the duchy of hetkettle trophish

looked at the heating oil assistance programs; pitiful. thought maybe it was time to go back to the economics of it, see why so many could suffer so much without acting together. “humiliating” was my guess.

you may have seen one or both of these but to watch them again in the context of exploring the price of home heat, they come out new.

first,

in the longer version of the speech,

So the economic puzzle is this: there is a debate among economists about whether the typical family, the median family, has experienced a gain in standard of living in income since the early 1970s, where you can cut it back and forth various ways… median income is up but that’s entirely because more spouses are working… you can go back and forth, are we measuring prices right, they didn’t have DVD players, you know, so on… the outcome of that debate is not important. What’s stunning is the fact that it’s even debatable.

Go back, we’re talking about 35 years. The end of the great Post-War Boom is usually dated to 1973. In 1973 there were no personal computers, no internet. Fax machines were extremely expensive things that basically only major news organizations had. Ships were unloaded by guys toting big bags of stuff, no freight containerization, no barcode scanners.

We’re a vastly richer, more productive society than we were in the early 70s and yet we’re not sure — it’s within the realm of argument — whether the typical family has gained anything. How’s that possible?

let’s ask an expert. (the intro lasts 5 mins. permission to skip it: granted!)

in short, the big important costs — housing, medical, education, child care, and tax expenses — have all grown past the ability of one middle income to pay them, so a one-earner household is generally priced out of prosperity. but even with two incomes — with the added cost of a second car and more child care to support it — you have no slack.

so how have families responded to this?

let me tell you about bankruptcy. what’s happened with bankruptcy?

[discusses graph showing households with children declare bankruptcy at twice or three times the rate of households without.]

so what this one tells me is that families with children are under enormous financial stress. i watch them, i study them, from the bankruptcy end of the spectrum, which is where they end up, and let me tell you a little bit about why they file for bankruptcy.

90% of those families file for one of three reasons.

• job loss,
• medical problem in the family, sometimes the wage earner, sometimes a child,
• or family breakup — either a death in the family or a divorce in the family.

in fact nearly half the families have at least two of those three and about 20% have been hit by three out of three. that’s how it is that they end up in bankruptcy. now let me give you an idea of what these numbers mean, so i can put it in a little bit different context.

these families that are filing for bankruptcy, families with children?

more children live in homes that will file for bankruptcy this year [2007] than live in homes that will file for divorce. that is, there are more children in america — and this has been true, by the way, since the late 1990s — every year, more children are going through their parents’ bankruptcy than are going through their parents’ divorce.

so let me say that to you a different way.

do you know anybody who got divorced, say, in the last 6 or 7 years? you know some children who live in homes where mom and dad have split up? then you, statistically speaking, know more — if you know random cross-sections of america — you know more who went bankrupt.

why do you think you don’t know more that went bankrupt? and that’s because you can’t hide divorce, but you can sure hide bankruptcy. and that’s what people have done. there’s an enormous stigma attached to filing for bankruptcy.

when we interviewed the families who had filed for bankruptcy … one of the key things we learned early on is that people would say, “don’t use the word. —partly because i can’t bear to hear it. and partly because i’m afraid a child will pick up an extension phone or someone will walk into the room and hear me use it and we don’t want anyone to know.”

about 85% of the families that were filing for bankruptcy were hiding it from their own parents, from their siblings, from their best friends, and in some cases from their own children.

we know what’s broke, besides a lot of us, and we know why the winners say it’s working. that’s barely anything. unless things change, winners lose, like everybody. they have money and they have hype and neither will mean shit.

i fear we are moving from a three-class society to a two-class society.

america has always been — [waves arm in bell curve shape] — sort of one of those perfect distributions: some poor, some rich, and a big, big solid middle class stuck right there in the middle. americans identify with the middle class. it affects our democracy, it’s part of what gives us our political stability, it’s what affects our economy and drives our economy, it affects our self identity. it affects who we are in this world.

but i fear that what is happening, and what these data are about, is that we actually are gonna see a larger upper class. we’re seeing that.

not just the rich rich, but the sorta rich: the ones who have the same jobs — bring in two incomes — who don’t get sick, who don’t lose a job — and that income volatility, and the things that go wrong in the medical world — who don’t divorce, who don’t have a death in the family — who don’t hit any of life’s bumps — they stay with the upper group. they put away some savings, they don’t get deep in debt, they do okay.

and then the rest is just one long trail of underclass that stays on a constant debt treadmill. sometimes it’s a little more, sometimes it’s a little less, but never out of debt. never any real economic security.

i could change my metaphors: people who are just constantly living on the edge of a cliff. some falling over, some scratching back up a little, but never with the kind of security that for the first three-quarters of a century we associated with being middle class.

i worry about what that means. i worry that the middle class which used to mean solid and boring — and not worth studying — only worth making fun of, you know, “my parents were hopelessly middle class” sort of remarks — that that’s kept us from seeing a problem in the middle class that threatens not just these families with children that i’ve identified — but really threatens the fabric of our country.

we have a middle class today that is newly weakened. and i think what this means is that it’s time to realign both our academic and our political interests and alliances to talk more about what’s happening to these families.

so with that i’m going to quit and take as many questions as people have!

both speeches are essentially before the food-gas-lodging ugliness but they do help explain the pain — and the hesitation to complain — or ask help.

we have to remember, we have most of the resources we need to build our way and lots of other people’s ways out of this hole and between our minds, our arms, our sun, and our earth, we have all the energy we’d ever need.

ps. that graph of prof warren’s, about where the money goes, did you learn anything from it? it didn’t knock down misconceptions for me, about consumer culture and all, i knew that trouble was more network damage than direct cost, but i was a little — mildly — blown away by the big ticket increases taken together and the % of income graphs, and it was nice to fix in the mind the picture of the mcmansions as an expansion of the lower upper class, however more leveraged, because who isn’t, no matter; what we really need to do is figure how we’re going to seal, insulate, and de-impactify the housing stock people are really using.

continued…

pps. FIRE. finance, insurance, real estate. opportunities.

education a real estate profit center by new buildings and new money for colleges to dabble. transportation a real estate profit center by sprawl. child care and taxes were freebie kidney punches from the winners.