Product Description

If Americans are so prosperous, why do we feel so insecure?

The U.S. economy is wrapping up twenty-five years of some of the strongest, smoothest growth in its history--a performance so sweet economists have given it a name: "the Great Moderation."

So why have so many of us, even those making hundreds of thousands of dollars, arrived at the new century with a gnawing sense that events are moving against our families and ourselves? The easy answer is that we're suffering a case of needless anxiety. But the easy answer is wrong.

Drawing on interviews with hundreds of Americans and new statistics he developed, Peter Gosselin traces a quarter-century shift of economic risk from the broad shoulders of business and government to the backs of working people. It is a shift that has shaken the pillars of most families' lives--stable jobs, solid benefits, government protections. The change doesn't mean one can't prosper. But it does mean the benefits of growth come at greater peril and your financial fall will be steeper if you stumble. This threat to working Americans' security--and what to do about it--is a pressing concern to economists, policy-makers, and everyone who works for a living.

Product Details

• Amazon Sales Rank: #465145 in Books
• Published on: 2008-06-02
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 272 pages

From Publishers Weekly
Starred Review. L.A. Times economics correspondent Gosselin outlines the current economic situation of American families in light of specific policies initiated since the stalled economy of the 1970s. Today, Gosselin finds, fewer households are likely to fall into financial ruin, but those who do experience layoffs, expensive medical problems, foreclosure or other financial strain have a much harder time bouncing back, as old social safety nets have been systematically unraveled. Gosselin argues that in today's economy, families and individuals are assuming an unprecedented amount of financial risk; another aspect of the new economy is that upper-middle class families are at just as much risk as the less well-off. Each chapter takes an in-depth look at a different facet of the economy, healthcare, retirement, education and rebuilding New Orleans among them. Gosselin also discusses "unjobs," short-term and freelance gigs secured by an increasingly desperate labor force, and the new indispensability of two-income households. Though scholarly, Gosselin's writing is effortlessly readable, bolstered by anecdotes from real people facing financial adversity. Packed with insight and understanding, this no-nonsense look at the present and future of the American Dream should be of interest to any wage-earner or salary-man.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

From The Washington Post

Reviewed by Martha M. Hamilton

The recent economic downturn, with the collapse of the housing bubble and the tightening of credit, has revealed a world of financial risk that had been there all along, unnoticed by most of us. Two new books examine other financial perils and inequities that put us further at risk.

You might not expect a book on economic policy to be a page-turner, but Peter Gosselin's High Wire is just that. Gosselin, a national economics reporter for the Los Angeles Times, has written a systematic investigation of the many ways financial risk has been transferred from employers, the federal government and insurance companies to individuals and families. Gosselin shows, in frightening detail, how our lives as Americans have become riskier over the last few decades. Instead of believing that we are mutually responsible for each other, we now rely on markets that have repeatedly demonstrated that they are distorted by greed, corruption and irrationality.

Gosselin makes his case using statistics and stories of real people, such as Debra Potter. Potter was a stay-at-home mother until the late 1980s, when she became an insurance agent to supplement the modest income of her husband, a Presbyterian pastor. In 2001, she earned more than $250,000. But by the end of May 2002, she had become so disabled by symptoms of what was later diagnosed as multiple sclerosis that she had to give up her job. Her insurer, whose policies she had previously sold, tried to reclassify her disability to reduce her benefits substantially.

Despite continued appeals, the insurance company stood by its decision, and Potter's condition worsened. As a result, the Potters spent almost all of their savings on Debra's treatment and living expenses and were forced to pull their son out of college. In August 2003, her diagnosis was definitive, and Social Security began disability payments. Nearly two years after the definite diagnosis, Potter's insurer finally began paying benefits. A check for the benefits previously denied arrived three years later, but the damage was done.

Gosselin marshals evidence that Potter's case was more than an unfortunate or isolated mistake, explaining how insurance companies routinely reduced payments of claims. In cases involving employer-provided insurance, the courts have let them off the hook by interpreting the Employee Retirement Income Security Act (ERISA), which covers employee benefits, in a way that favors the insurance companies.

