The men of steel, the men of power, are losing control by the hour
We
went to see the new Superman movie yesterday, and it wasn't quite as
bad as I expected based on what I had read about so far. My wife and
mother-in-law enjoyed it a lot. Even if the plot didn't really make any
sense, at least I enjoyed watching the flying scenes and the crystal
island, since even though everything there was CGI, I was not able to
tell it. That was money well spent from the filmmakers. I love it when
technology advances. However, I could not suspend the pretty much the
same disbelief that I had with the movie "Kill Bill": if Superman has
been gone for five years, how is it that during this time Lois Lane has
married and given birth to a kid who by my estimate is at least five or
six years old now?
I also finished reading "The Two-Income Trap", written by Harvard professor Elizabeth Warren and her daughter Amelia Warren Tyagi. I have seen professor Warren a couple of times on TV as an expert in a talkshow talking about personal finances, and liked her general schtick. I was certainly impressed by this book and the way it presented the issues and solutions. So maybe I'll now describe Warren by saying that she is basically an intelligent version of Barbara Ehrenreich. There is no way in hell that Elizabeth could ever write anything as stupid as Barbara's recent rant against Wal-Mart, you know, the one that has been mockingly linked all over. The impression I get from this book is Warren is politically liberal, but she must be the very best kind of liberal that there is.
The book examines the paradoxical fact that modern two-income families tend to be financially more fragile than the one-income families of the past. This should not be confused with the popular misconception these days that the average person is somehow poorer now than in the past. These days even the poor people can afford and take for granted items that were unimaginable luxuries even a generation ago, so we can safely skip all complaints of idiotic nostalgia about how a family used to have a higher standard of living in the past with only one income than a modern family has with two. If a modern family is able to settle for the standard of living that was typical in the 1970's or the 1950's (a tiny home, one ugly beater for car, no consumer electronics other than perhaps a radio and a small TV set, no AC, only the very rudimentary and simple clothes and food), they will find one paycheck to be more than adequate for this. Of course, this average standard of living of the past was so incomprehensibly poor that few middle class people would even think of settling for it today.
The problem is therefore not in the absolute level of material living, but in the financial fragility of trying to maintain this level. Having two incomes gives the family more money and especially disposable income that can be spent on toys and other fun, but it provides additional safety only if the family essentially lives on one income and saves and invests the second one. Me and my wife have done this for a decade now, but I know that very few other people do this, and it constantly surprises and amazes us whenever we encounter this alien reality. As a humorous anecdote, a while ago my wife told me about this woman who is working for their company and had contacted them because her paycheck hadn't arrived because of some glitch, and how she had anxiously asked them to hurry up since it's the end of the month and she can't pay her bills. This woman makes close to a hundred grand a year and yet she lives from paycheck to paycheck. Incomprehensible for me, yes, but so very normal these days.
Warren's central observation which I never thought of before this but is obvious in retrospect is that if they spend all that they earn, a two-income family is actually much more precarious financially than a one-income family, since they have no slack for various emergencies, which will statistically strike people more commonly than they expect. And of course, having both the husband and wife working also doubles the probability of one of them losing his or her job. Should the breadwinner of a one-income family lose his job (well, usually it is "his"), the wife can start working and this way complement the unemployment benefits or the lower-paying work that the husband can earn, this way keeping the household afloat. If both husband and wife already work, there is no similar slack or leeway, but it is easy to enter the death spiral in a few months.
The title "two-income trap" comes from the fact that the two-income family takes financial responsibilities (big mortgage) that they can't easily cut back on later even if they had to. And they might not have a choice of whether they want to accept these responsibilities or not. The second chapter of the book discusses the way that the American public school system in which a kid goes to the school next to him leads to massive competition for houses located in the areas where the "good" schools are (and everyone knows that this euphemism really means "no poor people", since a "school" itself is only brick and glass and blackboards which are pretty much same everywhere), which puts the middle class in a crunch. Now, the Finnish public school system works in a similar fashion, but since the population and schools in that little nation are a lot more homogeneous and it lacks the certain social pathologies and other problems that America suffers from but that can never be said out loud (as The Danimal once noted, if you switched the student populations of a "good" school and a "bad" school, you might soon be surprised how good the "bad" school can be), things don't work quite that way in Finland, except perhaps for a small handful of problem spots.
Warren puts this reality succinctly by noting that the supposedly "public" schools in these highly-competed areas are de facto private schools, it's just that the "tuition" is paid to the mortgage company instead of the school. Heh. Warren then goes on to discuss possible solutions, and notes correctly that housing subsidies don't work, since their only effect would be to drive the housing prices up the exact same amount while maintaining the relative rankings of the population. Warren therefore ends up supporting school vouchers, with the idea of decoupling school choice from the geographical location and thus bursting the bubble of the home prices in areas that have good schools.
