The American Dream Debt – The Truths Of Entrepreneurship From The Lens Of Debt Drowned Residents Vs. The Lens Of Clean-Slated Immigrants

If you scoop up all the open arrest warrants in America, more than two million would be for minor offenses. Michigan, for example, has one open arrest warrant for every ten residents. 13% of Americans owe student loans. A third of us owe month-to-month credit card debt. One in 10 of us has unpayable medical debt. As a culture, we become so comfortable blaming debt on the individual that we overlook companies that are so predatory that they'll sue their own staff as a course of day-to-day business.

Take Methodist Healthcare in Memphis. Between January and June of 2019, Methodist Hospital sued its own staff over hospital bills more than a dozen times. In the prior four years, they had filed lawsuits against 8,300 patients in general. But they began targeting their own staff when they realized courts and warrants were more effective at securing payments on old bills. One of the hospital's cleaning staff owed $23k and told the hospital on record, “You know how much you pay me? I can't live on that.” She makes $12.25 an hour. Another employee left her job at the hospital still wearing scrubs and gown and appeared in court where she's being sued for four thousand dollars. She claims the hospital didn't even bother to contact her before suing over her bill. “I don't know why they can't come upstairs," she said in the courtroom.

If Methodist employees had a choice about where their health go came from, they might seek treatment from a competitor. Financial assistance policies and other local hospices are more generous. But Methodist only allows its employees to seek healthcare at Methodist facilities. Meaning, if an employee gets sick, they're forced to get care at Methodist, knowing full well that the Methodist primarily uses the court system to collect its bills. On one side of the negotiating table, workers in scrubs are paid by the hospital. Conversely, you have lawyers in suits also being paid by the hospital. It's in the hospital is tax-exempt in Memphis - the public is paying for the hospital to employ and fleece its own people.

____________________________________________________________________________

Our nation was founded on debt. To hear your drunk uncle tell it on the Fourth Of July, the Boston Tea Party was an uncomplicated, kick-ass declaration of freedom, and it was America's first great step toward truck nuts and tailgate parties. It's pretty ironic, then, that a nation that started with the phrase ‘no taxation without representation’ has become a legal feedback system for businesses to collect their depths from citizens without having to be physically present.

A Pew Research study showed that 34% of foreign-born Hispanic Americans had no credit card or installment loan debt of any kind, and immigrants who arrived with a clean slate, started small businesses at twice the rate of born citizens. So, that's what our episode is about today. Is it better to grow up in a system learning to dodge the dept that companies, schools, and police try to pin it on us? Or does having a clean slate jumpstart entrepreneurship as much as a Pew seems to imply?

Myth 1: I'm an American and I don't have outstanding debt. So what's holding everyone else back?

Joe: I want to do a very brief catch up on one of our other episodes. Do you remember are pranking episode?

Todd: Yes, I do. I remember George Clooney enjoys pranking.

Joe: I remember all of the insane, real jerk people who set up prank channels and do terrible things to their kids and to strangers. There's no guile or cleverness; it was just them being rude and calling it a prank for clicks.

Todd: Yeah, what Joe is talking about is families that are setting up getting their kids in trouble by staging accidents and then video the kids crying for some reason.

Joe: Right. One of us had said at some point that one of these pranksters would get shot eventually. And that's the update to this. The prank channel by Tanner Cook usually does mall security and scare-style pranks. Well, he got shot in the stomach the other day because his prank went wrong. I don't condone violence, but that was satisfying. When you look at like his prank channel and how mean-spirited he is, it's hard not to hear that and be like well, it's not lethal.

Todd: As an older person, I can honestly tell you that he's not going to learn from this.

Joe: So, I love topics that kind of start with a question, especially if they spiral out. You will ask me a question about something interesting quirkier, or weird. Initially to me, starting in America is better, where you have all the benefits and safety net. But the more I dug into this, the more my head exploded. I started rethinking the way debt works here. So, please, let's start with where this question began.

