From the recent Boston Review’s New Democracy Forum, Elizabeth Warren and Amelia Warren Tyagi look at the sources of growing middle-class financial distress and indebtedness.
“If middle-class families have more money and aren’t spending themselves into oblivion for the sake of designer water and DVDs, how did they get into so much financial trouble?
The answer begins with the most expensive and most important thing most Americans will ever buy: a home. Homes define the lives of the children who grow up within them. A home’s location determines whether there will be computers in the classrooms, sidewalks to ride bikes on, and a safe front yard to play in. And a home will consume more of the family’s income than any other purchase—more than food, more than cars, more than health insurance, more than child care. (Because the overwhelming majority of middle-class families are homeowners, this discussion focuses on the costs of owning rather than of renting.)
Everyone knows that people spend a lot more on homes than they used to. But what is easy to forget is that today’s prices are not the product of some clear demographic force. Quite the opposite: in the late 1980s, several commentators predicted the spectacular collapse of the housing market. They reasoned that because the baby boomers were about to become empty nesters, pressure on the housing market would soon abate, and prices would reverse their 40-year upward trend and drop during the 1990s and 2000s by anywhere from ten to 47 percent.”
See some critical responses here.