| Topic: |
Politics > Politics-USA |
| User: |
"Your Special Friend" |
| Date: |
23 Sep 2003 11:13:07 AM |
| Object: |
Economy's yin, yang tugging middle class into bankruptcy |
http://www.sptimes.com/2003/09/22/news_pf/Columns/Economy_s_yin__yang_t.shtml
Economy's yin, yang tugging middle class into bankruptcy
By ROBERT TRIGAUX, Times Business Columnist
Published September 22, 2003
--------------------------------------------------------------------------------
There's no shortage of yins and yangs in our economy.
Yin: New York Stock Exchange chief ***** Grasso resigns after
disclosure of his outsized $140-million pay package rubs a
CEOs-are-too-greedy public the wrong way.
Yang: U.S. workers earning the federal minimum wage of $5.15 an hour
must work the equivalent of nearly three full-time jobs to afford the
typical two-bedroom apartment.
Yin: The combined net worth in Forbes magazine's annual list of the
wealthiest 400 U.S. citizens climbed 10 percent in the past year to
$955-billion - bigger than Canada's economy - thanks largely to a
recovering stock market and recent federal tax cuts.
Yang: More than one quarter of Florida's workers are "working poor"
because they earn less than $8 an hour, well below the poverty level
for a family of four.
Yin: The wealthiest 1 percent of U.S. households controls 38 percent
of national wealth.
Yang: The bottom 80 percent of households possess a shrinking portion
of U.S. wealth, now only 17 percent.
The split personality of the economy also appears in the latest
bankruptcy figures.
Business bankruptcies appear to have peaked and are declining. But
personal bankruptcies continue to soar. Together, the total number of
bankruptcies again broke records.
That trend holds true whether we're talking about the national economy
or mid Florida's.
"No question, business bankruptcy filings are down," Tampa bankruptcy
lawyer Michael Horan says. Many medium and large corporations have
managed to squeeze by in hard times by refinancing debt at the
market's extremely low interest rates.
Those same financial opportunities have not stemmed the rising tide of
personal bankruptcies. Horan cites the usual culprits for the
increase: less stigma from filing bankruptcy, the soft economy and
high levels of consumer debt.
His prediction? "I think personal bankruptcies could still be high in
the early stages of a recovery. I believe the trend in personal
bankruptcies will trail the trend of the general economy."
Nationwide, business bankruptcies dropped to 37,182 in the year ended
June from 39,201 in the same period a year ago. In contrast, personal
bankruptcies soared to a record 1.6-million this year from
1.47-million last year.
The pattern is repeated in Central Florida. Regional business
bankruptcies fell at a fast clip to 728, down a healthy 28 percent, in
the year ended June. But personal bankruptcies climbed 10 percent to
54,276 from a year ago.
While experts and surveys say the economy finally appears to be
gathering steam, the lack of job creation is still fueling the
personal bankruptcy boom. The Economic Policy Institute calls this the
worst recovery for job creation since records began in 1939.
Which brings us to the middle class and the growing debate that it is
under a financial stress not seen in generations.
Blame it on job cuts or jobs moving overseas, astronomical price hikes
for health insurance, and the runaway appreciation of housing prices
in an age of stagnant paychecks. But it all boils down to this:
Millions of families can no longer afford live a middle-class life -
even on two incomes.
That's the theme of a recently published book, The Two-Income Trap:
Why Middle-Class Mothers and Fathers Are Going Broke, that's sparking
some fresh controversy. The book was reviewed in this business section
this month, but it's worth a closer look in the context of the latest
national and regional bankruptcy data.
The book persuasively argues that the rise of dual-income families is
increasing the chances of a middle-class financial disaster. Why? Not
because families are squandering so much extra income on luxury items.
In part, it is because two incomes can generate extra expenses such as
day care and transportation. But mainly, two paychecks allow a family
to qualify for a more expensive home in a better neighborhood - with a
larger mortgage and little, if any, down payment.
In many U.S. housing markets, home prices have soared, making two
incomes mandatory to afford even modest accommodations.
The problem hits home when one of those two jobs ends - typically
involuntarily - and the family cannot carry the suddenly heavy load of
debt on one income.
It's a pattern feeding the personal bankruptcy maw. This year, Harvard
law professor and Two-Income co-author Elizabeth Warren says, children
are more likely to face the bankruptcy of their parents than the
divorce of their parents.
The outlook is worse for single mothers. By 2010, Warren says, an
estimated one of every seven single moms with children may declare
bankruptcy.
Is that really such a bad thing? Personal bankruptcy used to be a mark
of shame, a sign that somehow you had failed in the game of life.
That's changed. A lot. Now bankruptcy is increasingly viewed as a tool
for starting over fresh. For rebooting your life without all that
unpleasant money baggage.
Hey, if Enron and United Air Lines and Kmart and WorldCom can take the
bankruptcy route, what's the big deal?
I don't mean to make light of bankruptcy. Plenty of consumers are no
doubt deliberately abusing the system to escape out-of-control debts.
Bankruptcy still carries all sorts of life penalties when it comes to
regaining good credit standing. Just fewer penalties than it used to.
Ask the 55,004 individuals and businesses in Central Florida that
sought bankruptcy protection in the past year. There are plenty more
where they came from.
- Robert Trigaux can be reached at or 727
893-8405.
.
|
|
|
Related Articles |
|
|