The book also shows that the consequences of losing a job have become greater in the last 25 years. Unemployment benefits now replace less of many workers' income, and the loss of a job often starts a spiral in which subsequent jobs pay less and are less secure. On average, he says, the percentage wage drop for college graduates who lost jobs in the early 2000s was four times as great as it was in the 1990s. And that was before our current economic troubles. Gosselin concedes that unemployment has been low in the last few years compared to what it was in the mid-'70s and mid-'80s. But since many families now depend on two wage-earners, the risks of a family facing a substantial loss in income have risen. "As with so much else about the present economy," Gosselin writes, "the dangers are like rifle shots," hitting fewer targets but doing more lasting damage.

Gosselin goes on to explain how companies have transferred costs and risks to employees by dropping traditional pension plans and shifting health insurance costs. This is all part of a change, he shows, from an economy in which employers felt some obligation to workers even in tough times. Remember when a layoff was temporary, not a euphemism for firing?

There is so much more: how credit card debt has supplanted federal benefits, how a college education is more likely to guarantee huge debt than a good job, how your home is very likely badly underinsured. It adds up to an unsettling picture.

Barbara Ehrenreich's This Land Is Their Land looks at some of the same issues as Gosselin's book, but hers is more commentary than reporting, bringing together blog entries and essays, many of them previously published. The author of the bestselling Nickel and Dimed, Ehrenreich takes on well-worn targets, including greedy executives, oil companies and Wal-Mart, and she offers more indignation than insight. For example, she rants about pharmaceutical companies hiring college cheerleaders as sales reps, but her outrage seems focused on the idea of cheerleaders taking such positions, not on the possibility that these sales reps are promoting unneeded remedies. Corporations want employees to be perky and enthusiastic, she laments. "Maybe the cheerleaders should take over the entire corporation," she concludes. "CEOs, for example, define much of their work as 'motivational,' which suggests it could be done just as well, if not better, by a peppy airhead in a microskirt."

But some of her essays make good points, such as one about the ways the poor are forced to pay higher costs. For instance, she notes, citing a 2006 Brookings Institution study, car buyers who earn less than $30,000 a year pay 2 percentage points more for a car loan than do more affluent buyers.

She occasionally can also be funny: I laughed at her description of children, when she compares medical spending on them vs. pets: "True, they are not the ideal companions for the busy young professional," Ehrenreich writes. "It can take two to three years to housebreak them, their standards of personal hygiene are lamentably low, at least compared with cats, and large numbers of them cannot learn to 'sit' without the aid of Ritalin." As a whole, though, her book is like thin, reheated broth with just a morsel or two in it.

Copyright 2008, The Washington Post. All Rights Reserved.

Review
"[Peter Gosselin] has done the most convincing job I've seen in capturing the failures of America to deal with a changing, complex and far less generous economy than it has known in the past...The main theme of Gosselin, a veteran reporter for the Los Angeles Times, is the rise of deep-seated financial, health and material risk. He gathers the many pieces of the new economic America together quite beautifully, even elegantly, and brings them alive with interesting and not the usually predictable individual examples. I learned many things in this book, and I've been covering this territory for a long time."--Jeff Madrick, economic analyst on Truthdig.com

Customer Reviews

This is a Great Great Book and I Would Make it a Point to Read It
This is a GREAT book and I would encourage every citizen of America to read it, young or old. It's actually a hair-raising book. Well researched and each chapter has a personal, true life story of a family or individual that has been challenged with the topic being discussed.