The two-income trap snaps shut the hardest in the event of a divorce. Of course, divorces are so common these days that they have lost their stigma, either party being able to get a divorce if they just don't feel like bothering to continue the marriage any more. Feminists and leftists initiated this social development, hoping that it would be mostly women who would file for divorce in hopes of trading up. So I guess that there is a certain poetic justice in the fact that the life of these newly single women isn't quite as liberating and empowering as the feminists promised them that it would be. Perhaps the government could serve as a virtual "boyfriend" for these women, giving them money but never asking anything for return. After all, all women are entitled to happiness.
One chapter in the book discusses personal bankruptcy and goes on to recommend that more people should use this possibility. Now, I am not sure if the Finnish law has changed since I have been away, but the Finnish law doesn't even have a possibility of a personal bankruptcy. That's right, Americans, put that in your pipe and smoke it for a minute. That certainly encourages a person to maintain a certain level of financial responsibility. Warren goes to demolish the myth of people who file for a bankruptcy tend to be financially irresponsible. Americans who choose bankruptcy should need to be aware of their rights, as well as knowing that debt due to child support, taxes or student loans are not wiped clean in personal bankruptcy. The government sure knows to take care of its own needs, and I guess that the logic of relieving the destitute person of his debts somehow doesn't apply any more when the debt is owed to the government. Interesting.
Before coming to the finishing chapter of "financial fire drill", Warren moves on to criticize the modern credit industry that preys on the weakest. In the past, an American loan applicant had to wear his Sunday best to go apply for a loan from a stern-faced bank manager who would reject him for a slightest doubt that you won't be paying back the money (in Finland, there was similar interesting folklore about the extent that some loan applicants went to to look as reliable as possible), but these days entering the financial death spiral actually makes the creditors swarm in and offer you more credit. After all, if you can only afford to make the minimum payments, you will end up paying them lots of interest! People who are just out of bankruptcy are the very best targets, since legally they are not allowed to file for bankruptcy for the next seven years, and they have already demonstrated that they will probably be needing and using lots of credit.
I also finished reading "The Two-Income Trap", written by Harvard professor Elizabeth Warren and her daughter Amelia Warren Tyagi. I have seen professor Warren a couple of times on TV as an expert in a talkshow talking about personal finances, and liked her general schtick. I was certainly impressed by this book and the way it presented the issues and solutions. So maybe I'll now describe Warren by saying that she is basically an intelligent version of Barbara Ehrenreich. There is no way in hell that Elizabeth could ever write anything as stupid as Barbara's recent rant against Wal-Mart, you know, the one that has been mockingly linked all over. The impression I get from this book is Warren is politically liberal, but she must be the very best kind of liberal that there is.
The book examines the paradoxical fact that modern two-income families tend to be financially more fragile than the one-income families of the past. This should not be confused with the popular misconception these days that the average person is somehow poorer now than in the past. These days even the poor people can afford and take for granted items that were unimaginable luxuries even a generation ago, so we can safely skip all complaints of idiotic nostalgia about how a family used to have a higher standard of living in the past with only one income than a modern family has with two. If a modern family is able to settle for the standard of living that was typical in the 1970's or the 1950's (a tiny home, one ugly beater for car, no consumer electronics other than perhaps a radio and a small TV set, no AC, only the very rudimentary and simple clothes and food), they will find one paycheck to be more than adequate for this. Of course, this average standard of living of the past was so incomprehensibly poor that few middle class people would even think of settling for it today.
The problem is therefore not in the absolute level of material living, but in the financial fragility of trying to maintain this level. Having two incomes gives the family more money and especially disposable income that can be spent on toys and other fun, but it provides additional safety only if the family essentially lives on one income and saves and invests the second one. Me and my wife have done this for a decade now, but I know that very few other people do this, and it constantly surprises and amazes us whenever we encounter this alien reality. As a humorous anecdote, a while ago my wife told me about this woman who is working for their company and had contacted them because her paycheck hadn't arrived because of some glitch, and how she had anxiously asked them to hurry up since it's the end of the month and she can't pay her bills. This woman makes close to a hundred grand a year and yet she lives from paycheck to paycheck. Incomprehensible for me, yes, but so very normal these days.
Warren's central observation which I never thought of before this but is obvious in retrospect is that if they spend all that they earn, a two-income family is actually much more precarious financially than a one-income family, since they have no slack for various emergencies, which will statistically strike people more commonly than they expect. And of course, having both the husband and wife working also doubles the probability of one of them losing his or her job. Should the breadwinner of a one-income family lose his job (well, usually it is "his"), the wife can start working and this way complement the unemployment benefits or the lower-paying work that the husband can earn, this way keeping the household afloat. If both husband and wife already work, there is no similar slack or leeway, but it is easy to enter the death spiral in a few months.
