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Comment by gojomo | Hacker News Reader

Headline strongly debunked here:

https://twitter.com/p_millerd/status/1118071142311288838

Highlights:

"After some digging I found the 2016 appendix (again, 2017 not to be found). Only 12% of people couldn't actually pay the expense"

"Another survey question not highlighted actually gives some direct clarity on this question. It turns out only about 15% of people would not be able to cover a $400 expense [without impacting their ability to pay other bills]."

Note that "12% couldn't actually pay" is about equal to the 2017 official poverty rate of 12.3%. I don't find it surprising that people counted as "in poverty" would have problems covering a $400 immediate cash expense.

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>Headline strongly debunked here:

Actually not debunked at all.

Headline says "would struggle to cover a $400 emergency" and is perfectly accurate.

The guy doing the "debunking" (sic) looked at the table quoted in the study, isolated the percentage that could not pay the $400 at all (as opposed to the larger set that would struggle to pay it), and then "triumphantly" declared that the headline is moot because those are only ~ 12%.

But the headline was never about how many couldn't pay $400 at all at all. It was about how would struggle to pay it.

The funny thing is he himself quotes the full breakdown, that along with the 12% that won't be able to pay at all, includes people who would need to "borrow from a friend" to pay it (another 12%), "sell something" (8%), using a payday loan (2%) and so on.

I guess a lot hinges on the elasticity of 'struggle' here.

Having adequate credit, and being able to pay that off within a month, with zero impact on your ability to pay other bills, doesn't sound like too much of a 'struggle' to me. Sure, people complain, it's inconvenient, some other discretionary expenditures will be clipped, you might pay some extra interest or late fees, boo-hoo. But it's not necessarily a symbol of notable hardship on either historical or international levels. (And if these people didn't have easy credit they're confident they could pay off: they'd have kept more hard cash around, like is common in other countries.)

Just like there's a 'hedonic treadmill', where things that used to bring pleasure wear out from familiarity, there's "complaint inflation", in a generally rich & comfortable place like the USA, where whatever remaining nuisances exist become headline news, and get described in grandiose language previously reserved for deathly serious hardships.

I'm sure something like 40% of Americans "struggle" to get out of bed some mornings. Or "struggle" to choose between a $400 and a $1200 smart phone. Or "can't even" achieve some imprecise euphemestic lifestyle goal like "making ends meet" or "the American Dream". It's mostly hyperbole.

1) At least a few of the possible responses don't really map to any conclusion. Take for example, "Put it on my credit card and pay it off in full at the next statement". Does this mean someone is struggling to pay the expense? Or just a normal way to pay for things? I mentioned in another comment - I keep a fairly large emergency fund and $400 would be trivial to cover, but I'd still pay for it on a card and then pay it off when it was due, so I'd select this option. I think it makes it hard to infer much from this.

2) The responses are multiple choice, so you can't really say "40% of people would struggle". In fact, the percentages sum to 140%, so I don't know what you really can conclude, other than it probably isn't as high as 40% or as low as 12%?

>* suresk 1 hour ago [-]

I think a big part of the problem is the structure of the survey that these stories (and the "debunking" are based on) - I don't think you can fully support either conclusion based on it, for a few reasons: 1) At least a few of the possible responses don't really map to any conclusion. Take for example, "Put it on my credit card and pay it off in full at the next statement". Does this mean someone is struggling to pay the expense? Or just a normal way to pay for things? I mentioned in another comment - I keep a fairly large emergency fund and $400 would be trivial to cover, but I'd still pay for it on a card and then pay it off when it was due, so I'd select this option. I think it makes it hard to infer much from this.*

I don't think that's the case with this answer. It's more, I'll need credit cause I don't have either cash or deposits to pay for it.

If you looked at that table you would notice that the total is more than 100%. So the analysis in your last paragraph is not better than his.

headline: 40% would struggle to cover $400

debunker: actually the data says 12%

data: 12% can't cover $400, 28% would have to borrow the money or sell something to cover $400.

original author: yeah, I added 12 and 28 to get 40 and said "struggle"

Newspapers definitely use narratives to sell papers (or get clicks these days). This is a thing that I don't deny. It has always been a thing.

But it wasn't quite the strong debunking that I expected

Also same data: 38.8% pay it with CC that they pay off, 41.8% pay it with cash. Put two of them together and you get $80.6% not struggling at all.

