Frayed Bootstraps

Peter Gosselin, whose book High Wire: The Precarious Financial Lives of American Families languishes on my to-read list, has an op ed in the LA Times today. He writes, "[t]he prosperity we enjoyed [between 1980 and 2007] was purchased at a price of diminished security for our families and ourselves. Even as our incomes went up, economic risks -- the costs of being laid off, of suffering a work-stopping illness or of a catastrophe like a house fire -- that were once largely borne on the broad shoulders of business and government were being shifted onto the backs of ordinary families, from the working poor to the reasonably rich."

Gosselin's thesis, both in the LA Times and (so far as I understand) in his book, is that from employer-sponsored health insurance to homeowners insurance to college funding, individuals continue to bear more and more responsibility for ensuring their own financial stability, and that the consequences of failure are more and more serious. Although my memory is not long enough to corroborate his theory through my own anecdata, I find the whole thing just depressing enough to be completely plausible. Many pf bloggers wax poetic about the bootstrap approach to financial stability: those who have the guts and the fortitude can lift themselves by their own bootstraps into a better financial position; those who lack those qualities get what they deserve. If Gosselin is correct, many of the bootstrappers are positioned more precariously than they would like to believe.

Let's be honest. If you had a medical emergency and your health insurance provider (assuming you even have one) rejects your claim for coverage, how much of a hit can you afford? A broken leg? A car accident? A chronic illness? Chemo? If I had to cover the costs for anything requiring any sort of lengthy hospital stay, I would be knocked flat on my ass, economically speaking. And I'm not in the least hurting to begin with.

A bootstrap mindset is attractive to people on the upswing because it affirms their own deservingness of their success, and provides mental insulation from having to think about whether that success might not be permanent. It might be comforting to someone in the depths, too, because it provides a road map out. But although the bootstrap concept might be useful for any of these reasons, it's true only in a limited way.

On Presidential Wealth, and Federal Tax Policy, and The Columnist Who Cried Hypocrisy

It's presidential campaign season, which means it's once again time for largely innumerate journalists to read the tea leaves of candidates' financial disclosures in hopes of finding something--anything!--juicy enough to hold their largely innumerate readers' attention. Look, here's some dirt on Barack Obama's stash o' cash! And here's a peek behind John McCain's financial curtain! I'm not sure why anyone thinks this is a useful exercise. What value do we take from this armchair analysis, anyway?

One, we confirm that the candidates are far richer than most of us are. Just like pretty much every other person ever elected to national office. Wealth and power are strongly correlated, no surprise there. We don't learn with much specificity at all just how much richer than the average American they are; each category of assets is disclosed by a range (say, $1million to $5million) instead of with specificity. Add up the low end of each range and you get a very different picture than if you add up the high end of that range. So either specificity is not important, in which case we learn what we already knew (to quote Dave Chappelle's Rick James bit, "I'm rich, bitch!"), or specificity is important, in which case we don't get it because of how the disclosures are structured.

Two, we learn whether a candidate is invested in nasty, earth destroying, human rights abusing companies, either with individual stocks of through mutual funds. OK, that's interesting, and certainly juicy in a wonk-meets-US Weekly sort of a way. I like to judge people as much as the next opinionista. But precisely what that tells us in the policy dimension is unclear-- for example, both Obama and McCain have recently sold off funds that include companies doing business in Sudan. That doesn't tell us how their administration would address Darfur. Maybe it tells us they're interested in divestiture as one of many tools for political pressure and social change, and that they'll use the office of the president to stop the violence and to get the truth and reconciliation ball rolling; maybe it just tells us they don't want to get asked about Darfur on the campaign trail because genocide is so damn depressing and embarrassingly enough they aren't planning on doing anything about it. Regardless of what a candidate's financial disclosure says, people of good conscience should be asking the candidates "How would you use the resources and power of the United States to stop genocide, in Darfur and elsewhere?" No one gets a pass on genocide, for pete's sake. But financial disclosures don't provide us with a deeper way of asking that question.

