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(dramatic music)

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- I'm Mary Ann Mason,

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I'm the Dean of the Graduate Division,

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and I'm pleased, along[br]with the Graduate Council,

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to present Elizabeth Warren,[br]who is this year's speaker

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in the Jefferson Memorial Lecture series.

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As a condition of this bequest,

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we're obligated to tell[br]you how the endowment

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supporting the lectures[br]came to UC Berkeley.

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The Jefferson Memorial Lectures[br]were established in 1944

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through a bequest from[br]Elizabeth Bonestell,

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and her husband, Cutler L. Bonestell.

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A prominent San Francisco couple,

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the Bonestells cared deeply for history,

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and had hoped that the lectures[br]would encourage students,

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faculty, visiting scholars and others

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to study the legacy of Thomas Jefferson

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and to explore the values[br]inherent in American democracy.

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Past lecturers, Ambassador[br]Jeane Kirkpatrick,

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Senator Alan Simpson,[br]Representative Thomas Foley,

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Walter LaFeber and[br]Archibald Cox have delivered

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Jefferson Memorial Lectures[br]on early American history

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about Jefferson himself and[br]on American institutions

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and policies in economics,[br]education and the law.

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And now a few words[br]about Elizabeth Warren.

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One of America's leading[br]commentators on consumer issues

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and the law, Elizabeth Warren[br]has been an outspoken critic

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of America's credit economy,

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which she has linked to the[br]continuing rise in bankruptcy

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among the middle class.

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No one in the audience, I'm sure.

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Her critical analysis of[br]Congress's latest revision

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of America's national bankruptcy law

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has received wide attention in the media

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as well as in academic and policy circles.

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At Harvard Law School,[br]Warren's courses include

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contract law, bankruptcy[br]and commercial law.

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She said recently that[br]she has spent decades

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writing in academic books and[br]teaching an entire generation

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of law students about the rules of money.

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Those rules include the formal[br]statutes of commercial law,

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the policies inherent in them,

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and the ethical problems[br]that they can produce.

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Warren is a frequent[br]contributor to articles in

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The New York Times, The Washington Post,

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and Women's eNews, and her[br]commentary appears regularly

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on National Public Radio's news program,

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All Things Considered,

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and on the internet forum,[br]The Huffington Post.

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After earning a BS from the[br]University of Houston in 1970,

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Warren was awarded a J.D.

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from Rutgers University-Newark in 1976.

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She joined the faculty of[br]Harvard University in 1992

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and has served as the

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Leo Gottlieb Professor of Law since 1995.

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Prior to Harvard, Warren taught at

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the University of Pennsylvania Law School,

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the University of Texas Law School,

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the University of Houston Law Center,

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the University of Michigan,[br]and Rutgers School of Law.

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Warren has channeled her[br]expertise in commercial law

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into numerous other[br]professional activities.

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She acted as chief adviser

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to the National Bankruptcy[br]Review Commission

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from 1995 to '97.

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She served three terms on

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the Federal Judicial Center Committee

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on Judicial Education, 1990 to '99,

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and since 1995, Warren has[br]been the United States advisor

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to the Transnational Insolvency Project.

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In presenting its nomination[br]of Professor Warren

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for the lectureship,[br]the selection committee

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spoke of Warren's[br]prominence as a commentator

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in public discourse on bankruptcy[br]and other consumer issues.

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A scholar of great originality

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and insight into commercial[br]law and a law teacher

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and lecturer of exceptional distinction.

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According to committee[br]chair Harry N. Scheiber,

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the Riesenfeld Professor[br]of Law and History,

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"At a time when the social safety net

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"is no longer taken for[br]granted by Americans,

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"its unremitting attack in Washington

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"and many state capitals,

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"Elizabeth Warren's unique importance

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"as a researcher and writer,

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"concerned with changing[br]income distribution

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"and the imperiled condition[br]of the nation's social welfare

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"makes this lecture one[br]of special importance

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"to the campus community."

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I should say personally that[br]I read her book last year,

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"The Two-Income Trap",

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and I would put it among my very favorites

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of policy books that both made sense

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and are going to change policy.

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So it gives me very great pleasure

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to welcome Elizabeth Warren.

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(audience applauding)

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- Thank you, Dean Mason.

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Thank you, members of[br]the Berkeley faculty,

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Berkeley students and Berkeley friends.

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It's an honor to be invited[br]to give the Jefferson Lecture,

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especially following the footsteps

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of such esteemed people.

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And it's also a particular[br]pleasure to be here.

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I appreciate the hospitality,[br]it has been extraordinary,

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and the good weather,

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since I was on a plane[br]that had to be de-iced

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before it could take off,

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it really does seem that[br]I've landed in heaven.

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So it's a special treat to be here today.

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I want to say,

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I like to talk about the[br]things that I care about

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and that I'm passionate about,

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and I only get nervous about the fact that

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I may not tell you all the[br]things that I want to make sure

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that you know and I may[br]not be able to say it

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as clearly or distinctly,

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because I want you to hear these things,

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but today, I feel a special anxiety

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as I get ready to do this because[br]the only two conversations

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that I have had running[br]throughout the day today

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have been how appalling[br]it is to use PowerPoints,

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and about boring lectures and[br]falling asleep during them.

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So having my confidence[br]boosted before I came in here,

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I will approach this somewhat gingerly.

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What I wanted to talk about[br]today is I wanted to start

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by talking about what I[br]think is the single most

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important economic[br]shift of the second half

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of the 20th century in the United States,

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and that is that millions of mothers

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poured into the full-time paid workforce.

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A woman in 1970

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who had a 16 year old child

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was less likely to be in the workforce

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than a woman in 2003

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who had a six month old child at home.

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It was a profound shift in America.

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The median family in America,

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a married couple family in America,

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went over a 30-year[br]period, median, middle,

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from being a one-income household[br]to a two-income household,

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a significant shift.

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And so if we had known,[br]let's say, 30 years ago,

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35 years ago, we've been[br]sitting here in 1970,

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and as part of the Jefferson Lecture,

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I'd had my crystal ball and I'd said,

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"Here's what's going to[br]happen over the next 30 years.

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"Mothers are going to[br]pour into the workforce,

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"take on full-time work,

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"they're gonna get better education,

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"they're gonna have more work experience,

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"their incomes are going to rise.

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"They won't get all the[br]way to where men are,

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"but they're gonna make[br]substantial advances."

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Now let's speculate on what[br]the family will look like

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30 years hence, that[br]is, in 2000, 2005, 2007.

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Well the first thing[br]I would have estimated

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is that people would[br]stop living in suburbs

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that are far out.

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I would have guessed[br]everyone would live close in,

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that no mother of a six month old child

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would commute an hour[br]and 40 minutes to work.

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I would have been, of course,

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very wrong in that first estimate.

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The second thing I would[br]have guessed is that families

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will be very wealthy.

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They're going to have[br]lots of savings, no debt,

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and plenty of vacations, right?

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If you've got two people in the workforce,

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there's gonna be a lot of extra income.

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They're gonna be secure,

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there won't be a lot of bankruptcy,

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there won't be a lot of default,

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nobody's gonna be dealing[br]with debt collectors,

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that's what it's gonna[br]look like come the new era.

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So let's see what happened.

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This is all inflation adjusted,

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everything I'm gonna do today

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is gonna be inflation adjusted,

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so we can just make that[br]assumption as we go forward.

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This is what happened to median[br]income for married families

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and this is gonna be my period

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to the extent the data permitted.

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It's basically gonna be one[br]generation, 1970 to 1971,

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to 2005, 2006.

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What happened in a single generation,

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from your mom and dad to you, okay,

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is what we're talking about here.

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And you see how income[br]goes up for families.

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But there was an underlying message

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that was not nearly so good,

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and that is income went[br]up for married couples,

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but the green line, the one underneath,

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you notice that income for[br]males, fully employed males,

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in fact, didn't rise at all.

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And if you actually look at the numbers,

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a fully employed male today,

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once we had adjusted for inflation,

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makes about $800 less than his[br]father made a generation ago,

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talking about median earners here.

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Okay, so what that begins to tell us

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is the first part of the[br]story, family income rose,

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but as I said, it was rising only

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because women were going[br]into the workforce.

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In other words, the bump[br]we got is not a bump

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on top of the bump we were getting

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because men were also earning[br]more over this period of time

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as they had been in the[br]seven years that preceded,

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but is a bump that comes only because

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they put a second worker[br]into the workforce.

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All right, but my prediction[br]should still hold.

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After all, families are getting richer

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in the sense of more income over time.

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What happened?

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Savings went down in[br]this same time period.

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So the one-income family[br]in 1970 was putting away

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about 11% of their take-home pay.

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Think about it, week after[br]week, month after month,

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they're putting away about 11%.

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By the year 2006, you notice[br]the line goes below zero.

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This is a concept only[br]Alan Greenspan would love,

0:11:02.830,0:11:04.340
negative savings.

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The American family[br]today puts away nothing,

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and frankly has been putting away nothing

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for the last five or six years.

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There's nothing there,[br]there is no savings.

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So savings didn't go[br]up the way I predicted.

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Oh, but something went up,[br]and that's revolving debt.

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I picked revolving debt,

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I could have picked any of them,

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revolving debt just[br]basically means credit cards

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where you can carry a balance outstanding.

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We could have picked consumer debt,

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which would also include[br]car loans and payday loans

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and a few other kinds of debt,

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we could have included mortgage,

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and we would have gotten[br]much the same picture.

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Revolving debt is a[br]percentage of annual income.

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Notice there's supposed to be[br]some decimal points in there

0:11:49.009,0:11:50.000
that aren't showing up very well,

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I don't know what happened in[br]the translation of the program

0:11:52.399,0:11:57.019
but basically in 1970, the[br]median family in America

0:11:57.019,0:12:02.019
was carrying about 1.4%[br]of its annual income

0:12:02.139,0:12:05.279
in revolving debt, store charges.

0:12:05.279,0:12:08.938
So there was a tiny little[br]fraction on average.

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By the year 2005, the median[br]family is carrying about 15%

0:12:15.600,0:12:18.750
of its annual income in revolving debt,

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okay, just true there at the average.

