‘The rich rule over the poor’: Dave Ramsey, McDonald’s, and the personal salvation of personal finance (part 1)

‘The rich rule over the poor’: Dave Ramsey, McDonald’s, and the personal salvation of personal finance (part 1) December 4, 2013

Earlier this year McDonald’s created a publicity backlash for itself by creating a “personal finance” website for its employees.

Like much of the personal finance industry, the site was a mixture of banal common sense, condescension and victim-blaming. Worst of all was the sample household budget that the site offered as a model for McDonald’s workers. That budget wound up shining a huge spotlight on the fact that all the site’s preachy moralizing about frugality and “personal responsibility” didn’t mean bupkis to fast-food wage-slaves earning minimum wage. The budget included ridiculously unrealistic monthly figures — like $600 for rent, $20 for health insurance, and $0 for heat — yet it still assumed a 60-hour work week at two different jobs in order to make the math possible.

Oh, and it also left out taxes — pretending that McDonald’s workers earning $8.50 and hour were taking home $8.50 an hour. Otherwise change that 60 hours to 80 hours.

Laura Northrup at The Consumerist summed it up:

This is a terrible budget. Besides leaving out gas, heat, car maintenance, and remotely realistic medical expenses, it leaves out clothes, entertainment, furniture, various kinds of personal hygiene, furniture, charitable and religious giving, cleaning supplies, and groceries. Groceries.

It also completely ignores that you might have children, which is convenient, because it’s hard to fit child care for those 60 hours a week that you’re working into this budget. Assuming that you can even get that many hours from your job: maybe it’s time to start looking for a third one.

The bottom line is that “Whoever wrote these materials had no grasp of what it’s actually like to live on $8 or so per hour.”

Because of that, much of what the site offers that might otherwise seem like common-sense advice about making responsible “choices” reads instead as simply clueless. The authors of the site don’t realize that McDonald’s low-wage workers have no choice but to make such “choices.” They’re already forgoing all of those “luxuries” not out of choice, but out of necessity.

Lecturing people about their choices when their context does not afford them any is not just stupid, it’s cruel.

Which brings us to Dave Ramsey, the Christian-ish personal finance guru who has built an empire off of just such stupid and cruel lecturing. That McDonald’s website offered a distillation of Ramsey’s ideology of “personal responsibility” as the only significant variable for financial security.

McDonald’s didn’t design that website itself, mind you. They contracted that out to Visa. Yes, that Visa — the credit-card company. Dave Ramsey is famous for preaching against debt and borrowing. Visa makes its living encouraging debt and borrowing. Isn’t it interesting, then, that the essence of their “personal finance” advice turns out to be indistinguishable?

Sure, it’d be bad for Visa if suddenly everyone started following Ramsey’s advice, paying for everything with cash up-front, but Visa doesn’t seem too worried about that. They’re far too delighted by the larger effect of Ramsey’s influence: A three-hour daily radio show in every major market preaching that it’s a moral duty to make your payments on time and that it’s an irresponsible shirking of your personal moral duty to question interest rates or inexplicable fees. The anti-debt preacher may pose as their enemy, but they think of him as their MVP.

Credit-card banks and other lenders are scared of Richard Cordray and of Elizabeth Warren. But they’re not scared of Dave Ramsey. They love the guy. No matter how many new ways they concoct to fleece their customers, they can always count on Ramsey to have their back, telling his radio audience that it’s their fault and that their only response should be to cut expenses and pay those new rates and fees in full.

We’re seeing an encouraging wave of push-back against Ramsey’s victim-blaming and his apparent ignorance of “what it’s actually like to live on $8 or so per hour.” I want to highlight some of the sharp responses to Ramsey’s mean poverty-is-your-fault ideology, the graceless works-righteousness behind his individualistic misunderstanding of “personal responsibility,” and the way his victim-scolding framework serves the interests of creditors and robber barons. We’ll get to a bunch of them in Part 2, but here I want to focus on one in particular: Helaine Olen’s long, detailed profile and critique for Pacific Standard, “The Prophet.”

Olen knows this world intimately. She used to be a “personal finance” columnist and then became a whistleblower on the whole charade, publishing Pound Foolish: Exposing the Personal Finance Industry.

Here’s Olen’s stark summary of Dave Ramsey’s advice:

  1. Purge yourself of debt;
  2. Live on cash;
  3. Pretend economic trends don’t affect you;
  4. Blame yourself when they do.