Todd: I had someone that I worked with who moved from Moldavia about four years ago. Moldavia is one of the poorest countries in Eastern Europe, it's the average salary is $40 a month. So this man was in construction for $40 a month. What struck me as odd is how quickly immigrant people can rise from pennies in their pocket to homeowners and established. It's faster than people do who are already in this country, who have been here all their lives at a similar age in a similar point of their career. It was weird to me that they gets us momentum and can get things happening so fast. Here, you kind of have to earn your way to get established in credit so you can borrow money and at a rate that you could actually pay it back. I mean, some of these interest rates and stuff is set up for the lower class to never be able to get out from underneath these credit cards or these auto loans.

Joe: So, I want to kind of establish some rock bottoms here. All the stuff I know about money that is smart, I did not learn from my parents. I later learned little tricks just because I heard stories and talked to smarter people. I know that one of the tricks you can do is you can get your children involved in child acting and if you can get them paid, then you can open up accounts way earlier than normal. You can start building their credit in their savings. You can open adult accounts of certain types because they're technically working even though they are like 7. When Todd and I talked about being saddled with American debt, we came from a place of seeing it happen. So Todd, why aren't you and I instantly graded saving when we start making more money? Why don't immigrants start adapting and spending more once they make more?

Todd: They do eventually, but not right away. It’s definitely not on the first generation. The second generation is the one that gets Americanized, and we know what happens with inheritances.

Joe: We need to eliminate that element right off the bat. Let's get into the science and, more or less, the economy of this. We're going to eliminate motivation and hunger and grind. When we have talked about the subject before - the rate at which immigrants start businesses and work ethic and things like that. Something we haven't talked about yet is how debt and the lack of debt affect people coming into the country. So if anyone's listening to this and they're like, oh yeah, obviously you're going to be more prosperous and you'll start a business quicker, and you'll have your savings done faster if you are hungry for it and you just work hard. We're going to get past the work-hard part really quick. I think Todd, you and I could say that we're both pretty hard workers ethically. I have not yet started a business, but I have intentions later down the road when I'm not as busy to start a woodworking business. How many businesses have you started?

Todd: Successful ones, 3.

Joe: Okay. Let's say hypothetically we have somebody come over, and they start with less credit because they, first off, according to Pew Research, 34% of foreign-born Hispanic Americans arrived with no credit card or installment loans of any kind. So already, they have almost double the rate of not having ever taken credit. Usually, that's because it's not available. It's not because it was a moral choice; it was just because the banks either wouldn't have loaned you money or, you know, you didn't want to do business with that bank because their rates were so bad and their loans were so predatory. So, compare that to most here who have some sort of installment or loan or credit card debt. That's our first layer of debt shadiness that Americans have to sort of get used to wearing.

Todd: When you say that loans are predatory. That means you could never repay them – it's like a forever loan. So they're very wary and distrustful of lending in general.

Joe: If you become familiar with how credit works in America, you get used to the idea that you're going to have to use credit and manipulate it, and you work with the three big credit companies. When you look at it from the outside, that's absolute madness. Why the hell would you play ball with a system that puts you into debt permanently or semi-permanently and gives you a score based on how good you are at dealing with debt? Like, that is absolute madness from the outside.

Todd: I was a mutual manager for HSBC for their auto finance division. And at the time, it was the biggest bank in the world and before they closed down their Auto finish division, which I was shocked about, they were explaining to us that auto financing is not worldwide. America's one of the few countries where people get auto loans. In most countries, people buy cars cash, or they don't buy them at all. They explained how much more lucrative lending is with credit cards. I just thought I was interesting cause it's just so part of our language as Americans. We think in payments. We don't think about how much something costs; we think about whether we can afford it weekly or monthly.

Joe: I didn't think about that, but you're right. So, CNBC had a report where they talked about how immigrants who are moving to America to start their own businesses - they're way more likely to pool money among family and friends to reach their goals. This means they are less likely to be in debt for starting businesses; they are risking it all themselves when they start a business. But that also means they're tied to it, more likely to work insane hours and put their all into keeping it afloat because it's entirely their and their family's money. They literally have their reputation on the line. But also, it means that they don't have to pay back a bank to keep that business going. They're not indebted to somebody else. Again, this credit system isn't operating for them. They just have the money, and they have the business.