0:12:21.049,0:12:25.129
So savings have gone down,[br]revolving debt has gone up,

0:12:25.129,0:12:27.210
and it gives us this picture,

0:12:27.210,0:12:29.389
if we put the whole thing together here.

0:12:29.389,0:12:32.069
And that is the left side, 1972,

0:12:32.070,0:12:35.270
the family, blue, is saving 11%

0:12:35.269,0:12:37.932
and carrying debt about 1.4%.

0:12:39.029,0:12:42.360
By the year 2005, is[br]carrying credit card debt

0:12:42.360,0:12:47.039
equal to one in every seven[br]dollars that it earns, 15.6%,

0:12:47.039,0:12:50.649
and its savings rate is negative,[br]eight tenths of a percent.

0:12:50.649,0:12:55.649
So think about what that means.

0:12:55.870,0:12:59.970
That means, over the last 30[br]years, in terms of a shift,

0:12:59.970,0:13:03.759
the family spent everything[br]that mom's income

0:13:03.759,0:13:06.059
added to the family fisc,

0:13:06.059,0:13:08.759
spent everything they used to save,

0:13:08.759,0:13:12.000
that 11% that they used to put away,

0:13:12.000,0:13:16.700
and went into debt another[br]15% of income on top of that.

0:13:16.700,0:13:18.843
They spent it all.

0:13:20.049,0:13:22.399
Now, whoops, I'll do it a little faster,

0:13:22.399,0:13:24.459
what did they spend it on?

0:13:24.460,0:13:26.580
This was the question that really drove me

0:13:26.580,0:13:29.446
in my research over the last few years.

0:13:29.446,0:13:30.980
Where do they spend the money?

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Because what's interesting here is that

0:13:34.039,0:13:35.709
everybody has an answer on this one.

0:13:35.710,0:13:38.080
People can tell me exactly[br]what they spent it on,

0:13:38.080,0:13:43.080
people are sure, and so[br]I started to find out.

0:13:43.389,0:13:46.490
The federal government has[br]actually been keeping data

0:13:46.490,0:13:49.539
on how Americans spend their money.

0:13:49.539,0:13:51.480
This is done through[br]the Commerce Department,

0:13:51.480,0:13:52.312
large parts of this,

0:13:52.312,0:13:54.009
and some of it's due to[br]the Labor Department,

0:13:54.009,0:13:56.529
they've been keeping this[br]for more than a century

0:13:56.529,0:14:01.529
so that you can look at data[br]on canned meat consumption

0:14:02.480,0:14:06.519
going back to the late[br]1800s and early 1900s.

0:14:06.519,0:14:08.829
You can check out alcohol consumption,

0:14:08.830,0:14:11.129
you can check out cracker consumption,

0:14:11.129,0:14:12.370
it's not all about food,

0:14:12.370,0:14:15.440
it's about cars and rugs and furniture

0:14:15.440,0:14:17.170
and all sorts of things[br]that the government has been

0:14:17.169,0:14:18.370
collecting data on.

0:14:18.370,0:14:21.909
So I found this source for all the data,

0:14:21.909,0:14:23.709
right down the bottom in that list,

0:14:23.710,0:14:26.973
I don't know what the type[br]is called, like .01 type,

0:14:27.990,0:14:29.870
it tells what the government office is

0:14:29.870,0:14:32.779
that's responsible for this[br]and if you have any questions,

0:14:32.779,0:14:36.023
what you're looking for, so[br]glory be to the internet,

0:14:36.023,0:14:40.080
found a phone number and[br]found a live human being who,

0:14:40.080,0:14:41.560
and I started trying to ask about

0:14:41.559,0:14:42.949
how you could stabilize this stuff,

0:14:42.950,0:14:43.810
and look at it over time,

0:14:43.809,0:14:46.089
we all understand how you[br]could do inflation adjustment,

0:14:46.090,0:14:48.767
he said something about,[br]I said something that,

0:14:48.767,0:14:51.987
"Can you disaggregate this so[br]that you can look at families

0:14:51.986,0:14:54.469
"matched for family size?"

0:14:54.470,0:14:56.279
That's really the question here.

0:14:56.279,0:14:59.896
And the guy said, "Well", he said,

0:14:59.897,0:15:03.867
"I guess if you cared,[br]I could run the data."

0:15:04.809,0:15:09.309
And, all of a sudden, my little[br]heart starts beating faster

0:15:09.309,0:15:11.616
and I'm panting into the phone and I said,

0:15:11.616,0:15:13.230
"You can actually run the data?"

0:15:13.230,0:15:14.062
And he said, "Yeah."

0:15:14.062,0:15:16.120
He said, "What kind of family[br]do you want to look at?"

0:15:16.120,0:15:19.259
And I said, "I want to look[br]at a mom, dad and two kids",

0:15:19.259,0:15:20.639
because we have such variations,

0:15:20.639,0:15:23.643
there's so many more one[br]person family households now

0:15:23.643,0:15:26.970
and variations, "I want to look[br]at a mom, dad and two kids."

0:15:26.970,0:15:29.048
That will help me stabilize both on age

0:15:29.048,0:15:31.376
and family composition.

0:15:31.376,0:15:34.956
"I want to look at a mom, dad[br]and two kids in the 1970s,

0:15:34.956,0:15:39.826
"1970, 1971, and I want to[br]look at a mom, dad and two kids

0:15:39.826,0:15:42.759
"in 2003", and I'm trying[br]to gather these data,

0:15:42.759,0:15:44.759
and I want to compare them.

0:15:44.759,0:15:46.669
We lump together some expenses,

0:15:46.669,0:15:48.120
and I want to be able to[br]compare them over time,

0:15:48.120,0:15:49.220
we'll adjust for inflation,

0:15:49.220,0:15:51.040
and figure out how much[br]more people are spending.

0:15:51.039,0:15:52.049
He said, "Great."

0:15:52.049,0:15:53.416
So he said, "What's the[br]first one you want to do?

0:15:53.417,0:15:54.250
"What's the first run?"

0:15:54.250,0:15:55.110
Because you gotta test this stuff out see

0:15:55.110,0:15:57.517
to see if you're getting it[br]right, and I said, "Clothes,

0:15:57.517,0:15:59.480
"how much money are people[br]spending on clothes today?"

0:15:59.480,0:16:03.603
Because all I ever hear about[br]our designer toddler outfits,

0:16:04.816,0:16:09.598
the Gap, $200 sneakers,

0:16:09.597,0:16:12.009
all of the fancy things that people are

0:16:12.009,0:16:13.909
spending on themselves and[br]their children in terms of,

0:16:13.909,0:16:16.230
we have a closet full, and look,

0:16:16.230,0:16:17.730
I think this is probably why.

0:16:17.730,0:16:19.710
I can't get a parking place at the mall.

0:16:19.710,0:16:22.470
All the dressing rooms are always full.

0:16:22.470,0:16:25.980
So it must be that we're[br]spending too much on clothing.

0:16:25.980,0:16:29.879
So he calls me back when[br]he gets the first data runs

0:16:29.879,0:16:31.909
and emails them and he says, "Okay",

0:16:31.909,0:16:33.240
he said, "I've got your number."

0:16:33.240,0:16:35.350
And I said, "Good, what's the number?"

0:16:35.350,0:16:37.680
And he said, "32%."

0:16:37.679,0:16:39.799
And I said, "So they're[br]spending 32% more?"

0:16:39.799,0:16:42.856
And he said, "No, they're[br]spending 32% less today

0:16:42.856,0:16:44.809
"than they spent a generation ago",

0:16:44.809,0:16:46.489
in inflation adjusted dollars.

0:16:46.490,0:16:48.769
And of course, it's like[br]one of these things,

0:16:48.769,0:16:51.539
the first, I have to tell[br]you, this is really awful,

0:16:51.539,0:16:53.429
the first eight times I talked with him

0:16:53.429,0:16:56.269
after he gave me this one, I[br]knew he had the numbers wrong.

0:16:56.269,0:16:58.720
Finally, we ran this six[br]different ways 'til Christmas,

0:16:58.720,0:17:01.180
I finally believe that[br]the numbers were right,

0:17:01.179,0:17:02.549
and then we start to thinking,

0:17:02.549,0:17:03.939
well, you know, it makes sense.

0:17:03.940,0:17:06.080
Everybody shops at discount today,

0:17:06.079,0:17:08.259
nobody pays full price[br]in a department store,

0:17:08.259,0:17:11.079
we import a lot more of our[br]clothes than we used to,

0:17:11.079,0:17:13.779
men don't wear expensive[br]suits, except for my husband,

0:17:15.069,0:17:17.519
people don't wear leather shoes,

0:17:17.519,0:17:20.359
little children wear sandals[br]and go barefoot a lot,

0:17:20.359,0:17:21.869
on and on and on.

0:17:21.869,0:17:26.057
And so the numbers hold that[br]clothing expenses for a family

0:17:26.057,0:17:26.891
climbed up to 32%.

0:17:26.891,0:17:29.120
So, okay, food, let's do food,

0:17:29.119,0:17:31.839
and let's be sure to put in eating out,

0:17:31.839,0:17:34.809
because we all know with[br]mom not at home anymore,

0:17:34.809,0:17:36.849
it's gotta be that families[br]are spending a fortune

0:17:36.849,0:17:38.689
on eating out, and besides that,

0:17:38.690,0:17:41.145
in 1972, nobody ate kiwis,

0:17:41.145,0:17:43.829
and nobody paid for water, right?

0:17:43.829,0:17:47.247
And my grandparents would[br]be appalled by this, right?

0:17:47.248,0:17:51.269
So how much more is today's[br]family spending on food

0:17:51.269,0:17:52.710
than they spent a generation ago?

0:17:52.710,0:17:54.700
Same sort of matching,[br]including eating out,

0:17:54.700,0:17:58.950
and the answer is they're[br]spending 18% less on food

0:17:58.950,0:18:01.253
than they spent a generation ago.

