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Families go deep in debt to maintain a middle-class lifestyle (wsj.com)
51 points by mjirv 75 days ago | hide | past | web | favorite | 139 comments



This article has me shouting at my screen. I'll try to condense to one point:

> Earlier this year, Mr. Guzman put his credit cards in a Ziploc bag with water and placed it in the freezer. In May, however, they went to two weddings, and needed a card to cover the cost of a gift and a rental car.

1. You're never required to attend a wedding 2. You can give gifts with minimal cost

When I got married, I had a friend who was unemployed at the time. Didn't expect a gift, but they still took the time to go out of their way and provide baked goods they homemade for the wedding party. Can't bake? Write a nice letter or compose a song.

You can't mismanage your money, go into debt, and point your finger at anyone but yourself. Can't afford a new car? Don't buy one - buy a used one instead. Can't afford to travel to a wedding? Don't go, send the appropriate cards and letters and niceties. Buried under credit card debt? Don't have a kid yet, don't go get a dog, stop buying on credit.

Yes there are some terrible woes around medical debt, and that's a serious problem we should evaluate and fix, but you can't blame "the economy" or "society" for what is just an inability to manage your money.


I was similar shouting, especially at the end. My point:

> Growing up, Mr. Young says, he was taught to work hard to get a nice house and a reliable vehicle. Now he realizes how easily borrowing too much can undermine this plan.

> “Things we were taught could be assets aren’t really assets,” he said. “They’re liabilities.”

Houses appreciate, cars depreciate. Spend the minimum possible amount on transportation if you want your net worth to go up.


> Houses appreciate

Don't rely on this


Agreed. I've always considered this a bit of a myth.

Most houses only appreciate if you spend time, effort, and money to properly maintain them. On top of maintenance, in most places, you'll have to pay annual taxes.

When I go to sell my current house, I may break even - essentially living free. However, I certainly don't expect to come out ahead.


Worst case scenario, you get to retire and live rent free. Even if it doesn't appreciate, you still own a house.


Worst case scenario? It's probably closer to this: buy way more house than you need and can sensibly afford. Buy heavily leveraged at market peak. Housing market tumbles. Have a bit of bad luck and lose your job and your income. Be in a position where you can't keep up with mortgage repayments and be forced to sell when the market price for the house is less than the amount of debt you still owe the bank...

Or even grimmer: as above, but start renovations before the market crashes and losing your job. Discover there are major structural problems so it costs 3x more than expected to put the house back into a sellable state. Then, before construction is finished, be forced to sell an unfinished house with negative equity....


Houses appreciate while also having non-trivial upkeep costs that are often not factored in when people run the numbers on how much they "save" by owning.

If you want to become acutely aware of this, buy a rental property and see how close to just breaking even it usually is as a financial investment.


Everyone that I've talked to about their rental property usually talks about it in terms of just the cash flow though. So yeah, they'll complain about unexpected costs that bring them close to "break even" in many years, but then after 30 years they have a $500,000 (or however much it's worth) asset. So I don't feel too bad for them, and it makes sense why so many people do this if they can afford to.


Land usually appreciates. Houses depreciate just like cars, unless you constantly do expensive maintenance.


This article is designed to outrage, and specifically to reinforce the ethos of debt / poverty being entirely a problem of individual responsibility.

Late stage capitalism claps back.


society fails to teach us basics of personal finance. or at least in public K-12+4years at uni i was never exposed to this once.

most people don't understand exponents, they don't understand the power of compound interest (in either direction), ...

society also amps up weddings, resort style vacations, excess, and so forth.

so yeah, you can certainly blame society.


>> fails to teach us basics of personal finance

Actually that's not true anymore, at least where I live. My 15 year old had a class where they explained in pretty good detail how loans work, how one would go about getting a loan without getting ripped off, and how much one would have to pay back. I was very pleased when I saw homework related to this.

I don't know which percentage of kids will absorb (let alone retain) this, but they can no longer claim that society "fails" to teach them.


I'd like to know the motivation of the person who downvoted this. I thought that if there's anything we can all agree on it's that it's good to teach 15 year olds how not to get screwed in the real world. Apparently someone disagrees.


When I was in high school (admittedly, over 25 years ago), personal finance was a required class. The only detail I really remember from that class was that the instructor said "compound interest" many times a day.

A quick search shows we still require personal finance to be taught the senior year of high school.


Society has no duty to you. You have a duty to yourself to survive, and to learn the skills necessary to do that.


We have been told to get a good education, to get a good job and to live happier every after. For most, this is far from the truth. Wages have not increased in decades, while everything else is more expensive. Corps would rather hire you as a contractor, to pay you less so they make more. There are not enough jobs, because there is no process for teaching about free enterprise in America. Its jobs jobs jobs, but you need people to create those jobs. When H1Bs take your jobs, its hard to compete when they are paid less and willing to take less. So many issues, but we have an inept Congress and elected officials that care for more their power, and their greed that the American people. </rant>


i would say that you can't talk about this completely without mentioning health care.

the US health care system will absolutely extort and annihilate your net worth at first opportunity (legions of unnecessary tests/unaffiliated personnel/surprise billing/etc) should something bad happen to you. good luck starting a business like that. yes those words are appropriate: they are criminals that extort and ruin for profit.

many in US are tied to jobs solely for health coverage. so you need to divorce those to have any chance at spinning up entrepreneurship, education, and so forth.


