Laura McCloud
mccloud@plu.edu
Department of Sociology and Social Work
Pacific Lutheran University

Debt in 21st Century America

Discussion of “The Fragile American:
Hardship and Financial Troubles in the 21st
Century”

Debt and hardship since the bubble burst

Concern about debt

Inequality trends

Rising costs

Banking deregulation

Financialization

Individualized risk
Rising
costs
Everything
got more
expensive
•
Particularly
necessities
BEFORE. . .
AFTER
Neoliberal
economic policy

+

An
individualistic
culture

The paradox of debt

Weighing in on the
“good debt”/”bad
debt” debate

Expanding The Fragile
Middle Class

Our understanding of stratification is growing

Understanding financial hardships

Experiencing hardships may be bad luck
 Our ability to recover from them is not

Some hardships are worse than others

What we learn from bankruptcy research

Important class differences
 May be eroding

A national view of hardship and financial
troubles
 Need for a representative, updated test
 Multiple financial troubles

Consumers face a range of financial problems

No clear credit trouble trajectory

Hardship creates financial limitations
 Increasing the likelihood of default
 Increasing problems with access to credit

Looking beyond bankruptcy, looking at class

Class shapes how we experience hardship
 Middle class more vulnerable than upper class
 Lower class also vulnerable

No class is immune from the financial
implications of hardships

2004 Survey of Consumer Finances
 Nationally representative
 Extensive financial data
 Multiple imputation
▪ 5 data sets

N = 4,159 respondents who ever applied for
credit

Financial troubles





Declared bankruptcy
Defaulted on payments
Denied credit
Offered less credit
Hardships




Poor health
Divorced or widowed
Unemployed
Income disruption
Declared
bankruptcy
Defaulted on
payments
Denied credit
Offered less
credit
1.539***
3.804***
1.469***
1.803***
Divorced or widowed 1.593*
1.290*
1.212**
1.600
Unemployed
1.476***
1.911***
1.317***
1.023
Income disruption
1.732***
1.935***
1.420***
0.614***
2.422***
1.192
1.359***
1.104
Hardship
Poor health
Social class
Middle class
Declared
bankruptcy
Defaulted on
payments
Denied credit
Offered less
credit
Poor health
5.620***
2.291**
1.440**
0.244
Divorced or
widowed
2.572***
0.893
2.808**
0.534
Unemployed
0.000
1.249
0.802**
0.000
Income
disruption
1.157**
4.081**
2.031***
0.000
Declared
bankruptcy
Defaulted on
payments
Denied credit
Offered less
credit
Poor health
1.395***
4.541***
1.471***
2.009***
Divorced or
widowed
1.468*
1.479**
1.009*
1.717
Unemployed
1.779**
2.020***
1.350**
0.911
Income
disruption
1.903***
1.632*
1.375**
0.616*
Declared
bankruptcy
Defaulted on
payments
Denied credit
Offered less
credit
Poor health
1.595**
5.500**
1.350***
2.744***
Divorced or
widowed
0.000
1.487
0.880
2.327
Unemployed
2.529**
3.529***
1.659**
1.971***
Income
disruption
2.476**
2.202**
1.173
1.016

Poor health and job loss most associated with
financial hardship

The “great risk shift” (Hacker 2006)

The importance of credit in American
households

Economic instability and depression

Credit reform

Credit tightening

Declining credit use

Cash is king?

Defaults, not delinquencies

Consumer debt as a safety net

Universal vulnerability to poor health

Changing financial obligations in households

Increasing importance of access

Young adults starting out in the red

Unemployment, underemployment and lowwages
mccloud@plu.edu