The Two-Income Trap

"Elizabeth is, of course, at this moment, a candidate for the US presidency. Before she emerged in the political arena, she had a previous incarnation as a professor of bankruptcy law, in which guise she played a pivotal role in reinventing the agenda for bankruptcy scholarship. Specifically, she (with others) made it worthwhile and important to try to figure out just who filed for bankruptcy and why. In particular, there was (and perhaps always has been) a view that bankruptcy was mainly the result of debtor irresponsibility. Elizabeth made it her business to demonstrate that this account is bollocks: that most individual bankruptcies can be traced to structural failures for which individual debtors should not be held responsible. It’s a complicated proposition and it is possible to have reservations about some of her work while still recognizing that she has greatly changed the pattern of thinking about the issues (and has the right enemies…) Yes, if you mean the crisis of 2007-2008. That wasn’t even the first crisis. We’d already lived through other financial crises, not least the so-called savings and loan crisis of the 1980s, which spread like a prairie wildfire across the housing industry in its own time. The Warren-Tyagi book helps us to understand that the chain of events beginning in 2007 exposed systematic flaws that been growing more untenable for years. Do I agree that bankruptcy is not driven by the immoral debtor? Yes, it’s not. Certainly there are irresponsible debtors and some of them get away with stuff through the bankruptcy system. But they aren’t the heart of the problem. It’s more and more about debtors trying to maintain a secure and steady family life. That’s what Warren and Tyagi’s book argues and the mass of data supports them. “In particular, there was…a view that bankruptcy was mainly the result of debtor irresponsibility. Elizabeth [Warren] made it her business to demonstrate that this account is bollocks: that most individual bankruptcies can be traced to structural failures for which individual debtors should not be held responsible” I was never an intimate friend of Elizabeth’s, but I was an amiable professional colleague back in her academic life. We lunched out together a couple of times, she had the fruit box. For a short time, I had an office catty-corner across the hall. I remember overhearing her talking loudly and cheerfully into the telephone. She had her feet on the desk. I don’t think I’ve ever laid eyes on any of the other authors, but if there is an afterlife, I hope I get to do lunch with Balzac."

"The author, Elizabeth Warren, is a professor of law, specialising in bankruptcy, at Harvard Law School. She found that back when one person was responsible for the economic viability of a family, when families hit hard times then the other adult, usually the woman, could step into the labour market to help. But now since two-income households are the norm, when families hit hard times there’s no back-up. Increasingly, families get into a two-income trap where both mom and dad are working to keep up with middle class standards of living. After 30 years of stagnant wages, 30 years of unions under assault, 30 years of deregulation—even under Clinton—American middle class families find themselves in a very precarious economic position. Progressives understand that the poor aren’t necessarily poor because of some moral failing. We understand that there are systemic problems in our economy. But progressives don’t have a monopoly on compassion, and we aren’t just about opening opportunities for the poor. We are also focused on how the economy that Reaganism and Bushism have given us fails the middle class. Economic justice is at the heart of the progressive movement. Over the last 30 to 40 years, there have been political movements to suppress the public sector and exalt the private sector. As a result, we don’t have enough people minding and regulating markets. That’s directly related to how we ended up in this mortgage crisis and this financial crisis. We regard the appointment of Elizabeth Warren to lead the Consumer Financial Protection Bureau as a key strategic initiative. This Bureau will improve the information available to consumers to help them make good decisions. One of the ways that the market players got us into this major crisis is by having opaque markets. People didn’t know what they were signing, whether it’s a mortgage agreement or a credit card contract. Banks hide useful information behind gobbledygook. Her movement to provide a level playing field by requiring easier to understand information will be good for the American economy overall. Remember, some business interests didn’t want the Securities and Exchange Commission. They claimed it would destroy the market, and it’s helped our economy grow."