This is an expansion of my original entry from my blog: Fear and Debt.
In Michael Moore's movie SiCKO, he interviewed a member of the British Parliament, Tony Benn. Mr. Benn said something that was very relevant in America today:
"How do you control people? Through fear and debt."
Over the last 25 years, there has been a consistent policy of adding more and more obligations onto individuals that were once considered staples of American society.
Take for instance student loans. At one time, a college education was paid for through grants and scholarships. If you graduated from college 25 years ago, you would have left your college experience with a marketable degree and very little debt, if any. Now it is not unusual to find graduates with debt that equals a car -- or even a house -- payment.
This debt acts as a barrier to entry to financial success. Consider the fact that student loans are almost never dischargeable in bankruptcy proceedings. People who fall on hard times and become disabled (either partially or completely) very likely will not be able to free themselves of the yoke of debt they incurred getting through school.
Now, I am not going to say it is all of the fault of public policy. Americans clearly are spending too much on big houses, SUVs and non-essential consumer items. Too many Americans fail to educate themselves about credit card interest, the power of compounding at 18% interest vs. their dismal savings rate. They are spending beyond their means and there will be correction very soon, I'm sure.
(It is clear that we also have too much debt as a nation. Our national credit card (i.e. deficit spending) has created a debt where 9% of our federal budget is taken up by interest alone of our national debt. This is due, in great part, to the neoconservative "starve the beast" policy to prevent spending on social programs.)
But contrast bankruptcy laws for consumers to how the bankruptcy laws work for large corporations:
(This is an excerpt from my post Debt and Taxes.)
Obligations to pay for health care and pensions are still dischargeable in chapter 11 bankruptcy proceedings. Chapter 11 is a reorganization bankruptcy mainly used by corporations, but also used by wealthy (or at least seemingly wealthy) but largely-indebted individuals. That is why I have suggested that we create a national health care system and expand Social Security into a national pension system. Large corporations will deliberately underfund pension obligations because they will be able to overpay executives and pay "retention bonuses" to executives before filing for bankruptcy.
By way of analogy, if a consumer debtor did what corporations are allowed to do in chapter 11 proceedings, the bankruptcy trustee would invalidate the consumer debtor's transfer of their property and the court would probably dismiss their bankruptcy without a discharge.
We need to change health care and pension obligations to a kind of "priority debt."
For those of you unfamiliar with bankruptcy law, let me explain what I mean. There are basically three levels of debt in bankruptcy: secured, priority and unsecured non-priority.
A secured debt is one that is tied to a piece of property (such as your home mortgage and car payment). Priority debts are unsecured debts that are non-dischargeable for public policy reasons. Examples include most taxes and child support obligations. Unsecured non-priority debts are all other debt obligations such as medical bills, credit cards, payday loans and signature loans. Student loan debts are unsecured non-priority debts that are non-dischargeable except for "undue hardship."
It should be noted that Barack Obama has started mentioning this fact in some of his speeches. I'm glad he is. More Americans need to be aware of this fact. John Edwards has been harping on the abuses of the credit industry in his Two Americas speech. These are the two candidates that are raising awareness of these problems. While Americans need to start living more frugally, there are definitely some public policy issues that need to be addressed to provide greater opportunity to up-and-coming lower and middle class Americans who are doing the right thing: delaying gratification, getting their education, obeying the law and applying the work ethic.
So much for debt for now. The problem of the Bush Administration using fear to control Americans cannot be ignored.
On the one hand, there are very real bad people in the world who hate us and want to destroy us economically, culturally and politically. The problem is that Americans have become so fatigued by so many false terror warnings that we are becoming desensitized to them. George Bush may become the boy who cried wolf. The problem is that it will be the country that pays for it.
Another problem is that Iraq is becoming a training ground for Jihadists. Sooner or later they are going to perfect their skills (unlike the medical doctors recently in Britain). It's like the IRA used to say: "You have to be lucky every time; we only have to be lucky once."
I have this feeling that everything is just wrong in America right now. Our values and priorities are completely upside-down. The question that gnaws at me everyday is: can we correct the ship of state before it's too late?