That data is garbage.

Interesting to me CC is basicaly a loan. That is not comfortable no? To me borrowing money seems like last emergency option. If i cant pay 400usd without borrowing it that seems like struggle.

As it was mentioned in the thread several times using a credit card and paying it off is just using free money with some extra benefits. I.e. better consumer protection, perks (miles/cashback), expense tracking, etc.

I personally use CC for all my payments unless it is not accepted.

I don't see how "I would have to accrue unexpected and emergency debt to manage this expense" is any different from "I can't afford this expense"

"Afford" is a four-letter word. You can break it into:

1) I have the cash ready to spend right now or in liquid assets.

2) I can get the cash, but from an account/asset I'd rather not withdraw from (IRA, jewelry).

3) I can go into debt to pay it, and it wouldn't make a big difference over the next year.

4) I can go into debt to pay it, but my financial situation would be close to bankruptcy over the next year.

5) I can't access that kind of money by any means.

A good survey should iron out this spectrum of "affording" the expense to make the result robust and easy to interpret.

the difference is that the former requires credit. Some people are so poor they don't even have that.

I'd say that both count as "struggle", though

Sorry, but this thread does not "strongly debunk" the headline by any means. This is pure nitpicking, or trying to center on what does "struggling" to cover a cost really mean.

The data is still sound, whether you think having to borrow or sell something to pay an expense is still not being able to pay that expense or not.

Except putting something on a credit card that you routinely pay off at the end of the month isn't really borrowing. OK. Some percentage will have to cut back to make the end of month payment. But a lot of people routinely put just about everything on credit cards for perfectly rational convenience/rewards reasons.

I understand and I do not doubt that those people exist. However, they don't make up all credit card holders. There are still people who use a credit card rarely or only for emergencies.

Further, pointing out the distinction between these two groups does not strongly debunk the data. That's nit-picking, at best. This should still be concerning, even if it's improved over the past few years.

However, the survey did distinguish between those who were paying off at the end of the month and those who weren't. A credit card balance that's paid off at the end of the month is effectively using cash.

Of course, whether cash or put on a credit card to be paid off at month's end, that doesn't really say anything about how painful that unexpected expense is. One can cover an expense and realize they're not going to be able to take a vacation this year. There's a continuum between "I can't pay this" and "Whatever."

But it's hard for me to see cash vs. checking account vs. credit card that will be paid off in a few weeks as materially different.

Eh, his response is also misleading in places.

Here, he recognizes that there's double counting but still adds categories in a nonsensical way: https://twitter.com/p_millerd/status/1118071185311330309

The total of all responses is 140%, so there's way more overlap than he seems to account for. Isn't it likely that a lot of that overlap is between the only two answers that mean you have the full amount on hand?

Here, for example: https://twitter.com/p_millerd/status/1118071193393750016

Sure, 83% can still meet their other bills, but that's because, according to the other question he pulls out, half of them expect to borrow money to make it work. The other 15% lines up pretty neatly with the 12% who reported they couldn't beg, borrow or steal $400.

So yes, the newspaper headlines are overstated and imprecise, but the "debunking" is also pretty incoherent.

Headlines that say "Fed survey shows 40 percent of adults still can’t cover a $400 emergency expense" are technically incorrect. A majority can cover the expense with either cash or credit.

But I think that misses the point.

Only 41.8% have enough cash on hand. That is, a majority of Americans are living paycheck-to-paycheck. They're not saving money or building wealth - they're surviving.

Maybe this is the norm in other countries. Maybe it's the historical norm. But it doesn't bode well for wage earners.

Only 41.8% pay it with cash does not mean others do not have cash.

I routinely pay everything through credit cards that give me cash back and a nice organized ledger or all purchases despite having plenty of cash. A significant portion of people I know do the same thing.

"Struggle to pay" is not the same as "couldn't pay" It may be pedantic, but that's also the premise of the argument referenced in the tweet. So this article got the headline correct, but others ... not so much.

"Struggle to pay" introduces an inflammatory ambiguity that generates the undesirable heat/light ratio that journalists should be avoiding in the first place.

His point about the misleading headline is good. But the poverty stat still stands. Needing to borrow to come up with $400 is slightly better than not having $400, but, like... not by a lot?

hah! I saw this article, came here to post the same twitter thread.

Good eye, /u/gojomo.

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