Todd: I think if you come from a country with fewer resources, you're going to recognize talents and streets of opportunity with different people, right? They feel trust in their family that they get because they have had to rely on each other to survive. Arrival in this country is much different than survival in a country where you make $40 a month.

Myth 2: Anyone can wipe their own slate. You don't have to be an immigrant to start clean. Just pay off your debts and open a coffee shop. Simple.

Joe: So, we're going to cover the kinds of debt people get into. Americans have a lot of debt; we have all these types of debt that we do. Let's start with student loan debt. Have you ever had that, Todd?

Todd: I haven't, but you know, I'm not an academic. What about you?

Joe: Briefly. My father had student loan debt his entire life. The story of Millennials is having student loan debt that all these companies got set up and established and get got the thumbs up from the government to the tune that 13% of Americans still owed student loans. What about month-to-month credit card debt?

Todd: Oh yeah. I've been up and down in the credit spectrum. I've been underwater to the tune of probably 75 to 100 thousand dollars in credit cards. And then I've had available credit of 100k with zero debt. I've been all over that.

Joe: That sounds like somebody in a casino. You've Won everything and you have lost everything. The one that was next on our list, medical debt, that's on the got me. I had that for a couple of years and it was crushing. And then, as we mentioned in our opening, a tremendous number of Americans have warrants for small things. Having debt has become so normalized. To make it worse, we now have systems and businesses that will hijack the American court system to just be debt collectors. Our opening narrative was about that hospital that just as a matter of course, people wanted to pay them back, and people wanted to pay their bills and instead like they had hundreds and hundreds of people going to court because it was cheaper for them and easier for them to just say to the court - collect this please, and then they would be dragged in and they'd have to pay attorney fees on top of their medical fees.

Todd: We talked about before what medical companies are doing. They're very loosely billing everybody. And what they figured out was if the dollar amount is low enough, a very high percentage of people just pay the bill. They don't ask any questions because they don't have time. They're so busy in their regular life. Unless you get a jerk like Joe, who reads every goddamn thing.

Joe: It is the cheapness, not the intelligence. I called every Monday because I'm crazy, not because I'm smart. We have a way of a story about a guy that got into a standoff with US Marshals over a tiny student loan. Can we talk about that?

Todd: Oh yeah, this is great. Well, this happened in 2012. A warrant was issued for this man for not paying $1,500 and federal student loans. Well, this was for what he borrowed back in 1987, which probably paid for books and classes and everything. But this was 29 years later. And he doesn't remember a conversation, and he didn't receive any notifications, emails, or any phone calls - certainly no paperwork in the mail. So he failed to appear for the court date that he didn't know about. This resulted in two deputy sheriffs coming to his house with guns drawn to arrest him. It escalated quickly because he didn't know who these guys were. He knew nothing that was going on. So it's very, very dangerous because he's scared, and he's probably a gun-carrying citizen, which I think everyone has at least two guns in Texas. It was resolved, and the judge worked with them to make some payments on it. But why send guys with guns for a student loan?

Myth 3: Okay, so maybe our system is designed for debt. But how much of that is reflected in the legal system? It's not like law enforcement is more invested in securing payments than solving crime, right?

Joe: This leads to like a slightly dark place. Are you okay with us talking about how much of policing is technically debt collection?

Todd: Please.

Joe: Well, our first source comes from the Manchester Universities Criminology website. We also went to Reuters, which is basically raw stats. Now, you've heard this, the term Sword of Damocles. The reason I bring this up is Manchester's criminology stats literally compare the America system to The Sword of Damocles. They talk about how the majority of arrests are for low-level offenses, of which 80% of them are low-level. This is like traffic tickets. Most bench warrants are for failure to appear.

Todd: The fine part is the part that snowballs, where people are coming back into court because they haven't paid because they can't afford to pay.

Joe: Right. They're issued a poster arraignment for administrative reasons, and then after they don't pay the fine, they get a failure to appear slapped on their record.

Todd: But you got to drive to work, even though your driver's license is suspended because you don't have 1800 dollars to get it back, but you do still have to go to work and take your kids to school…so it can snowball.

