In Part One of this series, Marnie Ko detailed the effects of increasing debt on North American households. In Part Two, she examines the role the taxman plays in creating poverty in Canada, and looks for solutions.
Charles Moore, a Nova Scotia writer, argues in a recent article that skyrocketing indebtedness is a “fundamentally philosophical problem.” Society, he says, no longer values the “Judeo-Christian traditional values of frugality, restraint and thankfulness,” instead allowing lifestyles to be ruled by materialism and consumerism.
He has a point, but the economic state of many families today living paycheck to paycheck is not helped by an average income tax bill of roughly 49% of family income. According to the Fraser Institute, the average Canadian family in 2004 earned $75,436, which sounds like a fortune, except they paid a tax bill of over $36,000 against that income. Last year, most Canadians theoretically worked for free (meaning for the government) until June 18th, before they even began earning money to feed their kids.
Meanwhile, while the poorest people in the country get by on pasta and sauce from the food bank, the highest paid movers and shakers, the top 100 executives, as analyzed by the Canadian Centre for Policy Alternatives, earned the average Canadian yearly salary of $38,010 by January 2nd. And, of course, the richest people in the country just keep getting richer. 10% of Canadians in the country earned 50% of all national income, and owned 58.2% of the country’s wealth in 2005, notes Statistics Canada. It is estimated that roughly 6.7 million Canadians earn less than $20,000 a year.
Still, high taxes and widening social divides can’t completely explain the problem. Across the country, tens of thousands of Canadians, mostly the under-50 crowd, are recklessly racking up thousands of dollars in “bad debt”, the kind charged on credit cards, for disposable, consumable items with no potential to increase in value, or that depreciate immediately after purchase, such as big screen plasma televisions, luxury cars, clothing, televisions, and vacations. No one is arguing for a return to the good old days of the dirty ’30s and the recession — even though you could buy a new car in 1949 for $1650, and fill it with gas for 20 cents a gallon. But one sound principle was a fact of life back then: if you didn’t have the cash, you couldn’t buy it. The 50-plus population knew how to save money because they had to.
It’s clear we are a culture of consumption. It’s hard to avoid. Life should be enjoyed, and there has to be some sort of balance from the deprivation of the old days. No one wants to go through life denying themselves every pleasure — otherwise it feels like we’re working for nothing. And then comes that “rainy day” when the washing machine breaks down or dishwasher craps out. So that, too, gets put on the credit card, and most of the time, the debt lasts longer than the machine.
That’s not to say all Canadians overspend. A lot of folks, especially those with kids, find their paychecks simply cannot keep up with the cost of living, gas, utilities, dentists, and inflation. The actual number of Canadians living paycheck to paycheck is elusive. Estimates put it anywhere from 50% to as high as 70% in Canada, with about 65% of Americans one paycheck away from poverty according to surveys. A lot of conservatives argue poverty isn’t as dire as the numbers suggest, and are quick to scoff at any more hand-out style, state-funded welfare programs. Liberals generally think the solution is as simple as more money, a government-funded committee to study the issue, and plenty of state-funded daycare spots, so women can leave their kids to join the workforce. The over-50s would suggest the answer is to cut up the credit cards for good.
Likely, the real solution lies somewhere in between, and is probably patiently waiting for global discovery on a relatively obscure internet blog. It’s not surprising, really, that ordinary citizens with a free forum for reaching thousands of people via the net might come up with the most innovative and unorthodox solutions for society’s biggest social problems.
For example, American writer and blogger John Scalzi has an astute, funny/sad summary of relative poverty on his popular blog, Whatever. The highlights of his definition of poverty:
Being poor is knowing exactly how much everything costs.
Being poor is stopping the car to take a lamp from a stranger’s trash.
Being poor is hoping you’ll be invited for dinner.
Being poor is six dollars short on the utility bill and no way to close the gap.
Being poor is crying when you drop the mac and cheese on the floor.
Being poor is a six-hour wait in an emergency room with a sick child asleep on your lap.
Being poor is never buying anything someone else hasn’t bought first.
Being poor is picking the 10 cent ramen instead of the 12 cent ramen because that’s two extra packages for every dollar.
Except, truly poor people don’t really want to know how much everything costs, because they probably can’t afford it anyway, as pointed out by a critic of Scalzi’s list.
Blogger bickering aside, poverty in both Canada and the United States is a social and community problem, and odds are it will be solved at a grassroots level, with more innovation and effort than money. And strangely enough, it’s in the cultural phenomenon of blogging that the most thought-provoking proposals are found.
For example, Silicon Valley, California blogger Scot Myers-Lipton proposes a solution to poverty in his state in the aftermath of Hurricane Katrina. His Gulf Coast Civic Works Project suggests the hiring of 100,000 residents to rebuild New Orleans houses, schools, and parks, in exchange for subsidized tickets back to their neighborhoods.
One thing is certain, Steiner stimulated a lot of debate on his blog (see previous post), and it didn’t cost the taxpayers a penny. Hundreds of people posted comments, advice, and their own stories of living in poverty. Steiner, meanwhile, continued to exist on a diet almost solely made up of bread, noodles, beans, and rice. On day 29, he ate rice mixed with mashed potatoes, frozen vegetables, and a hot dog. “It eats like dog food,” he wrote. But it only cost 30 cents. Steiner calculated he saved $212.22 by starving for a month. And at the end of his experiment, he wrote a check for that sum to his local food bank.
His month-in-the-life of a poor person taught him that many people live this way for real. He’d tell people about his experiment. They’d get “a very somber look and their face and say something like, ‘Yeah, I remember that time in my life.’ Then they go on to explain some time in their life when things just weren’t going the way they should and they were forced to live on a doll
ar a day.” He also concluded these were people who were “quite financially successful now.” How did he know? “They own nice homes full of nice things, drive nice cars, wear nice clothes . . .”
Except, if they’re like many North Americans, chances are those nice cars, nice things, and nice clothes are financed on credit. The reality is most folks are just one paycheck away from their own chance to feed themselves for just $30 a month.