 trillion a year. That's twice the current Federal budget. So either taxes have to be three times as high, or they have to be twice as high while we eliminate every other thing that the Federal government currently does.
I don't think raising taxes to that level is possible, politically.
The usual answer to this objection is that the government can simply print money. Yes, they can. So could Venezuela's, but that didn't work out very well...
I think the solution is going to have to come from a change in society, not from a change in government programs. I think the rich are more often blissfully ignorant than they are evil oppressors. Things may start to change when the rich actually know some poor people, and can see the way society's structure looks through their eyes - when they can feel the pain it causes to people that they know.
America is over. The class divide has surpassed any reasonable threshold and in time it will only further crystalize. This country needs an Elon Musk to replace every part of the government, which is itself a jobs program at this point. We do not live in "America" anymore.
[+] [-] johnm1019|7 years ago|reply
[+] [-] rndmize|7 years ago|reply
Our economy is predicated on consumer spending; we have a whole set of industries built on the backs of poor financial decision making and being near-broke (payday loans, credit cards, overdraft charge reordering, debt collectors, etc.) all of which pull power away from desperate people and give it to others (now your landlord/phone company/ISP/etc have legal grounds to kick you out, terminate your service, etc.) Never mind the difficulty of making use of a court system stacked against the poor...
> I hope voters and politicians recognize...
Actually, it appears that voters and politicians have zero interest in improving this situation, seeing as the current administration is making every effort to demoralize and defang the CFPB[0], which was literally created to do some of the things you're interested in.
I especially like how Mulvaney is moving everything into "financial education", as if an agency with 500M budget is going to make a dent against the billions spent on marketing related to financial "services".
[0] http://www.latimes.com/business/la-fi-cfpb-student-loans-201...
[+] [-] sjg007|7 years ago|reply
[+] [-] mid|7 years ago|reply
Overall, which one of the following best describes how well you are managing financially these days?
[+] [-] 0x4f3759df|7 years ago|reply
[+] [-] Florin_Andrei|7 years ago|reply
[+] [-] ravar|7 years ago|reply
[+] [-] projectileboy|7 years ago|reply
[+] [-] fhkatari|7 years ago|reply
[+] [-] matte_black|7 years ago|reply
[+] [-] StephenSmith|7 years ago|reply
[+] [-] kibwen|7 years ago|reply
Furthermore, even the statistic that 40% of people can't cover a $400 expense is lowballing the severity of the situation, because who says that $400 is anywhere near the average financial cost of an unexpected emergency? What percentage of Americans can't cover a $500 expense (we know it's more than 40%)? What about a $1,000 emergency expense (which in my estimation is closer to the median deductible for a health insurance policy (assuming that one has health insurance in the first place))?
[+] [-] Meegul|7 years ago|reply
[+] [-] abritinthebay|7 years ago|reply
It's still pretty terrible it a) got to that point b) is still at this point.
[+] [-] maerF0x0|7 years ago|reply
I don't think 40% is some magic number to begin hysteria. Neither is $400. Selling something to cover your expenses might be a blessing in disguise if the thing you sell is a liability in the first place (ex: a car you cant really afford).
My observation of America is that for a whole lot of people we F'd up a long time ago... These people need financial education, they need to be taught to not buy things they dont need, they need to be taught delayed gratification and to not be consumerists.
[+] [-] s73v3r_|7 years ago|reply
In that specific case, no. In the US today, a car is damn near mandatory. Otherwise you'll be spending hours commuting on a bus, and that's if you're lucky enough to be somewhere with decent bus service. And that's assuming you have the type of job schedule where you can have that kind of time.
Many times, not being able to keep your car, even if it's expensive in maintenance costs, means you could lose your job.
[+] [-] phil248|7 years ago|reply
[+] [-] jartelt|7 years ago|reply
If you are poor, it's much harder to take risks and try to get ahead. You are always on the hook for your rent and can't just go ask your parent for a 0% interest loan to help you out for a couple months.
