Abstract
Mother-and-daughter authors Elizabeth Warren and Amelia Warren Tyagi tell the frightening tale of a rising tide of bankruptcies and financial difficulties in middle-class America. Their statistics show that families with children, including single-parent families, are hardest hit by this epidemic. The authors, who make no pretense of objectivity, blame corporate greed and government neglect. Their politically improbable proposals include school vouchers removing geography as a placement criteria and the reregulation of lending. The book does not ever really define its pivotal audience, the “middle class.” It trusts your conventional wisdom about what it means to be middle class, while passionately questioning conventional wisdom about consumer debt. Yet, despite the book’s flaws, the authors make a thought-provoking, eye-opening argument about subprime mortgages and other faulty lending practices, and they issue clear warnings about debt. The fact that they sounded these warnings in 2003, just a few years before the financial crisis, gives their opinions tremendous weight. getAbstract.com recommends this book to families, and to anyone concerned about social justice, family-friendly policies and consumer debt.
Middle-Class Families at Risk
America’s middle class is facing a hidden danger: bankruptcy. Today, more people file for bankruptcy than get divorced. While divorce, and its influence on children, is widely studied, few families discuss their finances or admit to the shame of bankruptcy. Yet, the effects of financial distress on children are as serious as the impact of divorce. Bankruptcy is very prevalent, but do not blame families for problems caused by corporations and government.
Contrary to popular belief, money problems are not limited to the poor. Millions of college-educated, hard-working, middle-class homeowners are closer than ever to financial collapse. The roots of this trouble go back to the 1970s, when women began to enter the workforce by the millions. A second paycheck promised to increase family stability and purchasing power, and to give women a safety net in case of divorce, which was also becoming more common.
Unfortunately, the rise of the two-income family accomplished neither goal. Today’s two-income families earn far more money than their 1970s counterparts, but have less disposable spending power, because three quarters of their income goes for fixed expenses such as housing, health insurance, car payments and education. These families are highly vulnerable to a sudden loss of income caused by a shock such as a layoff, a long illness or a divorce.
Main Take-Aways
Middle class families with children are facing unprecedented financial stress.
Two-income families can barely afford the fixed costs (house, car, education, health care) of the middle class, and single-income families are in even worse financial trouble.
The biggest expense for most families is a house in a good school district.
Where children reside should no longer determine the school they attend. A system of public school vouchers would enable school choice and raise the quality of all schools.
Preschool should be publicly funded, and state universities should freeze their tuitions.
The majority of bankruptcy filers did not create their own troubles; most are victims of one or more of three main factors: a layoff, an expensive medical problem or a divorce.
The government should mandate disability insurance and enact tax incentives for saving.
Consumer debt soared when interest-rate deregulation created a climate of easy credit.
Interest rates should be reregulated to decrease the unsustainable load of consumer debt.
Families should try to lower their fixed expenses, determine if they could survive on a single income and make backup plans in case of a financial crisis.
