The end of the New Deal

4 Jul

When FDR announced his "New Deal," it was an effort to change the underlying realities of Capitalism. It was the closet we have ever come to a socialist revolution in this country and even in its limited forms it was a resounding success (Whether you are ideologically inclined to believe it was Keynesian economics or the WWII that made it so). Arguably, the most successful public policy program in US history, Social Security, was central to the the New Deal. The idea was simple enough: Get the elderly out of poverty. At the time, the elderly made up the largest single group of individuals living under the poverty line. Social Security changed that dramatically. Yet aside from the real danger of Social Security running out of money, I fear that the New Deal goals are being lost in a much more insidious manner.

The New York Times reports this morning on the rise of debt amongst the elderly:

One in four families headed by someone 65 or older still had a mortgage to pay in 2001, the most recent data available. In 1989, just one in six still had house payments to make.

For many aging Americans, lingering expenses from their peak earning years, like car payments and college tuition for their children, have made it difficult to rip up their mortgages. Others have taken out fresh loans on their homes to pay off other debts, help their children and cover medical expenses.

Some brush off concerns, saying they expect to live longer and to work longer. Why not take out a 30-year home loan at age 65 to raise cash now? At low enough interest rates, the monthly housing payments could remain manageable.

But as older borrowers try to stretch what are often fixed incomes to cover the payments, they are increasingly putting their homes at risk, running into financial trouble, turning to their adult children for help and even filing for bankruptcy protection, policy groups and bankruptcy lawyers say. Many are forgoing retirement and taking on part-time work.

As a group, people over 65 have the distinction of having not only the fastest-growing home debt, but also the fastest-growing share of personal bankruptcy filings and the biggest growth in demand for credit counseling.

At the end of the article is a brief suggestion of why the elderly are deciding to take on all this debt:

In studying bankruptcy filings in 2001 as a member of the Consumer Bankruptcy Project, Elizabeth Warren, a professor at Harvard Law School, found the trend startling: "I was very surprised to see the number of older people who explained their bankruptcies in terms of their children's failed marriages, their children's drug addictions, their children's lack of health insurance. The impulse to take care of one's children never goes away."

See the New Deal was about giving everyone a fair deal. Since the youth of this country aren't getting one, it falls upon our parents to provide the safety net that should be provided by the government. The rising debt amongst the elderly is a sign that the ideals of the New Deal are lost and not even the elderly will be spared unless we recommit ourselves to providing a fair deal to everyone.

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