Joe: I'm not a lawyer, obviously, but that looks like to me a system that was in place because we want people to pay their fines. We want people to appear in court. So obviously, you're going to need a system where you want to penalize people for not showing up and going through due process. What it's become is a system where they rely on a certain number of people to not show up, and it's how much money you make off somebody. There's a group called Catalyst California which is part of the ACLU, and they revealed numbers about California policing. This was re-reported by New York Times. They found that about 4% of police officers’ time is devoted a violent crime. Less than 25% of all property crime is cleared, and in LA, 88% of the county sheriff's officers spent time on officer-initiated stops rather than responding to calls. So it is almost the reverse of what I hoped it would be. In this particular instance in LA County, almost 90% is just stopping people on traffic violations and on small tickets.

Todd: That seems like just a waste of time or just bad priorities. I know there is revenue based on tickets, but many bad things like school shootings and drug abuse, are going on. Doesn't that just seem like we're just putting our attention in the wrong place? All for money. That's what it's about. 

Joe: When I was working in security downtown, I worked with Portland Patrol, I only ever saw the cops responding to things that were necessary. They would show up when things were going bad and their professional and they did their job, and it was great. And then, going back and looking at the statistics and seeing that, I was only seeing the 11% where they arrive for calls or for reasonable suspicion of a crime. That changes the way I see it. I understand now that I was seeing them at their best and I was seeing what policing should be. What it actually is, most of the time, is traffic stops and stopping for violations. This is what we are talking about when we refer to Americans like that, where we have a Venn diagram of types of debt you can get into. This is one of the ones that happen extraordinarily frequently, where everybody will, at some point, pay a traffic ticket or fine. Just period. Everyone will. It won't put you into debt, but what will put you into debt is when you fail to come in and pay it. Traffic tickets become warrants, which become criminal offenses if you don’t appear, meaning you get totally screwed the next time you apply for a job or try to get a loan on a house. And that is not a fluke.

Todd: Well, don't always get notifications. Also, let’s say you had a lot of different loans from a lot of different sources. We are very human and can often misplace something and forgot about something, because we're paying so many other things and life goes on. It's easy to happen.

Joe: Right. The Manhattan District Attorney came out in public and said that these outstanding warrants are driving a wedge between the police and the community that he's trying to serve. He claims that they're unnecessary obstacles to housing and employment. It's not just a black mark; you are now out of the pool for doing the things in life, like getting a good job. We start the episode talking about how an immigrant with no baggage whatsoever can get loans from their family and start a business. Now, you can't. If you have one of these like these bench warrants turn into a criminal offense, you're out of housing, employment, loans, and business. Now, mentioned that the US Marshals came for Paul Acre for $1,500 in student loan. So the US Marshals implemented something to try to like curb this. They tried to implement a Fugitive Safe Surrender Program FSS, and it's to bring in high-level fugitives, to bring in serious crime. And it became clear after implementing it that they were only really able to net low-level offenses with it. It's weird to read this. To know that the criminal justice system is mostly geared toward collecting on those loans, and not only collecting on the loans you get from companies like a crooked hospital that forces you to take a bill or student loans that are already predatory, but the police themselves are designed to also be alone system that collects on it.

Todd: Yeah, I think the misconception, too, is that this money is lost. I don't think they know how successful and profitable these finance companies are. I have a myth that I think the majority of people, even well-educated people in the Auto Finance business, don't understand. Let’s say you go out and buy a car for 20,000, you put 10,000 dollars down, and you’ve got minimal medium credit of 12-15% on a used car. People think the bank would love to repo that car because they've already put 10k down. No, they wouldn't; they're loaning money on a depreciating item. The real profit is in people making their payments on time, or even better, just a little bit late. That is so much more profitable than repo-ing the car and reselling it. It doesn't matter what you put down.

Joe: Right. If anybody reposes something from you, unless it's a house, the odds are they won't get their money back. It's better to keep you paying. Am I correct in that?

Todd: Yeah. We learned that with the mortgage crisis. That's a prime example. Those banks didn't win getting all those houses back. They should have, right? You’d think it'd be great for them to get those houses back and resell them. No, it didn't work out so well.