Since the other reviews to date go over the book, I want to share what I took from it. First, I got out all my insurance policies after reading the chapters on how the insurance industry has slowly & slyly sandbagged us consumers. I read them with a fine tooth comb and voila! wouldn't you know it - just like the author said they were doing, well that is what they are doing. Sneaky company (and this is one of the Big Three property/casualty companies in California and the rest of the country) well guess what, they did exactly what the author said they were doing - changing the terms of the policy in such a way that the ordinary consumer, you & me, who (unfortunately) trust our agents so well ... are/were clueless that this got by us. Yep they changed me from the Guaranteed Replacement coverage on my home to the Limited Replacement + some percentage of cost overrun. And it got by me and I'm pretty smart (at least I thought I was). Just as it has probably gotten by most of you too. I called my agent last month and he told me it was the best policy money could by, Limited but with a 150% total replacement ratio, and furthermore the company I was considering replacing them with, well they had a reputation of quoting low and then next year WHAM they would sock it to me. I don't think so because that company is the one used exclusively by AARP and I just don't think AARP would stand for that kind of treatment. But back to my agent .. funny, but my policy said ... 125%. My agent disagreed with me and spoke to me in such a way that I would never want to go look further. But I did look further and HE WAS WRONG. I called the Home Office and got clarification and it is 125%. MY AGENT DIDN'T KNOW WHAT HE SOLD ME and my agent has been my agent since 1988 - or my agent wants that commission. He's a nice guy, I really don't know. But I'm not asking him. I got very angry when I realized that I had been sandbagged and g-d forbid if my house did burn to the ground, I would end up paying out of pocket over $200,000 to rebuild it just as it is.

Just as many of the Oakland/San Diego and other parts of California that have faced total losses have had to do.

The case studies in the book are all the same - about how the families of Oakland and San Diego fires really took it on the chin. The losses above the policy limits were/are staggering. Guess what, with rare exception, I'll bet you a zillion bucks that if you are reading this review or the book, chances are you are grossly underinsured.

I changed that. I changed companies and policies in the last 2 weeks. And surprisingly, between my car, home and umbrella policy, I went DOWN $600/year in premium along with going up from $1M to $2M in my umbrella. That was worth the book right there.

Then on to the ERISA chapters. What a shocker. I really was stunned at what I read. Imagine this law, passed to protect US the workers, in reality does not protect anyone except the insurance companies. Coincidentally there was a story in the LA Times last week about a woman whose 30-yr old husband died and was covered with $400,000 in his group life policy through his job. Guess what, the company and the insurance company refused to pay the death benefit even though the deceased employee paid the premiums for over the 3 years he worked there. The widow sued in state court, the insurance company knows its rights and got it into federal court (because this is ERISA) and the grieving widow was ordered by court to get the premiums paid returned to her and no payment for the policy. And it is not appealable. Who in the world ever knew that? Did you? I didn't. Does this mean that all life insurance policies through your job won't get paid? I guess I was lucky when my dad died 21 years ago because his group life policy did pay me. But then again my dad owned the company so suspect they didn't want to futz with that claim. However the gall of the company to deny the claim and then the courts, under ERISA precedent rulings, denying the payment. I almost fell off my chair. This is just as the author described is happening in the book.

So if ERISA is undermining employee's benefits (and this includes health coverage too, not just pensions, IRA's & other employer provided plans, employer offered disability and the rest of the benefits of the job) and if ERISA is stripping all our rights of we workers, what is left?

The chapters and stories on employeer provided disability coverage almost left me in tears. I usually shed tears only when reading fiction. This was just a scandalous nightmare to read. But I believe it. And the reason I believe it is that my former husband went blind in his last job due to a detached retina-like condition and his privately held disability company policy (coincidentally the same one talked about in the book) denied him his benefits for close to 4 years. Good thing my ex is an attorney and could take them on. 4 YEARS. While my ex is an attorney what he wasn't able to do was to pull money for living expenses out of a hat along with a few rabbits. He ended up on the brink of bankruptcy with this stunt the company pulled. How an attorney that goes blind can continue to be a litigator and read his briefs is beyond me - and the disability company plays the 'let's see who can hold out the longest' game.

This really is sick stuff.