0:18:02.630,0:18:07.183
And once again, welcome to[br]the world of big-box stores

0:18:08.089,0:18:10.009
where people are buying[br]on very thin margins,

0:18:10.009,0:18:12.690
supermarkets, people eat a lot more pasta

0:18:12.690,0:18:15.410
and they eat a lot less[br]meat than they used to,

0:18:15.410,0:18:18.750
there are lots of reasons[br]that it's actually gone down

0:18:18.750,0:18:21.220
in terms of what we spend on food.

0:18:21.220,0:18:23.569
Okay, so, I'm beginning[br]to get the hang of this,

0:18:23.569,0:18:26.356
I said, "Appliances, nobody[br]had an espresso machine

0:18:26.356,0:18:28.817
"a generation ago, nobody had[br]a separate popcorn popper,

0:18:28.817,0:18:30.019
"no one had a microwave oven."

0:18:30.019,0:18:32.730
And by the way, for each of these,

0:18:32.730,0:18:35.069
one of the fun parts of[br]being able to do research,

0:18:35.069,0:18:36.029
can't do this in a lecture,

0:18:36.029,0:18:37.809
you can't burden the lecture with this,

0:18:37.809,0:18:39.863
but it's to get all the quotes,

0:18:40.700,0:18:43.809
to get Robert Frank and Julie[br]Scherer and all these people

0:18:43.809,0:18:45.079
who are explaining why Americans

0:18:45.079,0:18:46.629
are in so much financial trouble,

0:18:46.630,0:18:48.390
and each time of course[br]they're explaining about

0:18:48.390,0:18:49.940
how much we spend on clothing,

0:18:49.940,0:18:51.519
how much we're spending on food,

0:18:51.519,0:18:53.069
and how much we're spending on appliances.

0:18:53.069,0:18:56.230
So yeah, just in your own[br]mind, pack all those in.

0:18:56.230,0:18:58.049
And of course, you know where I'm going.

0:18:58.049,0:19:03.049
52% less on appliances than[br]they spent a generation ago.

0:19:03.400,0:19:05.700
And you get the rest of the pattern.

0:19:05.700,0:19:09.778
Per car average, yeah,[br]we can talk about SUVs,

0:19:09.778,0:19:14.579
the size of a living room[br]and Corinthian leather

0:19:14.579,0:19:16.236
or whatever it is you think,

0:19:17.140,0:19:19.160
with televisions in the back,

0:19:19.160,0:19:23.810
the reality is the per car[br]cost of owning a car in America

0:19:23.809,0:19:26.659
has gone down 24% in 30 years.

0:19:26.660,0:19:28.100
Principle reason for it,

0:19:28.099,0:19:30.829
Americans today keep a car[br]more than two years longer

0:19:30.829,0:19:33.250
than they kept it 30 years ago,

0:19:33.250,0:19:36.000
and repair costs have[br]dropped significantly.

0:19:36.000,0:19:39.319
So the per car, this is[br]what people really spend,

0:19:39.319,0:19:42.230
not what they projected might have spent,

0:19:42.230,0:19:43.799
have gone down dramatically.

0:19:43.799,0:19:45.899
Whoop, I'm getting a little fast here.

0:19:45.900,0:19:47.603
So the question is,

0:19:47.603,0:19:49.670
it's a little trigger-happy[br]with this thing,

0:19:49.670,0:19:53.580
so the question is if all[br]those things went down,

0:19:53.579,0:19:57.000
if clothing and food and[br]appliances and cars went down,

0:19:57.000,0:19:58.329
and by the way, I could and a lot of this

0:19:58.329,0:19:59.819
with a lot more consumer goods,

0:19:59.819,0:20:04.819
electronics went up, surprise,[br]surprise, 300 bucks, okay?

0:20:04.819,0:20:08.453
Dog food went up, baby food went down,

0:20:08.453,0:20:12.859
cigarettes went down, liquor[br]went up, we should watch that,

0:20:12.859,0:20:15.479
dry cleaning went down.

0:20:15.480,0:20:20.339
The point is there's[br]either wash or a negative

0:20:20.339,0:20:22.939
in terms of kind of ordinary consumption,

0:20:22.940,0:20:25.830
the idea that we are an[br]over-consuming society,

0:20:25.829,0:20:28.669
what most people talk about[br]when they're consuming.

0:20:28.670,0:20:31.480
So where is the family spending more money

0:20:31.480,0:20:32.890
than they spent a generation ago?

0:20:32.890,0:20:36.200
Well, let's start with a[br]three-bedroom, one-bath house,

0:20:36.200,0:20:39.283
that the median income[br]family is paying for.

0:20:40.170,0:20:43.300
And there it is, inflation[br]adjusted dollars,

0:20:43.299,0:20:48.299
a 76% increase in what a[br]family spends on a mortgage.

0:20:49.220,0:20:51.576
That's the mortgage payment,[br]month in, month out.

0:20:51.576,0:20:52.950
Now think about that.

0:20:52.950,0:20:57.080
We have much lower mortgage[br]rates than we had 30 years ago,

0:20:57.079,0:20:59.139
for those of you who are[br]old enough to remember,

0:20:59.140,0:21:01.520
but the difference is when[br]you take out a mortgage

0:21:01.519,0:21:05.129
for much more money, the low interest rate

0:21:05.130,0:21:08.210
will not make up for that difference.

0:21:08.210,0:21:10.610
And I want to emphasize here,

0:21:10.609,0:21:14.819
the median sized house that[br]we're talking about here

0:21:14.819,0:21:17.279
did grow slightly in this period.

0:21:17.279,0:21:22.279
It grew from 5.8 rooms to 6.1 rooms.

0:21:22.410,0:21:25.300
So this is not about, and on average,

0:21:25.299,0:21:28.869
this family, this median family either

0:21:28.869,0:21:32.029
picked up a second bathroom[br]or a third bedroom,

0:21:32.029,0:21:33.113
but not both.

0:21:34.079,0:21:35.486
So for those of you who want to say,

0:21:35.487,0:21:38.200
"Oh but I've driven by the McMansions",

0:21:38.200,0:21:42.007
"everybody has to have granite[br]countertops and spa bathrooms

0:21:42.007,0:21:43.547
"and media rooms, I've seen them,

0:21:43.547,0:21:44.950
"I've seen them, I've seen them",

0:21:44.950,0:21:47.370
and compare that with Levittown,

0:21:47.369,0:21:49.119
which is more than 30 years ago,

0:21:49.119,0:21:52.079
but to give the idea, all that tells us

0:21:52.079,0:21:55.129
is that the new housing market has shifted

0:21:55.130,0:21:57.000
from the entry level house,

0:21:57.000,0:22:01.069
which is what was being built[br]in the 1950s and 1960s to,

0:22:01.069,0:22:03.490
on average, when you[br]buy a new house today,

0:22:03.490,0:22:06.400
it is your third to fourth house purchase,

0:22:06.400,0:22:08.080
that is, you've moved up and moved up

0:22:08.079,0:22:10.049
until you can afford this bigger house,

0:22:10.049,0:22:12.036
in other words, housing is not being built

0:22:12.036,0:22:14.330
for 70% of American families,

0:22:14.329,0:22:17.199
it's being built for the top[br]20% of American families,

0:22:17.200,0:22:18.309
that's what we see when we see

0:22:18.309,0:22:20.319
the new construction that's underway.

0:22:20.319,0:22:23.039
For the average family today,

0:22:23.039,0:22:25.680
they are about 50% more[br]likely to be in a house

0:22:25.680,0:22:27.570
more than 25 years old

0:22:27.569,0:22:31.099
and have all of the attendant[br]expenses for maintenance,

0:22:31.099,0:22:35.649
but just looking at the[br]mortgage, 76% more for a mortgage

0:22:35.650,0:22:37.790
than they had a generation ago.

0:22:37.789,0:22:40.649
Okay, well what's the next[br]one they spent money on?

0:22:40.650,0:22:42.040
Health insurance.

0:22:42.039,0:22:44.133
This is my family that's healthy.

0:22:44.980,0:22:49.160
And my family, because[br]I've loaded the dice here,

0:22:49.160,0:22:52.519
that's lucky enough to have an employer

0:22:52.519,0:22:54.250
who sponsors health insurance,

0:22:54.250,0:22:57.220
so I'm gonna make an[br]apples-to-apples comparison

0:22:57.220,0:23:00.759
of employer-sponsored health insurance,

0:23:00.759,0:23:03.349
how much more two does today's family pay?

0:23:03.349,0:23:08.119
And the answer is they pay 74%[br]in inflation adjusted dollars

0:23:08.119,0:23:10.939
more than they did a generation ago.

0:23:10.940,0:23:13.920
Third one, cars, increase of 52%.

0:23:13.920,0:23:15.480
Okay, Warren, how did you get cars

0:23:15.480,0:23:17.120
both above the line and below the line?

0:23:17.119,0:23:22.032
Well, I teach commercial[br]law, but the answer is,

0:23:22.032,0:23:25.509
the median family with two[br]people in the workforce

0:23:25.509,0:23:27.400
has moved from being a one-car family

0:23:27.400,0:23:29.230
to being a two-car family.

0:23:29.230,0:23:30.589
Families living out in the suburbs,

0:23:30.589,0:23:32.310
even if they keep a parent at home

0:23:32.310,0:23:34.826
can't get by on one car much of the time,

0:23:34.826,0:23:36.569
they've got to have two cars

0:23:36.569,0:23:38.579
in order to be able to get to the doctor,

0:23:38.579,0:23:40.579
to be able to get to the grocery store.

0:23:40.579,0:23:43.730
So families spend more[br]because they have more cars

0:23:43.730,0:23:45.640
than they used to have.

0:23:45.640,0:23:49.020
Fourth-biggest, remember, I've[br]got my mom, dad and two kids

0:23:49.019,0:23:50.460
and of course the big difference was

0:23:50.460,0:23:52.069
mom was at home a generation ago,

0:23:52.069,0:23:56.099
today she is out in the[br]workforce is childcare.

0:23:56.099,0:23:59.109
Now I put childcare at a 100% increase.