Health Insurance is the only thing that makes me feel like my employer has "leverage" over me.

That is such a back-breaking expense when your employer is not footing most of the bill that basically all of my other expenses are insignificant by comparison.

Thankfully, I think we're finally nearing critical mass of people who realize health insurance in the US is completely fucked, that something has to change before long (a decade maybe?).


Your complaints are misdirected.

> Corps would rather hire you as a contractor, to pay you less so they make more. There are not enough jobs, because there is no process for teaching about free enterprise in America.

Corps would rather hire you as a contractor exactly because free enterprise is taught in America.

Milton Freeman made a famous speech where he decried that any businessman who doesn't maximize returns to the shareholders is violating the ethics of the "free enterprise" system. That speech was coincidentally timed about the time wages stopped rising for US workers.

> We have been told to get a good education, to get a good job and to live happier every after.

I hate this trope for the same reason I hate people saying that the USA is "exceptional": it breeds complacency. It's Disney fairy tale junk that should be left in sunday school where it's taught.


With the 60% majority required in the Senate, entrenched two party system, lifetime appointment of judges, President's power of veto, I could go on forever but all the different aspects of the Constitution discourage any change to happen. It as much if not more of an issue with the American political system as it is the people who are elected. Although they are not without reproach considering the current campaign finance laws are a joke.


>We have been told to get a good education, to get a good job and to live happier every after.

This sentiment seems very US specific (maybe 1st world). My background is ahem classic western 1st world culturally, but grew up in a 3rd world country. And for me that cliched recipe worked exactly like it says on the tin. Even with a 3rd world university name on my CV I'm comfortably competitive globally. So when I read the US guys struggling I'm left a little puzzled. Not arrogant enough to assume I'm better so this smells like a country-structural issue.

Which to me suggests the 1st world countries have moved into a post uni-edu era if that makes sense?


> Even with a 3rd world university name on my CV

Actually I think that works to your advantage. There’s a class of hiring managers who figure that if you went to college in America but didn’t go to Harvard, Yale or MIT, you’re not qualified to tie your own shoes. They don’t know anything about foreign universities, though, so they figure one is as good as any other.


haha...well this is an African university so I'd imagine there are some preconception there. As I said - I'm thankful.

Fortunately I picked a niche where my countrymen dominate so all worked out fine.

>They don’t know anything about foreign universities, though, so they figure one is as good as any other.

I've literally seen directors grab a senior manager in the hall with "I'm supposed to interview this person who is from same country as you - look at this CV and tell me does this look solid"


US-specific, rather than 1st world, is enormous student debt.


So true.

I racked up a grand total of 4k USD (fees) debt.

3k legit expense, 1k me fkin up. Parents covered the 3 clean, 1k parental loan. I enter adult life nearly (1k) debt free with a world competitive degree.

And that's for an education I'll happily stack 1:1 with against other top unis globally.

I look at the US guys with 100k debts and my god...I'm thankful for my roll of life dice...competitive degree with near zero debt must be 0.1%


My word... Books cost more than that.


As an H1B, I can say that I get equal pay as an American/any person gets for the same job I am doing. I don’t think the issue is with immigration but more of businesses bring greedy to make more money skimping on paying decent pays. (On the side note, I don’t understand the concept of borders, when you have absolutely no control over where you are born. I can say I am intelligent than an average person regardless the ethnicity/country or what ever, which is why I am able to survive in the industry I am working)


Many in Congress are not just inept, they are carpetbaggers. They line their pockets by selling out the American people.


We have been told to get a good education, to get a good job and to live happier every after.

If that's what people believe, then it's a problem.

Even when people think back to the 1950's, people still struggled with money. It certainly wasn't "live happily ever after".


For "most", this is close to the truth.


What a creepy slave attitude. When you go to jail and someone tells you to pick up the soap, do you just do that?


This is an incorrect statement to make with the red hot jobs market that we have now. Extremely low unemployment, sky high salaries in a typical H1B sector - tech.

It has rarely been easier to get a job than it is now.


I'm not going to say you are wrong, but I would say your characterization is overstating the quality of the current job market in the US.

> Extremely low unemployment

This is accurate, if you measure U3 -- which is short term unemployed, as measured by surveys required to get short term unemployment insurance. If you measure the labor participation rate (U6), it shows something less than "extremely low unemployment".

That said, I think it's largely a problem with the candidates/employees and their mismatch between company expectations. Many unemployed have already filed for disability, so it's illegal for them to apply to work again. Many are convicted felons and have a criminal record which makes them unemployable in many careers. Many have life problems (learning disability, extreme substance abuse, illiterate, can't hold down a job, live in a region with a death of job openings and unable/unwilling to move, caring for a dependent, etc).


this has been debunked. some speculate that most of the difference in employment is in how the us counts uber drivers as being employed.

considering that it is the tech companies most involved in hiring h1b. it is not surprising that they are the main entities pushing this lie.


Why don't you show those studies that prove how the world finance, including the FED, has it backwards so I can pull a 2008-style big short? If you're right it shouldn't be hard to pull off a 5x return on investment through well placed shorts.

