Chapter Two: The Overconsumption Myth

Many people, even authors such as the authors of Affluenza: The All-Consuming Epidemic, believe that many families are deep into debt and in poor financial straights because they spend too much on "unnecessary" items such as clothes, food, and luxury appliances. However, Elizabeth and Amelia quickly debunk this myth by examining actual records of how much American families spend on "luxury" items today when compared to families of the 1970's. The authors do add that families do spend much more on entertainment items, such as televisions, cable, and computers, than families did in past generations. However, this increase in spending is much less than the savings families of today make in other areas (comparatively). The authors believe that many people blame the increase of debt and foreclosure on overspending because it is an "easy" fix. However, overspending is not the true cause of America's many financial problems.

The authors also debunk the myth that American families of today are spending money they don't have living in unnecessarily large and opulent "McMansions." In reality, though Americans are spending much more on houses, almost half of all families live in houses that are more than 25 or 50 years old.

The authors blame the sharp increase (73%) in the price of houses for married couples with children on the cost of finding a house that assures children safety and a good education. The effect of a successful public school on houses is astronomical; identical houses can be almost three times as expensive based on their school zone. In addition, parents look to find houses in areas with a higher average income level which have much lower crime rates than houses in lower income level areas. And so, parents become willing to pay anything to assure their children a successful, happy future.

As families sought more and more specific types of houses to raise their children in, the prices of this finite number of houses skyrocketed. The families unwittingly began a "bidding war" on the most desirable of houses. This problem was only amplified by the increased income working mothers brought to the equation. The price of houses desirable to families with children have now increased so much that mothers are forced to work just to be able to afford these houses.

To fix this problem, the authors suggest that the public education move to be based on vouchers instead. Each parent would receive a voucher to pay for their child's education and then they would be allowed to place their child in whatever school they wanted. School woulds improve to compete for students and everyone would win.

Another issue the authors blame the struggle of middle class families on is the rising cost of preschool. Since preschool is now considered mandatory by many experts and parents, parents are forced to pay more for their children to get into a good preschool than many pay for a college education. To solve this, they suggest adding preschool to public education. They also believe that the government should consider making public, taxpayer subsidized day cares, as long as the day cares would not put dual income families above single income families.

The authors then move on to tackle the subject of college. They trace the path that as college has come to appear more and more necessary for success in the workforce, the price of colleges have almost doubled. To say that the authors do not exactly buy that the tuition rise was necessary would be an understatement. They say that the extra expenses colleges suddenly gained have instead been moved into administrative bonuses, undergraduate research, and draining sports programs. Colleges use the extra income they gain from parents to pursue what the authors imply is unnecessary prestige.

The authors quickly dismiss the conservative "more debt" and the liberal "more taxes" solutions. They instead suggest a temporary freeze on the increase of tuition at public colleges and universities. They believe it would decrease costs while focusing the universities to diversify and re-focus on the community.

The final expenditure the authors tackle is the family car. From their studies, the authors believe that most of the increased expenditures on cars today comes not from a desire for more amenities, but from a second car and cars with more safety features.

The authors wrap up the chapter by comparing a typical one-income family of the 1970's to the typical two-income family today. After all expenses and inflation are accounted for, the family of today has less discretionary income than the family of the 1970's, despite bringing in more than twice the amount of money than the older family did. They show how the family of today is forced to spend much of its income on costs that will never change. This, of course, leaves families in a perilous position. If anything goes wrong, they will have nothing they can do to recover.

Chapter 1: Just the Way She Planned

The first chapter of The Two Income Trap sets up the setting and goal for the rest of the book.

The chapter begins with a short anecdote about a "normal" American family. They set up the perfect life for themselves--two kids, decent house, a good job for both the mother and the father. However, after the father loses his job, the family slips father and farther into financial ruin until they are eventually forced to declare bankruptcy.

The authors set up their credentials; Elizabeth is a Harvard business law professor, Amelia is an economist. Both women are mothers; in fact, Elizabeth is Amelia's mother. They explain that while conducting a study on financial ruin, they discovered that families are much more likely to experience financial problems than single families. Single mothers are at the highest risk to declare bankruptcy of all age catagories. They attribute this to a number of different factors, such as how two-income families rarely save any of their checks and so are left with no emergency fund when financial crisis hits.

The authors promise to explain in the rest of the book how they believe the increase of women in the workforce has helped to inflate the costs of middle class "essentials," such as houses, day cares, and college educations. Finally, they plan to present possible solutions to the rapid (600%) increase of bankruptcies in both families and among single mothers. These solutions will encompass changes from the level of the national government to changes families can make in their lives today to prevent financial ruin from ever descending upon their household.