Who'll Stop the Drain?
Reflections on the Art of Going Broke
By Vince Passaro
Copyright © 2016 by Michael Lydon
This is not a story about conspicuous consumption. My wife and I didn't, with one exception, travel; we didn't buy a house or an apartment or expensive furniture we could not afford. Indeed, she will be quick to point out, we didn't buy any home or any furniture, and still live in our same rent-stabilized apartment with three children and such items as we've been able to pick up along the way, such as a secondhand couch and almost 4,000 books. The couch in recent years became too ripped up to bear, leading us finally to buy a nice piece of cloth to hang over it—$50 or so, on a credit card—which cloth now sports its first major tear and has embarked, clearly, down the road toward being as ripped up as the couch beneath it. We spent moderate amounts on clothes, or moderate amounts for New York City, shopping for our children's apparel and equipment at rummage counters and yard sales; we didn't buy china or jewels or go out to good restaurants. We did go to the movies; in fact, we went to the movies to such a degree that I clearly recall once spending our rent money, which was a very low amount in those days, on a week-and-a-half-long cinema binge. For a period of two or three years I went to bars a lot. That about sums up where we spent our money these last ten years—on such things and on having and raising children in New York, where the upbringing and, particularly, the education of those children has been vastly more expensive than it might have been in most other places.
And now we are $63,000 in debt.
I think.
We owe $6,000 to Citibank Preferred Visa. We owe $4,000 to Discover. We owe $5,000 to BankAmericard Visa, $400 on an old Chase Visa card, $1,700 on a Chase overdraft account (which we may no longer draw on, so that as we pay off the balance we also manage to bounce other checks, written to other creditors). We owe about $3,000 to department stores such as Macy's, Bloomingdale's, Brooks Brothers, The Bon Ton, Ikea, Eddie Bauer, Sears. We each have one of those alumni credit cards, with $8,000 between them. The consumer credit-card debt comes to more than $28,000 overall, the interest rolling on, like Woody Guthrie's Columbia River. A few times, while our standing as debtors still allowed it, we turned some of that debt over with consolidating loans and by getting newer, lower-interest cards and moving our balances. We may have saved a few hundred dollars, but basically these moves gave us an opportunity to build up more debt, so that we cost ourselves more money in the long run. The cards offered at lower interest rates convert to usury-rate cards in three to twelve months. Right now we're averaging 20 percent annual interest, so the interest alone, compounding and compounding, like a fracture, is around $475 per month. At our tax rate, we have to earn $8,500 a year just to service our credit-card debt, never mind pay it back.
We are late with every credit-card payment, and the companies call and call and call. They call in the mornings around 8:00; they call in the evenings, between 7:30 and 9:00. They love to call on Saturdays. We have been known to get fifteen calls like these a week, a number somehow in proportion with the enormous number of checks we write per month: often more than forty, sometimes even fifty. Most of these dunning calls are computer generated; some are exclusively electronic. The MovieFone guy, it seems, doubles as a collection agent; that basso profundo voice comes like a foot through the line: "It is important that we speak with you. Please call one of our operators today to discuss your account …" Another call starts with an obnoxious trumpet herald: Bah, bah, bah, da-da-da-da-DAH! I always hang up. My wife, much smarter about these things, talks to the agents, tells them how much we want to pay this bill and that she'll send at least something by the end of the week, which, usually, she does. She often hits it off with the agents, laughs at herself and our predicament, gets them to commiserate—people who, given the pay and the turnover in the telemarketing business, probably have money troubles of their own.
The dunning letters and even some of the calls have taken on a new tone lately, one that indicates the credit companies' recognition that there is a big problem out here, and not just with the Passaros. Across America, the citizenry has managed to rack up $1.2 trillion in consumer debt, which is five times the national defense budget. Now, instead of warnings and veiled threats, the collection approach has been softened to one of "wanting to help." "If you are having difficulties, our agents can advise you and work with you on a payment plan …" Today, I stood over the answering machine listening to, but not picking up, this appeal: "Our operators are here to help you. You can call until 11:00 P.M. daylight savings time. Please call us." Perhaps a union of collection agents and twelve-step apostles is around the corner: Admit that you are in debt. Apologize and make amends to those you have injured. Pay us back one day at a time.