That's about it, so far as I can see.

Tom Middleton, however, seems to believe we can add a third item to the list: Oh noes, the tax-and-spend liberal invests in tax-free accounts! The hypocrisy! The humanity! The humocrisy! To the pillory with him!

Here's the scoop. At the end of 2007, Obama (or the Obamas; it's not clear from the article whether the account is joint) has between $1m at $5m in the Northern Municipal Money Market Fund.* It's his largest investment account, and because it includes assets like municipal bonds, it's largely tax free. Those types of investments are also some of the lowest-risk funds out there, which is just possibly maybe the tiniest bit relevant, considering the Obamas did not grow up wealthy, did not inherit or marry wealth, have in fact only come by most of their wealth relatively recently, and didn't even pay off their student loans until the royalties on his bestsellers hit their bank account, so possibly there's some element of wanting to play it real safe-like. Pop-psych notwithstanding, given the fact that Obama has said he would propose various "tax increases" (or, in less biased language, stop exempting certain types of income from taxes for certain high-income individuals), does his investment in tax-free funds present an appearance of hypocrisy? What a profoundly stupid question, thank you for asking, Tom. No, it does not. Here's why.

In the scheme of things, tax-free or tax-advantaged municipal investments (typically for physical infrastructure, like roads and bridges, or institutional infrastructure like schools, or for budget-balancing or debt repayment) are the types of investments that are socially beneficial. When a city or county can't afford these types of investments or expenses on their own, they turn to bonding, and in order to get people to buy the low-yield bonds instead of higher-potential stocks or mutual funds, government uses the carrot of tax incentives. It is responsible social policy to incentivize desirable behavior.

If Obama were proposing to begin taxing income from bonds, notes, and the like then yes, that would be hypocritical. But Middleton (and others who have jumped on the imaginary hypocrisy wagon train) is confusing apples with oranges despite the fact that they look, smell, feel, and taste very different. It's not his fault. Some conservatives have been brainwashed into believing that a tax is a tax is a tax. Those are not the people I want in charge of anything. Those people do not understand, or they willfully ignore, both nuance and logic, and they care only about scoring cheap points with other people who do not understand, or who wilfully ignore, both nuance and logic. Middleton implies that in order to be logically consistent, a person who wants to eliminate one tax exemption must work to eliminate all tax exemptions, lest they be a hypocrite. That's the definition of a logical fallacy. It's equivalent to saying that someone who wants to raise school district taxes must want to tax all the money in your 401(k) and Roth IRA, too. It's just a fantastically ill-conceived statement.

Obama's proposal to stop exempting high earners from paying their fair share of a 12.4% Social Security payroll tax (currently, income over $102,000/year is not subject to this tax) is a different animal entirely from rolling back the policy of not taxing income from bond investments. The former would proportionately spread the load among all taxpayers for a defined social program of general benefit; the latter would disincentive a socially useful incentive program to the point where bonding would no longer be a viable method of public financing, and would push money to a general fund with no guarantee of social benefit. Apples, meet oranges.

And underlying all of this is an idea that progressive values and a desire to strengthen the social safety net carries with it an obligation to give the government as much money as possible. Wrong for two reasons. First of all, I'm not especially interested in maximizing my tax exposure under the current regime given that something approaching half of all revnues paid fund militarism and fearmongering. Second of all, and this is especially so for those of us who do not have million dollar investment accounts, there is no social safety net. Not really, nothing beyond the kindness of other people, and the one you are able to create for yourself. It would be great if there were, but until that day shows up, there's no conflict between progressive politics and tax-advantaged investing.

Go ahead and hate on Obama's Social Security tax proposal; go ahead and hate on the failure to tax bond income. (I am not going to waste my time hating on either, because they both make a great deal of sense to me.) But do it honestly, and make sure your criticisms pass the smell test.

