Lending to visitors of Disney
Implications for Bankruptcy and Tax Policy
A recent New York Times article documented the tendency for families with young children who go on vacation at Disney World to pay for the vacation with new credit card debt. The article found that the cost of Disney vacations (which were never cheap) are rising due to new pricing strategies at the parks. One survey found that 45 percent of visitors to Disney with children under 18 went into debt because of their trip to Disney.
In a free society, businesses have the right to create innovative pricing schemes that maximize their profit and consumers have the right to spend their money as they see fit.
However, a decision to splurge on vacations has substantial impact on the well-being for families and government efforts to provide financial assistance to households with children.
The tendency for people to take out consumer debt for the purchase of unaffordable items and vacations and the incentives for for credit card companies to extend the credit are both influenced by the bankruptcy code.
In theory, a more stringent bankrupt code should discourage spontaneous consumer borrowing. The fear of adverse consequences stemming from bankruptcy does not appear to impact demand for vacations at Disney.
In theory, a more stringent bankruptcy code encourages financial services firms to extend more credit to borrowers with weak balance sheets. This seems to be occurring.
The existence of people splurging on overpriced vacations rather than saving and spending on necessities bolsters conservative arguments for personal responsibility and liberal arguments against predatory lending and pricing practices.
The existence of an optimal bankruptcy policy remains elusive.
The tendency for people for people to spontaneously borrow for vacations that they cannot afford also impacts government efforts to provide financial assistance to households with children.
One such effort is the child tax credit. Harris wants to bring back the pandemic-era child tax credit and add a $6,000 credit for newborns.
An expanded childcare tax credit puts cash immediately in the pocket of families. At least part of this cash will be spent by some household on unaffordable vacations to Disney World.
Subsidies tied to the purchase of day care, food, out-of-pocket expenditures on health services or contributions to retirement accounts may be more effective at improving the financial well-being of families than a cash subsidy.
These comments on the use of credit to fund Disney vacations could be viewed as paternalistic. However, a subsidy that is arguably used to fund an overpriced vacation will offset taxpayer subsidies designed to improve and expand opportunities for children. What occurs at Disney does not stay at Disney.