James O'Shea and Bridget O'Shea have a good piece in the Chicago News Cooperative today about Wanda Carter, the widow of WVON host Morgan Carter, the home she lost to foreclosure, and the "effects of predatory lending." It's one of many similar stories behind the foreclosure wave, many of which you've probably heard during the housing slump and financial crisis. But one thing jumped out at me, since I've been reading a lot about it (emphasis mine):
After the deal closed, Carter discovered the house needed structural work that would cost far more than $20,000. Then the man she married about a year after moving in received a diagnosis of late-stage cancer.
I've also been reading the "We Are the 99 Percent" Tumblr, self-submitted stories of economic hardship tied into the Occupy Wall Street movement. Unsurprisingly, health costs are one of the most frequent causes for financial stress, if not the most frequent:
"We both have extensive medical problems and are wondering how we’re going to pay for the medications we need to keep functioning."
"I had to declare bankruptcy, and give up an occupation I put 15 years into, all because of an injury that took 30 seconds to occur."
"Recently, my mother had a major dental procedure and it exceeded our insurance limit, and they had to pay thousands of dollars out of pocket."
"We stay married for health insurance and assistance with my college."
"Health coverage could have prevented my heart attack I had six months ago and since my recovery, I’ve been laid off twice (right before I would have been eligible for employer benefits)."
"I AM 24. I HAVE A BULGING DISC IN MY NECK. I NEED SURGERY. I HURT. I HAVE NO INSURANCE."
It reminded me of research that Elizabeth Warren, now running for Senate in Massachusetts, did while a professor at Harvard; a big reason that she's come to prominence in the past few years is her expertise in bankruptcy law, her scholarly work putting her on the pulse of recessionary America. In 2005, Warren, David U. Himmelstein, Deborah Thorne, and Steffie Woolhandler published "Illness And Injury As Contributors To Bankruptcy" in Health Affairs, a look at 1,171 bankruptcy filings in 2001. The authors found:
More than one-quarter cited illness or injury as a specific reason for bankruptcy; a similar number reported uncovered medical bills exceeding $1,000. Some debtors cited more than one medical contributor. Nearly half (46.2 percent) (95 percent confidence interval = 43.5, 48.9) of debtors met at least one of our criteria for “major medical bankruptcy.”
Their criteria caused some controversy:
Under the rubric “Major Medical Bankruptcy” we included debtors who either (1) cited illness or injury as a specific reason for bankruptcy, or (2) reported uncovered medical bills exceeding $1,000 in the past years, or (3) lost at least two weeks of work-related income because of illness/injury, or (4) mortgaged a home to pay medical bills.
Two Northwestern professors, David Dranove and Michael Millenson, published a critique, "Medical Bankruptcy: Myth Versus Fact," also in Health Affairs, which examines the existing literature and critiques the model of Warren and her co-authors. But even as they argue that the initial paper goes too far, the statistics they cite are disturbing:
Rising medical costs, coupled with recent increases in consumer cost sharing, are raising the anxiety level of the middle class. For example, for married-couple families with children, health spending rose three times faster than income between 2000 and 2003, absorbing half the growth of their income.
[snip]
Private employers’ spending on employee health benefits, meanwhile, jumped 51.4 percent from 1998 to 2003, to $330.9 billion. As economic theory would predict, employers are responding by holding the line on salaries; real wages and salaries declined in 2004 by about 1 percent, while overall benefit expenses increased 3.5 percent. Employers are also requiring employees to make larger contributions to premiums and cutting back on the retiree medical coverage that has been a critical supplement to Medicare. As benefits costs have risen, the percentage of full- and part-time employees covered by and participating in employer-sponsored health insurance has declined, from 53 percent in 1999 to just 45 percent in 2003. Simultaneously, the hiring of new permanent employees appears to have slowed.
Mike Konczal, a Roosevelt Institute fellow who runs the excellent econ blog Rortybomb, summarizes some of the research on medical care and bankruptcy that's been done since, as well as more of Warren's work: "Warren pointed out that people actually spend less on clothing that they used to as a result of globalization and technology, but that the real squeeze on middle-class families came from increases in health care, education and housing."
Returning to We Are the 99 Percent, the other two themes besides medical expenses that recur are indeed education and housing: student loan debt and mortgage debt. Putting a number to the latter, Konczal points out that "housing price increases have vastly outstripped housing price consumption; housing prices have tripled since 1987. Also tripling during a similar period? Higher education:
Since 1980, inflation- adjusted tuition at public universities has tripled; at private universities it has more than doubled. Compared to all other goods and services in the American economy, including medical care, only “cigarettes and other tobacco products” have seen prices rise faster than the cost of going to college.
[snip]
Between 1975 and 2005, total spending by American higher educational institutions, stated in constant dollars, tripled, to more than $325 billion per year.
One thing that does seem clear reading Warren's work, and Dranove and Millenson's in response, is the difficulty in separating out causes of financial distress. If you buy their criticisms, then medical expenses are not as frequent a cause as Warren et al. conclude. But if medical costs, more broadly speaking, suppress employment, and unemployment leads to bankruptcy on its own or through other means—like defaulting on mortgage payments—then it is causual, just not in the direct terms that are the subject of the debate.
That's what's valuable about We Are the 99 Percent: you can see the factors of financial stress in all their messy reality, and the reasons why economists and social scientists have trouble pulling out causes for each piece of the puzzle. Nor is the 99 Percent limited to people who are broke; it's college students building debt and afraid they won't get jobs; small business owners on the brink of disaster; Gen X/Yers whose parents are unemployed or sick.
(Some of the financial wounds are self-inflicted; some of the authors admit as much. But that's another important piece of the puzzle: how debt magnifies mistakes.)
That's why I can't get too bothered that Occupy Wall Street doesn't have a coherent complaint, a criticism lobbed at the Tea Party as well, and intentionally started out without one. There's none to have, not one that encompasses the litany of personal and institutional decisions, private and public, that led here. A more coherent list of demands would be either grossly simplistic or endless; it would have to be, to encompass the range of fears driving the 99 Percent into the streets. Actual ideas are spinning off from the movement, from Konczal and Nick Kristof and others—which seems to be as easily an argument for the potential of Occupy Wall Street's approach as a sign of its failure—but Occupy Wall Street's incohate mission is, in some ways, the most honest response.
Photograph: Sign0fH0pe (CC by 2.0)