* I'm working from the article because I can't find his most recent financial disclosure online in my quick googling, and therefore can't verify whether this is all correct as Middleton reported.

Bloomberg Named In Pregnancy Discrimination Lawsuit

As though pregnancy, with its morning sickness, wardrobe limbo, and constant need to pee, was not already enjoyable enough, 58 women who work (or used to work) at Bloomberg LP, the financial services corporation founded by current NYC mayor Michael Bloomberg are suing the company, alleging they were discriminated against for getting knocked up.

The lawsuit also claims the women were paid less when they returned from maternity leave and were demoted and replaced by "junior" male employees.
...
Stanford Law School Professor Deborah Rhode said, "It's not uncommon to find employers responding in this way to employees who become pregnant."

Asked how hard it would be to prove discrimination, she replied: "It's not rocket science ... There's usually documentary evidence that shows what was their job before and what was their job when they came back. And is there any other plausible explanation other than discrimination."

Looks like it's time for a quick pregnancy discrimination primer. Gather 'round, chickadees:

It is illegal for an employer to refuse to hire a woman because she is pregnant.

It is illegal for an employer to fire a woman because she is pregnant.

It is illegal for an employer to demote a woman, reduce her hours, dock her pay, or backpedal her seniority because she is pregnant.

It is illegal for an employer to ask a woman about her baby-making plans.

It is illegal for an employer to tie a pregnant woman's eligibility for benfits, like health insurance or parental leave, to her marital status.

More from 'Lect law on what is and is not allowed, how much leave you're entitled to, and what to do if your employer decides to break the law.

Republicans In Congress Could Not Care Less About Pay Discrimination

Earlier this week Republican Senators blocked a vote on the Lilly Ledbetter Fair Pay Act. Say it with me now: that's crap.

Equal Pay Day

It's Equal Pay Day, netizens! I am blogging for fair pay for women today in an event sponsored by the National Women's Law Center.

It's been nearly a year since Lilly Ledbetter lost her pay discrimination case before the Supreme Court. It's not that Ledbetter wasn't paid less than her male colleagues at the Goodyear plant in Gadsden, Alabama; she was. It's not that this lesser pay wasn't a form of sex discrimination; a jury had already concluded it was. It's that she was discriminated against for so long that it basically stopped counting. Say wha?

In the lower court, Ledbetter won a verdict against Goodyear that was based on nineteen years of discriminatory compensation and performance reviews. Nineteen years. That's longer than I've been able to do long division. But Title VII's statute of limitations requires victims of workplace discrimination to file suit within 180 days of being discriminated against. And because Lilly Ledbetter didn't know she'd been discriminated against--didn't know that she was routinely receiving smaller raises than her male colleagues--until that small 180-day window had slammed shut, she was SOL. This decision overturned the established and eminently logical interpretation of Title VII's statute of limitations, which considered every paycheck diminished by discriminatory activity to be a separate act of discrimination.

Justice Ginsberg (who was, in her lawyer days, an amazing advocate for sex equity in the workplace, and who is now the only sitting female Justice) pointed out the impossible position this new statute of limitations put Lilly Ledbetter, and countless other women in: file at the first sign of any possible discrimination, go to court with an undeveloped factual record, and risk being thrown out of court as a crackpot conspiracy theorist, or wait until the facts are better developed, the discrimination is more clearly established, and get thrown out of court as to late to the pay-discrimination party. Either way, the employer wins. Deal or no deal?

Congress is considering legislation to prevent employees from having to make this impossible "choice." Please voice your support of the Lilly Ledbetter Fair Pay Act. But until Congress steps up, what do we do to protect our most valuable financial assets, i.e., our earning power?