0:23:59.109,0:24:01.919
In fact, you may remember from third grade

0:24:01.920,0:24:03.730
that you can't divide by zero,

0:24:03.730,0:24:06.390
so I could have picked 1,000% or 1%,

0:24:06.390,0:24:07.759
or whatever I wanted to pick here,

0:24:07.759,0:24:10.839
it is a new expense picked[br]up by the two-income family

0:24:10.839,0:24:13.709
that was simply not there[br]for the one-income family.

0:24:13.710,0:24:17.890
And we have one more[br]expense, and it's taxes.

0:24:17.890,0:24:21.990
What's happened with taxes is[br]that progressive tax system,

0:24:21.990,0:24:24.849
as mildly progressive as it is,

0:24:24.849,0:24:28.559
the first dollar that the[br]second earner earns is taxed

0:24:28.559,0:24:31.240
after the last dollar of the first earner,

0:24:31.240,0:24:34.710
so it means that the tax[br]rate for this economic unit

0:24:34.710,0:24:39.380
has gone out by about 25%[br]in this period of time.

0:24:39.380,0:24:43.040
Okay, so there it is, downs and ups.

0:24:43.039,0:24:44.990
And I hope there are two[br]things you notice about

0:24:44.990,0:24:46.470
the downs and ups.

0:24:46.470,0:24:50.950
The first one is the downs[br]frankly are all smaller purchases

0:24:50.950,0:24:54.090
than the ups are, and that's bad news.

0:24:54.089,0:24:58.279
And the second is the downs[br]are all flexible purchases,

0:24:58.279,0:25:01.009
that is, lose your job, get sick,

0:25:01.009,0:25:04.475
have a tough month with various expenses,

0:25:04.476,0:25:06.070
you cut back on the downs,

0:25:06.069,0:25:07.850
don't buy appliances this month,

0:25:07.851,0:25:10.470
cut back on food, it's[br]not that you quit eating,

0:25:10.470,0:25:11.740
but you know, there's a difference between

0:25:11.740,0:25:13.640
macaroni and cheese and steak.

0:25:13.640,0:25:16.960
Families have flexibility in[br]all the things that shrunk,

0:25:16.960,0:25:19.900
they shrunk the things[br]where flexibility is,

0:25:19.900,0:25:21.220
but look at those other expenses,

0:25:21.220,0:25:24.600
those other expenses are big,[br]fixed, relentless expenses.

0:25:24.599,0:25:27.240
And so this gets to what I think of

0:25:27.240,0:25:32.240
as the heart of what my research[br]is about up to this point

0:25:32.950,0:25:35.870
and that is what these families look like,

0:25:35.869,0:25:38.364
and I do look at this the[br]way a commercial lawyer does,

0:25:38.365,0:25:40.549
if this were a little business,

0:25:40.549,0:25:42.490
what these families look at.

0:25:42.490,0:25:47.370
The single income family[br]back in the early 1970s

0:25:47.369,0:25:48.599
earned less money,

0:25:48.599,0:25:50.369
that's the first thing[br]you'll notice here, right?

0:25:50.369,0:25:52.812
They're making about $32,000.

0:25:52.813,0:25:56.070
This is all inflation[br]adjusted dollars again.

0:25:56.069,0:25:57.549
And you notice, of course,

0:25:57.549,0:25:59.430
they're making a whole lot more money,

0:25:59.430,0:26:01.701
making about $63,000,

0:26:01.701,0:26:04.303
about $73,000 in the early 2000s.

0:26:06.779,0:26:09.649
But notice those five[br]expenses that I gave you

0:26:09.650,0:26:13.560
on the preceding chart,[br]that's the part that's in red.

0:26:13.559,0:26:18.539
The early family is spending[br]right at half its income

0:26:18.539,0:26:20.269
on these big fixed expenses,

0:26:20.269,0:26:23.349
these expenses that are[br]very difficult to cut down,

0:26:23.349,0:26:25.192
to trim back, to cope with.

0:26:26.035,0:26:29.550
And that family, by the early 2000s,

0:26:29.549,0:26:33.500
has committed three[br]quarters of their income

0:26:33.500,0:26:38.500
in order to meet those[br]five basic expenses.

0:26:38.529,0:26:43.529
In fact, you'll notice the math[br]we've done here, the family,

0:26:43.869,0:26:46.869
the two-income family,[br]the mom, dad and two kids,

0:26:46.869,0:26:48.669
the prototype of the family[br]that's supposed to be

0:26:48.670,0:26:50.330
working in America,

0:26:50.329,0:26:52.829
the one that's supposed[br]to be making it all,

0:26:52.829,0:26:56.372
by the time they pay[br]their five basic expenses,

0:26:57.289,0:27:01.829
they have less money left[br]over, fewer total dollars,

0:27:01.829,0:27:05.072
than their one-income[br]parents had a generation ago.

0:27:06.019,0:27:08.809
And now from the point of view[br]of a commercial law scholar,

0:27:08.809,0:27:12.139
if I were simply looking at[br]them and these were businesses,

0:27:12.140,0:27:14.830
this is, Business A is on the the far side

0:27:14.829,0:27:17.500
and Business B is on the[br]near side, I'd say, well,

0:27:17.500,0:27:20.049
Business B is gonna go[br]broke a lot more often

0:27:20.049,0:27:24.970
than Business A because they[br]have so much less flexibility,

0:27:24.970,0:27:28.495
so much more debt, they're[br]much more deeply leveraged,

0:27:28.494,0:27:31.629
and they're gonna have more[br]of a harder time economically.

0:27:31.630,0:27:36.630
And in fact, that's about what's[br]happened to these families.

0:27:36.789,0:27:41.149
So there's the heart, now I[br]want to shift this a little bit

0:27:41.150,0:27:43.650
to say that's the economics[br]of what's happened.

0:27:43.650,0:27:45.019
We've seen it on the income side,

0:27:45.019,0:27:46.446
we've seen what happened[br]on the expense side,

0:27:46.446,0:27:49.279
and we've seen what it did[br]to the American budget,

0:27:49.279,0:27:53.710
how it changed and made this[br]a riskier economic unit,

0:27:53.710,0:27:56.420
but now what I want to do[br]is I want to press on how

0:27:56.420,0:28:01.420
this family in the 2000s[br]faces in fact even more risk

0:28:02.099,0:28:04.409
than these numbers suggest.

0:28:04.410,0:28:06.100
All right, first part,[br]let's think about it

0:28:06.099,0:28:07.669
from the income side.

0:28:07.670,0:28:12.670
The family of the early 2000s[br]now has to have two incomes

0:28:14.160,0:28:16.100
in order to keep its health insurance,

0:28:16.099,0:28:20.392
to make its house payment,[br]to keep its cars on the road.

0:28:21.740,0:28:24.390
That means, just statistically speaking,

0:28:24.390,0:28:28.470
if the risk of losing your job[br]had stayed exactly the same

0:28:28.470,0:28:31.819
over the last generation,[br]the family on the right

0:28:31.819,0:28:35.230
has twice the risk of[br]the family on the left

0:28:35.230,0:28:37.539
of not being able to make[br]the mortgage payment.

0:28:37.539,0:28:39.819
Yes, they've diversified,[br]they won't go to zero,

0:28:39.819,0:28:40.789
but the point is, they won't have enough

0:28:40.789,0:28:42.759
to make the mortgage payment.

0:28:42.759,0:28:46.329
So what we've got now[br]is we've got families

0:28:46.329,0:28:49.210
who don't have to bring in 52 checks

0:28:49.210,0:28:52.450
in order to be able to make[br]the monthly mortgage payment,

0:28:52.450,0:28:54.730
they got to bring in 104.

0:28:54.730,0:28:59.200
And if either of them loses their job,

0:28:59.200,0:29:00.430
they don't make the mortgage payment,

0:29:00.430,0:29:02.269
they're flat out of luck.

0:29:02.269,0:29:03.609
Let me say this another way,

0:29:03.609,0:29:05.299
'cause I want to give it one more twist.

0:29:05.299,0:29:09.309
The family on the left has[br]has a hidden resource here.

0:29:09.309,0:29:12.740
They have another worker,[br]the added worker effect.

0:29:12.740,0:29:16.420
If dad, and that's how it[br]usually was, loses his job

0:29:16.420,0:29:20.490
or has a heart attack and can't[br]go to work for three months,

0:29:20.490,0:29:22.519
the family on the left has[br]somebody they can send in

0:29:22.519,0:29:23.670
to the workforce.

0:29:23.670,0:29:26.500
Now she doesn't make as[br]much money as she does

0:29:26.500,0:29:27.710
by the year 2000,

0:29:27.710,0:29:28.890
she doesn't have as much education,

0:29:28.890,0:29:31.060
she doesn't have as much[br]on-the-job training,

0:29:31.059,0:29:32.440
but, and here's the key,

0:29:32.440,0:29:34.450
every dollar she earns is a new dollar.

0:29:34.450,0:29:37.350
It's an unbudgeted[br]dollar that was not part

0:29:37.349,0:29:38.879
of what they originally had.

0:29:38.880,0:29:40.680
So for example, the family on the left

0:29:40.680,0:29:42.910
that collects unemployment insurance,

0:29:42.910,0:29:47.060
combined with the additional[br]income that mom can bring in

0:29:47.059,0:29:49.339
for a temporary period of employment,

0:29:49.339,0:29:51.490
they got a chance, they'll go down some,

0:29:51.490,0:29:52.870
but they got a chance to pull through

0:29:52.869,0:29:55.359
and come back up on the other side.

0:29:55.359,0:29:58.240
The family on the right,[br]if something goes wrong,

0:29:58.240,0:29:59.089
there's no place to go,

0:29:59.089,0:30:02.019
they've already got their[br]other person not only at work

0:30:02.019,0:30:03.329
but already fully budgeted,

0:30:03.329,0:30:05.939
they've already given up that income fully

0:30:07.226,0:30:09.100
in order to survive.

0:30:09.099,0:30:11.709
But the risk of losing your job,

0:30:11.710,0:30:15.400
the risk of losing[br]income didn't stay steady

0:30:15.400,0:30:18.500
between the early 1970s and today.

0:30:18.500,0:30:21.690
I draw here on Jacob Hacker's work,

0:30:21.690,0:30:25.680
some of you may be familiar[br]with it, "The Great Risk Shift".