Also, the hot jobs market is not an American phenomenon. It's worldwide:

The Economist | The great jobs boom https://www.economist.com/leaders/2019/05/23/the-rich-world-...


uber is global. bet there is a direct correlation with uber setting up shop and countries suddenly getting low unemployment.


Let's make that bet together! I'm willing to put 50k USD on this. Show me the numbers.


https://www.businessinsider.com/uber-lyft-drivers-gig-econom...

It's so obvious that this is a gig economy thing where survey data are being manipulated for the benefit of these tech companies. the issue is that these companies can't justify all the h1b requests if so many us citizens are out of work. to fix that it's clear they are fudging the definition of an employee.

https://www.cbsnews.com/news/feds-first-rate-cut-in-10-years...

they've lowered the fed fun rate for the first time in over 10 years. the unemployment numbers are effectively a sham. you can't have recessionary pressures and "full employment".


>When H1Bs take your jobs, its hard to compete when they are paid less and willing to take less.

I think you're going to have a bad time arguing that point. H-1Bs constitute an fraction of the overall tech sector jobs. Personally, I might agree with you on the grounds that those H-1Bs cause a domino effect on overall job openings. However, the argument, at face value, that H-1Bs are a significant factor in the difficulty of finding a tech sector jobs is, in my opinion, largely a scapegoat.


... “We demonstrate that H-1Bs given to a firm on average do not raise the firm’s patenting and/or other employment, contrary to firms’ frequent claims. Overall our results are more consistent with the second [i.e., the critics’] narrative, in which H-1Bs replace other workers to some extent, are paid less than alternative workers, and increase the firm’s profits (despite little, if any, effect on firm patenting).”

In addition, “we robustly find that new H-1Bs cause no significant increase in firm employment. New H-1Bs substantially and statistically significantly crowd out median employment of other workers,” they continue. This result conflicts with the widely repeated claim that foreign workers create American jobs, which is based, as we have previously reported, partly on the work of economist Madeline Zavodny of Agnes Scott College in Decatur, Georgia. Furthermore, “[o]ur results are consistent with the possibility that H-1B and non-H-1B workers are perfect substitutes. This is notable in light of frequent claims that H-1Bs have unique skills that cannot easily be obtained elsewhere.”

The authors of this “important” study “have done an exhaustive analysis, given the data available, and they have better data than anyone to date, best I can tell,” says labor force expert Hal Salzman of Rutgers University in New Brunswick, New Jersey, by e-mail. “And their findings are consistent with all the other analyses that were done competently—and consistent with what the companies themselves state is the function of H-1B (to lower wage costs and raise profits).”"

https://www.sciencemag.org/careers/2015/05/economists-h-1b-v... (Economists: H-1B visas suppress wages)

https://gspp.berkeley.edu/assets/uploads/research/pdf/h1b.pd... (The Effects of High-Skilled Immigration Policy on Firms: Evidence from Visa Lotteries)


> an fraction of the overall tech sector jobs

Wait, what? Where have you been? I mean, 9/10 is a fraction, so yeah… but I’ve been in software development for 25 years across five different geographic regions (of the United States) and I’m usually the _only_ non-Indian non-H1B software developer there.


I'm only seeing a total of < 500,000 according to the below link. That's a pretty small fraction of the total number of workers. I'm very open to anyone disputing that number.

https://economictimes.indiatimes.com/nri/visa-and-immigratio...


there are speculations that there are over 1 million h1b workers. this is not counting the other work visa program. the government and tech industries have been hiding their population.


How does this math work?

They take home $8070 [0].

The mortgage might be $2130 (assuming $360k house, $300k initial mortgage @ 5%) [1].

Credit cards of $50k - if they put $1000 on it each month @ 12% that's 70 months to pay off [2].

For $51k of student loans, lets say they are paying $985/month (which would take 5 years [3].)

So far I've used up $4115 and have $3955 left. Let's assume they pay $2000 for childcare and $1000/month for groceries for a family of three. They'll also have utilities and insurance payments to make. These are all insane number in my opinion, and I was already generous with overpaying on the credit cards and rapidly paying towards the student loans. Now they've only got $955/month left (which some people are actually able to live on.) What did I miss from their budget and which of the numbers did I get wrong?

I'm not saying the article is wrong. I'm saying what was the point of their example household?

[0] https://smartasset.com/taxes/connecticut-paycheck-calculator...

[1] http://www.calcxml.com/do/mortgage-calculator?skn=292#calcou...

[2] https://www.bankrate.com/calculators/credit-cards/credit-car...

[3] https://www.bankrate.com/calculators/college-planning/loan-c...


The article could have maybe picked someone more sympathetic.

These folks are actually doing quite well. And their housing is quite affordable.

But, you know, they ran up a bunch of consumer debt, including $8k on a high-interest TJ Maxx card...

The story here is of a middle-class couple overspending on consumer goods.


You forgot to factor in UberEats, Disney trips, and other one off expenses that end up easily being $75+ a pop. Expenses that some people would budget for a week or two (or longer), people are easily spending on a single event. That hefty $4000 in your checking account quickly dwindles down to nothing because they spent $500 bucks over the weekend on multiple UberEats and a quick run to the mall.


I think this is the right response to the gp's budget item enumeration.