I realize this is a long review. But I decided to list real life stories to support exactly what this book is all about. I have to say, anybody reading this review that is thinking about buying the book, STOP NOW and buy this book. I came upon it at Borders by accident, it was shelved under Economics and not my favorite category which is Investments - and I don't really like economics, but this is an easy & engrossing book to read. And the time has now come at this passage of time in our history that the public, ALL OF US, need to get our heads out of the sand and meet these challenges head on, informed, and not stupidly ignorant. Ignorance costs and at this point of our historical times, NOBODY can afford to be ignorant anymore.

Please read the book. And thank you for reading this review.

Where we went wrong, and what we can do about it
High Wire is a great book for two reasons. First, it presents a wealth of statistical and anecdotal evidence documenting the additional risk that many of us have sensed we are shouldering even in the best of times. Second, it does so in a reasoned, even-handed fashion that liberals and conservatives alike should find persuasive.

Among financial journalists, Gosselin stands out as a passionate moderate. He acknowledges the benefits that 25 years of market-focused policy changes have spread across the U.S. economy--faster growth, higher productivity, lower unemployment among them. But he perceives more clearly than most the trade-offs those policy changes have forced upon us--diminished pay and benefits, less secure retirements and a substantially increased risk of individual and familial catastrophe.

It's a scary portrait, but Gosselin has not lost faith. For nearly four centuries, he notes, American have been striving to strike the right balance between personal opportunity and mutual obligation. The past 25 years represent a pendulum swing that appears to have carried us well past the midpoint. Restoring balance to the system will require accurate data, perceptive analysis--and courage to change. In one book, Gosselin has served up plenty of each.

Impactful, but Ignores the Elephants in the Room
Gosselin's "High Wire" asserts that over the past quarter-century the "ownership society" is becoming the "on-your-own society," contrary to the thinking behind the Mayflower Compact that united everyone for the common good.

Insurance is Gosselin's biggest target, and anecdotal evidence provided by actual Americans his vehicle. Private sector health insurers were exempted from professional liability due to ERISA (1974) rulings, state laws notwithstanding. Thus, these insurers have every incentive to delay and with-hold payments, and plaintiff attorneys little/no incentive to sue for damages. Similarly, homeowners (about 60%) are often surprised to find their home insurance scaled back from "guaranteed replacement cost" to "extended replacement cost" ($X + Y%), while others find coverage unavailable at any cost. Finally, pensions are increasingly threatened by the vagaries of the stock market, coupled with the time and information demands associated with it. (Gosselin documents that even Nobel Prize winners in economics do take the time to do so.)

Gosselin's most alarming revelation, however, is the fact that the odds of a family seeing an income drop of 50% or more during any 2-year interval have gone from about 5% in the 1970s to about 9% in the 2000's. The pattern is the same for all ages, income levels, and amount of education. Further, the average size workplace slid 18% during the same period; 50% in L.A. - smaller firms have always had weaker job and benefit security.

Clearly there are fewer stable jobs and sources of reliable benefits. Gosselin also emphasizes that a college education is less than touted. Large debts hanging over graduates (the average private four-year school cost increased 8X over the prior three decades, public school costs rose 7X, while median incomes rose 23%). Most "increased aid" (the rationale offered for these increases) actually consists of loans.

A major Gosselin weak point is his overemphasis on anecdotes and an underemphasis on generalizable, clear statistics. (The lack of clarity is due to his continual failure to state whether various statistics that are offered are inflation-adjusted or not.)

"High Wire's" biggest weakness, however, is his failure to provide any information/data on why jobs, earnings, and benefits are weakening. Thus, readers cannot understand the overall logic behind these dark trends (temporary, or permanent) or develop reasonable solutions (eg. simply require better treatment of workers, or also shield American corporations from rapacious competitors).

Elephants in the room that Gosselin missed include: #1: Outsourcing to Asia, legal (eg. H-1B) and illegal immigration, and automation are causing major job losses. #2: Runaway costs in higher education are largely encouraged by government funding. #3: Runaway costs in health care are also encouraged by government funding; government also has missed a large opportunity to identify and decrease wasteful spending.

The "good news" is that President Bush's effort to privatize Social Security and add it to the "ownership society" failed - just before the latest market dive.