Hung out to dry

America must come to aid of struggling middle class

August 01, 2004|By Elizabeth Warren and Amelia Tyagi

THEY TEACH America's children. They build our bridges and highways. They keep our streets safe and our factories running. They fight our wars and protect our peace. They raise the children who will be America's future. And they should be the centerpiece of presidential and congressional campaigns across the country.

They are America's middle class.

And they are in trouble.

Since 2000, family incomes have remained stagnant while costs for the basics - a home, health insurance, utilities, gasoline, day care, college tuition - have surged by an average of 24 percent. All those critics who want to point a finger at middle-class families for buying "too much stuff" should face the fact that rising prices for the basics have left these families with less money to spend on extras - an enforced budgetary limit that they cannot escape.

The struggle to pay for the basics is taking its toll. Debt for a typical middle-class family has soared to an all-time high, now 113 percent of total annual income. And the number of families who have fallen behind on their credit cards and other bills has increased sharply.

As paying the bills gets harder, families have less to put aside for the future. Personal savings, which once stood at a solid 11 percent of income, are now near zero. In just the past three years, mortgage foreclosures have increased by 45 percent and bankruptcies are up 33 percent. Today, more children live through their parents' bankruptcy than their parents' divorce. In fact, this year, more people will file for bankruptcy than graduate from college.

Middle-class families are taking another hit. In all the front-page stories about employment numbers, the cost of gasoline and the high price of health insurance, there is one staggering increase in expenses that has been ignored: Since 2000, the average cost of child care in this country has jumped 18 percent. An average working family with two young children in day care now spends about $12,910 per year on child care, up from $10,860 in 2000.

The American middle class is under assault, squeezed on every front. It is time to turn attention to the middle, to focus on policies that strengthen the vitality of our once great middle class. They are:

Education. America must offer a quality education for all children, so that no child will be stuck in an inadequate school and no parents will feel the need to bankrupt themselves with a high-priced house they can't afford just to locate their children in a passable public school district.

Universal preschool should be made available to every child, relieving families of the need to spend the equivalent of two years' college tuition just to get their kids ready for kindergarten. And affordable college must become a reality, so that young people will not be required to take on the equivalent of a home mortgage before they ever collect their first real paycheck.

Medical care. This year, more than 800,000 families will file for bankruptcy in the wake of an illness or accident. The uninsured need access to affordable insurance, but we cannot stop there. America needs to get serious about controlling health care costs so that health insurance alone does not threaten to bankrupt struggling businesses and hardworking families.

Debt and savings. It is long past time to crack down on predatory and fraudulent lending practices that fatten corporate lenders with record profits by draining money from hardworking Americans. And tax policy should be redesigned to help middle-class families build their safety nets by favoring all forms of savings - not just retirement or college savings.

An agenda aimed at the middle helps all Americans, including the poor and the wealthy. Strong public schools, affordable medical care and honest financial markets help everyone. A resilient and vital middle class can lead the way to stronger economic growth that helps all Americans - rich, poor and in between.

Today, the middle class is often stretched too thin to support policies that would take more from their pockets to help others. Meanwhile, the rich are moving toward isolating themselves and their children from the rest of America. We risk fracturing into disparate groups, divided and jealously guarding whatever benefits we have gained, supporting separate identities instead of the country's shared identity as part of one great American middle class.

The middle class has borne one economic blow after another - rising costs, stagnating incomes, layoffs and rising medical costs and less access to health insurance. It is not only fitting that the presidential campaign turn to issues about the middle, it is essential. A strong middle class is the very heart of a strong America.

Elizabeth Warren and Amelia Tyagi are co-authors of The Two-Income Trap: Why Middle Class Mothers and Fathers Are Going Broke.

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