Stuck in the middle, continued
Out of the Trap
The authors outline a litany of traps the middle class can fall into. But they also propose potential solutions, a combination of public policy shifts and government regulations that they say will free middle-class families to achieve what they want and what they deserve.
Potentially the most controversial recommendation goes to the heart of the two-income trap: the desire of middle-class parents to send their children to good schools--and their need to buy inflated-priced homes in order to gain access to them. Since that desire--understandable and admirable as it is--can literally lead them to bankruptcy, Warren and Tyagi call for a policy that would distinguish the location of one's home from the location of children's schools, thereby mitigating the home-buying frenzy in many suburban neighborhoods. A taxpayer-funded voucher system that allows a child to attend any public school at no cost would broaden the housing options available to parents, who would in turn exert more influence over their children's schools, they argue. Administrators, who often inveigh against school choice plans, may not like it, but teachers will, they say.
"I think most teachers appreciate that what really matters happens in the classroom," said Tyagi, whose areas of expertise at McKinsey included education, "and the more control we can put back into the classroom, the easier teachers' lives will be and the better they can do their jobs."
Such a change, the authors acknowledge in the book, "would be a shock to the educational system, but the shakeout might be just what the system needs. . . . By selecting where to send their children (and where to spend their vouchers), parents would take control over schools' tax dollars, making them the de facto owners of these schools."
They also propose expanding tax dollars to cover preschool education, which is no longer a luxury but now a necessity for middle-class families, they contend. For college education, also increasingly a necessity, they call for tuition freezes and cost cutting at public universities, where spending has far outstripped the rate of inflation. And to fight the inequities they charge the credit industry with, they recommend reviving usury laws and fortifying personal bankruptcy protection.
In the end, however, families should take responsibility, the authors advise. They outline a "financial fire drill" to practice before disaster happens. It includes shifting down fixed expenses (though they say people should enjoy occasional frills while they can--they're the easiest things to cut from the family budget if needed), such as not buying a home if two incomes are needed to pay for it. They also give families some ways out if the "fire" has already started.
But most important, they are in the prevention business, trying to prevent the outlook from getting even worse for the vast middle class--a group in which nearly everyone in America claims membership. It will get worse if nothing is done, they warn. Warren, for her part, feels that improvements will come, despite the memory of her own thwarted efforts with the bankruptcy commission. So many people are caught in the trap or face its threat that inevitably they will fight back, she says, and eventually they will win.
"Politicians can insulate themselves as much as they want; they can tell whatever story they want," Warren said. "But the underlying reality facing the middle class is not going to change. And every day, a few hundred thousand more families come to know that reality. They will insist their politicians make changes. It may not happen today. It may not happen tomorrow. But it will happen."
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