Yes, a lot of Americans have bad financial habits and buy unnecessary things. But some of these people with little savings are doing everything they can to stay afloat and just don't have the luxury of doing an 8 week data science boot camp to get a better job (or they would miss rent and get evicted).
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] kamaal|7 years ago|reply
You have two apples, you eat one. How many apples remain?
The part about delayed gratification is pure psychology. And its just personal training.
I'm not from the US, I am Indian, these problems are universal. Most people can't handle freedom, that is all there is to it.
[+] [-] sugarpile|7 years ago|reply
[+] [-] ryanobjc|7 years ago|reply
[+] [-] zeth___|7 years ago|reply
This might be a bad state of affairs to be in, but before we go trying to change people we need to change the system. Else we will be looking at Hitler as a moderate who had some reasonable national policies.
[+] [-] airstrike|7 years ago|reply
Except the American economy essentially banks on this fact, so you'd actually likely do more harm than good if people decided not to spend so much
[+] [-] prewett|7 years ago|reply
The poverty rate in the US is about 13% [1]; we would expect those people to not have any savings. That leaves about 33% unaccounted for. It looks like 42% of workers in the US make less than $15/hr [2], which does fit the figure fairly close. However, some of those are teenagers, so they don't count as they aren't living on their own.
I'd like to see some analysis of spending. How many people don't have any savings because they aren't spending wisely. This girl [3] discovered that she could actually save for a deposit for a house in London, despite making under £40k (about $53k). That's less than the median US income and presumably doesn't go all that for in London. She was simply spending a lot of money on food, drinks, and specialty coffee.
[1] https://poverty.ucdavis.edu/faq/what-current-poverty-rate-un...
[2] http://fortune.com/2015/04/13/who-makes-15-per-hour/
[3] https://www.theguardian.com/money/2018/jan/29/can-you-really...
[+] [-] ugh123|7 years ago|reply
[+] [-] gerdesj|7 years ago|reply
Is that true? What happens when those 25% retire or can no longer work? Ahh: https://www.telegraph.co.uk/finance/personalfinance/pensions... - not too bad - the US got a C, UK got a C+.
Now back to the headline: $400 in available readies? You do have to start measuring somewhere when looking into poverty but it is harder than it seems on the face of it. Many people will drain their balance regardless to zero or below, (nearly) no matter how well off. I recall being a youngish lad with an income of £30 per hour - let's realistically say ~£50,000 per annum (gross, pre IR45). At that point in my life, I too would often qualify for "can't find £350" right now. My real point is that you have to be really careful how you measure this sort of thing, ie trying to quantify bits of people's lives with simple pithy statements.
[+] [-] integration|7 years ago|reply
The bigger problem is American’s terrible spending habits not lack of real income.
https://www.google.com/amp/s/www.marketwatch.com/amp/story/g...
[+] [-] kbrwn|7 years ago|reply
[+] [-] sigstoat|7 years ago|reply
so the average american doesn't have $400 saved up, _and_ spends $206 per year on lotto tickets.
if we're in society collapsing danger, maybe we could look at the organizations running the lottos?
[+] [-] cwperkins|7 years ago|reply
[+] [-] makecheck|7 years ago|reply
[+] [-] protomyth|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] simonsarris|7 years ago|reply
[+] [-] skookumchuck|7 years ago|reply
Be careful about concluding that these people are poor. I'm not poor, and I have no cash. Everything is invested. Piling up cash in a savings account just means it'll get eaten away by inflation.
This is hardly uncommon. If you've got a house with a large payment, you aren't poor, even though you may not have any cash. Your money is invested in the house.
[+] [-] joeblow9999|7 years ago|reply
[+] [-] cryptoz|7 years ago|reply
In the US especially, but nearly everywhere, there are hoards of people trying to lower or eliminate social services, basic science research, etc, with the dog-whistle claim that those things are not necessary and should not be provided by the state or using state funds. This line of thinking is extremely common in conservative circles, where they claim that societal prosperity would come from hurting the poor as much as possible in order to extract the greatest amount of wealth from them.