People don't naturally pay the minimum for each necessary bill and never buy anything else. They have a stream of money and tend to spend it on what they see their costs are now.

Some adults are cognizant of future planning and are detailed with their budgets (past, present, and future), but I suspect most are too tired from working + raising kids to spend the extra mental effort to budget carefully and stick to it.


> balance of approximately $7,500

> about 23 years to pay it off

i'm guessing that's much much higher than 12% interest, although we don't know what the minimum payment is.

i just looked at this site (TJMaxx isn't available in my country [thankfully?]) and it's nearly 30%:

https://www.supermoney.com/reviews/personal-credit-cards/tjx...

not sure if correct but i've never seen 12%, only mid 20s


> not sure if correct but i've never seen 12%, only mid 20s

I think there are three classes of interest rates: - teaser rates (very low, but only in the first x months, then they reset to a standard rate) - standard rate for decent credit - default-risk rate -- card holders are moved to this rate by a clause in their contract if they default on any credit obligation on their credit report or if they miss a certain number of payments on the "due by" date.

I'm using my own terminology; no idea what industry jargon is for these.


Off the top of my head:

* Medical Insurance * 401(k) Contributions * HSA/FSA Contributions * Commuting Expenses * Auto Loan * Gas * Auto Insurance * Property Taxes (unless you rolled that into the mortgage) * Home owners insurance

All of that will easily chew up that 955 left a month. And, that doesn't even take into consideration a date night or two a month, and general keep me out of a depressive state stuff.


I did mention insurances, but missing their auto loan was a big omission! I used the estimate on the linked page for mortgage, which includes property taxes and insurance.

So that leaves the optional retirement and healthcare savings, plus commuting/gas (which may have some overlap.) And again I was going really high on the debt payoff estimates, groceries, and hopefully child care (though I have seen even worse.)

But yes if have student loans, but then choose to take on a car loan and a mortgage payment that stretches you thin, you start to have to choose between savings, debt pay off and fun things including eating out and more expensive forms of entertainment.

The snapshot isn't the complete picture, but they definitely look like they are in a perfectly reasonably situation, and they could have those optional debts paid down relatively quickly, which would massively ease up their budget.



Even if you buy your cars cash, unless you already have that much liquid sitting around you've gotta be saving hundreds every month to prep for the next car and for major repairs to the current car. You're either saving hundreds a month for future car expenses, already have a large savings (so, not these folks), or you're 100% for sure guaranteeing future debt.

[EDIT] which is to say that even without a car payment, you better be saving the equivalent of at least half a car payment a month, or you're probably falling behind.


Car payment, insurance, food, gas, tolls, oh and healthcare.


The mortgage would actually be closer to $1600 unless I'm missing something.


Taxes & insurance.


I've actually seen the opposite. Most people who get to the upper-middle class do so by smartly using debt.

Beyond the obvious examples of borrowing to get an in-demand education and buying real estate in an in-demand location -- there are other smart times to borrow as well, like to expand a business.

It's quite difficult to really get ahead without at least a little leverage.

The irony is that the poorer you are, the more likely you are afraid of any and all debt -- which can be a very bad thing. In philanthropy I've seen many stories of young people who refuse to go to college due to a cultural fear of debt -- which often gets them stuck with a lifetime of low earnings. Or folks avoid taking on a mortgage only to find that rent inflation makes it difficult for them to retire later in life.

(I realize that the article is much more focused on "bad" debt: car loans and running up credit cards to buy consumer goods.)


The way I see it 0% APR is getting paid to take out debt. 2% APR is breaking even. Inflation is 2% and Cash pays 2% in the right places.

Any time you have a chance to stash spending you were already making into 0% debt, you are coming out ahead.


What a lot of it really comes down to is investing in yourself as if you were a business.

There are plenty of reasons to take on debt that make business sense.

Most of what people go into this kind of debt over is not debt that a well-managed business would take on.


The Credit Card interest rates are at all time high, in spite of the fact the PRIME interest rates at historic lows. This is something no one is talking about.

The Corporate Debt is going to BITE so hard in the next recession -- I say, bring them the pitch forks and every person who had a C in their title be prepared for clawbacks!


Credit interest rates are low for those who have access and the ability to carefully utilize credit. Balance transfer and introductory offers are as low as they've ever been and you can get away with paying 4% interest annually, occasionally even 3%. That's competitive with the best mortgage rates!

But "Standard APRs" are crazy high at around 14-18%. I have never understood why credit rates are so high compared to literally any other type of borrowing. I also don't understand how standard rates are sky high while promotional rates are near the rock bottom.

It's baffling. But it's helped me manage big sums of debts during a couple of professional transitions I've gone through over the years. Without those 3-5% balance transfers I would still be deeply in debt today.


They're high because there's no collateral. When people default on credit cards the money is just gone, when people default on mortgages it's as if the bank owned the house and was renting to them.


> don't understand how standard rates are sky high while promotional rates are near the rock bottom.

Promo rates are the bank's marketing department paying to hook in the card holder on the probability that they will use the card for a long time. The standard rate largely factors in the cost of doing transactions (shared with the merchant percentage) and covering the risk of default.

The 14-18% rates go to 24%+ if the card holder moves to a higher risk class (recently defaulted on another card, missing payment dates, etc).


