Economic Downturn, or Life as We’ll know it

Republicans have often said that if families can do it, so can government when it comes to living within its means. I didn’t think much of this rhetoric until I read the included heart wrenching story from the Wall Street Journal.

Intentional or otherwise, the conservative “frame” has always been able to portray families as survivors, working things out during economic downturns by cutting back on a dinner out, or a weekend movie.

It’s much worse than that for many.

Such is the case of Sharon Brunner. Here’s how people are really getting by.

Sheron Brunner, 63 years old, bought a $250,000 life-insurance policy in 1997, planning to leave the proceeds to her three children. But after retiring in 2002 from her job running a homelessness-prevention program, her finances unraveled. Health problems forced her to siphon her savings. A monthly Social Security check of about $700, her only source of income, doesn't cover her medical bills and rising everyday expenses. In September, she moved to Wichita, Kan., from San Francisco to cut her cost of living.

It wasn't enough, so this spring she signed what's known as a life-settlement
agreement with J.G. Wentworth, a company that buys life-insurance policies and
other tough-to-sell assets. The contract transfers ownership of a life-insurance
policy to a third party, which then pays future premiums and collects the benefit. Ms. Brunner received about $45,000 for her $250,000 term policy. "It wasn't what I wanted," she says. But "with the economy the way it is, I needed that help now."

Americans are resorting to these more extreme measures due to the combination of dwindling jobs, falling home prices, shaky credit markets and a sharp run-up in food and energy prices. Consumer confidence hit a 28-year low in May…The Financial Industry Regulatory Authority recently issued investor alerts warning consumers about the high costs of reverse mortgages and the opacity of the life-settlement market. More broadly, it also cautioned that some cash-now transactions could hurt consumers' ability to qualify for certain benefits, like Medicaid. A lump-sum payment from a life settlement or reverse mortgage could leave an individual with too much cash to be eligible for such programs.

Is this how the American dream will end for many of us?

It will be in if we buy into the Republicans vision of an “ownership society.” We’re almost there now.