0:30:25.680,0:30:29.080
What Jacob has done in this has looked at

0:30:29.079,0:30:34.079
a family's chance of a 20%[br]or greater drop in income.

0:30:34.400,0:30:37.180
And he starts back in 1970,

0:30:37.180,0:30:40.560
Jacob is a good friend and[br]will stick with the same years

0:30:40.559,0:30:44.409
I want to go with, and he goes up to 2003,

0:30:44.410,0:30:48.080
and you notice how income volatility

0:30:48.079,0:30:50.139
has gone up in this period of time.

0:30:50.140,0:30:52.186
So now we've got that family,

0:30:52.185,0:30:56.889
not only struggling because[br]they got to have 104 paychecks,

0:30:56.890,0:30:58.830
struggling because the[br]odds that one of them

0:30:58.829,0:31:01.109
will be laid off has[br]gone up from where it was

0:31:01.109,0:31:02.039
a generation ago.

0:31:02.039,0:31:04.119
Okay, so that's where they[br]are on the income side,

0:31:04.119,0:31:05.339
in terms of risk.

0:31:05.339,0:31:08.959
This is risk this little unit has to bear.

0:31:08.960,0:31:10.629
Let's think about health.

0:31:10.628,0:31:13.429
Okay, same argument I[br]could make as before.

0:31:13.430,0:31:14.750
They now have double the chance

0:31:14.750,0:31:17.390
that someone will be in a car accident,

0:31:17.390,0:31:18.520
one of their two workers,

0:31:18.519,0:31:21.019
and won't be able to go[br]to work and therefore

0:31:21.019,0:31:23.599
make enough money to[br]pay a mortgage payment,

0:31:23.599,0:31:26.869
but this family now faces additional risks

0:31:26.869,0:31:29.459
on the health side as well.

0:31:29.460,0:31:30.990
What additional risks do they face?

0:31:30.990,0:31:32.670
Well, I'll pop forward to one,

0:31:32.670,0:31:35.630
and that is the increased odds

0:31:35.630,0:31:37.693
that they won't have health insurance.

0:31:37.692,0:31:41.299
Those odds have gone up[br]over the past 20 years,

0:31:41.299,0:31:42.970
but the ones I like to think about,

0:31:42.970,0:31:43.900
I keep coming back to this one

0:31:43.900,0:31:45.730
because it's my favorite slide,

0:31:45.730,0:31:48.000
the ones I like to think about

0:31:48.000,0:31:51.349
are that the world of healthcare[br]has changed in 30 years.

0:31:51.349,0:31:52.719
So let me just give you an example.

0:31:52.720,0:31:56.450
In 1971, a woman who was healthy

0:31:56.450,0:31:58.299
and gave birth to a healthy baby,

0:31:58.299,0:32:00.193
ordinary delivery, non-cesarean,

0:32:00.193,0:32:02.985
stayed in the hospital for five days

0:32:02.986,0:32:05.280
after the day the baby was born,

0:32:05.279,0:32:06.410
that's what insurance paid for,

0:32:06.410,0:32:07.790
that's what the hospital expected.

0:32:07.789,0:32:09.200
You could go home earlier if you wanted to

0:32:09.200,0:32:11.400
but you're entitled to[br]five days in the hospital.

0:32:11.400,0:32:13.370
If you had a cesarean, 10,

0:32:13.369,0:32:15.062
that you got to stay in 1971.

0:32:15.063,0:32:18.580
And you know what the numbers are in 2006?

0:32:18.579,0:32:20.371
24 hours, okay?

0:32:20.372,0:32:23.259
24 hours, and keep in[br]mind, in some places,

0:32:23.259,0:32:25.069
that's by legislation,

0:32:25.069,0:32:27.169
because they were trying[br]to push them out faster.

0:32:27.170,0:32:31.170
How have we made gains[br]in hospital efficiency

0:32:31.170,0:32:32.529
over the past 30 years?

0:32:32.529,0:32:34.029
You send home the sick people.

0:32:34.980,0:32:37.339
It really works, there is a policy,

0:32:37.339,0:32:40.059
we never want to talk about[br]this in the United States,

0:32:40.059,0:32:42.399
it's known in the trade,[br]in the hospital trade,

0:32:42.400,0:32:44.623
is send them home quicker and sicker.

0:32:46.970,0:32:51.400
They save money by letting the[br]family provide nursing care

0:32:51.400,0:32:52.480
instead of having the hospital,

0:32:52.480,0:32:55.809
so you still have your[br]surgery done at the hospital,

0:32:55.809,0:32:59.549
but it's the family that will[br]take care of you post-surgery.

0:32:59.549,0:33:04.549
And so today we witness the[br]spectacle of my mother-in-law,

0:33:06.394,0:33:10.450
a woman in her 80s where[br]someone's trying to explain to her

0:33:10.450,0:33:13.490
how it is that she can wash a tube

0:33:15.099,0:33:18.269
and rinse things out and give injections,

0:33:18.269,0:33:19.859
my sister-in-law was just asked to do this

0:33:19.859,0:33:21.979
when my brother had some surgery,

0:33:21.980,0:33:25.160
we're gonna train the family to take care,

0:33:25.160,0:33:27.130
only they're both at work.

0:33:27.130,0:33:30.830
And the consequence of this[br]means that for these families

0:33:30.829,0:33:33.279
with everybody in the[br]workforce, somebody gets sick,

0:33:33.279,0:33:34.289
you just take off work,

0:33:34.289,0:33:35.970
'cause somebody's gonna[br]have to take care of them,

0:33:35.970,0:33:37.490
somebody's gonna have to[br]'cause you're not gonna get

0:33:37.490,0:33:39.920
this extra period of nursing care.

0:33:39.920,0:33:42.350
It's just another way[br]to give one more push.

0:33:42.349,0:33:44.569
How about if a kid gets sick, a child?

0:33:44.569,0:33:46.460
I mean something really serious,

0:33:46.460,0:33:48.720
grandma falls and breaks a hip.

0:33:48.720,0:33:51.120
A generation ago, there[br]was someone at home

0:33:51.119,0:33:52.639
to provide that nursing care,

0:33:52.640,0:33:54.580
for that extra eight[br]weeks that grandma needed

0:33:54.579,0:33:56.149
some extra help.

0:33:56.150,0:33:59.820
Today, the illness of a family member

0:33:59.819,0:34:02.789
has a direct income impact for people

0:34:02.789,0:34:04.819
who aren't lucky enough[br]to have jobs that pay you

0:34:04.819,0:34:06.450
even when you're not at work.

0:34:06.450,0:34:10.300
So the consequence is we[br]end up with these families,

0:34:10.300,0:34:11.650
the child gets sick,

0:34:11.650,0:34:14.710
I read these stories over and[br]over in my bankruptcy files,

0:34:14.710,0:34:16.670
the child gets sick,

0:34:16.670,0:34:18.470
mom stays at the hospital with the child

0:34:18.469,0:34:19.712
until she loses her job.

0:34:20.610,0:34:24.360
There are income effects[br]now from any illness

0:34:24.360,0:34:26.420
anywhere in the family.

0:34:26.420,0:34:31.099
So we end up with a family[br]once again bearing more risk

0:34:31.099,0:34:33.490
that someone will get sick,

0:34:33.490,0:34:36.050
and we can just keep multiplying this.

0:34:36.050,0:34:38.519
What are the odds of spending $10,000

0:34:38.519,0:34:39.690
in an emergency room today

0:34:39.690,0:34:41.860
compared to spending[br]$10,000 in an emergency room

0:34:41.860,0:34:43.454
a generation ago?

0:34:43.454,0:34:45.610
One more that I just have to mention

0:34:45.610,0:34:48.500
that we can't quantify[br]yet but I'm watching it

0:34:48.500,0:34:50.650
is that insurance itself has changed

0:34:50.650,0:34:53.372
in terms of how much of the medical cost

0:34:53.371,0:34:55.659
is actually covered.

0:34:55.659,0:34:57.929
We now have floating around in America,

0:34:57.929,0:34:59.269
I just, I don't know what else to call it

0:34:59.269,0:35:01.009
except faux insurance,

0:35:01.010,0:35:02.470
people who think they're insured

0:35:02.469,0:35:05.889
until they actually get sick[br]and need their insurance

0:35:05.889,0:35:08.139
and it turns out that, well,

0:35:08.139,0:35:09.029
yeah, you have insurance,

0:35:09.030,0:35:12.400
I love the Utah policy that our

0:35:12.400,0:35:16.750
Secretary of Health Education and Welfare

0:35:16.750,0:35:19.797
comes out and says, "I got[br]everybody in Utah insured,

0:35:19.797,0:35:22.922
"except it doesn't cover hospitalization.

0:35:22.922,0:35:24.257
(audience laughing)

0:35:24.257,0:35:26.007
"And it doesn't cover specialists."

0:35:26.849,0:35:27.967
And you call that,

0:35:27.967,0:35:29.780
and of course, it doesn't[br]cover prescription drugs,

0:35:29.780,0:35:32.240
and it doesn't cover[br]supplies and it doesn't,

0:35:32.239,0:35:35.199
there's more than it doesn't[br]cover than it does cover.

0:35:35.199,0:35:39.222
So all of this is being[br]pushed back on the family.

0:35:40.349,0:35:42.009
So let me take one more twist on it,

0:35:42.010,0:35:45.350
so we've got changes in jobs,[br]changes in health insurance,

0:35:45.349,0:35:46.299
changes to healthcare,

0:35:46.300,0:35:48.000
what it cost to do health and care,

0:35:48.000,0:35:51.260
and I just want to put[br]one more tweak into it

0:35:51.260,0:35:54.480
and that is to talk[br]about the special risks

0:35:54.480,0:35:56.570
facing families with children.

0:35:56.570,0:35:58.583
I've made this my iconic family,

0:35:59.579,0:36:02.592
but I want to make two points[br]about the iconic family here,

0:36:02.592,0:36:06.250
the mom, dad and two kids.

0:36:06.250,0:36:08.929
This is how it works for[br]mom, dad and two kids.