First, this cultural taboo against talking about money has got to go. In addition to being healthier, saner, and better for everybody to get over our collective money weirdness, open conversations about salaries, wages, and benefits appear to be the only way victims of pay discrimination have a prayer of finding out about the discrimination within the fantastically short statute of limitations period. Having more information also sets you up better to negotiate from a position of authority. Talk to friends in your company and in your industry outside your company. Talk about pay scales, bonus systems, bennies. Can you gather more data points on the internet or through professional organizations? You want to go into informational hunter-gatherer mode. This will help you get to...

Step number 2, which is the ask. It's never too early in your career to start. All the cool kids are doing it. And there's a good reason why: If you don't ask, you won't get it. And women ask all too infrequently compared with men. Go in equipped with your research. You don't need to dispense graphs and spreadsheets, just confidence and facts. Compare this:

"In this market, for my level of experience, the median salary is X. Based on my performance reviews and abc projects, I think we agree that my work here is well above average. Therefore I think a salary of X+Y(more money, more vacation, more educational benefits, whatever) is fair and appropriate.

with this:

"Would you like to give me more money? Please?"

Just imagine which one you'll feel more confident saying, and which one your employer is going to find more compelling. It can be especially hard for women to be direct, to think of their desires as valid, rather than just taking what they are given--those things are hard to reconcile with a social expectation that we will be relational, non-confrontational, and wholly other-oriented. But you know you deserve to be paid what you're worth. You know you deserve a good advocate, and you are her. If you're nervous about it, do a couple of role plays with a friend. Have a strong cup of coffee. And then ask.

But in case they say no, it's time for step three. OK, let's take a quick detour to step two and a half for those of you who are otherwise fond of your current job. If you don't get your ask, find out what it would take to get it in the future. Is it another year of experience? A change in job title that would change your pay scale? Some additional training you could do? If you like your job, and you want to stay there, find out where there are holes in your resume that would set you up for what you're asking for. And then do them. And then remind your boss that you did them and revist the "Can I haz muny plz now?" discussion.

If you aren't in love with your job, by all means go straight to step three. Look around. You don't owe any employer your continued allegiance. If they're not doing right by you, and you don't investigate your other options, you're not doing right by yourself. And then repeat steps one and two as your job search proceeds.

The solution to unequal pay is not going to be solved on an individual basis. It's going to take continued advocacy to end all forms of workplace discrimination. But in your spare time, when you're not pushing for broad social change, don't forget to look out for your own interests, as well.

This post was featured in the 149th Carnival of Personal Finance, hosted by The Happy Rock.

Blog For Choice 2008: Personal Finance and Pro-Choice Politics

A while back I had a discussion with an acquaintance of mine about what he thought was the single best poverty-alleviating measure in the history of the United States. He was a labor organizer, so I shouldn't have been surprised that he said without hesitation that unions were far and away the most important development in that respect. And probably because he was a he, and consequently he'd never had to make diligently remaining NotPregnant a big part of his adult life, he was pretty surprised when I said I suspected readily available family planning information and supplies had had an even bigger effect on the American family's ability to get ahead and stay afloat financially than the labor movement. After all, what good is making the pie bigger if it can't keep pace with the number of people eating it? The ability to decide whether and when to have children is not just a feminist issue, it is also a financial issue. In some families both here and around the world, access to information and contraceptives may be a question of financial survival. Even in my rather comfortable corner of the world, these resources have been key to planning for my future and taking control of my own economic independence.

For all of you who thought you'd never see the day when Roe v. Wade would be commemorated on a personal finance blog, think about it. Roe, and the cases that came before and after it involving contraception access, have ensured in this country a woman's right to control when they have children, or whether they have them at all. That decision is not just about childbearing, it's about a woman's ability to complete her education or to stay in the workforce, to earn a wage, to avoid economic dependence on or permanent and unwanted legal ties to any partner, to avoid substantial medical risks and the attendant healthcare costs of pregnancy, childbirth, and parenthood, to provide adequately for the family she already has or hopes to have someday. Think about that the next time you are standing in line at the pharmacy to pick up your birth control prescription.

