The possibility that a family—
our
family—faces a rapidly growing chance of disaster is too painful to think about, especially if there seems to be little way to avoid it. The Myth of the Immoral Debtor nourishes the unspoken idea that families who have lost their financial footing are a tainted group, some “other” who are different from the rest of us. If we can believe that those in serious trouble are morally suspect, then it is easier to glance away from the harsh dangers of everyday life. The myth supports a comforting illusion that the rest of us are safely distanced from financial collapse, making it possible to avoid that terrifying moment of connection with someone caught in a financial disaster, that frightening there-but-for-the-grace-of-God-go-I realization.
One Survivor’s Story
Of course, not every job loss, divorce, or illness ends in the bankruptcy courts. Some families collapse under the weight of too many bills and not enough income, but many families do not. They may find themselves torn and battered, but they make it through.
Consider the Duprees. Jamal Dupree just turned forty, but he could be mistaken for a much older man. His face is deeply lined, and his hands shake when he lifts a cup of coffee. The trouble started with chest pains. Not the maybe-it’s-heartburn sort of discomfort, but the real thing: “It felt like someone had my chest in his fist and was just squeezing all the breath out of me. I never hurt like that in all my life. I thought for sure my time was up.”
Thanks to a quick-witted coworker who spirited Jamal to a hospital in nearby Nashville, Jamal’s time was not up. Three months after his open-heart surgery, Jamal was able to climb a flight of stairs again. Five months later he returned to his job as a technician at the electric company.
But five months was a long time for Jamal to take off from work. His wife, Trish, lost a lot of time at her job as an airline ticket agent, spending days outside the intensive care unit and weeks caring for Jamal after he went home. As the medical bills arrived in the mail, the Duprees were confronted by exclusions and deductions they hadn’t even known were written into their health insurance policy. “My medication costs me out of pocket over $200 per month. I don’t know what I’d do if I didn’t have health insurance, but really, it doesn’t keep the wolf away from the door. They still want us to pay so much.” Jamal had another scare a few weeks after he returned to work: “I had blackout spells because of a medication I was taking. I fell in the shower and hurt my rotator cuff in my shoulder. I need surgery, but I am putting it off because I can’t afford the extra cost now. I would have a big bill at the end of the surgery.”
But Jamal and Trish were lucky in other ways. Because Jamal has always been a worrier, he had signed up for every form of insurance his employer offered. Hefty deductions chewed a hole out of his paycheck each month, but when he had his heart attack, it paid off. Once his vacation time was used up, the disability insurance kicked in, giving the Duprees 60 percent of Jamal’s former income. Jamal reflects, “It wasn’t really enough, but I don’t know what we would have done without that money.”
The Duprees inevitably fell behind on their credit card bills, and they missed a mortgage payment. “Norwest [Mortgage, Inc.] called me a bunch of times. They said, ‘We see you’re having trouble paying your mortgage. Come to our office and get a second mortgage and pay off your other bills.’” Jamal held firm; he didn’t want to risk losing the house that their three children were growing up in. But the calls scared him. He and Trish talked it through and decided that from now on, they would make the mortgage payment first—no matter what. Twice the gas was shut off, so they lived without hot water until the next check arrived, and the phone was disconnected for nearly a month. But Jamal kept making those house payments.
Four months after he returned to work, Jamal took a second job working the evening shift at 7-Eleven. Trish, meanwhile, had already requested all the overtime hours she could get. Their oldest son, Jared, got a job delivering pizzas on the weekends; most weeks he slips a few twenties to his mom. When his sister made the cheerleading squad, Jared quietly paid for her uniform. The Duprees have drained their kids’ college funds, emptied their retirement accounts, and they haven’t eaten in a restaurant in more than a year. They still have several thousand dollars in credit card bills, and Jamal is praying that he can avoid another surgery. But, with a little luck, they just may make it.