0:36:08.929,0:36:12.759
Think how it works for[br]either a mom and two kids

0:36:12.760,0:36:14.523
or a dad and two kids.

0:36:15.980,0:36:17.480
They are now competing,

0:36:17.480,0:36:20.563
I actually met a woman, it[br]was a wonderful exchange,

0:36:20.563,0:36:23.677
I was sitting on an airplane[br]right after the book came out,

0:36:23.677,0:36:25.470
"The Two-Income Trap"[br]and I had it on my lap

0:36:25.469,0:36:27.502
and this woman next to me said,[br]"Have you read that book?"

0:36:27.503,0:36:30.500
(audience laughing)[br]And I said, "Mm-hmm."

0:36:30.500,0:36:33.820
And she said, "I'm a divorced mother",

0:36:33.820,0:36:34.880
and she said, "I'm an accountant."

0:36:34.880,0:36:36.336
She said, "I make a good income,

0:36:36.336,0:36:39.239
"I make above a median income[br]in the United States today."

0:36:39.239,0:36:42.126
She said, "I could make it,[br]I could support my two kids

0:36:42.126,0:36:44.273
"on what I get for child support.

0:36:45.516,0:36:47.936
"I could do it if I were only competing

0:36:47.936,0:36:50.476
"against other one-income households,

0:36:50.476,0:36:53.646
"for the basics, for[br]housing, for healthcare,

0:36:53.646,0:36:55.299
"for all the things we're buying."

0:36:55.300,0:36:57.570
But she said, "I'm competing[br]against two-income households."

0:36:57.570,0:36:58.680
And she said, "I just can't do it."

0:36:58.679,0:37:01.690
She said, "I can't hang[br]on, I can't make it."

0:37:01.690,0:37:03.559
So that's the first[br]part I want you to see,

0:37:03.559,0:37:06.289
the one-income family[br]gets the lower income,

0:37:06.289,0:37:09.119
still faces high expenses,[br]still wants the house

0:37:09.119,0:37:12.389
and so on and so forth, and[br]faces all the same risks

0:37:12.389,0:37:16.129
with no one to back up and[br]provide that second income,

0:37:16.130,0:37:18.930
but I want to step forward[br]to say something else

0:37:18.929,0:37:22.779
about families with children and that is

0:37:22.780,0:37:24.500
this goes back to Hacker's work,

0:37:24.500,0:37:28.820
percentage increase in[br]volatility by family type

0:37:28.820,0:37:31.940
from 1970 to 2003.

0:37:31.940,0:37:34.650
And notice what Hacker points out here.

0:37:34.650,0:37:36.180
For those of you can't read the wording

0:37:36.179,0:37:37.899
all the way over to the far side,

0:37:37.900,0:37:40.170
green is single without children,

0:37:40.170,0:37:41.619
that's how much income volatility,

0:37:41.619,0:37:43.599
and look, that's substantial[br]income volatility

0:37:43.599,0:37:47.409
that we've got there, in the high 30s.

0:37:47.409,0:37:51.670
Single with children, a little above 40%.

0:37:51.670,0:37:55.230
Married without children, you[br]get about a 70% volatility.

0:37:55.230,0:37:59.400
And married with children[br]pushes up to about 95%

0:37:59.400,0:38:03.300
increase in volatility[br]over the past generation.

0:38:03.300,0:38:05.400
Now, are families struggling with this?

0:38:05.400,0:38:07.300
Well, let me show you some of my data.

0:38:08.579,0:38:10.259
Oh, not my data, government data,

0:38:10.260,0:38:12.146
I never know what the[br]next slide is going to be,

0:38:12.146,0:38:14.250
keeps me on my toes.

0:38:14.250,0:38:15.980
The next one is to disaggregate

0:38:15.980,0:38:17.500
a little bit more about housing,

0:38:17.500,0:38:19.489
we talked just a little[br]bit about it before.

0:38:19.489,0:38:20.519
This is one of those charts,

0:38:20.519,0:38:22.289
it doesn't fit perfectly[br]with what I'm talking about

0:38:22.289,0:38:24.029
because the years aren't quite right,

0:38:24.030,0:38:26.360
this is some government data I found.

0:38:26.360,0:38:28.599
Only goes back to 1983,

0:38:28.599,0:38:33.500
but notice what it shows, that[br]increase in housing costs,

0:38:33.500,0:38:35.150
what families are paying for mortgages,

0:38:35.150,0:38:36.970
not my part in general,

0:38:36.969,0:38:38.639
they've done it the other way around,

0:38:38.639,0:38:40.529
what they're paying for the house itself,

0:38:40.530,0:38:42.360
what the cost of the house is.

0:38:42.360,0:38:47.180
We saw a 50% increase among[br]the families with no children,

0:38:47.179,0:38:49.869
inflation adjusted and what housing costs,

0:38:49.869,0:38:52.529
but you notice among[br]families with children,

0:38:52.530,0:38:54.230
it's 100% increase,

0:38:54.230,0:38:57.929
a full 100% increase in[br]inflation adjusted dollars

0:38:57.929,0:39:00.960
for what a home costs for[br]families with children.

0:39:00.960,0:39:02.682
Now we're gonna save plenty[br]of time here for Q and A

0:39:02.682,0:39:04.210
because I think that's more fun

0:39:04.210,0:39:06.780
than having to listen to a lecture,

0:39:06.780,0:39:08.930
but I'll tell you at least[br]how I read this chart.

0:39:08.929,0:39:10.429
Families are going to schools.

0:39:11.409,0:39:13.859
People without children[br]don't have to buy schools,

0:39:13.860,0:39:16.329
and so they buy from[br]a wider pool of homes,

0:39:16.329,0:39:19.130
they can look at a lot of homes[br]in a lot of neighborhoods.

0:39:19.130,0:39:22.099
Families with children are[br]buying what they believe

0:39:22.099,0:39:24.009
is a shrinking resource, that is,

0:39:24.010,0:39:26.120
places where you can have[br]decent public schools

0:39:26.119,0:39:27.849
and send your children to public schools.

0:39:27.849,0:39:31.335
And in fact, we can triangulate[br]these data in other ways,

0:39:31.335,0:39:32.985
so that you'll love this.

0:39:32.985,0:39:35.759
I wonder, I was gonna it's[br]gonna say it would happen

0:39:35.760,0:39:36.970
only outside Boston,

0:39:36.969,0:39:38.859
but I bet it also[br]happens outside Berkeley,

0:39:38.860,0:39:41.360
we just have the data outside Boston,

0:39:41.360,0:39:46.360
a five point increase in[br]third grade reading scores

0:39:48.440,0:39:51.710
between two side-by-side municipalities

0:39:51.710,0:39:55.360
in the Boston suburbs that are[br]otherwise matched for access

0:39:55.360,0:39:57.230
to public transportation[br]and size of houses,

0:39:57.230,0:39:58.360
they've measured for everything,

0:39:58.360,0:40:02.410
sidewalks, crime rates,[br]racial composition,

0:40:02.409,0:40:03.440
everything you want to look at,

0:40:03.440,0:40:05.970
five points in third grade reading scores

0:40:05.969,0:40:09.349
translates into tens of thousands[br]of dollars of difference

0:40:09.349,0:40:10.759
in housing prices.

0:40:10.760,0:40:13.053
Parents are buying schools.

0:40:14.050,0:40:15.550
There was a great one out of San Diego,

0:40:15.550,0:40:17.050
study out of San Diego,

0:40:17.050,0:40:18.830
where they were having[br]parents do preferences

0:40:18.829,0:40:19.663
on where they buy,

0:40:19.663,0:40:23.393
parents would rather[br]live near a toxic dump

0:40:23.393,0:40:25.699
than live in a place where they thought

0:40:25.699,0:40:27.239
the schools were underperforming,

0:40:27.239,0:40:28.639
where they thought their[br]children would not have

0:40:28.639,0:40:31.250
as good a chance in school,[br]and I think that's what we're,

0:40:31.250,0:40:33.239
that's a large part of[br]what we're seeing here.

0:40:33.239,0:40:35.646
So parents say, "I've gotta[br]have those good schools,

0:40:35.646,0:40:40.516
"I gotta get out there, I gotta[br]push, I gotta get forward."

0:40:41.949,0:40:44.919
They're spending more[br]as we've talked about,

0:40:44.920,0:40:48.590
so what happens to them[br]when they push this hard?

0:40:48.590,0:40:51.559
Well, there comes in[br]just a little touch of

0:40:51.559,0:40:54.989
what I want to talk about[br]with the safety net.

0:40:54.989,0:40:57.649
What's happened to the American safety net

0:40:57.650,0:40:59.340
for these families?

0:40:59.340,0:41:01.930
Well, the first part is[br]the personal safety net,

0:41:01.929,0:41:03.069
the part you build yourself.

0:41:03.070,0:41:05.340
We've already looked at the data on that.

0:41:05.340,0:41:07.670
Less savings, more debt,

0:41:07.670,0:41:09.829
more people without health insurance

0:41:09.829,0:41:11.489
than we've ever had before.

0:41:11.489,0:41:13.460
And by the way, I should[br]make a point on this,

0:41:13.460,0:41:15.309
more people without health insurance,

0:41:16.480,0:41:18.840
it's really been important to see here

0:41:18.840,0:41:22.190
how much lack of health[br]insurance in the 1970s,

0:41:22.190,0:41:25.184
the typical modal uninsured person

0:41:25.184,0:41:30.184
was an unmarried male, no[br]children, 23 years old.

0:41:30.489,0:41:35.489
Today, modal is a 35[br]year old married person

0:41:35.699,0:41:39.599
with two children, has[br]no health insurance,

0:41:39.599,0:41:42.029
this is the largest group[br]when you start looking

0:41:42.030,0:41:44.810
at the groups who have[br]no health insurance.

0:41:44.809,0:41:47.809
In 2001,

0:41:47.809,0:41:52.809
1.4 million people lost[br]their health insurance.

0:41:53.760,0:41:58.760
Of those, 800,000 earned[br]more than $75,000 a year,

0:41:59.788,0:42:03.980
that is moved from the[br]insured to the uninsured ranks

0:42:03.980,0:42:05.150
that we have data for.

