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Insights: Predatory economy dines on Colorado's upward mobility

July 10, 2017 Updated: July 10, 2017 at 6:43 am
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photo - Businessman Holding Money Bag
Businessman Holding Money Bag 

Over sandwiches and iced tea with two smart guys, the Bell Policy Center's Rich Jones and his boss, Scott Wasserman, I asked why things always seem harder on the working man, while the rich get richer.

That's not just me saying it. In May, the University of Michigan's Panel Study on Income Dynamics released a report that said the richest 5 percent of Americans saw their incomes rise by an average of 5.8 percent from 2012 to 2014. The median U.S. household income rose by exactly half that, 2.9 percent, "which doesn't even keep up with inflation," researchers noted.

The left-leaning Bell Policy think tank has put up a good fight against predatory lenders, but now Rich and Scott are convinced it's just an obvious symptom of a predatory economy. People with no wealth inevitably need loans, laden with hidden fees and mandated insurance that gnaw deeper into their pockets. The rich get richer, and you know the rest.

"You can't pick yourself up by the bootstraps if your feet are chained to the floor," Scott said. "Debt is preventing Americans from moving up, and our increasingly predatory economy makes that possible." Colorado lawmakers in 2010 capped payday loan rates at 45 percent. Interest rates had been north of 300 percent. Bail bonds in Colorado are capped at 15 percent, so it's still easier to get of jail than it is to get out of debt.

Predatory lending works this way: You're dead broke and desperate, so you borrow money from a payday lender at a high-priced interest rate. Folks who are desperate enough to turn to a payday lender aren't typically people with ready cash, so many fall further behind as the interest and penalties mount and the cycle of debt spins into a tornado. But that sounds like most credit cards that banks are eager to give to those most likely to run up bills and pay the interest. The loan industry and its political allies have a defensible response: Don't borrow what you can't afford to repay, and thank goodness for lenders willing to serve the desperate, albeit at a price that reflects risk. Human nature is part of it. Debt is a bridge for the have-nots, and the ultimate weakness is giving our children the best we can. Sending kids to college seems as much a necessity as food, clothing and an iPhone.

What does that look like around the kitchen table? The average cost for college tuition in Colorado last year was $11,858. The average cost of food for one adult and three children in Denver last year was $10,601.

The conservative Millennial Policy Center noted in a white paper in May that the price of tuition has marched upward in step with the availability of loans and grants. That's a win-win for banks and colleges, but it left the average graduate from a Colorado university with nearly $26,000 in debt last year, and 53 percent were in hock for their higher learning.

Health care takes a big bite out of Joe Lunchbucket's upward mobility, too.

An emergency room basically works like a grocery store where you go in and the clerks decide what to put in your cart - trust them, you need it - and when you get to the checkout they charge you prices beyond your control. ("Sorry, sir, these potatoes are out-of-network. You'll pay for your French fries out of pocket.")

Obamacare, many hoped, would address unaffordable health care, but it hasn't. People now have insurance the government forces them to buy, but it's too darn expensive both in premiums and deductibles.

If Congress strips away insurance and Medicaid for the working poor, their economic pit only deepens, perhaps into an abyss, Rich and Scott agreed.

Health Insurance companies saw their profits rise 80 percent under President Obama, the conservative Weekly Standard reported in October, and The New York Times reported in March that managed care insurance companies saw stock gains of 300 percent since 2010, compared to 135.6 percent for the overall market.

Property insurers also are getting richer while the working man pays, as well. Despite covering $7.3 billion in catastrophic losses in the first three months of 2017, the worst quarter since 1994, they still turned in $7.7 billion in profit.

Remember that afternoon hail storm that hit Denver on May 8?

I shell out $132 a month for homeowner's insurance, more than I pay for electricity. But by the time my insurer applied a rated deductible, depreciation and dodges that would make a mob legbreaker blush, my policy is only covering about $4,000. I'm eating almost $5,000.

That's not even an outrage. It's just how our economy works.

I'm reminded of Frank Sobotka, the union leader on the Baltimore docks on the HBO show "The Wire." He was trying to get the legislature to back a grain pier than would mean jobs for stevedores. He played politics with money he got from smugglers.

"You know what the trouble is, Brucey?" Sobotka tells his lobbyist when the jig is up. "We used to make (stuff) in this country, build (stuff). "Now we just put our hand in the next guy's pocket."

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