An Ounce of Prevention
What makes the Duprees’ story different? Why did they endure, when so many others failed? Some of the answer was luck. Jamal was lucky to have a job to return to. (He was out too long for the Family and Medical Leave Act to safeguard his job.) Trish was lucky to get the overtime pay she badly needed. Most of all, they were lucky that no other disasters hit them while they were vulnerable.
But some part of their survival should be credited to planning, the ounce of prevention that policymakers and anxious families could learn from. Sensible planning starts with insurance. This is the classic
prescription from any economist. Whenever a family (or a business) confronts the possibility of a potentially devastating danger, it is time to buy an insurance policy.
The Duprees’ health insurance policy didn’t cover everything; the deductibles are high enough to prevent Jamal from getting the rotator cuff surgery he badly needs. Many families have discovered that the exclusions, copayments, and caps on health insurance mean that they are on the hook for far more than they anticipated, while others have learned that much-needed services such as physical therapy or mental health treatment are scarcely covered at all. Health insurance is no guarantee that a catastrophic illness won’t send a family into a financial tailspin. Approximately 240,000 families
with
continuous medical insurance file for bankruptcy every year at least in part because of outstanding medical bills.
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But without that insurance policy, the Duprees wouldn’t have had a prayer. Ever since President Clinton promised to expand health insurance coverage to all Americans, coverage for the uninsured has remained a prominent political issue. And for a good reason: A lack of health insurance coverage sends as many as 150,000 families to the bankruptcy courts each year.
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But another form of insurance may be even more critical for preserving families’ financial health in the wake of illness: disability coverage. The liberal policy wonks may stop us right here. What do we mean expansion of health insurance isn’t the most important initiative since The New Deal? Reducing the number of uninsured ranks high on the agenda of both major political parties, whereas disability coverage is virtually nonexistent on the national agenda.
In the age of the Two-Income Trap, when families have sacrificed their own personal safety nets, disability insurance can be all that stands between them and financial ruin. Unfortunately, a majority of workers do not have any private long-term disability insurance, and only a handful of states provide coverage for their residents.
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Unemployment insurance offers no relief, since most states require that an individual be “able” to work in order to qualify for benefits.
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Fortunately,
there is some good news here. Fixing the disability coverage problem may be easier than solving the health insurance crisis, because the apparatus already exists. Virtually every worker in America has long-term disability coverage through the Social Security Disability Insurance (SSDI) program. All that remains is to close the holes in the SSDI safety net, many of which are big enough to drive a truck through.
SSDI disability benefits are available only to those whose condition is expected to result in death or to last at least twelve months. In addition, there is a five-month waiting period after the onset of permanent illness. This means that anyone who, like Jamal Dupree, is seriously ill but is expected to recover within a year is out of luck. If the program were amended so that all serious illnesses were covered (even those not likely to result in death) and the waiting period were dropped to a few weeks (more like the unemployment insurance program), SSDI would save far more families from financial ruin. Disability benefits would still be reserved for those with a serious illness, but families would acquire an urgently needed safety net.
In addition, under the current SSDI guidelines, the disability must be so severe that the individual is unable to perform
any
job anywhere in the entire country, not just the job for which the worker is trained and has spent a lifetime building skills and qualifications. This means that someone who had worked for decades as an electrician or as a surgeon, but who developed a disability that prevented him from performing those duties, would not receive a single dime if he were deemed well enough to work as a telemarketer or a toll collector. The SSDI program could be modified to provide a sliding benefit depending on the level of disability (akin to many private disability policies), and temporary benefits could be offered while the worker undergoes retraining.
Universal, state-sponsored disability benefits would be ideal to fill the gap in the safety net. But families don’t have to sit back and wait for the government to take action; they can purchase insurance in the private market, either through their employers or on their own. Expanded
coverage won’t protect families against every danger. A disability policy wouldn’t have saved Carmen and Mike (from chapter 3), because it covers only workers who fall ill, not those who must take time off to care for other family members. But it could make a very big dent in the risks facing many families. We estimate that universal, comprehensive disability coverage could help as many as 300,000 families avoid the bankruptcy courts
every year
—and hundreds of thousands more who are on the brink of collapse.