What are the yields on corporate debt? Companies will certainly downsize when the next recession hits, but if the interest rates are low and locked in, how bad will it be?


Rule #1: Do not use debt to fund consumption or purchase assets that historically are not expected to appreciate within 5 years.

People are getting into debt to buy cars and go on vacation, this is ridiculous. Buying a house, even if it's a stretch on your income -- is not too bad. You can build equity and there is lots of support, you can even rent out a room. But going into debt to buy a luxury car? Absolute stupidity.


Using debt to buy a depreciating asset is fine in a lot of situations, and different people are in different situations. For example, I'd rather have $20k in cash and a 3 year 1% loan for a car than have $0 in cash and no loan.

Making hard rules about debt is what gets people into trouble in the first place. We need to spend some time teaching/learning how to reason about debt in order to make these decisions.


You can make greater than a 1% return on your cash, so yeah that makes sense. Debt can be a valuable tool, but most people aren't using it correctly.


Buying cars with debt isn't insane because oftentimes the appreciating asset you're getting is your job.


To me "middle class lifestyle" means no debts other than mortgage, a place to call your own, and a car. With very heavy emphasis on "no debts". Car can be just about any decent car, doesn't even have to be new. Anybody can get a loan for a fancy car, so it no longer means what it used to. That's "middle class".


I agree with you but I think a lot of people have a definition of middle class that includes whatever Toyota 4Bagger Reddit is fawning over and a few of the designer whatever's that the Instagram influencers are shilling (i.e. a few "nice things") and excludes things like Walmart jeans and any lawnmower that you have to push yourself. You can do all that on middle class money, but you can't do all that and raise your kids in a good school district and pay down your student loans, etc. etc.


This is an interesting article and much of the discussion points out the structures in our society that are not optimized for the consumer. For example student loans, medical debts and high interest on credit cards.

But I would like to highlight that "middle class" is a made up concept and a fairly arbitrary estimation of class based on net mostly consumeristic factors.

For instance, to be middle class I should be able to pay for college with loans, own a home of ample size, have two cars and afford to have a child and pay for child care while both my partner and I work. I must maintain this definition of 'middle class' at all costs, even if that that means taking on $50,000 of credit card debt. Because I am middle class and I have the stuff to prove it.

Unfortunately, this means the middle class will continue to get poorer and deeper in debt because yes, wages have stagnated, but we continue to go into debt to maintain the appearance of middle classism based on consumeristic targets.


Reminds me of Russian literature where there is almost always some technically-still-aristocrat who is broke and going into debt to maintain his status, while scheming to regain his fortune through marriage or else inheritance


s/are not optimized for the consumer/optimized against the consumer/

Subtle, but important, difference.


They need to do a large consolidation loan and cut up the cards. paying 6 or 7 different cards at the mins kills people. I did this myself and my score went up 70 points. However, it's hard to convince a lender you're worthy of it. I think a lot of people need to change their ways after getting consolidated.

So now instead of 2100 a month paying mostly minimums and looking at 8 years I'm doing 1450 and looking at 3 years. The extra 600 I'm "saving" per month may sometimes go towards the consolidated loan, but often I need to use it - which is what the credit cards were piling up for.

Debt can be a trap because people are simply not paid enough but their expenses outweigh their income. If this happens you need to change jobs, ask your boss for more or change your budget. In my case I asked for $30k more per year and got $20k more per year.

Other tricks: Go to ting or a cheap MNVO, Stop justifying yet another $10 / month netflix/prime/hulu - they all add up quickly. Get off the $160/mo cable plan. Buy your own cable modem and don't rent it from the cable company. They cost $40 and your cable provider is renting it to you for $10 per month.

Food: Set up a "chipotle" at your house, cook in large batches and think of ways to make Tacos or Burritos quickly. This is the most complicated area - people get tired of food quickly. Food can be the most expensive if you just keep eating out.

And of course, as mentioned many times - budget budget budget. There's no way to get out of debt if you don't simply have a balance sheet showing income and expenditures per month. If you don't know then there's no way to stay below the line.

I'm sure there are some banks out there now that help with this. I'm sure it's been said elsewhere but you don't owe society anything - you're just here like everyone else. Stop gifting people, stop xmas shopping, stop going to weddings, stop having kids. I've done all these things and I'm quite happy. My parents stopped sending me stuff and there's no expectations either way now, it's fabulous for everyone.


Buisness investment was negative last quarter but consumer spending was robust, we're a service economy now and people are going into debt to keep it growing. The next recession will be caused when all these middle class folk are forced to deleverage or foreclose.


Please let me know 1 month before that starts to snowball. Thx.


"Earlier this year, Mr. Guzman put his credit cards in a Ziploc bag with water and placed it in the freezer."

Mr. Guzman literally froze his credit!


Two definitions of middle class:

Marx: the section of society that makes their income from a combination of capital and labor.

WSJ: people that buy more expensive things than Doritos


If you are deep in debt, you are not middle class.


A bit pedantic, I guess. I interpret the title as "getting deep in debt to continue living like someone in middle class"


Unpopular opinion: If you can't afford to buy the crappiest home within a somewhat unreasonable commute to your office, you are not colloquially middle class.

