As millions of working women have added paychecks to the family pot, middle-class income has risen dramatically. Yet modern American families face a financial crisis of unprecedented proportions.
Even as today’s two-income families earn 75 percent more than single-income families of yesteryear, they have less to spend and are deeper in debt.
Two experts with opposing views discuss the problem. Elizabeth Warren, a Harvard law professor, is the author of “The Two Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke.”
David Wann, a former policy analyst for the Environmental Protection Agency, is co-author of “Affluenza: The All-Consuming Epidemic” and lives in Golden.
Wann says problems stem from overconsumption. Warren counters the overconsumption theory is a simplistic myth that shifts the blame to the victims.
Q: How did the nation get to this point?
Warren: Families are trying to raise their children in the middle class, but the cost of preschool, college, a home in a neighborhood with a decent public school, health insurance, a second car for Mom to get to work and higher taxes have left them struggling.
Wann: Our deeply ingrained habit of buying to live began centuries ago when the laissez-faire market was first conceived. The world was a completely different place – for one thing, there were far fewer people and far more resources than there are now. As industrialism progressed, we were capable of producing much more than was necessary. Overproduction plus skillful marketing made the post-World War II years a turning point in the creation of the America dream.
Q: Who’s to blame for the financial mess we are in?
Wann: It’s not really about blame but rather responsibility. We’ve let basic skills like cooking, sewing, gardening and carpentry go “out of style” while we scrambled to earn the money to pay somebody else to do these things and most others. We feel we have no choice but to hire the care out: day care, lawn care, pet care, health care, elder care, security systems, prepared food because we simply don’t believe we have the time to care.
Warren: Consumerism makes a great story. Blame the victim because it means that no one needs to make any real changes. But look at the hard numbers. The median-earning family in the United States is spending 21 percent less on clothing, 22 percent less on food (including eating out), 44 percent less on appliances and less on most consumer items than their parents spent a generation ago. And everyone who wants to talk about big houses should note that the upper-income families may be living in great places, but housing for the median-earning family has gone from 5.8 rooms to 6.1 rooms – while the cost has skyrocketed.
Q: Can it be fixed and how?
Warren: We need big structural changes: a better education system for middle-class children, relief on health care insurance, tax incentives for savings for middle-class earners. And we need to put brakes on a consumer lending industry that is out of control, squeezing middle-class families with interest rates and fees that would have landed them in jail for loansharking a generation ago.
Wann: In a basic sense, the challenges we face begin in our heads. Examining where we currently spend our household money offers opportunities to stay out of debt. Food comprises about 14 percent of the typical American budget; however close to half of that is food eaten away from home. Seven percent goes for utilities and public services, another expenditure that can be trimmed with efficient fixtures, appliances, windows and solar orientation.
Q: Most financial gurus preach a message of a spartan existence. How do you leave room for an interesting and expansive life?
Warren: I think the gurus have it wrong. If you can’t afford some fun, you can’t afford your life. It is a question of bringing down the big must-have expenses to something manageable and getting on a regular saving schedule.
Wann: I believe there are many other definitions of success besides fame and wealth. And even though many world citizens aspire to be like the actors and actresses in “Desperate Housewives,” my guess is that the majority of the world’s population is more concerned about their “gladness to be alive” than the size of their house or wardrobe.
Q: What do people do when they already are in debt and facing foreclosure?
Wann: At times like these, people need to hang onto their sense of connection to things bigger than themselves, such as the importance of bonds between family members or a sense of unity with whatever they conceive God to be. Seeking (financial) counseling is a tangible step, as are a strategic look at interest rates and organized systems such as Internet bill paying.
Warren: No. 1: Know that you are not alone. It is happening to decent, hardworking people all over America. No 2: Know that you are in control. You make the decisions that are best for your family. Don’t pay the noisiest creditor. Pay the mortgage and, if you have to, let the others slide. No. 3: Stay away from debt counselors. There are some good people doing it, but the industry is riddled with cheats who will drain your last assets and leave you with nothing.
Q: Is it time to revise the America dream?
Warren: No. The dream is what makes us great. It is time that the rules were changed to favor the middle class again.
Wann: The America dream is already being revised. The new America dream is more about health and vitality. It includes a richer mix of information and knowledge about nature, cultural traditions and the tested examples of other cultures. These qualities deliver value that doesn’t cost a penny.
Q: Where do you see the trend ending, and what will it take to trigger change?
Wann: There are major changes in store for the U.S. and world economies. I suspect that a convergence of social, economic and environmental constraints will alter the course of history, sometime within the upcoming decade. The world’s most informed petroleum geologists report that a world production peak will be reached within 10 to 20 years, depending on how fast demand increases. When the long-predicted world oil peak arrives, the America dream in its current form is over.
Warren: The middle class is made up of fighters. They will fight to give their children decent lives. They are under assault right now, and I think they aren’t going to take it much longer from politicians who represent credit card companies and insurance giants. When they find the person who speaks out on their behalf, I think we’ll see big changes in this country.