This admonition to blame no one but yourself appeals most to those who are, in fact, largely powerless:

In [Ramsey’s] version of the story, the wider economy’s problems are not structural or political, but instead stem from the fact that most people, including his listeners, are weak-willed, self-indulgent, and stupid (he doesn’t shy from the word) when it comes to spending. “The problem with your money,” he often says with perfect certainty, “is the person in your mirror.” Once you get over the casual meanness of this message, it becomes clear how oddly reassuring it is. It assumes that we are in control. To his listeners, Ramsey holds out the promise that they can simply choose to be different — that it’s within their power to not take part in recessions and the economic troubles facing American families.

And that, like the McDonald’s budget, requires that we prefer an imaginary world in which, “there is always fat that can be trimmed from a family’s budget, always another job that can be scraped together to add to a family’s income.”

Olen discusses the importance of Ramsey’s personal story as a redemption parable for his audience, but also notes how it distorts his understanding of what the real world is really like for people whose stories aren’t just exactly like his was:

His story begins during the real estate boom of the 1980s. As a young entrepreneur fresh out of college, he convinced a local Tennessee bank to loan him money so he could build up a real estate empire. But Ramsey’s properties were financed via short-term loans and lines of credit. The bank called in all the debts, and his $4 million real estate portfolio collapsed. Lawsuits and foreclosures ensued.

… Ramsey was a risk-prone real estate developer who went bankrupt because he attempted to leverage borrowed money into riches and failed. He didn’t hit financial bottom because he was fired, or because he was stuck with a high-deductible, low-benefit insurance policy when his child got sick.

There seems to be, in other words, an element of projection in Ramsey’s “personal responsibility” shtick. He imagines he knows how everyone else got into debt because he knows how he did — through extravagance and risk and leveraged dreams. That taught him one set of lessons that might apply to other people whose story is just like his story, but those lessons are completely alien and irrelevant to someone who got laid off or who got hit by a drunken driver.

He also, defensively, denies his followers access to the actual way he first achieved his own debt-free status: Ramsey declared personal bankruptcy in 1988. Sure, his methods have helped him stay debt-free since then, but bankruptcy protection is how he got there in the first place.

Olen also examines the huge fortune Ramsey has amassed from doling out his victim-blaming message of “tough love”:

As the world economy was imploding in 2008, Dave Ramsey went shopping for a new home. According to published reports, Ramsey paid a little more than $1.5 million for several acres of land in Franklin, Tennessee, and then constructed a 13,000-plus-square-foot residence (the garage is another 1,450 square feet). After completion, it was valued at just under $5 million. More than a few evangelicals thought Ramsey was flaunting his wealth, and took to the blogosphere to say so.

The attention seems to have gotten under Ramsey’s skin. “No one was mad at me when I sold 10 books and made $10,” he said during his Houston show. “Wait ’til you sell 10 million — you’ll be attacked like you wouldn’t believe.” He laments that “winning is no longer OK” in our culture.

He’s a “winner,” see. What does that make people who don’t own $5 million homes? Losers. And like all sore winners, there’s nothing Ramsey hates more than losers. He’s not just thin-skinned and prickly about his own prodigal lifestyle, he’s also deeply resentful of those who have less than he does:

Not surprisingly, Ramsey’s political views — which are often vividly on display during his radio show and in his public appearances — are quite conservative. He argues that estate taxes are “immoral” and a sign of incipient socialism. So too is Obamacare, which will damage the American economy. Social Security is “running out of money fast” and “mathematically doomed.” And he believes the federal government, like any household he advises, needs to say “no” to things it can’t afford, balance its budget, and stop borrowing money. (Needless to say, he’s generally not in favor of raising taxes either.)

What’s more, Ramsey has said that the story of rising income inequality in America — a story backed up by reams of data — is “not really true.”

Dave Ramsey serves up a lot of lies in the quotations there above. Well, let’s be generous — Ramsey says many things that are not true. Ramsey says many things that are not true that he ought to know are not true. Ramsey says many things that are not true that are so easily disproved that it would seem impossible for anyone to continue repeating them unless that person was simply unconcerned with whether or not they are true.

So maybe not a liar, then. Maybe just a lazily ignorant fellow with a reckless disregard for the veracity of what comes out of his mouth.

In the middle of her article, Helaine Olen discusses the Bible verse — or the half-verse — that Dave Ramsey has taken as his slogan and marketing motto:

He turned to the Bible, where he saw wisdom in Proverbs 22:7. A portion of that verse is his mantra to this day: “The borrower is the slave of the lender.” (The first part of the verse — “The rich rule over the poor” — is less prominently featured in his messaging.)

