A Fighting Chance

the savings rate for the average family was approaching zero: The Two-Income Trap, 113.

sucked in people who were in a crunch: Borrowing from payday lenders, virtually non-existent twenty years ago, has grown tremendously. One study estimates that ten million households borrow from payday lenders each year, with more storefronts in the United States than McDonald’s and Starbucks combined. Paige Skiba and Jeremy Tobacman, “Do Payday Loans Cause Bankruptcy?” Vanderbilt Law and Economics Research Paper No. 11–13 (2009). Payday lenders typically charge “10–20 percent interest for a one-to-two-week loan, implying an annualized percentage rate (APR) between 260 and 1040 percent.” Neil Bhutta, Paige Skiba, and Jeremy Tobacman, “Payday Loan Choices and Consequences,” Vanderbilt Law and Economics Research Paper No. 12–30 (2012). Similarly, credit card debt increased by 570 percent in a single generation. The Two-Income Trap, 20.

hanging on to the cliff by their fingernails: For example, Michelle J. White estimates that 17 percent of households in the United States are in so much financial distress that they would have significant improvements in their balance sheets if they filed for bankruptcy. “Why It Pays to File for Bankruptcy.”

starting to climb, even back in the 1990s and early 2000s: The rate of mortgage foreclosure more than tripled between 1979 and 2002. The Two-Income Trap, 78.

covered by CBS News, the Boston Globe, NPR, and CNN: For examples of media coverage of The Two-Income Trap, see Daniel McGuinn, “Housebound: Young Families Always Stretch to Buy Their First Home but the Growing Ranks of the ‘House Poor’ Suggest Many People Are Stretching Budgets Too Far,” Newsweek, September 15, 2003. See also Christopher Shea, “Two Incomes, One Bankruptcy,” Boston Globe, September 14, 2003. See also Rome Neal, “Broke on Two Incomes,” CBS News, September 9, 2003. See also Jeanne Shahidi, “Are You Worse Off than Mom and Dad?” CNNMoney, September 11, 2003, and Michele Norris, “Two-Income Families at Risk of Financial Crisis,” NPR, All Things Considered, September 8, 2003.

in 2004 they stepped up to the plate again: See, for example, Robert Zausner and Josh Goldstein, “Bush’s Largest Funding Source: Employees of Credit-Card Firm,” Philadelphia Inquirer, July 28, 2000. “By orchestrating mass contributions from its employees, the Wilmington-based company has become Bush’s single largest source of campaign money. MBNA employees and their families have given more than $250,000 to the Republican’s presidential bid, an Inquirer analysis found.” Christopher H. Schmitt, “Tougher Bankruptcy Laws—Compliments of MBNA?,” Business Week, February 2001, 43. Schmitt confirmed that MBNA was “the candidate’s single biggest source of cash” and added: “On the soft-money side, MBNA chipped in nearly $600,000.… On top of that, MBNA Chairman and CEO Alfred Lerner and his wife, Norma, each kicked in $250,000 to the Republicans. Charles M. Cawley, CEO of MBNA’s bank unit and a friend of Bush Sr., organized fund-raisers and gave $18,660 to Bush and the GOP.”

Similarly, in 2004 the Center for Public Integrity reports: “MBNA surpasses Enron as the president’s top lifetime contributor.” Alex Knott, “Bush Has a New Top Career Patron,” The Center for Public Integrity, March 11, 2004. The Center for Responsive Politics reports that MBNA slipped to ninth place in 2004, when it was outspent by employees of other banking giants like Citigroup, Lehman Brothers, Morgan Stanley, and Merrill Lynch. See analysis of Top Contributors by Center for Responsive Politics, at OpenSecrets.org.

law kicked in, bankruptcy filings dropped sharply: In 2004, there were 1,563,145 bankruptcy filings. In 2005, that number shot up to 2,039,214. Then in 2006, in the wake of the new law, the number of filings fell to 597,965. See American Bankruptcy Institute.

charged more—sometimes a lot more—to navigate the more complex law: One study found that attorney fees for the simplest type of bankruptcy filing—Chapter 7 with no assets—increased 51 percent after the new law. For more complex Chapter 13 filings, costs increased 24 to 27 percent. Lois R. Lupica, “The Consumer Bankruptcy Fee Study,” American Bankruptcy Institute, December 2011.