High Wire: The Precarious Financial Lives of American Families

tags: book review, economic insecurity, politics, social programs, insurance, poverty, employment, education, housing

What ever happened to the American Dream? Well, if you are like me, you will admit that your pursuit of the American Dream is like chasing after a mythical horse that disappeared out the barn door literally decades ago. For example, even though I did everything right -- staying out of trouble, staying out of debt, avoiding all chemical and behavioral addictions, postponing pleasure by working hard and sacrificing so I could earn a top-notch education doing something I love and am good at -- I felt that I am unique because my entire life has been nothing but an agonizing and neverending mistake. But when I read Peter Gosselin's new book, High Wire: The Precarious Financial Lives of American Families (NYC: Basic Books; 2008), I learned that I am not an isolated example of the devastating downward plunge that many Americans' lives follow. In fact, the only thing that makes me different from the vast majority of Americans is that I lack both a family and community connections, so therefore, my financial challenges and woes are much more severe and protracted than even those described in this book. But contrary to what I've been led to believe, I am not alone in facing an overwhelming cavalcade of financial dilemmas and disasters, nor am I alone in my inability to fully recover from them.

This gripping page-turner is the perfect combination of scholarship and story-telling, of meticulous statistical analyses and chilling anecdotes, as the author describes the lives of American families and the increasingly damaging economic challenges they face as a result of specific policies that were intended to restart the stalled economy of the 1970s. While Gosselin finds that fewer households will actually fall into financial ruin, he discovers that unemployment, medical problems, divorce, foreclosure or other financial strains damage financial stability, so life is much more volatile now, making it much more difficult for American families to bounce back because old social safety nets have been weakened or removed altogether. The cruel reality is that families and individuals are being forced to assume ever greater amounts of financial risk for normal life events that are far beyond their ability to cope with and further, these financial risks are just as damaging for upper-middle class families as for those who are less well-off.

Each chapter provides an in-depth examination of a different facet of the economy: a stasistical analysis of the fiscal volatility of American families from different economic and educational classes throughout the decades; the traditional link between benefits and employment; the increasingly damaging effects of unemployment and underemployment; the housing crisis; poverty, education; health and health insurance; and retirement. After the author has explained his findings, he then examines the rebuilding of New Orleans as a real-life case study for how government leadership and intervention (and the lack thereof) has dramatically affected the recovery of a large city from a major disaster.

Several things in this book reasonated with me. First, the description of "unjobs" (typically referred to as "McJobs" by those of us who are trapped in them), which are long periods of poorly-paid benefits-free underemployment in temporary and freelance jobs where a white-collar employee's skills, training and education are either not fully utilized or are not used at all. Even though the author provides a brief glimpse of what this sort of life is like, I think this chapter alone has the makings of a book because the economic, social and health costs of being trapped in such a diminished existence are severe and all-encompassing: losing one's marriage, family and pets are common consequences; as are loss of one's home and possessions -- sometimes culminating in homelessness; also rising debt and the increased risk of bankruptcy; the greater likelihood of developing health problems usually triggered by stress and lack of regular medical attention; increasing social isolation, and last but certainly not least, emotional and mental problems and even suicide. Because of my blog, I have been in contact with a number of research scientists who are teetering on the edge of financial and medical ruin and even homelessness due to the loss of their careers through no fault of their own, and they all tell me about these many challenges and how their professional and personal lives have been permanently ruined.

Gosselin also touches on another topic that could form the basis of a book: the pervasive and growing problem of accessing health care when a person is living on nearly no income, and with no health insurance. It's a shocking reality that during these increasingly volatile economic times, American society has become so punitive and uncaring as to allow those to die who are so stupid as to become ill while poor and uninsured.

But this effect is now extending its effects up the socioeconomic ladder, affecting those in even the upper economic classes who have the audacity to suffer chronic health problems such as diabetes and asthma, as well as experiencing sudden and life-threatening crises such as cancer, stroke or heart disease. But this institutionalized lack of concern for the welfare of others, even those who are clearly not poor, is becoming a malignant social cancer. Even those who do have health insurance are making the nasty discovery that their insurers are increasingly successful in dodging payouts for policyholders' health problems that were insured, leaving their despairing clients facing needless suffering, bankruptcy and even premature death. Worse, people who experience expensive health problems at any time in their lives are unduly penalized since they generally are unable to find any health insurance at any price in the future, unless their employer provides it. This new reality powerfully affects all their subsequent decisions, such as whether to accept a new job, how to plan for retirement, and even whether (and whom) to marry and where (and whether) to vacation.

The chapter in the book that surprised me most was the one that dealt with retirement planning and the development of economic theories underlying modern investing practices. For example, this chapter discusses Harry Markowitz's discovery that a diversified investment portfolio was far superior to an "all eggs in one basket" strategy for investing one's money. That one discovery revolutionized financial planning strategies and earned Markowitz the Nobel Prize in economics. But that wasn't what surprised me. Instead, the author's examination of the overall long-term performance of IRAs and 401(k)s are every bit as volatile as the average American's financial situation and they tend not to perform reliably. In view of this, Americans really dodged a bullet when you recall that Social Security was almost made into an individual retirement investment plan instead of a government-guaranteed retirement fund. Gosselin also found that the average American does not have, and rarely develops, the necessary expertise to invest their retirement money so they "beat the odds" and actually end up with enough funds to provide a comfortable retirement. The astonishing fact that the author reports is that even Nobel Prize winning economists lack this necessary expertise and commitment to wisely invest their retirement savings. Wow. Yet, the Rethuglicans were, at one point not too long ago, demanding that the average American not only could but must develop the same investing savvy as career financial analyists, despite being preoccupied with keeping their jobs, marriage and housing, raising their kids, and protecting their health and savings. The Rethuglicans conveniently forgot that the average American cannot balance their own checkbooks, but I suppose that could also be viewed as an investment strategy.

The story is gripping and the writing is highly readable: it was like watching the 9-11 videos once again; fascinating, horrifying, wrenching, and terribly, coldly real. I ended up reading this entire book in one sitting without even realizing it. In short, this accessible book is essential reading for all Americans because of the upcoming presidential election and because it answers politicians' naive and oft-asked question, "Even though America's economy is expanding, why are most Americans so pessimistic about their future and that of their nation?" I also think that people from other countries who read this book will learn a great deal about how changing governmental policies have threatened the stability of the vast majority of its citizens' lives, and how that volatility is jeopardizing the economic health and future of the country itself. I highly recommend this eye-opening book to everyone from high school students to Nobel Prize winning economists, from America's public libraries and especially to GW, although, by all accounts I've heard, he doesn't yet know how to read.

Peter Gosselin is the national economics correspondent for the Los Angeles Times and a member of the paper's Washington bureau. His new book, High Wire is based on a series of articles he wrote for the Los Angeles Times that won both the Sidney Hillman and the James Aronson awards for investigative excellence. He is also a two-time winner of the coveted George Polk Award for investigative reporting. In addition to his newspaper job, he is a visiting fellow at the Urban Institute in Washington, D.C., where he lives with his wife, New York Times correspondent Robin Toner, and their two children, Nora and Jacob.