Lesley Stedman Weidenbener, writing for the Louisville Courier Press, reports that bankruptcy filings are up nationally more than 30% in the past year and that Indiana’s filings were among the highest in the country (the Governor’s “hot streak” notwithstanding. Incidentally, the “hot streak” language has been removed from the Governor’s bio at the state web page but is still in the Google cache. “Indiana is on an economic hot streak, thanks to Governor Daniels’ strong leadership and the pro-active business-minded skills he brought to state government[.]” )
Where was I before I got distracted by that “hot streak” talk? Oh, right. Bankruptcies. Indiana has a lot of them. Indiana is 5th in the country with 5.9 per 1,000 residents, compared to a national average of 3.4 per thousand. This is the 12th straight year Indiana has been in the top 10.
Medical costs, foreclosures, rising unemployment and the loss of high-paying manufacturing jobs are to blame for the climbing numbers locally and nationally, economists and bankruptcy attorneys said.
One cause of Indiana’s higher rates is that apparently Indiana has a higher incidence of people owning homes they can’t afford, resulting in foreclosure and bankruptcy. An interesting fact of which I had not been aware until recently is that many states do not allow deficiency judgments on mortgage foreclosures. In Indiana, your lender will sue to foreclose on your house, get a judgment for the outstanding balance, sell your house at a Sheriff’s sale, and if the house sold for less than you owe, the lender will have a personal judgment against you for the balance. In some other states, non-recourse loans are apparently more common where the lender can’t do more than sell the house. With no personal judgment against you for the deficiency, you’re less likely to file bankruptcy after foreclosure — and a lender is more likely (one would think) to evaluate the collateral more closely.
Our jobless rate also doesn’t tell the full story of our state’s economic health. There are a significant number of people who are employed but in worse paying jobs. Jobs have shifted from high paying manufacturing work to lower paying health and retail jobs. Those jobs tend not to have health benefits which results in an exacerbation of the main reason for bankruptcies: medical bills.
Carol Rogers of the Indiana University Business Research Center points out that Indiana also ranks pretty low on health measures with bad rates of smoking and obesity. On the one hand – yes. Healthy living is important, and Indiana needs to do a lot, lot better. We need to change our culture by promoting fitness. We need to design our communities with an eye toward running, biking, and generally being active. On the other hand, I’m always a little leery of this line of conversation when discussing medical costs. Our medical system is poorly designed, and not just because we’re a bunch of fat, lazy smokers who could afford our medical bills if we weren’t so damn fat and lazy. Obviously Ms. Rogers didn’t say this, but I’ve seen any number of conversations on medical costs head in this general direction.
So, generally speaking, Indiana is in a hole and we need to figure out how to get out of it.
I hope we don’t cling too tenaciously to manufacturing jobs. Having lived my first 30 or so years in Cleveland, I know what the result is when people refuse to become educated, or re-educated and cling desperately to the idea that you can do a repetitive task and claim $30/hour. That worked for a while, and was a great thing for undereducated people. But now we find that there is a great worldwide pool of undereducated people who are willing to do repetitive tasks, and for a lot less than what Americans are used to getting. So, we can sit around and ignore this reality, or, we can work to remake ourselves such that we have more to offer employers who pay high wages.
Some places fostered a spirit of reaching out for newer technologies (Pittsburgh) while others (Cleveland) sat around waiting for someone to do something for them. Both places are more or less devoid of steel mills anymore (Pittsburgh completely so), but Cleveland’s economy makes Indiana’s look vibrant, while Pittsburgh’s really is.
I hope the spirit of our state shifts, from desperate clinging to the past, to an embrace of becoming educated and future oriented. We talk about providing education, and lay out a lot of money to do so, but our people don’t take on learning as cool or fun or even as good. We see the result.
I agree that there is nothing intrinsically valuable about manufacturing jobs versus other jobs. Those jobs paid more because unions were successful in squeezing some of the profits from the enterprise down from the owners to the workers. That hasn’t happened so much in the service industries.
A couple of the things our economy needs are:
1. A lot of people with spending money. If the available wealth is unduly concentrated in the hands of too few people, the economy won’t work as well — social justice considerations aside.
2. A system where hard work and ingenuity are rewarded more than connections and pre-existing family wealth. (And, of course, more than sloth and copying the ideas of others.)
Educated people leave Indiana in droves, and it is hard to lure educated people from other places to live here. I don’t think we’re going to lure educated people to a state that is blanketed with CAFOs and that has local government services cut to the bone.
As for all of this bad news, there is an explanation for it. Indiana’s economic “hot streak” abruptly ended on Nov. 5th. ;-)
The worst is yet to come, this is true news by CNN. This Year 2009, some big countries like US, Japan or even Singapore will have negative growth (GDP) and predicted by the 2010, the GDP growth will slowly to increase by a rate of 0% – 1.5%. That’s very slow. So do your savings now, I believe now, Cash is King.
Houston, don’t fall into the trap by believing everything some talking head in the media is prattling. Give the citizens some tax breaks and we WILL spend again (and subsequently expand the economy again).
Australia has so far ridden the storm. We are seeing some backruptcies, but not like you guys are experiencing
Australia is doing pretty well (their interest rates are actually around 3% aren’t they) compared to the rest of the world at a per capita basis.
The recession shows signs of easing a lot and confidence is getting higher, so hopefully this bleeding can stop.