Ramsey’s message to borrowers is to work their way to emancipation from the slavery of debt. It is not the slave’s place to question the legitimacy of their enslavement. For Ramsey, Proverbs 22:7b always carries with it an implicit citation of Ephesians 6:5: “Slaves, obey your earthly masters with fear and trembling, in singleness of heart.”

“The rich rule over the poor” because the rich are winners. Maybe lazy, irresponsible poor people think that “winning is no longer OK,” but Ramsey knows that winning means winning the right to rule, and to demand that your slaves make their payments on time, in full, without ever questioning your right to collect them.

Preaching this anti-Jubilee interpretation of Proverbs 22:7 means that Dave Ramsey had better hope that Proverbs 22:8 isn’t telling us the truth: “Whoever sows injustice will reap calamity.”

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  • http://www.kiwi-musume.com/myicons/ANTM%20Icons/sporfle.gif

    You actually tried fobbing me off with Dave Ramsey’s very own favorite mortgage company? Same dude who declared bankruptcy? And now makes his dough giving all those silly-ass motivational speeches? Lordycakes.

  • AlexSeanchai

    Wait, wait. Dave Ramsey recommends people live without a credit history, such that the only mortgage company that’ll take them is Dave Ramsey’s?
    Hell of a scam, that.

  • I don’t see per capita, but as a percentage of GDP is a decent proxy measure. The fact that it’s remained essentially constant over quite some time would seem to indicate that the much-vaunted “boost revenues with tax cuts!!!!” thingo seems to have as much to do with the fact that GDP growth in the US tends to clock in at around 2.5% per year anyway.

  • Yup! “See why Dave Ramsey endorses Churchill Mortgage!” in big ol’ print right there.

  • Joshin

    This is funny to me. Let me ask you a question. What happens if they raise the minimum wage. Now everyone makes at least $15.00 hooray look at all of us now making $15.00 aren’t we happy? Now that the wages have gone up the cost of good must now go up. The cost of transportation goes up, An item that used to cost $5.50 now costs $7.15. This happens across the board and within a year or so the 15.00 dollars they are now making is equal to the money they were making before. The buying power of the dollar has dropped and inflation rises. It now cost more USD to buy the same products over seas. It doesn’t work to raise minimum wage. It’s only a bandaid. What if tomorrow everyone suddenly had a million dollars. Yay we’re all equal look at our happy millionaires. Guess what that million is worth now? Nothing, that’s right nothing because everyone has it. If everyone on the same block was suddenly given a red bike guess what that bike would be worth compared to the one blue bike? Nothing! You could trade fifteen red bikes for that one blue one. Don’t raise minimum wage. It’s not an effective, long term solution.

  • So why is it that none of these catastrophes happened when minimum wage was increased so many times in the past, including a handful of very large increases? And why can our employers, who are making record profits, not afford to pay us proportional to their gains?

  • Joshin

    People borrow when they want something that they can afford. Every day I see people, friends and family buying massive quantities of items that they stick on a credit card. Xbox’s, TV’s, Movies, CD’s you name it. Cha ching bada bling. “You want that new sweater, go on you deserve it. You had a hard break up.” Cha ching. Charged. Most people don’t have a budget. They don’t live by one. They don’t say no to themselves. How many people do you know blow all their money on one weekend party? Listen. You don’t make tons of money now, so start a budget. Tell every dollar where it has to go. No, I’m not going to buy this fast food. My electric bill is due tomorrow. It has to start there. I hope no one plans on making minimum wage forever. That would be horrible to have no aspirations and such hopelessness. It’s a great starting point. As spring board to doing something else. Something you were made to do and are passionate about!

  • Every day I see people, friends and family buying massive quantities of items that they stick on a credit card.

    This is like the whole “I totes saw a friend’s mother’s roommate’s pet gerbil do such-and-so!” thing I see people trot out when they want to prove hasty generalizations anecdotally.

  • Minimum wage in terms of purchasing power was around $10 an hour in the 1960s.

    (See here: http://oregonstate.edu/instruct/anth484/minwage.html )

  • Morilore

    Now that the wages have gone up the cost of good must now go up.

    Since what stopped rising was real wages, i.e. wages normalized against the prices of commodities, your entire comment is irrelevant to my comment.

    However, let me roll with it for a sec. The price of a good can be crudely broken down into

    price = physical cost + labor cost + profit

    that is, the price of the raw materials needed to assemble and transport the product, the wages/salaries of the workers who assemble it and transport it, and the profit margin.

