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Paul Ryan's Bullshit About Bankruptcy Data

posted by Bob Lawless

Bankruptcy Filings & CreditThe philosopher Harry Frankfurt famously published his book, On Bullshit, where he distinguished lying (intentional disregard of truth) from bullshit (apathy as to the truth). Frankfurt argued that bullshit harms public discourse more than lying. Liars at least acknowledge the truth matters, although consciously choose to disregard it, but the bullshit artist displays a contempt for facts. To the bullshitter, facts are irrelevant.

Yesterday, Paul Ryan and his campaign put themselves firmly in the bullshit category, at least when it comes to bankruptcy statistics. Ryan said:

In 1980 under Jimmy Carter, 330,000 businesses filed for bankruptcy. Last year, under President Obama’s failed leadership, 1.4 million businesses filed for bankruptcy.

Both the New York Times and ABC News noted several problems with Ryan's statement. Most notably, Ryan conflated the total number of bankruptcies with the number of business bankruptcies. When ABC News called out Ryan for his misstatement, an official Ryan spokesman pulled out another doozy:

He obviously misspoke, but it’s still an apples to apples comparison. The point remains: bankruptcies are up dramatically under President Obama compared to the Carter years.

The Ryan campaign apparently wants to stand by this point.

If the standard is how many bankruptcies occurred under a president's watch, then the worst president in U.S. history is George W. Bush because a record 2.1 million bankruptcies occurred in 2005 under his watch. In addition, the daily bankruptcy filing rate steadily rose from 2006 until the day Bush left office. By his own standard, Ryan also must admire the success of FDR's first year in office -- the New Deal, the first 100 days and all that -- because bankruptcies declined 11.1% from 1932 to 1933. If you ignore changing laws, changing economic conditions, and population growth, you can find lots of interesting patterns in the bankruptcy statistics to support pretty much whatever political position you prefer.

One has to be dumber than a rock to think that the absolute number of bankruptcies is an indicator of the president's job performance. He may be many things, but Paul Ryan is not dumber than a rock. A moment's reflection would have told Ryan and his campaign that the bankruptcy numbers they were spewing told us nothing about Obama's job performance. It is difficult to imagine any explanation other than the fact that the Ryan campaign simply did not care. It was just bullshit as Harry Frankfort has labeled it.

Bankruptcy filings have increased hand-in-hand with the amount of debt American households have. The graph at the top of this post shows population-adjusted and inflation-adjusted figures for bankruptcy filings and household debt (defined as the total of consumer credit and home mortgages). The trend has been happening for over 65 years, so there is plenty of blame to go around. If we want to have serious conversations about what rising bankruptcy filing rates mean, we have to discuss what that means for household borrowing. But, we apparently have a political climate where anything but serious conversations will occur.

Comments

Excellent post! Do you happen to have a similar chart that shows household debt-to-income ratios, or something like that? I realize that inflation-adjusted numbers are probably good enough, but I'm curious if the picture looks any different if you adjust for the amount of real income households have.

To the people Ryan's talking to, there's a certain "truthiness" to what he's saying, even if it is not technically true. Since your post cannot fit on a bumper sticker or be stated in less than 20 seconds, it is excluded from the so-called "conversation" we have every four years. If the Obama campaign were to point out the number of bankruptcies during the Cheney administration they'd be accused of trying to blame everything on Bush.

His comment was a blunder and I heard it live and shouted at the screen when he said it. The 2011 12 month number for business filings is approximately 47,000. The total number of filings in 2011 is approximately 1.41M. Of the approximate 1.4M that are classified as non-business, the vast majority are truly personal filings, with all, or nearly all consumer debts. The number within that 1.4M that represent sole-practitioner business-driven bankruptcies (where there is no separate legal entity from the personal filer), I would estimate at no more than 15 percent.

I'm a Romney/Ryan supporter, but that kind of error is just carelessness. The numbers are easily available at http://www.uscourts.gov/FederalCourts/Bankruptcy.aspx.

Just figured I'd point out that, as you well know, 2005 was an anomaly. Because the law was changing, people/companies filed for bankruptcy under the old law before the change could take effect.

I'm not saying W was great for the economy, but 2005's filings weren't indicative of anything.

Ben: I have not put together the chart with real income. The Fed has the Financial Obligations Ratio (FOR), which is similar to what you are suggesting. I believe it does not go back as far as the bankruptcy data and there were some changing definitions such that the series might not be continuous. But, the FOR would be another data point to consider. The larger point, which you make, is that using these other measures are not going to result in a dramatically different picture of what has happened. More personal debt means more personal bankruptc.

Wally Kaibacken: Yes, it was a blunder, but my point is that it was more than just a blunder. It was a deliberate use of the bankruptcy statistics in a misleading way.

Lawrence D. Loeb: Absolutely, 2005 was an anomaly. My point was that it is silly to use the bankruptcy filing rates as an indicator of presidential job performance.

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

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