Steve G.

Peter Orvetti: “Of Stewardship and Safety Nets”

In Libertarian on July 11, 2008 at 2:39 am

The following is posted with permission of the author, Peter Orvetti.  It was originally posted on his blog, The Orvetti Factor.

There was an interesting mini-debate on the letters page of USA Today last week. Reader Sarah Kapcar wrote that she feels “like an American anomaly” because she and her husband “have no credit card debt. Yes, we use our credit, but we pay off our balances monthly. I could have used those credit cards for a pair of Manolo Blahniks but thought better. My Chevy is a lease, but my husband’s older car is paid for. He could have purchased that new Audi but thought better. We could be just like all the other Americans who are in trouble, but we thought better.” Kapcar continued, “We have been lucky in terms of maintaining good health and jobs, and I can understand how some families today need financial help. Where is my government thank-you for being responsible and not going into debt and facing foreclosure?”

This drew a rebuke a few days later from reader Tracy Grady, who wrote that her son “died of cancer three years ago. He was 8 years old. The hospital bills drove us to bankruptcy. My husband went back and forth from work to the hospital so much that he lost his job. It took him more than a year to get another one, which paid less. Now we have a mortgage we can’t afford, and no bank will refinance us because of the bankruptcy. … All this time I thought we were having a run of really bad luck. Now I understand it. If only we were better stewards, all of this would not have happened.”

This neatly sums up a dilemma I confront in thinking about personal responsibility. It drives me nuts when irresponsible folks expect some outside power — usually the government — to look after them and enable them to continue to act irresponsibly. (I remember seeing a person-on-the-street story about privatizing Social Security accounts in which one woman said, “Don’t give me the money, I’ll just spend it,” and then laughing like it was cute.) But then there are those who do live responsibly but who face unexpected and tragic changes in their personal and financial circumstances. I honestly don’t know what the answer is to this problem.

Of course, when it’s a corporation that is acting irresponsibly, it’s a no-brainer. The Seattle Post-Intelligencer was appalled — though probably not surprised to learm that “Bank of America ‘can use tax write-offs to pay for Countrywide. … Taxpayers may pick up about $5 billion of Countrywide’s losses over 20 years’ and ‘Bank of America would more than recoup the entire $3 billion purchase price.'” The newspaper rightly called Countrywide “a poster child for a bad player in the industry,” and said it “seems beyond wrong that the purchase of Countrywide — at the expense of taxpayers, no less — would bring profits to Bank of America even as so many of its mortgage holders are left in the lurch.”

Not much to argue with there.

  1. One possibility that I could see, which would be a lot more “salable” if the gov’t wasn’t so well known for doing bailouts of the not-so-prudent might be some sort of “Catastrophic expense” insurance….

    Given that the numbers of people with huge unforseeable losses are relatively small, I’d expect the premiums would be minimal – with the requirement that to collect the expense would have to be non-predictable such as a “not-at-fault accident” or a major illness, and the costs would be greater than the coverage of the regular insurance a prudent person would have, and exceed a certain high deductible…

    The other option, which doesn’t perhaps fit the best preferences of everyone, is to fall back on charity of some sort…

    In the example cited above, I’d first wonder if the father was employed, whether or not he had insurance on the kid? Did they contact the various cancer societies? Did they try asking their church or other organizations they belonged to for help? Did they try to get a charitable plug from their local paper? Did they ask relatives for help? There are lots of charitable “safety nets” out there, which while they shouldn’t be over-used, some folks are reluctant to tap into at all, whether out of pride or whatever…

    In some ways our modern society, in part because of all the gov’t provided safety nets, has fewer people participating in the private ones – back in the “bad old days” many of the groups like “Lions” or “Rotary” or the various other “fraternal” organizations, not to mention churches and so forth had a definite “safety net” function to help their members out in times of trouble. The Mormon Church is noted for their support system even today… People used to join these sorts of organizations as much for the “safety net” aspects as anything else, with the expectation that they would be putting into the “benevolent fund” whatever they could, in order to support their other members in need… With all the gov’t safety nets, this function has been greatly lessenned, which leaves people in the lurch when the gov’t nets fail to help enough…

    Some of this unfortunately falls in the category of “bad $#!+ happening to good people” and there isn’t a way to protect fully against it, but IMHO prudent people will manage better.


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