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Maxed Out
buzzed, B&W
hairylunch
Just got done watching Maxed Out, a movie that Netflix's summary describes as
Investigating both the personal and the national debt owed by Americans, this thought-provoking documentary explores the staggering financial burden we live with every day and exposes how the contemporary financial industry is set up in ways that can harm unwitting customers. With both sobering facts and black humor, Maxed Out unveils the consequences of our debt addiction, including its contribution to the vanishing of the American middle class.
While the movie has a strong liberal bias (for example, when the bankruptcy laws were rewritten several years ago to make it harder for individuals to file for bankruptcy, they highlighted how it was all Democrats objecting to the bill). Still, some surprising tidbits of information - such as the Federal government pays more in interest than it does for funding Iraq, and how over a trillion dollars has been "borrowed" from the Social Security trust to pay interest and avoid defaulting on loans. Kind of crazy.

The movie also highlights three families who lost family members to suicide over debt - 2 college students, and one older woman. It's frightening to imagine people committing suicide over debt, particularly college students. One of them had $12,000 in credit card debt - a large amount, but not insurmountable. From the NY Times review, "The facts speak for themselves. Consumer debt in the United States amounts to more than $2.4 trillion; the debt carried by the median American household is $9,000. When people go into bankruptcy, about two-thirds of what they owe is in interest and penalties, not principal."

I tend to agree with the author the review in the SF Gate, that "while the documentary does a credible job of pointing out the magnitude of the problem, it skirts the issue of what can be done about it and by whom."

The whole issue parallels a recent conversation I had with a friend about Super Size Me. Her whole point was that no one eats McDonald's thinking that it's healthy, and if people showed a little self-restraint, we wouldn't have the issues that Spurlock raises in Super Size Me. I'd guess she'd say the same thing about credit card debt, that people dig their own graves, and they should deal with it. While I can see where she's coming from, I also think that for both obesity and credit card debt, society has made it too easy to dig your own grave. The two mothers who lost their children to suicide went to DC to try and propose a bill to ban credit cards from doing on campus promotions. Sounds reasonable to me. In other words, I don't think credit card companies should be put out of business (hell, I love my Discover card), I do think we could make it harder for people to get in trouble. Whether this be done by controls (similar to speed limits making roads safer), or by making the alternatives easier (micro-loans by banks rather than pay-day lending), is open to debate.

The other thing that struck me while watching this movie was my view of debt. My brother and I had the conversation several years ago that both of us have a weird reluctance to go into debt. In fact, as far as I know, neither of us has been in any real debt. Neither of us had student loans (yea for scholarships), and have never carried a balance on our credit cards. Of course, it helps that we both received cars for our college graduations, so haven't had to deal with auto loans (yet), but neither of us has racked up any debt lasting more than a credit card billing cycle. I wonder why we have this attitude, yet so many others seem to get into trouble with their credit cards?

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From your beloved local economic advocate...

(Anonymous)
I have this movie in my queue for netflix so I'll be interested in discussing it with you.

In terms of bankruptcy, part of the problem with the changes to the law is that people are required to go through bankruptcy counseling and it doesn't provide oversight on who can provide this counseling- so you could go to somewhere reputable and actually interested in helping with credit counseling, like Consumer Credit Counseling Services, or go to, say, some fake non-profit set up to provide bankruptcy counseling with more interest in screwing you over (or some for-profit business like those commercials that say 'call now and we'll get rid of all of your debt!!!').

I don't know if it's addressed in the movie, but I think that a "you-dug-your-own-grave" attitude neglects the people who are barely, if at all, making a living wage, and relying on credit cards to get by- paying for groceries, day care, utilities, or hey- leaving an abusive relationship in the middle of the night, whatever- not just the people who make money and choose to spend on credit unwisely.

Credit card companies, while at times a necessary evil, are in the business of putting people into debt. They don't like people like you and Tony who pay off your debt every month. What kind of profit can they make from that? Instead, they like things like revolving debt, APRs that can change whenever (like if you forgot to pay your cell phone bill last month and Verizon reports it to any of the three credit reporting agencies), and recruiting college kids (who probably have never had any type of financial education). When I was in college I got my first Visa with a $200 credit limit (woo hoo). I had a roommate without a job who had $5,000 in debt whose way of paying it off was to do balance transfers every month- accumulating more debt, but never making a payment.

I don't know what the answer is to the nation's debt, but if anything, with these sub-prime mortgages, we're learning all the more that financial institutions also need to have some kind of oversight or regulation. And I think some financial education would go a long way for folks.

Re: From your beloved local economic advocate...

So the movie addresses both of your issues - it talks about how credit companies want to see you accrue fees. There's even a Harvard professor in there who talks about speaking to a group of bankers, and pointing out how a bit more proactive screening would help, but one of the exces saying something like "But then we'd stop making money."

There's also a clear section in the movie where they discuss the idea of how people have less buying power today than they did years ago.

As for the credit card companies not liking me as a customer, they're still making 3% or 4% off of my purchases on the merchant side of the transaction . . .

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