Elizabeth Warren and Amelia Warren Tyagi are essentially correct in their assessment of middle-class America’s standard of living. The question is why there is such resistance to their conclusions on both the left and the right.
Admittedly, Warren and Tyagi may underestimate the effects of advertising, television, and material culture in general on the nation’s spending habits. They may understate Americans’ taste for gas-guzzling cars, for example. They may underestimate the need for parents to dress their children in the “latest” to keep up face at school.
But they persuasively argue that material profligacy is not the cause of today’s financial pressure, nor is it the principal reason for growing indebtedness and low levels of savings. The house, the kids’ education, the potential loss of health insurance, the high and rising cost of drugs, the uncertainty over retirement income, and the inexorably rising number of hours that family members must work are undermining the standard of living and driving people into debt.
In fact, the Labor Department’s data are clear on this. The costs of education, health care, drugs, public transportation, and a few others goods and services have been rising considerably faster than family incomes since the 1970s. No surprise, because family incomes have risen at tepid rates since then, even as more spouses go to work.
But some on the left are enamored of the profligacy claim. They get off some well-deserved shots, in the grand tradition of Veblen and Galbraith, at pervasive and omnipresent advertising and promotion. But this doesn’t excuse them from getting their facts right. Blaming profligacy distracts us from the real, crucial issues.
The right’s denial has a longer history, and, given its agenda, is more understandable. It has come in stages. In the 1980s, in light of spreading complaints about Reagan’s economic policies, some insisted that the nation’s income was not growing more unequal. They also, of course, claimed that more inequality only made the worse-off work harder. Eventually, though, the right wing threw in the cards. Their dubious studies gave way to the facts.
But they also had another difficult and inexorable problem to address: average wages had been almost stagnant since the early 1970s. Male wages, in particular, were doing poorly. The counterargument of the right was that income mobility was improving and that it compensated for higher inequality. These studies, too, eventually foundered on the harsh rocks of more honest analysis. It turns out that, if anything, mobility has declined over recent decades.
Stuck? Hardly. The right began pushing the idea that new products more than made up for sagging incomes. Moreover, the costs of many desirable products—notably, consumer electronics—were falling rapidly. Forget the income data published by the government, even if it did adjust for inflation, and look at the real world. American consumers had microwave ovens, color TVs, cell phones, cable television, VCRs, and eventually even PCs and access to the Internet—all at low or even falling prices. Moreover, the costs of food and clothing were not rising as fast as typical family incomes. People had to work fewer hours to buy a carton of milk or a pair of Gap shorts. Of course they were better off.
Myths of Rich and Poor: Why We’re Better Off Than We Think (1999), by W. Michael Cox and Richard Alm, is the classic statement of this thesis. Others have taken up the cause. Not only do we have all of the products mentioned above, but airline fares are way down, health care is much better, and houses are ridiculously bigger. Thank goodness Warren and Tyagi give lie to this last point. They look at the size of a median house, not an average house, which would include all those mansions going up now in your local upper-middle-class neighborhood. The median house is up ever-so-slightly in size. Also, the proportion of adults with young children who own their own home is still below the level of 25 years ago.
Many of the right’s claims on these matters are based on simple technological myopia. It seems to be a rule of thumb to the mind so disposed that any innovation now is more exciting than any in the past. In the 1920s, Americans were first introduced to the affordable car, the telephone, the radio, the electric ice box, the electric washing machine, and so on. Were the 1990s remotely comparable? Not only that, but in the 1920s agricultural productivity was revolutionized through innovations in chemistry, advances in public health made it safe to live in cities, and free high schools were built everywhere. Now that was an age of change.
In the 1950s, we had the remarkable television, soon owned by 90 percent of families. We had the new highway system, the polio vaccine, antibiotics, air conditioning, the ballpoint pen, and consumer-friendly plastic and rubber. Consider the revolution caused by Rubbermaid alone. And on top of all that, family incomes doubled in two decades instead of growing tepidly. Moreover, corporate benefits, including health care and pensions, were expanding rapidly in this period, and workers became more secure.
Cox and Alm, among others, simply ignore the high and rising costs of health care and education in recent decades. Those in this camp exaggerate the values of new products as compared to old new products. And to fit their rather patronizing view of what makes Americans happy, they seem to think that the VCR, or now the DVD, is the central middle-class product of our time. That’s wrong. What makes middle-class people happy today is good health care and access to first-rate education.
The media have too often bought into the right’s arguments. Little noticed, for example, is the disturbing fact that the proportion of high-school graduates going to college stopped rising years ago. Also, students are taking longer to get degrees. This means that they do not get good jobs as soon as they otherwise would.
So Warren and Tyagi have put their finger on it. Housing spending is up because parents need good educations for their children. College tuition is way up, and government does not help families to keep up sufficiently. Health-care costs are rising on the job, and if you lose your job, you may have none. You certainly cannot afford individual health insurance.
Why aren’t people rebelling, even the liberals? In fact, people historically rebelled—that is, favored progressive policies—when times were good. The first progressive period was ushered in amid prosperity during the Teddy Roosevelt and Woodrow Wilson years. The Great Society of the 1960s was also implemented in a time of great prosperity.
During the Great Depression, Americans expanded their social programs as well, of course. But just because the experience of the last 30 years was not as bad as the Depression does not mean that it was good.
There are two final reasons for the distortion of the central facts in the public discourse. One is that during the 1990s the Democrats, under President Clinton, vigorously put the best face on their economic accomplishments. No self-criticism emanated from the Oval Office, in part due to fear of giving the eager Republicans fodder for their own criticism.
A second problem is that the press and the academic establishment too often swallow these arguments whole. Could it be that this is because they are now among the best-paid professions? Reporters and academics must perform a serious act of imagination to understand the circumstances of the true American middle.Return to the New Democracy Forum
Jeff Madrick is an adjunct professor of social sciences at Cooper Union, the editor of Challenge Magazine, and the director of policy research at the Schwartz Center for Economic Policy Analysis at the New School. His latest book is Why Economies Grow.