Joe: Right. And we've learned from companies that turning houses into rentals is where the money is. The mistake the banks were making is they were treating it like a tradable asset. And they were just sort of buying houses to have houses to trade again. What they really should have done is they should have used all of that to basically make a rental fleecing system, as these rental companies have.

Todd: And never sell it.

Joe: I don't want to give any more tips to any bankers listening to us if any do. But okay, so what happens when these two intersect - when the immigrant-owned business collides with police trying to get some small tickets passed? Do we have a story about that?

Todd: We do, and it stems from Tiburon, California. A Kenyan man was married to an Ethiopian woman - they're both immigrants educated overseas. They have a small clothing store in a smaller town. The police came by one night and started harassing them about why they were open and that this was suspicious. Now the man’s last name is Awash, and he is not a quiet guy; he does not appreciate this. And it's all on the police’s body cam. He gets pretty worked up, and he knows exactly what this is. He's being identified because they're black people in a small town. The police were screaming at them, to the point where the police were like, well, you should be thanking us for coming and checking on your business. Just very condescending. At one point, a white man was screaming out the window because he was tired of the noise, saying it was their effing business and to leave them alone. The point of the Kenyan man was a lot of people stay after work and do work; they're just here harassing us. It's just absolute targeting because of the race they were; because we're not white.

Joe: The two takeaways from that to me are the obvious one which is this is an officer who is facing discipline, and their whole policing system is about to change. Like, they got sweeping departmental changes after this because it was such an issue. In the video, it's the cop who was trying to tell the owner to put his key in the door. Let me see that it's your business. He wasn't asking for ID, and there wasn't anything to question him on. There was no reasonable suspicion. Again, 11% of the policing done in California is reasonable suspicion. The rest is just ticketing.

Todd: They're trained to come and harass someone. For example, traffic stops. They try to scare you and spook you, and regardless of who you are, they remind you that they are authority figure who has a gun and can take you to jail. This is not a cop acting up. They are trained to do this, to get lower-level tickets. It's harassment but with revenue in mind.

Joe: I’m so glad you went to the same place as I did, mentally. I did not see this as a protest in the making. I saw this as, here's a successful business owner, and we will still try to find a way to put you in debt. We will still find a way to ticket you, even if we have to make things up. In the police handbook. I guarantee that says make them pull out their key and put it in the door to prove its theirs is not a standard operating procedure. This is we want money from you, and we will find a way to ticket you, even if you have literally done every single step right. After the incident, the department has to pay 150k in a settlement, which they're going to have to work extra in tickets to get back. They also made it easier to identify police acting with the public because the police didn't adequately identify themselves during this exchange. They are making it easier to fire police who are suspended or disciplined multiple times, and the supervising officer and the police chief resigned.

Final Thoughts

Joe: We got to answer the question that we started this with: If we are going with we are on the land of opportunity (I still believe that on some level), but if we are comparing showing up with a family willing to loan you money and a blank slate. You've never had debt before versus a system that tries to get you to take loans as a student and tries to get you hooked on loans through credit cards. We have medical loans that are incredibly predatory and a ticketing system that will try to ticket you for minor stuff in the hopes that you actually don't pay it on time...would you take the clean-slate advantage, or would you take what we have right now?

 Todd: It's a no-brainer. No duh.

 Joe: I loaded that question; I'm sorry. I don't know why you're letting me run things.

 Todd: Well, the statistics of it are not even measurable. It's a landslide victory for the immigrants.

 Joe: And that's what you witnessed, proving it with an episode.

 Todd: To recap our episode today, there are a few differences between starting a business as a citizen versus arriving with a clean slate. An immigrant coming to the US workforce often does so without ever borrowing credit from a major banking institution. A student arriving to the workforce on a college does so with predatory loans and can be visited by a US Marshal if they don't make payments. An immigrant leaves their out-of-country traffic tickets behind. An American with non-criminal infractions can have their bench warrants upgraded to criminal offenses, making it impossible to secure business loans or houses. Immigrants often pool resources with their families, and everyone works to pay for their first brick and motor. An American be sued by the business they work for because it's less costly to use the legal system, like a bludgeon. But there is one thing that unites us all - whether you're born in America or you immigrate here. If you get seriously ill in this country and you don't have premium insurance, you're fucked.