Savings Rate Goes Negative

[sweeps]

First off, what you're calling "gorilla dust" is experience and a healthy dose of skepticism. How many times have we seen studies warning about some awful thing and then a year later more studies come out with the totally opposite conclusion? Way too many.

In this situation, the researchers' data is made up of court records from bankruptcies and, yes, surveys from the bankruptcy filers. Do you really think that someone is going to admit to a judge (or an overzealous researcher): "Yeah, I lived way beyond my means. I bought too big of a house, I had to have a new car every couple years, and I ate out 5 times a week. I don't even own a savings account. Therefore I'm declaring bankruptcy." Hell no. They're going to look for something that shifts the blame to other things. A medical bill or two is just the ticket to elicit some pity from the judge.

And no, you didn't "answer" the question about what the saving and spending patterns were before these bankruptcy was filed. That information is not available -- and probably for good reason.

[cercis]

Have you ever looked at a bankruptcy filing? Honest question.

I've looked at too many to count. Here is what they consist of:

All debts broken down by type (mortgage, car, medical, legal, credit card, other unsecured). You must list ALL debts.

All income, broken down by regular and not regular (I don't remember the correct term).

Then, you must be prepared to explain any large expenditures you've had over the last year (and this may be longer since the new rules went into effect). This is to prevent any asset protection from creditors.

Then you have to list your assets. And if the trustee thinks you are lying, they will investigate everything you own. Each state has different "homestead" lists (I think it's odd that bkr is a fed program but the homestead is controlled by states) and you are allowed to keep what is your homestead, anything else is subject to seizure and sale by the trustee.

So, just examining bankruptcy records provides a very detailed picture. Extremely detailed. The amount of information I can find out about a bkr filer is staggering and often after having reviewed the documents I end up having a faintly guilty, "snooper" vibe.

[sweeps]

cercis, I think you may be missing the point. I'm not saying that medical bills are inconsequential. But you know what, they're a necessary expense and as you pointed out, just one line item in a long list of a person's expenditures. The question is why are we singling out medical expenses? Why aren't we focusing on the cost of groceries, for example? I'm sure 100% of those bankruptcy filers had to pay for substantial grocery bills. The reason is this is simply a political statement to change the health care system in this country. Heck, I'll be the first to agree the health care system in this country needs a major overhaul. But let's stop blaming everything else for our financial problems and start taking responsibility for living below our means.

EDIT: And I'd like to add that many of the people who do the complaining do not participate in the democratic process. I would really like to cross-reference the list of people in this Harvard study with the list of people who vote in Presidential and Congressional elections. My "gorilla dust" tells me that the correlation would be low.

[cercis]

But Sweeps, EVERYONE has to pay grocery bills. We have to look at what makes the differences between these people and people who aren't filing bankruptcy. In a good portion of these cases, it's an unexpected medical expense (and in too many cases, they had insurance that should have covered this expense).

In a lot of cases, it's a catastrophic job loss coupled with a soft job market. I know too many people who were living well within their means who lost their jobs and are now working for half the wage. No one dreams that you will end up with that much less in wages. They thought they were being careful, they had the 6-12 months expenses saved. They didnt' get the max mortgage, etc. But when you end up with 1/2 your income, you quickly find that the completely reasonable credit lines you had are no longer reasonable. Now most of my friends were able to downsize enough that (so far) they haven't needed to file bankruptcy, but it's a struggle every day. They wrestle with the decision of whether to take a job paying a little more than they make now but will require a move across country (and the job won't pay moving expenses).

It's due to them that I'm striving to carry no debt at all and even prepaying my mortgage (not much yet, but will increase it as other debt is paid off). I've learned that life sucks and we're all just one major catastrophe away from eventual bankruptcy. And the social safety nets we used to have in place are all gone, replaced with the mantra of "personal responsibility".

