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Senate Thinks About the Middle Class

posted by Elizabeth Warren

For those of us who care about credit issues, yesterday's Senate Finance Committee hearing, called by Senator Baucus, was instructive.  The title: "Can the Middle Class Make Ends Meet?" I testified, along with a Brookings fellow, a social worker specializing in pediatric oncology, and the president of a tax-cut foundation.  Three of us thought the middle class was in trouble, and the fourth thought that thanks to tax cuts the middle class was doing great and the with more tax cuts they would be even better off.  (You can guess who took what positions.) 

While the senators focused mostly on specific issues like paying for college or the impact of a medical problem, everything said in that room (except maybe the tax cut stuff) was also about credit.  Rising debt, falling savings, bankruptcy, aggressive credit marketing, aggressive collection--it all plays out against the background of what's happening to the middle class.  If families could still afford to put away 11% of their incomes in savings, as they did in 1972, then the credit and bankruptcy issues we discuss would be very different.

The numbers are grim for families with median earnings, even if everything goes well.  But any small bump in the road will upend these families financially.  As our earlier work showed, it doesn't take a diagnosis of leukemia or a life-threatening accident to push a family into bankruptcy; a torn up knee or an infant born with some health problems can result in copays, lost wages, and uncovered expenses that send a family into an economic meltdown. 

For families, all the pieces are tied together.  They can't schedule their crises, and taking on a big mortgage to get into a decent school district affects savings which affects debt which affects the decision on where to send the kids to college--and so on. 

I'm glad to see Congress beginning to tie the pieces together too.   

Comments

I can't believe you testified in favor of the tax cuts helping the middle class!

Welcome to the United States.

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