On a day-to-day basis, I take my ability to control my fertility for granted. I assume that because I do not consider myself ready to have a child that *poof!* I will not have a child. I had accurate, comprehensive sex education years before I ever had sex. I have never had sex without using at least one form of safe and effective birth control, which I have always been able to obtain for a price I was readily able to pay. I have never had an unplanned pregnancy. Because of when and where I was born, if I had unexpectedly found myself pregnant I would have had options about what to do. Once I'm married, my husband and I will be able to wait to have children until we decide our relationship and our finances are strong enough to take on those new responsibilities. In each and every one of these respects I have been spectacularly fortunate, because those are resources not every woman has, and choices not every woman gets to make. And that's just not right. Women who can't control their reproductive life can't control their economic life.

MLK Day

In honor of martin Luther King Jr. Day, I encourage you to head over to Money and Values and check out Martin Luther King on Economic Justice.

Also worth a thoughtful read is Martin Luther King On Frugality on the same site.

Subprime Lending Debacle Knocks Women Of Color Harder

The New York Times reports that Baltimore Finds Subprime Crisis Snags Women:

The foreclosures threaten the neighborhood's fragile stability. And they highlight a broader dimension of the housing meltdown: subprime mortgages, which are driving the foreclosure rate, have gone disproportionately to women.

Single women have been among the fastest-growing groups of homeowners in recent years, and in Baltimore they accounted for 40 percent of home sales in 2006, twice the national average, according to the National Association of Realtors. Nearly half of these mortgages were subprime, National Community Reinvestment Coalition found.

...

The findings support earlier research by the Consumers Union, which attributed some of the disparity to instability in women's credit status because of divorce or family medical emergency. Women also have less wealth than men, which increases the likelihood that they will get subprime loans.

Increased homeownership has been the principal means for women to close this wealth gap. But the disproportion of subprime loans, advocates said, makes it harder for women at all income levels to build wealth by paying off their mortgages.

"The striking thing is that the disparity between men and women actually goes up as income rises," said Allen J. Fishbein, director of credit and housing policy for the Consumer Federation of America. Among high earners — defined as people earning twice the median income — black women are as much as five times more likely to receive subprime mortgages than white men.

Political Violence And My Microloan

In November 2006, I made a $25 loan through Kiva.org to a Kenyan woman who took out a $1,700 loan to transition from maize farming to dairy farming by purchasing two diary cows. This is one of several loans I've made through Kiva. I don't make any money in interest, and I don't loan huge amounts of money, but I intend to keeping the money I currently have loaned through Kiva circulating to other Kiva clients because microlending is such a powerful tool for improving people's lives. The impact on the lives of women is especially remarkable. Microlending organizations have documented that microfinance extended to women is more likely to benefit family nutrition and children's education than loans made to men, and that loans to women are more likely to be repaid, allowing for the money to be lended to another client and further widening the circle. Many of the women whose loans I have funded through Kiva have been restuaranteurs or retail entrepreneurs. The loan to this Kenyan woman was my first agricultural loan, and as a fan of programs like Heifer International, I was especially interested in watching this woman's progress.

I get periodic e-mail updates about my various loans from Kiva and their partner organizations, the local groups responsible for administering Kiva's loans. Today I received an update from the Ebony Foundation, who administer this particular loan, describing the impact of the recent political violence on the Kenyan entrepreneurs repaying Kiva loans, and I wanted to share some of it with you:

The impact of the riots is most felt in the micro and small business
sector. Over 1 million small businesses were looted and or burnt down destroying the only source of income to millions of Kenyans. Most of the fighting and destruction occurred in slum areas in Nairobi, Mombasa, Nakuru and Kericho in Rift Valley. These regions are home to over 70% of Ebony Foundation’s clients and as you can imagine almost all of our clients in these regions have been affected by the riots. Only one region- (Mount Kenya) which is home to about 20% of EbF’s clients was spared the violence. The economy in this safe region is now getting stretched as the residents have to now house the displaced population.