[sweeps]

The social safety nets are gone? Take a look at page 81 in the instructions for the 2005 Form 1040. Out of 2.3 trillion dollars in government outlays (federal, we're not even talking state and local), 36% was spent on social security, medicare, and other government retirement programs. Another 21% was spent on social programs. And another 10% was spent on physical, human and community development. If my math is correct, that's 67% of all federal expenditures on social programs.

[paypalbid]

With the high credit card debt average per family and the negative savings rate. Its like a depressing and sensitive subject to a lot of people.

[VJW]

Originally Posted by Sweepsplayer

First off, what you're calling "gorilla dust" is experience and a healthy dose of skepticism.

Unfortunately, it’s unsubstantiated.

How many times have we seen studies warning about some awful thing and then a year later more studies come out with the totally opposite conclusion? Way too many.

Anecdotal.

In this situation, the researchers' data is made up of court records from bankruptcies and, yes, surveys from the bankruptcy filers. Do you really think that someone is going to admit to a judge (or an overzealous researcher):

Ah, the data is collected from court documentation, not by asking people questions.

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[VJW]

Originally Posted by Sweepsplayer

I'm not saying that medical bills are inconsequential. But you know what, they're a necessary expense and as you pointed out, just one line item in a long list of a person's expenditures. The question is why are we singling out medical expenses?

Because they are responsible for half the bankruptcy filings.

Why aren't we focusing on the cost of groceries, for example? I'm sure 100% of those bankruptcy filers had to pay for substantial grocery bills. The reason is this is simply a political statement to change the health care system in this country.

Another baseless assertion.

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[VJW]

Originally Posted by Sweepsplayer

The social safety nets are gone? Take a look at page 81 in the instructions for the 2005 Form 1040. Out of 2.3 trillion dollars in government outlays (federal, we're not even talking state and local), 36% was spent on social security, medicare, and other government retirement programs. Another 21% was spent on social programs. And another 10% was spent on physical, human and community development. If my math is correct, that's 67% of all federal expenditures on social programs.

You’ve allowed yourself to be bamboozled by administration propaganda. They are utilizing the trust funds, which are SELF-FINANCING and do not draw upon income tax revenues, to mask the true size of the federal deficits, which are approaching a trillion dollars annually. The Social Security Trust Funds, the Medicare Trust Funds, the Airport Trust Fund, the Transportation Trust Fund, the Railroad Trust Fund, the Federal Retirees Trust Fund, and others, are all running large surpluses.

A realistic representation of where your income tax dollars actually go is that almost 2/3rds of every federal income tax dollar you pay covers only the Military Industrial Complex and interest on the Reagan/Bush/Bush federal debt. Add in Corporate Welfare, and you have the three largest budget items where your income tax dollars are being spent.

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[sweeps]

If by "self-financing" you mean that taxpayers fund the accounts and that the federal government, i.e. taxpayers, pay the interest on the funds' investments, then I would agree with you.

By the way, can you convince my payroll administrator that the trust funds are "self-financing"? She seems to think that I have to make a sizeable payment to FICA each pay period.

[CRFSaver]

So without getting into the deficite and bankruptcy numbers, I am curious as to why everyone things it is a bad thing to borrow from our trust funds. I run the treasury for my company and I lend out my excess funds every day. Why wouldnt we want to reduce our "Public" borrowing by using other excess funds that are sitting idle?

[VJW]

It’s not a bad idea. What’s a bad idea is using a fraudulent accounting system that makes the federal deficit appear smaller by offsetting with the trust funds (or other off-budget items), which by law cannot be utilized for anything other than their stated task.

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[VJW]

Originally Posted by Sweepsplayer

If by "self-financing" you mean that taxpayers fund the accounts and that the federal government, i.e. taxpayers, pay the interest on the funds' investments, then I would agree with you.

No.

“Self-financing” refers to the fact that those trust funds do not receive any monies from federal income tax dollars or the general fund, but instead are funded by their own separate source.

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