Teaching Economics in the Classroom

Teaching Economics in the Classroom to Effect a Change in
Number of Bankruptcies Filed in America.

With the bankruptcy rates in America rising to the point that new legislation is written to protect the creditors from entering into bankruptcy themselves, it lies with the American people to investigate why our bankruptcies were increasing?  Who is filing bankruptcies?  Why are they filing bankruptcies?  What can we, as a society, do to help these people so they do not feel that bankruptcy is the way out?
The bottom line is that in order for business, and capitalism, to succeed businesses need to make money.  In order for business to make money, those who purchase their products must pay their bills.  But do the consumers have to pay their bills?  The short answer is, no.  Consumers may file for government protection if they get too far in debt to have a “reasonable” (as defined by The Federal Judiciary) chance to pay off their debts.
According to The American Bankruptcy Institute the following conditions play major roles in a person’s fall into “unrecoverable” indebtedness:

The factors that helped feed the bankruptcy boom of the last decade are certainly still in place. Those include:
• An enormous expansion of credit by the lending industry, including to customers with shaky repayment histories and questionable ability to repay. The amount of outstanding credit card debt was more than quadrupled since 1990, to $696.7 billion, according to CardWeb.com.
• A large segment of the public that’s financially illiterate. Only one-third of adults in a recent poll had a good understanding of basic economic and personal finance concepts, according to a Harris Interactive study prepared for the National Council on Economic Education.
• Interest rates with no caps. Many credit cards now come with penalty rates above 30% which can be triggered by a single late payment. Overextended consumers facing those kinds of finance charges can quickly find themselves unable to keep up with payments.
• A growing number of people who are uninsured, or underinsured, against medical bills. The Census Bureau counts 45 million uninsured, and a recent Commonwealth Fund study found 41% of moderate- to middle-income adults did not have health insurance for at least part of 2005, up from 28% in 2001. A Harvard University study found medical bills were a factor in half of consumer bankruptcies.

“A large segment of the public that’s financially illiterate.”  In other words, the populace of this country has not been educated properly in how to balance a checkbook, how to create a budget, how to live in said budget or how to invest.
According to Elizabeth Warren, the Middle Class of this nation are the primary targets of our credit card companies, banks and other financial institutions and the least capable of handling their money.  The following chart profiles the average bankruptcy filer in the United States of America:

Average Age: 38
44% of filers are couples
Slightly better educated than the general population
Two out of three have lost a job
Half have experienced serious health problems
Highest bankruptcy rates are Tennessee, Utah, Georgia and Alabama

As can be seen by the above referenced chart, the average bankruptcy filer is the average American citizen.  Neither rich nor poor, neither old nor young, usually experiencing an unexpected event such as job loss or a serious health problem.
But what can we do about it?  By starting the education of our children into the importance of financial matters early in life, we can teach them how to budget and stay on budget; how to save for the future so that unexpected bills do not throw them and their families into a financial quagmire that they cannot possibly escape; and how to shop responsibly.
James Madison University has a good lesson plan that, if implemented properly, could be used to teach our children how to handle money.  These topics could be broached over years, as students get more mature and could be expanded upon if the time and resources permit.

Lesson: How Has the Constitution Shaped the Economic System In The United States?
Concepts: economics, civics, private property, free enterprise, choice, self-interest motive, competition, markets, prices, role of government

Lesson: What Are the Economic Functions Of Government?
Concepts:  economics, civics, economic functions of government

Lesson:  Why Nations Trade & Limiting Trade
Concepts: economics, geography, tariffs, quotas, embargoes, licensing requirements, standards (health and safety), subsidies, infant industry, strategic industry, exports, imports, terms of trade

Lesson: Places and Production
Concepts: economics, geography, gross domestic product (GDP), measure of value, double counting, final goods and services, flow of product, consumer spending

Lesson: What Is a Stock? or Who Owns McDonalds?
Concepts: economize, ownership, profit, risk, social studies, language arts

Reading: How Can Entrepreneurs Control Costs?
Concepts: business, accounting, economics, fixed costs, variable costs

Lesson: How Can Big Business Make Money From Tariffs?
Concepts: economics, American history, incentives, tariffs, special interest groups

Lesson: Andersonville Prison:  An Economic Microcosm
Concepts: American history, scarcity, economic wants, markets, prices, economic systems, command economy, market economy

Lesson on The Economic Value of Education: Is the Tassel Worth the Hassle?
Concepts: e-consumer economics, choice, opportunity cost, incentives

Demand and Supply
Concepts: economics, demand, supply, equilibrium, income, prices, diminishing marginal utility

With proper training and a proper respect for money and the power of money, we can effectively reduce not the symptom of financial irresponsibility that is bankruptcy, but the cause of financial irresponsibility in this nation.

Bibliography

1. Administrative Office of the Courts, http://www.uscourts.gov/Press_Releases/
2. The American Bankruptcy Institute, http://www.abiworld.org//AM/Template.cfm?Section=Home
3. The Federal Judiciary: Administrative Office of the U.S. Courts , Office of Public Affairs, (202) 502-2600
4. Federal Reserve (1997) www.federalreserve.gov/
5. James Madison University, http://cob.jmu.edu/econed/High.htm
6. Source: The Fragile Middle Class: Americans in Debt; Elizabeth Warren, Harvard Law School; Smith Business Solutions

Okay, I wanted to seperate this from the background information above to make it easier to find.

So, do you, as a population, agree that this is an adequate solution or do you think there needs to be more, less or something else to the rising bankruptcy rate epidemic in this country?

Common guys, this is an action project.  I need responses so I can “prove” I took some kind of action on this issue.  I mean, I know you, Jermo and you Janus can think of SOMETHING to argue with me about in the above!

I agree.  Americans do not need two cars in every garage.  It’s nice.  However, what possible purpose is there in two or more televisions?  Why should you keep up with the Jones’ anyway?  Do we really need to purchase 12 pounds of candy for halloween?  Where can we cut?  How do you budget?  Where do we teach these skills?

Credit card companies COUNT on the fact that Americans over spend, under budget and couldn’t pass 5th grade math exams. (Are you smarter then a fifth grader?  I know the contestants on the show are not!)

So what’s the dysfunction?  Maybe we need less cultural diversity classes and more life skills classes?  Maybe we just need a longer class day to cover all the material our children need to know to function in society?