The title "two-income trap" comes from the fact that the two-income family takes financial responsibilities (big mortgage) that they can't easily cut back on later even if they had to. And they might not have a choice of whether they want to accept these responsibilities or not. The second chapter of the book discusses the way that the American public school system in which a kid goes to the school next to him leads to massive competition for houses located in the areas where the "good" schools are (and everyone knows that this euphemism really means "no poor people", since a "school" itself is only brick and glass and blackboards which are pretty much same everywhere), which puts the middle class in a crunch. Now, the Finnish public school system works in a similar fashion, but since the population and schools in that little nation are a lot more homogeneous and it lacks the certain social pathologies and other problems that America suffers from but that can never be said out loud (as The Danimal once noted, if you switched the student populations of a "good" school and a "bad" school, you might soon be surprised how good the "bad" school can be), things don't work quite that way in Finland, except perhaps for a small handful of problem spots.
Warren puts this reality succinctly by noting that the supposedly "public" schools in these highly-competed areas are de facto private schools, it's just that the "tuition" is paid to the mortgage company instead of the school. Heh. Warren then goes on to discuss possible solutions, and notes correctly that housing subsidies don't work, since their only effect would be to drive the housing prices up the exact same amount while maintaining the relative rankings of the population. Warren therefore ends up supporting school vouchers, with the idea of decoupling school choice from the geographical location and thus bursting the bubble of the home prices in areas that have good schools.
The two-income trap snaps shut the hardest in the event of a divorce. Of course, divorces are so common these days that they have lost their stigma, either party being able to get a divorce if they just don't feel like bothering to continue the marriage any more. Feminists and leftists initiated this social development, hoping that it would be mostly women who would file for divorce in hopes of trading up. So I guess that there is a certain poetic justice in the fact that the life of these newly single women isn't quite as liberating and empowering as the feminists promised them that it would be. Perhaps the government could serve as a virtual "boyfriend" for these women, giving them money but never asking anything for return. After all, all women are entitled to happiness.
One chapter in the book discusses personal bankruptcy and goes on to recommend that more people should use this possibility. Now, I am not sure if the Finnish law has changed since I have been away, but the Finnish law doesn't even have a possibility of a personal bankruptcy. That's right, Americans, put that in your pipe and smoke it for a minute. That certainly encourages a person to maintain a certain level of financial responsibility. Warren goes to demolish the myth of people who file for a bankruptcy tend to be financially irresponsible. Americans who choose bankruptcy should need to be aware of their rights, as well as knowing that debt due to child support, taxes or student loans are not wiped clean in personal bankruptcy. The government sure knows to take care of its own needs, and I guess that the logic of relieving the destitute person of his debts somehow doesn't apply any more when the debt is owed to the government. Interesting.
Before coming to the finishing chapter of "financial fire drill", Warren moves on to criticize the modern credit industry that preys on the weakest. In the past, an American loan applicant had to wear his Sunday best to go apply for a loan from a stern-faced bank manager who would reject him for a slightest doubt that you won't be paying back the money (in Finland, there was similar interesting folklore about the extent that some loan applicants went to to look as reliable as possible), but these days entering the financial death spiral actually makes the creditors swarm in and offer you more credit. After all, if you can only afford to make the minimum payments, you will end up paying them lots of interest! People who are just out of bankruptcy are the very best targets, since legally they are not allowed to file for bankruptcy for the next seven years, and they have already demonstrated that they will probably be needing and using lots of credit.
This quest for "good" schools reflects absurd parental anxieties rather than anything grounded in reality. Children from families that value education can get good educations in almost any school. In fact, if your child is quite talented he or she actually might be better off in a not-so-good school, under the "big fish in a small pond" theory.
As for bankruptcy, recent law in the United States has added a number of restrictions, though it's still too early to see how things are working out in practice.
Peter
Iron Rails & Iron Weights
Posted by Anonymous | 12:24 PM
Try this article, it captures what is happening in the real estate market vis a vis public schools in America.
www.vdare.com/Sailer/two_incomes.htm
Posted by Anonymous | 2:03 PM
Heh, should have guess that Steve Sailer had already discussed this issue when the book came out.
Posted by Ilkka Kokkarinen | 2:57 PM
We are raising three children on one income, and we would go back fifty years in a heartbeat. Quality of life isn't just about availability of consumer goods and amount of private space (which we don't have much of anyway - we live in a small apartment with no parking and no one has their own bedroom.) I would vastly prefer a neighborhood with other mothers at home, where children were expected to entertain themselves by playing outside, to cheap consumer electronics and lots of snack food choices at Trader's Joes. Quality of life for middle class families really has deteriorated over the past fifty years, in every area outside the availablity of consumer goods (and I guess housing, but I live in the city so I'm stuck in a crackerbox either way). However, a lot of people seem to want to blame the availablity of cheap consumer for the wreckage of community life, when really they have practically nothing to do with each other.
Posted by Anonymous | 11:22 PM
Oh, and first anonymous - at least in Texas and California, the quest for "good" schools reflects the desire not to have your white child be an ethnic minority who has the shit kicked out of him regularly and can't get services from a native English speaker, and not have him corrupted by underclass values and behavior. Have you ever been inside a "bad" American school? You wouldn't board a dog there.
Posted by Anonymous | 11:25 PM