We have recently completed auditing the riot’s impact on our clients and as of yesterday about 4,900 of our clients had been badly affected by the riots:

-- About 1,532 of our clients were displaced and both their homes and business premises burnt down. This population is currently housed in church compounds and police stations.

-- Another 2,479 clients had their business premises burnt down or looted leaving them with no source of income at all.

-- 833 clients had their homes looted or burnt down and about 56 clients are missing and feared dead or critically injured.

We arrived at these figures through a survey being administered at holding grounds, police stations, and through reliable reports from groups and community leaders.

Of course I've heard news coverage here in the states about the political violence in Kenya, and clucked and fretted about how it sounded terrible and very sad. But receiving this email made it seem more immediate to me, and more personal. This is a set of impacts I had not thought about in much detail before, but it seems obvious to me now that political violence would have wide-ranging and potentially long lasting effects on the economic lives of the victims. I don't know yet whether "my" farmer was among those affected. The Ebony Fondation update talks only of loan clients in the aggregate. I hope for the best for all of them.

The Outsourced Uterus

I've continued to think about this piece by Judith Warner at the NYT about outsourcing surrogacy to India since I first read it a couple of days ago. Couples in the US who want to have a baby via a surrogate mother are looking at a steep price tag--the article says in the US it may cost couples as much as $80k. Faced with that cost, US couples are increasingly turning to India for women who will gestate and bear children for them for far less--$6k-10k. That is no small amount of money, particularly to these women, for whom that might be equivalent to ten to fifteen years worth of income. Consequently, the women featured in the article seem to enter into surrogacy willingly, even enthusiastically, because it provides them with a way to get a whole lot of much-needed income.

I admit to feeling quite muddy and conflicted about the situation. On the one hand, it seems so wrong to me, not because I think think there's anything inherently bad about assistive reproductive technologies, but because I think there is a point at which relying on another person's extreme poverty to make them willing to do hard, dangerous work for you is fundamentally disturbing. And also because in reading Warner's description makes me think of A Handmaid's Tale multiplied by Battlestar Galactica's The Farm:

Images of pregnant women lying in rows, or sitting lined up, belly after belly, for medical exams look like industrial outsourcing pushed to a nightmarish extreme.

And yet I feel like that's the wrong reaction to have, that as Jill at Feministe points out, this is just another example of the sort of economic exchange that greases the wheels of the global economy:

If we're going to do the surrogacy thing — and we already are doing it — then let's call it what it is: An exchange of money for services. And let's not pussyfoot around the fact that in a whole lot of service industries, the people providing services are poor, female and brown. Think of housekeepers, fieldworkers, childcare providers, elder-care workers — all of these women use their bodies in the service of others. Many of them are exploited, some are abused, and most are under-paid. But we only go into panic mode when the services provided are sexual.

Stick around for some interesting discussion in Feministe's comments.

And then there's the fact that if my pro-choice politics mean anything, they mean that a woman has the right to decide what to do with her body, and whether and when to have children, not just those children that are biologically or legally hers. If an Indian woman thinks she can best provide for her economic wellbeing, and perhaps that of her family, by acting as a surrogate mother for relatively wealthy, privileged folks from developed countries, shouldn't she have the right to make that choice? And the economics of it certainly make sense from the surrogate's end. There are repeated mentions of being able to buy a house with the proceeds of a stint as a surrogate, from women for whom that purchase would unlikely ever be possible without that money.

Of course that begs the question: am I content to live in a world in which the best path to economic independence for a woman--in India or anywhere else--is renting out her body for nine months to be treated in a manner similar to breeding stock? Not especially, no. But until global poverty and racism get dismantled (no short order!), I certainly can't fault Indian women who use the assets other people, rightly or wrongly, seem to value most: their ability to grow babies.

What do you think about this development?