Saving America’s Middle Class? Or Drowning It In Austerity?

Today’s post on Frugal Dad was written by a guest blogger pimping his own site,, a site that claims to be about middle class survival during these hard times.

I read the post on Frugal Dad and I see that the author is using statistics gathered by Elizabeth Warren. Going to his site, he even has a category for her and he’s put up some of her videos. However, he takes her statistics and completely misinterprets them to continue to put forth the “overconsumption myth” which Warren has also gone to great lengths to debunk.


To wit, according to the author, M,W. Larsson, and most of the personal finance community, the reason we, as a country are in this financial pickle is debt. The Federal government is in debt because they spend too much and we’re in debt because we also spend too much.

From the post on FG:

The second reason, however, is one that doesn’t get as much play, because it’s personal, and it “hurts” a little. And that reason is simply this: WE’VE changed, and we want more, because there is more. Many families cannot “make it” on their salary not because food and shelter cost too much – it’s because of all the other stuff.


We want the food and shelter and automobiles that people used to have, but we also want a flatscreen TV in every room, cellphones for all, birthday parties for kids that run into the hundreds and even thousands, satellite radio, DVD’s (every child I know has a personal DVD collection of Disney and Pixar films), and more. Plus, we want more space – the average house is far bigger than one just thirty years ago. The “great room” is now part of our vocabulary

We want more. You hear that? We want more and we’re borrowing to the hilt to be able to get more stuff. That’s the central message of this post and it is also the central message behind thedailymiddle blog.

Here come the misinterpreted Elizabeth Warren stats:

      • One in nine families can’t make the minimum payment on their credit cards.
      • One in eight mortgages is in default or foreclosure.
      • One in eight Americans is on food stamps.
      • More than 120,000 families are filing for bankruptcy every month.

Let’s look at what Ms. Warren says herself about the statistics she’s gathered over the past ten or so years of studying the middle class and families that enter bankruptcy:

In America Without A Middle Class, Elizabeth Warren says this:

Even as productivity rose, the wages of the average fully-employed male have been flat since the 1970s.

So that means that as workers became more productive, and you and I both know that American workers are the most productive workers out there, wages have not gone up much since the 1970’s, when you account for inflation and other things.  So. basically, people are making less money, making the two income household a necessity.

However, it gets worse:

By the early 2000s, families were spending twice as much (adjusted for inflation) on mortgages than they did a generation ago — for a house that was, on average, only ten percent bigger and 25 years older. They also had to pay twice as much to hang on to their health insurance.

But higher housing and medical costs combined with new expenses for child care, the costs of a second car to get to work and higher taxes combined to squeeze families even harder. Even with two incomes, they tightened their belts. Families today spend less than they did a generation ago on food, clothing, furniture, appliances, and other flexible purchases — but it hasn’t been enough to save them. Today’s families have spent all their income, have spent all their savings, and have gone into debt to pay for college, to cover serious medical problems, and just to stay afloat a little while longer.

Remember how Larsson’s premise is that we’re broke because we’re spending our way into oblivion and in order to correct that we must face some “pain” and make do with less? Well, it seems that most American median income earners have already been doing that.  Today’s median income family spends less on food, clothing, furniture, and appliances. Big screen TV’s? Cell phones? Really? Actual research, using, you know, actual facts, doesn’t seem to bear the author’s argument out. Oh, and that huge house Larsson says median income families got into that they really can’t afford? It’s  actually only 10% bigger and is actually older.

With respect to the bankruptcy numbers, here’s a quote directly from Elizabeth Warren’s book, The Two Income Trap:

But the critics are off the mark on one point — the role played by over-consumption or its ubiquitous cousin, "trouble managing money." By 2001, those two reasons combined to account for less than 6 percent of families in bankruptcy. What about the rest? The overwhelming majority of bankrupt families faced far more serious problems. As we showed in chapter 4, nearly 90 percent had been felled by a job loss, a medical problem, or a family breakup, or by some combination of all three.

So, only 6% of families who file for bankruptcy do so because they have trouble managing their money….they overspent, blah blah blah. The other 94%? They found themselves going bankrupt because of some mishap beyond their control. Medical bills, ill health, a job loss. The real problem here is not that we’re over-consuming, it is that we are all teetering over a financial cliff and a good stiff breeze could push any one of us over the edge. That’s the reality the statistics show.

No, it is not as comforting as the pat answer that we just spend too much and if we just tighten our belts, we’ll be just fine.  That answer still leaves us with the illusion that the United States has some measure of upward mobility that any of us can attain. All we have to do is just work hard, knuckle under, and take our medicine. Sure, we can all be rich some day, so you wouldn’t want to put in laws and regulations that affect the upper one percent. Oh, no, because one day, we could be there, too, by gum!

You know, I wish it were so. Nothing would make me happier than to know that anyone, by sheer dint of will and hard work, could rise up into the ranks of the wealthy. That’s always just been a fairy tale, however, but even still, it used to be that hard work could earn you membership in the middle class, where you could live a nice life. What’s more, you could aspire to and feel glad that your children would no doubt live a better life than you did. No more. No, even, in Larsson’s world, we shouldn’t aspire to do anything more than survive, so that maybe our children might do so as well. How sad that the aspirations of a once great nation should be so diminished.

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