Book Review, NationalJournal.com
As the title implies, "The Two-Income Trap" is not a cheery book. Authors Elizabeth Warren and Amelia Warren Tyagi argue that today's two-income families, despite working harder, have far less economic security than their one-wage counterparts a generation ago. Putting both parents in the workplace has increased the likelihood of financial disaster. And "having children has become the dividing line between the solvent and the insolvent;" a woman who forgoes having children "decreases her chance of going bankrupt by 66 percent." How's that for family values?
Worse, they contend, this trap cannot simply be attributed to "Affluenza" or consumerism run wild. Warren, a Harvard law professor, and Tyagi, a former McKinsey consultant, write that "the average family of four today spends 21 percent less (inflation adjusted) on clothing than a similar family did in the early 1970s." Average expenditures on food (groceries and restaurants combined) is down 22 percent. "Home entertainment" and computer spending is up, but the combined bump is less than $500 a year -- an amount "more than offset by families' savings" on major appliances and household furnishings.
The real culprit, "The Two-Income Trap" argues, is a pernicious combination of substandard schools, skyrocketing prices for desirable housing and a dangerous deregulation of mortgage lending and other consumer credit. And according to Warren and Tyagi, it's Congress, not consumers, that is best able to craft a solution.
The authors call for "a well-designed voucher program" that pays "the entire cost of educating a child," so that home-buying is not the primary means for parents to secure a quality education for their children. They want public education to be extended to the preschool years, and argue that bankruptcy reform should be shelved in favor of sharp restrictions on subprime mortgages and other reregulations of the lending industry.
The policy proposals run the ideological gamut, which Warren and Tyagi see as utterly appropriate: "Liberal or conservative, faith-based or secular, any group that sees its mission as families should have interest rate regulation and bankruptcy protection at the very top of its agenda."
Not every argument in "The Two-Income Trap" is convincing, of course. Warren and Tyagi often gloss over the complexities and trade-offs their ideas involve, and they accurately note that the current systems have powerful defenders. But their counterintuitive conclusions raise interesting questions, and provide a valuable reminder that simple belt-tightening won't fix most families' finances.
The Two-Income Trap
By Elizabeth Warren and Amelia Warren Tyagi
ISBN 0465090826
Basic Books
288 pp.