    So check it out: if labor cost goes up, the whole sum will go up if nothing else changes. But you can look at this for five seconds and realize that the whole problem of inequality in our society boils down to

    labor cost << profit

    I.E. you can raise the minimum wage without causing inflation if you simultaneously impose something like a maximum wage. Raise the wages of workers and pay for it by cutting the obscene salaries of the hyper-rich.

  • Joshin

    Why are you going to stay in slave wages?!!! Why would anyone only ever aspire to that level?!! Who would want to stop there and say I’ve done it, I’ve arrived. I can go no further? If a man gets wealthy by coming up with an amazing idea, spending thousands of hours getting other people to believe in it too, creates it and sells it to people who want to use it. IE the computer you are writing this post on, the internet you are using to access this post, the electricity you are using to turn on the internet to access this post. All inventions by people who are now very rich. I think it’s a brilliant system. Then it creates opportunities for others to work too, you can either choose to work there for the going wage or work somewhere else, or try staring your own company. I tell you one thing for sure. I’m not staying at minimum wage! That would be insane!!!

  • AlexSeanchai

    Imagine for a moment that the only jobs anyone’s vaguely willing to hire you for are minimum wage. For your entire life.

  • Also, productivity keeps going up and up, so the minimum wage could easily be increased by around 3% per year essentially indefinitely.

  • I’d bet anything Joshin’s brilliant rejoinder will be to edumacate urself, bcuz reasons. Never mind that mass production of B. Sc and B. A. students is creating situations where the Bachelor’s degree is the new high school diploma.

  • Joshin

    They also have populations that are a fraction of the size of the US and a majority of the citizens contribute. They do not punish the wealthy there either. Think Saab (bankrupt I know), Volvo, Ikea. “Horrible, evil, wealthy capitalists” Why is it okay if they prosper? Those countries would not work either if the same number of people were not contributing members of society. Where do you get that people are drowning in misery from their being rich people? That makes little to know sense. People are drowning in misery not because they have no money, but because they have broken homes, abusive parents, little meaning in their lives, and a sense of hopelessness. Money has little direct correlation with happiness. It can make you temporarily happy yes, but it is not a source of happiness that can last. Some of the most miserable people are wealthy and some of the happiest people are the poor. People need to understand that their lives matter and that they have a purpose. They are loved and valued and that they can change the world around them. Which I know they can! When you empower, instead of complain, you can change your lives and your situations.

  • AlexSeanchai

    You do know Ikea uses the same strategy re furniture production that a lot of US companies use for production of various goods, yes? That being, put the factories somewhere that pays shit wages compared to the domicile country’s federal minimum. For the US, that’s places like Bangladesh. For Ikea, that’s the US.

  • Okay, they have marginal tax rates on rich people in some cases getting close to 70% and yet you’re going to go into apoplexy over Obama wanting the top tax rate to go back to 39.6% in the USA?

  • Most inventions are not successful and not every person has the brilliance to invent something, the means to patent and prototype it, the connections to get it widely distributed, etc, etc. The first step of any such venture? Obtain large amounts of money. Most people sink tens of thousands of dollars into their inventions — whether successful or not. For a person living paycheck to paycheck, experimentation with thousands of dollars just isn’t feasible, nor can every one of the people out there either unemployed or employed below a living wage become a successful inventor.

    In short, you’re pointing at a pipe dream as being a viable strategy for anyone. Frankly, I’m an intelligent person (IQ measured at 135), but I’m not intelligent in that way and I’d be happy simply to get a decent revenue stream off my own creations so I could pay my day to day bills.

  • Hell, in my experience, I can’t even get those jobs. I get paid-by-commission job offers that would involve a lot of travel, or buying specialized equipment — meaning it’s quite feasible that trying to do these jobs will cost me money.

  • They do not punish the wealthy there either.

    Our wealthy are struggling so hard

  • But that sort of thing only happens to those people!

  • DO you know what happened the very first time they raised the minimum wage? It made the economy better. It did not cause runaway inflation. It did not end up being a zero sum game. It just fixed the problem.

    Do you know by what percentage they raised the minimum wage?

    100%. They doubled it.

  • Morilore

    People are drowning in misery not because they have no money,

    No, actually, pretty sure it’s the money.

  • Morilore

    Why are you going to stay in slave wages?!!! Why would anyone only ever aspire to that level?!!

    I’m not staying at minimum wage! That would be insane!!!

    You seem to think everyone has the power to obtain rising wages. This is a really fundamental misunderstanding on your part.