"Is there a reason for this problem?" one agent asks my wife. "Well, yes," she says. There is always a reason. The soccer bill came in—meet the deadline or the kids don't play in the fall. The school is paid off but the bill for the two weeks of summer camp has come in, $1,300 and change. We still owe our nursery school, which we left almost a year ago, and were shamed into giving them a few hundred. My wife tells me that an initial payment from this magazine for this article, as I type the final draft, has already been transferred electronically to our creditors.
NEEDLESS TO SAY, there's more: we owe my wife's brother $550. He's very kind, and single, and never mentions it. I still owe $8,000 on my graduate-school loans, and figured out the other day that if I take no further forbearances and make all the remaining payments, the sum will be paid off four years before my oldest boy, now ten, enters college.
But the troubles of the day are sufficient thereto.
Until this past winter we owed $2,200 to the IRS, but they came with unusual swiftness (only eight months after the tax form was filed, two years earlier than the last time, I guess figuring that with us there's no reason to fuck around with a lot of chitchat), taking care of the problem by garnisheeing my wages. A fat bundle of official paperwork arrived at the payroll department where I work, and I was called in. Apparently, it wasn't enough that the IRS was going to take my money; I had to fill in some forms to help the process along. The nice payroll lady looked very sorry for me and told me I could appeal, but I declined. Appeal what? The power of the government to tax individuals? I suffered a reduced paycheck for six weeks.
Also, until recently, we owed roughly $1,100 in old parking tickets, including fines, double fines, and late fees, but then a few weeks ago, while I was driving to work, a New York City sheriff in a prowling, tow-truck-accompanied, spiffy white Caprice pulled up behind me, put on his twirling blue lights, ordered me by bullhorn to the side of the road, told me my license plate had come up triple cherries on the computer, and swiftly seized the car. I have to admit, they had my attention. I stood on the corner of 125th Street and Seventh Avenue on a lovely sunny day, holding my canvas workbag and a plastic grocery sack stuffed with shirts for the dry cleaner, watching the expertise of the towing guy, who needed no more than fifteen seconds to hook my car up, climb back into his truck, and start pulling away. "If you leave the key in the ignition, they'll have an easier time with it at the pound," the officer said significantly. In other words, maybe they won't yank out the ignition lock or mash the car up towing it into place. I hailed a cab. When I got home I called the bank line, getting a balance for checking, getting a balance for savings. Well, I might—if I got some of the tickets thrown out by a judge (technicalities always eliminate a few)—just might have enough cash on hand to get the car back.
This kind of stripping of the family account
s needed spousal consultation. When I told my wife the news she was surprisingly understanding, for a woman who'd been urging me for two years to go and see a judge and work out some kind of deal on the parking tickets; for a woman whose husband's car had been towed for tickets twice before (that is, for a woman whose husband rather adamantly makes the same mistakes twice, or three times); for a woman whose rent and grocery money was about to go through a scratched plexiglass window to get back a ten-year-old car with 122,000 miles on it, only two (of four) working power windows, and $600 still to pay on the loan we'd taken to purchase it.
My wife is long-suffering and rather bohemian, but even so, fighting is an inevitable part of being broke, or being that thing worse than broke; i.e., in debt. When she gets the box of bills out and sits down at the dining room table, I want to head for the hills. There aren't, unfortunately, any hills to head for. My desire for flight is the problem, as far as she is concerned. At this point, my perspective is: I earn the money; you worry about paying it out. I like nice borders such as this. But marriage isn't that way: no borders last long. She wants to know in detail all news from the earning front, and expects me to be there, a one-man chorus, to sing the pain of her attempts to pay the unpayable.
