Posted in book reviews

I haven't done a book review in a while, but don't worry!  I'm still reading and will post several book reviews in the next couple days.

The Great Risk Shift by Jacob S. Hacker was a really interesting read.  If you have thought that American families are increasingly vulnerable and their fortunes can turn seemingly on a dime, this book confirms your suspicions.  He outlines the many ways that American society and businesses have saddled the family with all the risk inherent in life: from job (in)security, to family responsibility, to individual retirement planning, to lack of affordable health insurance.  He devotes a thorough chapter to each topic.  He explains how families who seem to have it all can suddenly be applying for welfare or Medicaid, by showing how the volatility of incomes has increased.  A family may be making $100,000 this year, but that is no guarantee for next year.

I personally learned the most from the retirement chapter, because I didn't really know anything about the subject.  I knew that traditional pensions were all but gone, but understood nothing about what had supposedly replaced them.  Using Enron as a example, Hacker demonstrates that 401Ks are completely vulnerable - the profits are yours, but so are the losses, and if your company disappears, so can your money.  One Enron employee had $600,000 in retirement savings, and one year later, they were worth $11,000.  Hacker also explains why 401Ks mainly benefit people with high incomes, especially since most low-income people don't even have them.  And with the volatility of the stock market, it's really hard to take a 401K and turn it into a guaranteed source of retirement income.  There is another example of a man who had $900,000 in his, and then received a check for his account of nearly $800.  Yes, you read that right.  Nearly a third of Americans born between 1931 and 1941 lost 50% of their financial wealth between 1992-2002.

You would think that these changes would make politicians and others realize the absolute necessity of Social Security, but instead there are critics who want to "privatize" Social Security to make it more like the 401Ks, which aren't working.  Hacker makes a persuasive argument that all of the doomsday talk we have heard about SS is just propaganda to undermine support of the program.  It made me think: have I ever heard someone who actually receives SS complain about it?  No, I haven't.  SS is certainly part of my financial plan should anything happen to my husband (it doesn't do much for him if I die, because I haven't worked enough to get decent benefits).  I learned enough to know now that any talk of "privatizing" Social Security would be disastrous to Americans and will vote accordingly in the future.

Over and over Hacker talks about the "Personal Responsibility Crusade" which is his term for the people who go on and on about individual responsibility and believe that it's OK for families to carry all this risk, and actually would shift more risk onto them. "Say this for the Personal Responsibility Crusade: it has a vision and a goal.  Critics of public and private programs of insurance know what they are against, and they know what they are for: greater personal responsibility and individual self-reliance, propelled by aggressive government policies that erode the bonds of shared fate and undermine the systems of social insurance that once linked Americans across lines of class and economic vulnerability."

I have run into this attitude many times on the Internet.  I'm not sure where it comes from or why.  I have seen Americans write horrible slurs about Canada and their health care system, when most Canadians I talk to seem pretty satisfied with it and relieved that they, unlike their American neighbors, don't have to sometimes choose between a doctor visit or food on the table, or face bankruptcy because of medical bills.  They don't have to worry about changing jobs and losing decent insurance, or about even being able to find "affordable" coverage.  They don't have their rates jacked up every January by a supposedly "non-profit" company.  Canada is sounding kind of like paradise, huh?  But don't mention universal health insurance in certain circles unless you are prepared for the fallout.

It just really makes no sense to me, in the supposedly richest county in the world, that we tell families that in every aspect of life, they are completely on their own.  You must pay for your own overpriced health insurance and everything that isn't covered, while simultaneously raising your children and paying for everything related to their care, while also saving enough money for your retirement AND investing it correctly, AND you must do all this by relying on the goodwill of your employer to let you keep your job.  If this is the new definition of the American dream, then that is definitely what it is: a dream.

Hacker's recommendations?  Understand the risks, save a lot more than you probably are, limit debt, don't overextend to buy a house, go to a college you can actually afford so that you complete the degree (the most important thing), have reasonable insurance, use whatever government programs you qualify for (another thing many people I have talked to on the Internet are against), get mad about the topic and speak out.  And he also makes political recommendations to address these huge areas.

This book was definitely worth reading, so that you can have a clear picture of what American families are up against.  I enjoyed it and learned a lot.