While you may fall in the middle of the distribution, when most people say 'middle class' they mean you have a reasonable amount of stability and security in your life.


You just expelled every family with a mortgage or a car payment or a student loan from the middle class. You also radically redefined the concept of "middle".


I didn't down vote but I think the clarification for "deep debt" would not include a low interest home mortgage or a car payment which you can also get as low as 0% interest on. Also many people have a student loan debt that can easily be paid off in a few years.

On a side note, I think all the above are excellent ways of debt.

Right now you can get a mortgage for under 4%. Mortgages typically do not compound interest. So it makes more sense to dump your savings into one of many savings that pay a similar interest rate or higher & do compound interest.

Many car dealers have 0% interest if you want to buy your car & not lease.

Of course any education debt that gets you a salary much higher than the debt makes sense as well.


This is why Bernie's Cancel all Student Debt and make colleges tuition-free makes really good economic sense. Student Debt is a huge weight on our economy. Our economy runs on consumer spending and Bernie's policies, including Medicare for All will increase consumer spending and make starting businesses a lot easier.

EDIT: Here is an interesting interview from Asher Edelman about the velocity of money and Bernie. https://www.youtube.com/watch?v=a9xSVzdUNqo


I'm sure the tradesmen who didn't go to college would be fine with their tax money going to someone who spent 4 years studying art history.


I'm sure the tradesmen would prefer they buy his/her products vs paying for student debt.


I'm sure a tradesman would much prefer his kids being able to afford college too. And actually there are a lot of tradesmen who probably would like to be able to afford to go to college.


That could be satisfied by making college free going forwards but not cancelling any outstanding debt.


That's a fairness argument. How about this, in the 1980's I got a BSME for under $20k since the State of California paid for most of it.

Friend of mine got a free ride to MIT courtesy of wealthy grandparents on his mothers side.

Another friends single mother was on welfare, as a reasult he got a bunch of grants which paid for everything. He was lucky because he managed to get his BSEE before Reagan made sure kids like him got screwed good and hard.

One can argue that that people currently suffering under high levels of student debt were given a raw deal already.

Life is so very unfair already. That it's 'bad' to make things more fair for one set of people but not another is a weak argument in my opinion.


What if they become tradesmen?


Compared to trillions of dollars of unnecessary war spending we've already borrowed for and spent? I don't see tradesmen protesting that. At least forgiving loan debt generates economic activity and growth, as those dollars are now discretionary income to circulate through the economy, not another tax payment to the US government. Who do you think needs those services and might be more able to pay for them?

Tradesmen can be forgiven for not understanding macroeconomic policy though, which is why it isn't their role to set it, just as I don't ask an economist to weld a pipeline together. I can still respect the roles of both practitioners regardless.


> Compared to trillions of dollars of unnecessary war spending we've already borrowed for and spent?

Two wrongs don't make a right.

> Tradesmen can be forgiven for not understanding macroeconomic policy though

Well that's very classist of you. I've seen a whole mess of folks with fancy credentials that are about as useful as a pair of tits on a hog.

You know what I saw when I went to university? Professors willfully lowering the bar to cater to unmotived, unprepared students because tuition dollars. Fix that and then we can talk about free education, until then you're just pouring gasoline onto a dumpster fire.


> Well that's very classist of you. I've seen a whole mess of folks with fancy credentials that are about as useful as a pair of tits on a hog.

I wouldn't have a welder or other tradesperson perform neurosurgery on me, nor argue as my defense attorney in court. Why would I expect them any more qualified to set economic policy? That's not classism, that's common sense and reason. What is more astounding is that someone could be of the opinion that as person not educated in economics should have the ability to set such policy.

An intelligent, rational human being evaluates a decision and delegates the responsibility to a domain expert when they have ascertained that the domain knowledge and experience they have falls outside of what is required to make said decision. Any other course of action isn't just irrational, but possibly dangerous ("unknown unknowns", "you don't know what you don't know").


> Why would I expect them any more qualified to set economic policy?

Well that's moving the goalposts. You'd made it out like a tradesman couldn't understand economic policy to begin with, that's a different contention.


Yes, I’m saying exactly this, that your average tradesperson doesn’t understand macroeconomic policy, why monetary velocity is crucial for the health of an economic system, etc. Outliers certainly exist, but we’re talking average.


> why monetary velocity is crucial for the health of an economic system

I sincerely doubt it takes a university education to understand that more money changing hands is a good sign of a healthy economy. They do still teach civics and economics in high school.

It also doesn't take a degree to know that giving money to someone, or in this case something, with no incentive to act right is a bad thing.


Disagree on both points. Basic personal finance isn’t even taught in high school. Witness the financial illiteracy rate of the general public.

And it entirely makes sense to expunge debt that shouldn’t have existed because of broken public policy and an ignorant electorate that withdrew public funding from higher education, necessitating the need for education loans. I understand it might be difficult for some to understand this concept, which is why you push forward despite the opinion of those people.


"Don't worry, this time we're just lighting your money on fire without pissing on it first" is not likely to resonate with voters. Last time the government bailed things out it didn't exactly turn out well for the average voter, especially the blue collar ones (that said, it probably did make the '08 recession a hell of a lot less bad)

Like it or not those tradesmen get to vote. You're gonna need to do a job selling your bailout than "the money will bounce around our economy" (which is a valid claim IMO).