We owe, to finish off the litany, $23,000 borrowed from a 401(k) account and $3,000 to a friend, who has recently taken to buying me a weekly lottery ticket.
WHAT'S INTERESTING ABOUT my kind of debt—and that of some other people, according to reports—is that I have no realistic expectations of paying it off. I have only unrealistic expectations. If my kids' education expenses suddenly disappeared, I presumably would be able to dedicate ten or fifteen thousand a year toward payback. (My wife says that, in fact, I'd simply work less, which is probably true.) In five years or so, things would be under control, and some number of years after that, ten perhaps, my credit rating would be cleaned up enough to make me an acceptable risk for a mortgage or a loan. By then I will be fifty-five and my youngest child will be twenty-one. I will have had to pay for three college tuitions.
For now, I watch the economy grow, the stock market almost faultlessly rise, and all I know is, rents and sale prices for apartments in New York are going to go up again, from the phenomenally unaffordable to the stratospherically unaffordable.1 All this boom makes me, relatively speaking, poorer. The economy as phantasm is a situation apparently shared by millions of other Americans: last year, amid a period of growth as impressive as any since the end of the Second World War, with near-zero inflation and very low unemployment rates, there were a record-breaking 1.3 million filings for personal bankruptcy protection, which is an increase of 20 percent in 1997 alone.2
The economy may be thriving, but in part this is because the populace is willing to fund consumption with borrowing: the average American household now carries debt nearly equivalent to its disposable income, a level of borrowing higher than at any time during the roaring 1980s. Meanwhile, the cards and checks from banks keep coming. Fleet Financial Group, for example, last year mailed out more than one million checks in denominations ranging from $3,000 to $10,000, inviting borrowers who hadn't known of their intention to add some debt until the post came that day to use the checks to pay taxes or "spruce up your home…." Overall, banks and other credit institutions pummeled us with 3 billion pitches for new credit cards last year, which amounts to eleven solicitations for every man, woman, and child in the nation. Total consumer debt obligingly has risen 58 percent in the last five years.
The monthly feed on my consumer debt—or, as financial institutions humbly like to put it, the "minimum amount due"—is $1,300. If I were actually retiring the debt in any significant way, it would be more.
In fact, I don't really know what my debt costs because I am rarely able to pay even the minimums on time. I am a university administrator; my wife is a photo librarian. Our combined gross pay in 1997 was $99,651. If you were to include, which the IRS doesn't for tax purposes, the money my wife and I earned and paid into tax-deferred pension plans and for health coverage, our income would be about $12,800 more. Living, of course, takes place in cash, and our cash income, after taxes, pension deductions, credit-union deductions for our auto loan, and payments against the 401(k) loans we took through work, and including an average of the net I make from freelance articles like this one, comes roughly to $5,000 per month.
This amount is vastly more than most Americans bring home each month. It happens to be not enough for us.