0:42:05.150,0:42:06.789
So what we're starting to see is

0:42:06.789,0:42:08.539
people who have no health insurance,

0:42:08.539,0:42:10.579
the people who've lost that[br]part of their safety net

0:42:10.579,0:42:13.815
are increasingly among[br]in the middle class.

0:42:13.815,0:42:16.989
We could pick some[br]others that shift between

0:42:16.989,0:42:21.250
the defined benefit plan and[br]the defined contribution plan,

0:42:21.250,0:42:24.980
for those of you who who keep[br]up with the pension lingo.

0:42:24.980,0:42:27.449
What it basically means is the shift

0:42:27.449,0:42:32.139
so that you put in money,[br]and you take the risk

0:42:32.139,0:42:33.779
of how long you'll live, that is,

0:42:33.780,0:42:35.320
whether or not you'll outlive your money

0:42:35.320,0:42:38.626
versus the defined benefit plan which is

0:42:38.626,0:42:41.019
you get a certain amount until you die.

0:42:41.019,0:42:44.860
We've moved very much to[br]the former from the latter,

0:42:44.860,0:42:47.430
so you have a real chance to outlive.

0:42:47.429,0:42:49.769
Those are on the personal side.

0:42:49.769,0:42:51.829
If you take a look on the public side,

0:42:51.829,0:42:55.630
we've had the same kind of[br]erosion of the safety net,

0:42:55.630,0:42:59.300
and that is unemployment benefits

0:42:59.300,0:43:01.870
no longer is a proportion of income,

0:43:01.869,0:43:05.239
are nearly as high as[br]they were 30 years ago,

0:43:05.239,0:43:07.689
so they're not providing[br]the same kind of safety.

0:43:09.269,0:43:12.880
I would make a pitch that what[br]we pay for public education

0:43:12.880,0:43:15.360
to launch our children[br]into the middle class

0:43:16.239,0:43:18.079
has eroded sharply.

0:43:18.079,0:43:19.869
And I'll make the pitch this way,

0:43:19.869,0:43:21.279
I'm giving you lots of different pieces

0:43:21.280,0:43:24.263
that we can talk about here,[br]but here's the way it goes.

0:43:25.239,0:43:29.959
In 1970, it took 12[br]years to educate a child

0:43:29.960,0:43:31.820
to go forward into the middle class.

0:43:31.820,0:43:32.653
How do I know that?

0:43:32.652,0:43:35.869
I know that from looking[br]at Gallup polling data

0:43:35.869,0:43:38.190
about what parents[br]thought it took to make it

0:43:38.190,0:43:39.269
in the middle class.

0:43:39.269,0:43:42.170
And the answer was a high school diploma,

0:43:42.170,0:43:43.269
a good work ethic,

0:43:43.269,0:43:45.360
there were parents who[br]believed in college,

0:43:45.360,0:43:47.380
but they believed that you could make it

0:43:47.380,0:43:49.510
in the middle class with[br]a high school diploma

0:43:49.510,0:43:51.890
and a willingness to work hard.

0:43:51.889,0:43:54.239
Roll that forward to the year 2002,

0:43:56.230,0:43:58.170
here's a great number for you,

0:43:58.170,0:44:02.159
twice as many people in America by 2002

0:44:02.159,0:44:06.092
believe that the moon[br]shot landing was faked,

0:44:07.409,0:44:10.722
and they filmed in Burbank, California,

0:44:12.239,0:44:15.179
than believe you can make[br]it into the middle class

0:44:15.179,0:44:17.522
in America without a college diploma.

0:44:19.420,0:44:24.420
Americans who differ on[br]everything have adopted wholesale

0:44:24.429,0:44:29.169
in a single generation that[br]there is a single ticket

0:44:29.170,0:44:32.940
to the middle class, and[br]that is a college diploma.

0:44:32.940,0:44:35.389
Now, all by itself, would[br]I be opposed to this?

0:44:35.389,0:44:36.222
Are you kidding?

0:44:36.222,0:44:39.840
I'm in the education biz,[br]I think this is fabulous.

0:44:39.840,0:44:41.019
Everyone should go to college,

0:44:41.019,0:44:42.724
my dog should get a college education,

0:44:42.724,0:44:46.890
I'm for college educations,[br]I think that's terrific.

0:44:46.889,0:44:49.900
The difference is when you[br]look at middle class families,

0:44:49.900,0:44:54.900
if you needed 12 years back[br]in 1970, taxpayer paid for it.

0:44:55.289,0:44:56.860
You got it all for free.

0:44:56.860,0:44:59.833
All you had to do was show[br]up, live there and show up.

0:45:00.690,0:45:04.700
By the year 2000, if you[br]need a college diploma,

0:45:04.699,0:45:07.189
you've gotta pay for it[br]yourself, by and short.

0:45:07.190,0:45:09.320
Berkeley, other state supported schools,

0:45:09.320,0:45:12.013
I guess that means you guys[br]are not paying any tuition?

0:45:13.050,0:45:14.630
Room, board, books, right?

0:45:14.630,0:45:15.910
It's not very much,

0:45:15.909,0:45:18.029
I guess you borrowed maybe a dollar or two

0:45:19.150,0:45:20.280
in order to do this,

0:45:20.280,0:45:22.340
but notice what that means,

0:45:22.340,0:45:25.530
it means the launch, what[br]the parents have to do

0:45:25.530,0:45:29.850
to get this next generation in[br]the middle class has shifted

0:45:29.849,0:45:32.029
from being something[br]that everybody pays for,

0:45:32.030,0:45:33.800
the taxpayer pays for,

0:45:33.800,0:45:37.500
to something only the families[br]with children are paying for.

0:45:37.500,0:45:38.949
I'll make the same point, by the way,

0:45:38.949,0:45:41.143
on the other end of[br]the education spectrum.

0:45:42.068,0:45:44.280
In 1970, I actually went[br]back and looked at this data,

0:45:44.280,0:45:46.830
it surprised me, almost no one

0:45:46.829,0:45:49.212
sent their children to preschool.

0:45:50.090,0:45:52.180
And in fact, if you go[br]back and read the articles,

0:45:52.179,0:45:55.399
you read Dr. Spock from[br]the 1970s editions,

0:45:55.400,0:45:57.410
1960s, 1970s editions,

0:45:57.409,0:45:58.769
they can play with the[br]neighborhood children,

0:45:58.769,0:46:02.820
they'll be fine, and only a tiny fraction

0:46:02.820,0:46:06.300
of American children are in preschool.

0:46:06.300,0:46:08.234
Today, it's totally flipped.

0:46:08.233,0:46:12.340
Basically through all the education folks,

0:46:12.340,0:46:14.870
early childhood specialists,[br]they are completely in for

0:46:14.869,0:46:17.232
children under two years have preschool.

0:46:18.199,0:46:22.609
And once again, who pays for[br]the two years of preschool?

0:46:22.610,0:46:24.599
It's paid for by the family.

0:46:24.599,0:46:26.119
So one way you could look at this

0:46:26.119,0:46:27.900
is in the space of a generation,

0:46:27.900,0:46:32.280
we went from 12 years being[br]enough to push that kid forward

0:46:32.280,0:46:34.370
to adding two more years, that's 14,

0:46:34.369,0:46:37.819
and four more years, that's[br]18 years of education

0:46:37.820,0:46:39.870
in order to push those kids forward,

0:46:39.869,0:46:43.259
only the difference now[br]is the family privately

0:46:43.260,0:46:45.890
pays for a third of the[br]education themselves.

0:46:45.889,0:46:47.619
And we could have some great fun

0:46:47.619,0:46:49.402
with what the education costs.

0:46:51.190,0:46:53.950
Recently, it's been about three years ago,

0:46:53.949,0:46:58.878
Chicago, city of Chicago[br]publicly supported

0:46:58.878,0:47:03.744
preschool programs, there was[br]already some tax dollars in it

0:47:03.744,0:47:05.000
but the parents had to pay tuition.

0:47:05.000,0:47:07.900
I always loved this one,[br]the tuition was larger

0:47:07.900,0:47:10.691
than the tuition at the[br]University of Illinois.

0:47:10.690,0:47:12.939
That's what the parents were[br]supposed to come up with

0:47:12.940,0:47:16.630
to put their three year[br]old into the system

0:47:16.630,0:47:18.240
that was gonna get them the education

0:47:18.239,0:47:20.139
that was gonna get them[br]ultimately launched

0:47:20.139,0:47:22.072
into the middle class.

0:47:22.072,0:47:26.029
So in that sense, we shrink[br]part of what's available

0:47:26.030,0:47:27.960
to support families with children

0:47:27.960,0:47:29.360
so that they can move forward,

0:47:29.360,0:47:31.559
so they can launch this next generation.

0:47:31.559,0:47:33.409
So how have families responded to this?

0:47:33.409,0:47:34.909
This is where I said I'll come to

0:47:34.909,0:47:36.929
at least a little bit of my data here.

0:47:36.929,0:47:38.692
Let me tell you about bankruptcy.

0:47:39.614,0:47:42.209
What's happened with bankruptcy?

0:47:42.210,0:47:43.150
What this one's about,

0:47:43.150,0:47:45.630
I'll tell you what the[br]bright colors on here,

0:47:45.630,0:47:49.390
this is about bankruptcy[br]filing rates per thousand

0:47:49.389,0:47:50.822
in the population.

0:47:51.750,0:47:55.563
And this is in 200 and 2001,

0:47:55.563,0:47:59.019
I love this data, it's[br]got 2003 on these data.

0:47:59.019,0:48:02.110
Married couples are the[br]far one in the light blue,

0:48:02.110,0:48:07.099
about 7.4 married couples[br]per 1,000 married couples,

0:48:07.099,0:48:09.402
so each is being within their own group,

0:48:10.239,0:48:12.039
filed for bankruptcy.

0:48:12.039,0:48:16.300
Unmarried men, about 6.3 per 1,000.

0:48:16.300,0:48:20.650
Unmarried women, about 7.2 per 1,000.