If you can't argue to someone's compassionate side, nor their economic rationally, all you're left with is negating the value of their vote whenever possible. There is no point in engaging or fighting against a brick wall.


> Compared to trillions of dollars of unnecessary war spending we've already borrowed for and spent?

There can be multiple bad ideas at one time. Wasting money is wasting money.


Where by "cancel student debt" Bernie just means that everyone will pay, not just the borrowers. Anything else would break the laws of physics. In the 60s you could fully finance your education working part time as a waiter/waitress (Elizabeth Warren is a notable example). But then government got involved, and now your education costs as much as a house. What Bernie is proposing is essentially an unlimited amount of money for the education industry to take, and no way for the taxpayer to refuse to pay. Thanks but no thanks.


coupled with changing the law so that this debt is dischargable - like any other - so that the economics of private uni/college also improve alongside (i believe his proposal is free public college/U).

it currently is not, which is just asinine; it's modern indentured servitude by any other name (naive 18y/o signs up after getting hustled, etc.)


Yes, this would be a really good change. As you said, it's insane you can't bankrupt on that debt.


I'm no expert by any means, but isn't this due to the idea that nearly all students would simply declare bankruptcy upon graduation?


That's always brought up but the debt used to be dischargeable and people didn't default on it at any abnormally high rate. With current loan inflated tuition prices I bet there would be a spike in "intentional" bankruptcy as tuition prices plummet towards their new equilibrium.


Most student debt is owed by people who are already in the top quartile of wealth. I like free money too, but let’s call it what it is: a handout to people who largely don’t need handouts.


Then there's those who've gotten to the point of giving themselves their own handout...https://www.wsj.com/articles/college-financial-aid-loophole-...


This isn't true, the majority of student debt is owned by those in the bottom 3 quartiles. Only 34% is owed by the top quartile.

https://www.urban.org/urban-wire/which-households-hold-most-...

Which means a student loan cancellation would help the middle class the most since student debt would be a higher percentage of their income and the bottom 75% hold 66% (the majority) of the debt.


Read your link again. It says 34% of educational debt is held by the highest quartile households by income. Only 17% by the lowest.


OP Said

> Most student debt is owed by people who are already in the top quartile of wealth

I interpreted most to mean majority. It's clear the middle quartiles holds the majority of the debt not the top.


I probably should have phrased that better. My point was that the top quartile has a disproportionately large amount of the debt.


2/3rds is owned by the top half.


This is demonstrably untrue, as 2010's SAFRA effectively nationalized 80% of student debt. Direct Loans by the government, not private lenders, comprise almost all of the student debt market, as of now.

https://en.wikipedia.org/wiki/Student_Aid_and_Fiscal_Respons...


I’m talking about the students who owe the money, not the lenders that own the debt.


Can those of us who were terrified of student loans and who scrimped through on extra hardship to avoid them have some of that money?


I'm genuinely not trying to be hateful, and these next sentences are not meant to be as shitty sounding as they might sound, but I don't know how else to phrase this. I have this question when I hear people like you say things like that:

Why can't you just support policies that help other people without worrying about yourself?

Is 'I had it bad so everyone else should, too' really where you want to live?


Well, if we're being shitty to each other... my tax burden is the thing that's hurting me the most - and you want to increase it (a lot) for your benefit. You can pay off your student loans, like we did. We can never pay off our taxes. Even if by some miracle Bernie doesn't confiscate my 401(k) savings and redistribute it to "the needy" and I can someday retire, I'll still be paying higher and higher taxes for somebody else to go to college... at least until the whole system collapses.


Because people with personal responsibility paid for themselves AND are now expected to pay for others through their taxes. Why should I be expected to pay for your poor financial decisions?


Honestly, this is the big difference I think in American and EU thinking (to be incredibly general). I am paying back my UK student loan, and if a party like Labour once again said they were going to make university tuition free again, I would vote for them in a heartbeat.

I don't care that I'd still have to pay, I want my country to be better. To be a bit melodramatic, yours and my ancestors sacrificed a lot to be where we are now. I'm just glad the only thing I'm likely going to need to sacrifice is some extra tax.


I see what you mean by trying to improve your own country. But consider this: college education is not for everyone. If someone doesn't decide to go to college and still makes a good living as a tradesman or even unskilled worker, why should they be taxed to subsidize someone else's college?

Why not just tax less and let people make their own decisions with how the money they've earned is spent. Every time you create a new tax it's one less choice (freedom) someone has in their life.


Good point. College (university for us!) is not for everyone, and I can't speak for America but I feel that we look down upon trades in the UK a little sometimes. Being a tradesman is a completely valid choice that I believe is equal with a more academic route.

That being said, it's hard to blame the individual going to university if there career requires that and it's also a fact that a tradesman is probably going to be earning a lot more than a student for at least the period of time they're studying.

I also believe (like I said before) that allowing people financial help to study improves the whole country, especially being that every family can afford to send their children so for myself I can justify this extra tax.

Your point hasn't swayed me, but it has made me consider the 'other side' at least so thank you.


> we look down upon trades in the UK a little sometimes. Being a tradesman is a completely valid choice that I believe is equal with a more academic route.