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Similarly, a couple can purchase a long-term-care insurance policy for themselves—or for their aging parents—that covers both home health and nursing home care. Today, fewer than 10 percent of the nation’s elderly have purchased private insurance to protect themselves against the risk that they will someday need long-term care, and even fewer working-age adults are covered.
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Once again, these policies don’t provide coverage against every possible contingency, but they offer another way for a family to mitigate one of life’s dangers.
The solutions we propose here wouldn’t be free to taxpayers, and the private market for insurance is far from perfect. On the other hand, these proposals aren’t all that radical either. We haven’t suggested a complete overhaul of the tax structure, and we haven’t demanded that businesses cease and desist from ever closing another plant or firing another worker. Nor have we suggested that the United States should build a quasi-socialist safety net to rival the European model. All of the solutions we have proposed thus far—creating tax incentives for saving, expanding state-funded disability coverage, and encouraging families to insure themselves against an uncertain future—can be implemented within America’s current blend of public and private systems without drastic changes or massive tax increases.
The Myth
When Orrin Hatch claims that the real change needed in America is for individuals to “take personal responsibility for their debts,”
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we
are left to wonder exactly what he has in mind. Should people take more responsibility for losing their jobs or for having heart attacks? Or does he mean that “responsible” families should sell their homes and move into the street as soon as they are laid off so they run no risk of falling behind on the mortgage or owing money to a landlord? Many of the families we studied lead lives that are already thick with personal responsibility—time lost from work to take care of an elderly parent, thousands of dollars of debts to provide medical care for a loved one. Perhaps if these families let go of some of that “personal responsibility” they would be in better financial shape—but we don’t think they would be better people.
The Myth of the Immoral Debtor may be little more than an ugly fairy tale, but it has the power to maroon families—both emotionally and financially—just when they most need support. The changes needed to increase the safety of the middle class aren’t radical, and they are not exorbitantly expensive. But they require a consensus that change is essential. So long as Americans can be persuaded that families in financial trouble have only themselves to blame, there will be no demand to change anything. In order to get on with the difficult business of making America once again safe for families to raise children, the Myth of the Immoral Debtor must be laid to rest for good.
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Going It Alone in a Two-Income World
G
ayle Pritchard taps nervously on the table as she talks about twelve years of marriage to Brad. The litany of complaints comes easily to her lips; she’s told this story before. Brad drank too much. He didn’t pick up after himself. He always forgot birthdays. But after a few more jabs, Gayle exhausts herself, and her face softens. “Brad loves his kids. On weekends he would lie on the couch for hours, with little Kaitlyn sound asleep across his lap, the drool just sliding all over his shirt and he never even minded. How could you hate a man like that?”
After more than a decade of marriage, their life together began to unravel. “They outsourced Brad’s job at the distribution center. No severance. Nothing.” Gayle was working hard, too tired to be very supportive. She dismissed Brad’s mood swings as nothing more than “a male ego type thing.” But then Brad started disappearing, spending his days and then nights away from home. The anger bubbles up again as Gayle recalls, “Money that was allotted for day care started disappearing.”
After a few months, Brad found a new job and his dark moods lifted, but the damage was done. Gayle learned the reason for Brad’s disappearances; he had been seeing another woman. Today Gayle looks back reflectively. “He felt like I didn’t need him. . . . He lost confidence in himself. He found somebody to cater to that lack of
self-confidence.” She says it doesn’t matter so much now, but at the time all she could think was that he had found some other woman beautiful, had put his hands on someone else. “I swear I could smell her on him. It made me crazy.” She screamed, threw his clothes in the yard, and broke his baseball trophy. Brad didn’t hang around for more. He found a new apartment and invited his girlfriend to move in.