Fortunately, our rent is low, about $900 per month. That should leave enough to pay our bills, except for a certain set of expenses that are not at all low, those associated with the care, education, and lifestyle of our children. Our financial situation is fundamentally complicated by our refusal to send our children to public schools, an extravagance we have steadfastly insisted on not forgoing, against all good sense except that which is applied to judging the quality of our children's education. People say, move to the suburbs! The schools! Well, with a credit rating like ours, you can't even move to a different apartment in your own building. So, to provide our children in New York City with even a semblance of the education I had, in overcrowded parochial schools on Long Island in the 1960s and 1970s, means anywhere from $10,000 to $15,000 a year per child in the primary grades. Our school helps out with financial aid, but recently I tallied the cost of our children's school year, the minimal additional child care we pay for, their music lessons and instrument rentals, their summer camp, and baseball and soccer and basketball and skating and swimming. We have been fortunate: the lessons and rentals are the cheapest around, and very good, the sports fees quite reasonable. But with three children it adds up. Specifically, it adds up to $36,250 per year. For ten months a year, the reduced school bill alone would, if we didn't borrow against the retirement account, earn extra money writing, sell old employee stock from my wife's company (the last of it went last year), and pull other financial irons from financial fires, amount to half of our monthly cash income. Since, after exemptions, we pay 24 percent federal tax (which includes Social Security and Medicare), 5 percent state tax, and 3 percent city tax (which comes to a 32 percent tax rate), the $36,250 for the children adds up to about $54,000 per year in required gross earnings. That's before or after or while we do or don't pay other bills and take the kids to see The Man in the Iron Mask or a children's opera or a ball game at Shea. It doesn't take a genius to do the arithmetic with our cash: the regular income of $5,000 meets the children's expenses, the rent, and most of our commuting and food expenses. After that, aside from our credit-card bills, we still must pay for the phone and utilities (about $250 per month), clothes for five (who knows?), activities ($200?), vacations (ha!), medical and pharmaceutical copayments (the dentist!), the maintenance on the car (averages about $75 per month, but in increments, it always turns out, of $500 per occasion), the garage that hides the car from the authorities ($240), the car insurance and term life insurance (none of the other stuff we own, like the highly flammable books, is insured, so insurance comes to only about $120 per month), all of which amounts to what I've come to call "after income" expenses of nearly $ 1,000 per month.
So, good luck to the credit-card companies. That we manage to pay them at all astonishes me.
Any reasonable person might conclude that we've made the wrong choices. Yet most of the time we don't feel that way. In the end, there is no arguing our case; it is something the gut either tells you to do or not. There is a kind of insanity in accruing debt, as there is in gambling or drinking. Our particular insanity revolves around the cultural and spiritual comfort provided by our children's school. I remember a creeping, decisive horror, when my first two children were still babies, while talking with a very well-paid friend with two children each about a year ahead of our first two. She said, flat out, that she had no intention of spending all her money on her children; she wanted to be able to go out in the evenings, take vacations, live well. It might have been at that moment, by default, that I became someo
ne who did have the intention of spending all his money on his children.
I have no greater satisfaction in my life than watching my children learn about music and languages and their world, watching them play and fall and fail and succeed. I like their school and its religious environment; it is a warm, slightly old-fashioned, jargon-free place around the corner from where we live. Our children are eager to get there every day and have missed, the three of them, perhaps six days in five years.
Unfortunately, I don't see as much of their lives as I wish to, because I'm either at my office or working at home when they are doing things. All winter, my wife takes the children ice-skating, and in the warm weather she takes them to a pool, while I use the time to work. I would like to have time to do more with my family. I'd like to travel with them: I can see my oldest son in the Uffizi; I can see my middle boy with the horses in the dome of San Marco, my youngest in the Catacombs. My strange role model, I sometimes suspect, is based on what I remember of the slightly insane father of the James family, Henry Sr.—steadily consuming the inheritance, never caring, wanting to give his children not objects so much as the world itself and the mysteries that lie beyond the world. This is not a helpful attitude on a day-to-day basis.
IN AN ECONOMY such as ours, the much advertised availability of upper-middle-class comfort and ease can be financed for many only on the installment plan. No one who can afford to pay his way in cash would do so instead at 20 percent interest rates. But the kind of life that was once held up as the most respectable alternative—frugal, humble, and smart—has become culturally unpromotable; we believe one lives either in abject poverty or in smug Izod-and-golf-shoe wealth. In the distant economic doldrums of the early 1990s, George Bush made a symbolic demonstration of fealty to what makes America work by taking news cameras along on a shopping trip to J. C. Penney. The idea was, simply, that people were foolishly responding to harder times by cutting back on consumption. As soon as they got over this hokey notion, the economy would be back in swing.
Reflections on the Art of Going Broke (Singles Classic) Page 1
