award tour

I came across this fantastic lecture by Harvard Law Professor Elizabeth Warren from UC Berkley entitled The Coming Collapse of the Middle Class. Warren seems to be the media’s go-to lately when talking about bankruptcy and credit card debt. I’ve seen her in several New York Times articles, on Frontline, and in the documentary Maxed Out.

The lecture talks about the change in the middle class from the mid-70s to today and presents some really interesting data. Warren spends the majority of the lecture talking about the decline in savings rates and asks the question “where is all the money going”. Around the 15-minute mark she starts going into different items and shows how basically all consumer goods (like clothes, food, home appliances, etc) are 20-50% cheaper today (inflation adjusted) than back in the mid-70s. Where the money is going is in mortgage payments (up 75% excluding upkeep costs), owning a second car (50% increase), and health care costs (up 75%). She then spends quite a bit of time talking about why the increase in housing and health care costs create a “living on the edge” situation for dual income families.

The part which I found really interesting was her discussion about education and bankruptcy in the middle class. On education, she mentions how in the mid-70s the majority of Americans believed you could enter “the middle class” with a high school diploma and a strong work ethic. Today, twice as many Americans believe the moon landing was faked than believe you can make it into the middle class on a high school education. She then goes on to discuss how that means, in a generation, getting to the middle class went from 12 years of taxpayer paid education to 2 years of paid pre-school, 12 years of taxpayer paid education, and 4 years of paid post-secondary.

The numbers on bankruptcy filing was genuinely surprising to me. Ninety percent of families file for bankruptcy because of one of three reasons: job loss, medical problem in the family, or family breakup. Nearly half of those who filed had two of those three. “More children live in homes that will file for bankruptcy this year than live in homes that will file for divorce. This has been true since the late 1990s.” Put another way, “you know anyone who got divorced in the last 6 or 7 years? Know any children who come from divorced families in the last 6 or 7 years? Than statistically speaking, assuming you know a random cross sampling of Americans, you know more people whose family has filed for bankruptcy.” She goes on to mention how there is an enormous stigma attached to bankruptcy. Also telling, in some research Warren had done, 85% of people they spoke to who had filed for bankruptcy had kept it a secret from their parents, a best friend, or their children.

Here’s the full video. It’s an hours long so you might want to get in a comfy seat. Also just wanted to give a hat tip to Little Bites of Point for the link. That blog comes across some great youtube content concerning economics.

The Seattle Times has special section called Confronting Malaria where it talks about the disease and what the Gates Foundation is trying to do to address such a massive problem. The section includes a really interesting interview with Gates (transcript and audio) where he points out the huge implications of malaria. Annually there are 200 million cases of malaria and 1 million related deaths (90% of which are children in Africa).

What caught my ear in the Gates interview concerns how malaria creates a huge socioeconomic burden. First, the rate of malaria infections has a direct relation on the number of children in each family (in order to get a child to adulthood) which creates a horrible cycle of poverty. Second, the cost of trying to save a child infected with malaria essentially bankrupts a family. A viable vaccine would not only prevent a million deaths a year but would also create a huge win against global poverty.

The other thing which caught my ear was on the topic of “making people care”. The reporter mentioned how in the last five years malaria has gone from “forgotten” to being a fund raiser on American Idol. But Gates makes an interesting statement about the current state of affairs:

If we re-sorted the world and your neighbors were dying of malaria — that a kid you’d met and had a human connection with — the amount of urgency, resources going into this would be a hundred times what it is even now. I mean it would be viewed as a total crisis.

What interested me about that statement, of reshuffling your neighbors, is that it isn’t just an issue of gaining global perspective. It’s something that happens on a national and local level too. Just think about how AIDS in America was totally trivialized until it significantly affected groups other than homosexuals. Just think about how a shooting is addressed in your city when it happens in a “good part of town” versus a “bad part of town”.

60 Minutes has an interview with U.S. Comptroller General David Walker and it is a “must see”. Walker, whose tone throughout the interview is serious as cancer, is the only person in Washington who wants to admit that the United States is going broke. Walker has given up on elected officials and has taken his message directly to taxpayers and opinion makers, with an Al Gore style slideshow, hoping to shape the debate in the next presidential election.

You can watch the video here but here’s some of the dizzy quotes from the piece:

• In 2040, “If nothing changes, the federal government’s not gonna be able to do much more than pay interest on the mounting debt and some entitlement benefits. It won’t have money left for anything else – national defense, homeland security, education, you name it,”
• Talks about how Medicare and Medicaid are financial disasters and calls the Republicans Perscription Drug Plan “probably the most fiscally irresponsible piece of legislation since the 1960s”
• To pay from the Drug Plan “[The US would] have to have eight trillion dollars today, invested in treasury rates, to deliver on that promise”. They have zero.
• “He does believe the current health care system is way too expensive, and overrated.”
• “On cost we’re number one in the world. We spend 50 percent more of our economy on health care than any nation on earth”
• “We have the largest uninsured population of any major industrialized nation. We have above average infant mortality, below average life expectancy, and much higher than average medical error rates for an industrialized nation”
• And as pointed out by Steve Kroft: “You’re probably expecting to hear from someone who disagrees with the comptroller general’s numbers, projections, and analysis. But hardly anyone does.”
• “We are mortgaging the future of our children and grandchildren at record rates, and that is not only an issue of fiscal irresponsibility, it’s an issue of immorality”