But when you look at statistics like these, it is clear that there is no more wealth to be extracted from the lower classes - they are all just merely trying to survive. Provide UBI or something like it, along with all other things necessary for a strong social net, and watch the rich get even richer while the poor grow into a stronger middle class.
It is especially confusing that this outcome seems to be hated by the rich, despite it certainly lifting their wealth. It makes me wonder if much of conservative policy is just as much about hating the poor as it is helping the rich - because conservative policies that hurt the poor are increasingly obviously hurting the rich. I just don't understand why it isn't taken for granted that we need a stable society to make more money over time. That seems clear to me.
Many of those in poverty today are there because of the systematic oppression of the poor across America for the last many hundreds of years. Blaming them for it isn't going to help - they aren't even being provided basic education, as that is also being cut in many places in the USA (so how do you expect them to become financially aware, anyway, if they are not taught that growing up in school? Parents raising children in poverty are in no place to teach their own kids financial management skills).
To lift people out of poverty we must change our attitudes towards class and capitalism and be more compassionate to create a more stable society.
[+] [-] dv_dt|7 years ago|reply
Even if not intentional, it's a question of financial buffers. The extremely wealthy can weather recession and do even better by buying distressed assets from any who don't have the buffer which they hold. It's not the absolute numbers of the wealth, it's the amount of growth in control of assets that matter in this model. Without the right public policy, the wealthy win on the backs of the poor on the downswing and upswing of the broad economy.
https://en.wikipedia.org/wiki/The_Shock_Doctrine
I wonder what happens when we swing into recession and there is nothing left to take.
[+] [-] matthewmacleod|7 years ago|reply
A long-term stable society, with a controlled income and wealth gap, seems to be in the general long-term best interests of everybody, rich and poor alike.
[+] [-] extesy|7 years ago|reply
[+] [-] dragonwriter|7 years ago|reply
The goal is not to maximize wealth, but to maximize power over others. Insecurity in the working class does not increase the maximum extractable wealth for the capitalists, but it does increase the power that the capitalists can exert over the working classes because security creates the practical freedom to not knuckle under.
[+] [-] djtriptych|7 years ago|reply
[+] [-] baby|7 years ago|reply
[+] [-] eanzenberg|7 years ago|reply
[+] [-] Chyzwar|7 years ago|reply
Problem is that most US population is not educated/smart and easy to manipulate into crazy consumption. UBI will not fix it, it will make it worse. Even putting more money into education is not really a clear solution.
You need to understand that middle class is gone. Beside 2-5% of highly specialised STEM workers everyone else job is already subsidized.
[+] [-] cabaalis|7 years ago|reply
[+] [-] AnimalMuppet|7 years ago|reply
For example, there are over 300M (300,000,000) people in the US. To provide $1000 per year would require $300B. But that's less than $100/month. If you're homeless, that might be enough that you don't starve. But it's not enough that you can go to a doctor and eat. It's sure not enough that you can pay rent so you can get off the street.
If you make it $1000/month, now it's enough money to actually help people. But it also costs $3 trillion a year. That's twice the current Federal budget. So either taxes have to be three times as high, or they have to be twice as high while we eliminate every other thing that the Federal government currently does.
I don't think raising taxes to that level is possible, politically.
The usual answer to this objection is that the government can simply print money. Yes, they can. So could Venezuela's, but that didn't work out very well...
I think the solution is going to have to come from a change in society, not from a change in government programs. I think the rich are more often blissfully ignorant than they are evil oppressors. Things may start to change when the rich actually know some poor people, and can see the way society's structure looks through their eyes - when they can feel the pain it causes to people that they know.
[+] [-] himom|7 years ago|reply
[+] [-] georgrwasington|7 years ago|reply