I have been off the Ben Stein beat for quite some times, since it is ably covered by Felix Salmon and I don’t want to encourage Stein by giving him undue attention. But this week’s offering is such a doozy that I had to say something.
Now remember, his column is titled, “Everybody’s Business.” So how does he begin a column presumably addressed to a broad swathe of Americans?
Not long ago, a woman in California called me for advice. She is divorced, with two children, and has a series of interlocking financial problems.
She lives in a lovely home in a stylish inland enclave. It has an interest-only mortgage of about $2.2 million that requires a payment of $12,000 a month, very roughly. It was last appraised at $2.7 million, but who knows if it’s now worth anything remotely close to that price.
The woman, whom I’ve known since she was a teenager, has no job or other remunerative employment. She has a former husband, an entrepreneur whose business has suffered recently. He pays her $20,000 a month, of which roughly half is alimony and half child support. The alimony is scheduled to stop this summer….
She has no savings and has refinanced her home repeatedly, always adding to indebtedness and then putting the money into a shop she owns that has never come close to earning a dime. Now she is up all night worrying about money. “Terrified,” as she put it. She wanted me to tell her what to do.
What could I say? I did the best I could, but I had to tell her that she was on very thin ice.
Ever since, I’ve been thinking of the troubles of this sweet woman, consumed with worry about money.
Is that story going to elicit one iota of sympathy from anyone? The
bimbo woman knew when her meal ticket was due to run out well in advance. And she clearly took zero steps to prepare: no job, no plan to get a job, no downsizing of expenses so she had a buffer when the checks quit coming, merely throwing money at a “shop” that given its lack of earnings, the IRS would see as a hobby rather than a business (note to readers: it isn’t uncommon for wealthy women to have marginally profitable decorating or clothing businesses so they can buy at wholesale and have good conversational fodder). Indeed, given the fact that she kept refinancing her house, she was clearly spending more than what her ex was paying her.
Reading between the lines, her plan A was to snag another well-off man, and she had no Plan B.
And I snipped this tidbit for separate delectation:
She has a wealthy beau who pays her credit card bills and other incidentals, but she is thinking of telling him she is through with him.
Maybe she has decided to ditch “wealthy beau” because he won’t execute on Plan A. However, it is another sign of her generally lousy judgment that she wants to dump her only source of incremental cash now. Yes, it may feel like prostitution to stick with him, but prostitution at that level looks vastly better than any of her alternatives (and I know women who turned tricks due to lack of better income options when their money ran out. This is NOT a theoretical issue).
But later in the story we learn why he highlighted this paragon of irresponsibilty: he needs to make his pampered son look better:
…. my handsome son, age 21, a student, has just married a lovely young woman, 20. You may have seen on television the pudgy, aging face of their sole means of support….
I wish I could teach that work ethic to those close to me. I wish I could teach them that money is a scarce good, worth fighting for and protecting. But I very much fear that my son, more up-to-date than I am in almost every way, is more of a modern-day American than I am. To hustle and scuffle for a deal is something he cannot even imagine. To not be able to eat at any restaurant he feels like eating at is just not on his wavelength. Of course, that’s my fault. (I have learned that everything bad that happens anywhere is my fault.) And I hope to be able to leave him well enough provided for to ease his eventual transition into some form of self-sufficiency.
But I keep thinking of my friend in California, and what a perfect specimen of what we have become that she has become. I keep lecturing my son, as Pop lectured me, to learn prudence. I keep lecturing myself to learn it; I am far from a small player in the extravagance game.
Maybe, upon second thought, I did not learn well about prudence. Then I think that maybe it’s too late for far too many of us. The age when money was a free good, available in unlimited quantities just for signing a note, may well be over. What the heck will we do when we have to start acting like mature adults? How will we cope with limits? With reality?
Yes, Americans did not just get drunk on debt, but also drove while intoxicated and managed to plow their SUVs into crowds of innocents.
There are plenty of people who came to ruin who took far more defensible gambles than Miss Big House, Big Debts, No More Alimony. For instance, new graduates who racked up education debts and can’t find the sort of jobs that were on offer when they embarked on that path, businessmen who borrowed to keep their entreprises going (one buddy maxed out on his credit cards at least three times over 15 years to keep his firm afloat. And he sold it before the wheels came off the economy, so that sort of gamble isn’t always imprudent). Risk taking is part of life. Even crossing the street involves risk. Some risks are patently stupid, and some are reasonable, but even in normal times, a certain percentage of reasonable risks do not pan out. Many of the people who are coming to bad ends were reckless, but it is important to recall that some did make good decisions (in the sense that the risks looked reasonable at the time) but still had bad outcomes.
But the collateral damage is big and getting bigger with every day, and engulfing plenty of people who didn’t go to the leverage party. The list is long: cascading job losses, implosion of home values and investment portfolios, cutbacks in state and local services.
Do we learn anything by being shown two cartoon figure who for much of their lives never had to worry about money? (t appears that Stein’s son is likely never to need to worry about money either, although he will probably not be able to dine as well as he’d like). Stein is trying to give us a morality tale of sorts, but his object lesson isso far removed from the most common manifestations of the debt disease that it sheds no light on the issue. And while Stein’s son might have been the sort who would have gotten him in over his head with credit, he perversely will be saved by the crunch now upon us.
Update 3:05 AM: Not surprisingly, Frank Rich offers a much better zeitgeist piece.