Same here in the US, but you're right, it's an honorable job and nothing wrong with it.

> allowing people financial help to study improves the whole country, especially being that every family can afford to send their children

In the US we already have that as a system. See: FAFSA/Pell Grants. Those with low incomes already do receive free/subsidized college education.

These "new" proposals say that _everyone_ regardless of income can get free money for college. So in that way it's really just a giveaway for the middle/upper class. Considering that, the argument that it will help the poor doesn't hold water for me.

> Your point hasn't swayed me, but it has made me consider the 'other side' at least so thank you.

Same here, appreciate debating with someone respectfully even if opinions are different.


You're comparing different things.

If you had just paid off your student loans by diligently saving and the Labour party said they'll forgive the debt of your classmates who partied it up and never paid back their loans would you feel the same?


I get your point, but it doesn't work like that in the UK so your example wouldn't happen. However, if it did.. I don't think I'd be annoyed but that's hard to say until it happens.

In some respects, it would actually work in a similar way though. In their statement, they said that they'd forgive the student debt of those currently studying, but not those who had already finished (like me). For this I can safely say that I'd still be incredibly happy.

By the way, I'm not trying to paint American's in a negative light. I'm a big fan of America, but it is a difference as far as I can tell, although which line of thinking is right is incredibly hard to say.


The distinction between the two scenarios is important though, because if the US gov't was to institute changes to college where newly attending students got a break that earlier students didn't, sure you'd get pushback, but not nearly as much as just forgiving existing student loans.

The US is more individualistic than the UK, but we're not entirely heartless bastards.


Because that's how civilization operates. Why should I subsidize someone else's electric car? Why should I pay for firefighters even though my house has a very low risk of burning down? Why should I pay for a rehab clinic even though I'm not an addict?

Because it makes society better off, that's why.


> Why should I subsidize someone else's electric car?

You shouldn't have to, that's absurd! They can buy their own car :)

> Why should I pay for firefighters even though my house has a very low risk of burning down?

To protect the life and property of the entire community. This gets down to the point of being a necessity to protect a large group of people vs an individuals choices affecting _only_ themselves.

> Why should I pay for a rehab clinic even though I'm not an addict?

Debatable whether you should have to pay for this or not. But I would prioritize someone's life when it's on the line over a nicety like a college education. You can survive without a college education, just like you can survive without a subsidized Tesla.


By personal responsibility, I'm guessing you mean saving and not getting into debt. It is rather strange that you propose everyone does this, since

A) money IS debt. The money in your savings account, that you are so responsible with, is money that originated as a bank loan, or government debt.

B) If everyone is responsible, then you end up with the paradox of thrift where you get a deflation spiral and economy tanks.

So thank those who are being "irresponsible" for your savings, because without them you would have no income.

If you want to know more about how money works, read the great resource provided by the Bank of England.

https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...

Or watch this great video by David Graeber,

https://www.youtube.com/watch?v=LxJW7hl8oqM


Are you arguing that I should be forced to spend my money in a certain way else the government should take it away?

Why is what I do with my own money any of your or the government's business?

> money IS debt. The money in your savings account, that you are so responsible with, is money that originated as a bank loan, or government debt.

You're going to need to explain a bit more here. Arguing that money that was _formerly_ debt is still debt when in my possession is gonna take some strong convincing :)


Did you check out the video? If you want more detail, read the link I posted from the bank England


I honestly hadn't but just went back and watched it not. Interesting explanation there, thanks for sharing. So the point is, like you pointed out, money is just government debt.

Let's say I pay for my education in cash directly to the university, without taking any private or public sector loans. Would that cause a "deflation spiral" as you put it? It's just bypassing a middleman that is unnecessary if I had saved that cash over time to be able to pay for the goods/service I'm receiving (in this case: an education). So, yes, while money may be government debt, I don't see how avoiding private/public loans would have negative economic impacts overall on society.


I had it bad so everyone else should, too

It's not that at all. It's "I didn't live high on the hog in college, so why should I pay you to?"


Did you demand money when they bailed out the banks? Or what about when they recently passed massive tax cuts for the rich? Did you demand money then? Do you demand money every time someone declares bankruptcy due to medical bills (they can't give that medical treatment back!).

So many garbage people that can't see the forest for the trees. Think of how many more customers with disposable income you could have (if you wanted to start a business) if so many people in this country weren't deep in debt.


Calling people "human garbage" and throwing an tantrum does not magically make scarcity disappear.


the bailouts were loans that were paid back with interest. the government profited off lending the banks money.


And what was the interest rate charged?

Bet it was lower than what the government charges kids that are trying to make a better life for themselves and contribute to a productive society.

Human garbage.


I wont try to interpret this accurately without help BUT it looks like the government profited 100B on 600B in loans? https://projects.propublica.org/bailout/

16%?

its also important to remember that a bunch of banks were forced to take bailouts against their own wishes, as either a precautionary measure, or possibly as marketing spin to make it look like everyone was in equal trouble. https://projects.propublica.org/bailout/main/list/stress_tes... Some banks literally didnt have a choice, the government said "you are taking this money."


... or those of us who paid ours off years ago?


Do you want medical treatment when you're not injured? You should be thankful you avoided hardship.




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