0:48:20.650,0:48:23.740
But the trick here for[br]all three of these groups

0:48:23.739,0:48:26.239
is they are all childless groups.

0:48:26.239,0:48:29.109
So I've got them, all you've[br]got them in their graphics,

0:48:29.110,0:48:32.849
they're couples, men,[br]men alone, women alone,

0:48:32.849,0:48:34.440
and none of them have children.

0:48:34.440,0:48:37.300
These are the bankruptcy filing[br]rates in the United States

0:48:37.300,0:48:39.220
in the early 2000s.

0:48:39.219,0:48:40.592
Now let's add in children.

0:48:43.969,0:48:47.019
Turquoise, again, is married couples,

0:48:47.019,0:48:49.079
only this time with children.

0:48:49.079,0:48:53.793
It's jumped, the filing rate[br]has jumped to 15 per 1,000,

0:48:53.793,0:48:57.410
and among women heads of household,

0:48:57.409,0:48:59.079
no husband in the household,

0:48:59.079,0:49:00.920
it has jumped to 23 per 1,000.

0:49:00.920,0:49:03.880
You notice by the way,[br]unmarried men with children

0:49:03.880,0:49:06.140
fall out statistically[br]because there aren't enough

0:49:06.139,0:49:09.589
to be able to say something[br]that's statistically valid

0:49:09.590,0:49:11.539
about what's going on here.

0:49:11.539,0:49:16.539
So what this one tells me is[br]that families with children

0:49:17.090,0:49:20.720
are under enormous financial stress.

0:49:20.719,0:49:23.789
I watch them, I study them[br]from the bankruptcy end

0:49:23.789,0:49:26.179
of the spectrum which[br]is where they end up,

0:49:26.179,0:49:27.879
and let me tell you a little bit about

0:49:27.880,0:49:30.240
why they file for bankruptcy.

0:49:30.239,0:49:35.239
90% of those families file[br]for one of three reasons;

0:49:36.110,0:49:40.430
Job loss, medical problem in the family,

0:49:40.429,0:49:42.679
sometimes the wage[br]earner, sometimes a child,

0:49:43.829,0:49:46.269
or family breakup, either[br]a death in the family

0:49:46.269,0:49:47.789
or a divorce in the family.

0:49:47.789,0:49:50.099
In fact, nearly half the families

0:49:50.099,0:49:52.819
have at least two of those three,

0:49:52.820,0:49:57.023
and about 20% have been[br]hit by three out of three.

0:49:59.170,0:50:01.860
That's how it is that[br]they end up in bankruptcy.

0:50:01.860,0:50:05.050
Now let me give you an idea[br]of what these numbers mean

0:50:05.050,0:50:08.250
so I can put it in a little[br]bit different context.

0:50:08.250,0:50:10.159
These families that are[br]filing for bankruptcy,

0:50:10.159,0:50:15.159
families with children,[br]more children live in homes

0:50:15.217,0:50:19.610
that will file for bankruptcy this year

0:50:19.610,0:50:22.623
than live in homes that[br]will file for divorce.

0:50:23.789,0:50:25.869
That is, there are more[br]children in America,

0:50:25.869,0:50:29.179
and this has been true by[br]the way since the late 1990s,

0:50:29.179,0:50:31.750
every year, more children[br]are going through

0:50:31.750,0:50:35.429
their parents' bankruptcy[br]than are going through

0:50:35.429,0:50:36.739
their parents' divorce.

0:50:36.739,0:50:38.609
So let me say that to you a different way.

0:50:38.610,0:50:40.300
You know anybody who[br]got divorced any time,

0:50:40.300,0:50:42.093
say in the last six or seven years,

0:50:43.079,0:50:45.880
you know some children who live in homes

0:50:45.880,0:50:47.733
where mom and dad have split up,

0:50:48.826,0:50:52.510
then you, statistically[br]speaking, know more,

0:50:52.510,0:50:55.040
random cross-sections of America,

0:50:55.039,0:50:57.659
you know more who went bankrupt.

0:50:57.659,0:51:00.199
Why do you think you don't[br]know more that went bankrupt?

0:51:00.199,0:51:01.849
And that's because you can't hide divorce,

0:51:01.849,0:51:03.730
but you can sure hide bankruptcy.

0:51:03.730,0:51:05.652
And that's what people have done.

0:51:06.489,0:51:08.219
There's an enormous stigma

0:51:08.219,0:51:10.429
attached to filing for bankruptcy.

0:51:10.429,0:51:13.069
When we interviewed the families

0:51:13.070,0:51:16.360
who had filed for[br]bankruptcy, quite frankly,

0:51:16.360,0:51:19.640
I was shameless about[br]this, we paid them $50

0:51:19.639,0:51:23.609
if they would take extensive[br]telephone surveys for us

0:51:23.610,0:51:27.530
about bankruptcy, and so we[br]got very high response rates,

0:51:27.530,0:51:30.000
but one of the key things[br]we learned early on

0:51:30.000,0:51:33.536
is that people would[br]say, "Don't use the word,

0:51:33.536,0:51:35.676
"partly because I can't bear to hear it,

0:51:35.677,0:51:37.737
"and partly because I'm[br]afraid the child will pick up

0:51:37.737,0:51:40.487
"an extension phone, or[br]someone will walk into the room

0:51:40.487,0:51:45.487
"and hear me say it, and we[br]don't want anyone to know."

0:51:45.489,0:51:49.529
About 85% of the families that[br]were filing for bankruptcy

0:51:49.530,0:51:54.100
were hiding it from their own[br]parents, from their siblings,

0:51:54.099,0:51:56.469
from their best friends,[br]and in some cases,

0:51:56.469,0:51:57.669
from their own children.

0:51:59.400,0:52:01.950
Many of them said they had other stories.

0:52:01.949,0:52:03.949
Yeah, they were giving up the house,

0:52:03.949,0:52:06.069
and moving in with Bob's mom

0:52:06.070,0:52:08.763
because Bob's mom's health was not good.

0:52:10.159,0:52:12.336
Yeah, that's a story you can tell.

0:52:12.336,0:52:13.617
"We're moving across country

0:52:13.617,0:52:15.930
"because there are better[br]job opportunities."

0:52:15.929,0:52:18.259
Yeah, they're moving across country

0:52:18.260,0:52:20.500
hoping they can get a job,

0:52:20.500,0:52:24.380
but going to live in rather[br]reduced circumstances.

0:52:24.380,0:52:27.724
So those are the families who[br]are filing for bankruptcy,

0:52:27.724,0:52:31.230
in part, the reflection of what's happened

0:52:31.230,0:52:32.920
to this safety net.

0:52:32.920,0:52:34.260
So I just want to wrap this up

0:52:34.260,0:52:36.909
and open it up for some[br]questions and answers

0:52:37.869,0:52:41.599
because I just want to make[br]three or four big points

0:52:41.599,0:52:44.179
at the end here about about[br]what we're talking about

0:52:44.179,0:52:47.699
with these families in financial trouble.

0:52:47.699,0:52:50.282
First I want to make is[br]a point about the poor.

0:52:51.469,0:52:55.605
I've hammered on the middle[br]class over and over and over,

0:52:55.605,0:52:59.599
and I've done it because for[br]everybody who cares about

0:52:59.599,0:53:01.710
poor families in America,

0:53:01.710,0:53:04.579
you should be riveted on these data.

0:53:04.579,0:53:08.880
Middle class families under[br]enormous economic stress

0:53:08.880,0:53:10.583
have fewer resources to give

0:53:10.583,0:53:12.380
when we talk about how it is

0:53:12.380,0:53:14.690
that we're going to help the poor.

0:53:14.690,0:53:18.579
More importantly, they frankly[br]have less appetite to give,

0:53:18.579,0:53:20.690
when they see themselves[br]as already stretched,

0:53:20.690,0:53:23.170
when they see themselves[br]facing foreclosure notices

0:53:23.170,0:53:26.670
and bill collectors, they back off.

0:53:26.670,0:53:30.680
And more critically, a middle[br]class that looks like this,

0:53:30.679,0:53:34.460
a middle class where people are[br]falling out and into poverty

0:53:34.460,0:53:38.750
is a middle class that has[br]less room to bring the poor up

0:53:38.750,0:53:41.989
and provide them the opportunities[br]to join the middle class.

0:53:41.989,0:53:44.009
I think people who talk[br]about the intractability

0:53:44.010,0:53:46.870
of poverty now are absolutely right,

0:53:46.869,0:53:50.230
there are social issues[br]far beyond my expertise,

0:53:50.230,0:53:53.512
but this is an element of it[br]that no one's talking about.

0:53:53.512,0:53:56.480
There's no place for the poor to go,

0:53:56.480,0:53:59.460
and not much help coming[br]from the middle class today

0:53:59.460,0:54:01.443
compared with even a generation ago.

0:54:02.349,0:54:03.712
The second point I want to make about

0:54:03.713,0:54:06.163
what these data speak to me about

0:54:06.163,0:54:10.190
is that I fear we're moving[br]from a three class society

0:54:10.190,0:54:11.813
to a two class society.

0:54:12.789,0:54:16.846
America has always been[br]sort of one of those

0:54:16.846,0:54:20.900
perfect distributions,[br]some poor, some rich,

0:54:20.900,0:54:25.150
and a big, big solid middle class

0:54:25.150,0:54:27.660
stuck right there in the middle.

0:54:27.659,0:54:30.402
Americans identify with the middle class,

0:54:31.679,0:54:33.119
it affects our democracy,

0:54:33.119,0:54:35.299
it's part of what gives us[br]our political stability,

0:54:35.300,0:54:38.000
it's what affects our economy[br]and drives our economy,

0:54:38.000,0:54:39.670
it affects our self-identity,

0:54:39.670,0:54:41.738
it affects who we are in this world,

0:54:41.737,0:54:43.500
but I fear that what's happening

0:54:43.500,0:54:45.469
and what these data are about

0:54:45.469,0:54:48.949
is that we actually are gonna[br]see a larger upper class.

0:54:48.949,0:54:53.899
We're seeing, not just the rich[br]rich, but the sort of rich,

0:54:53.900,0:54:57.840
the ones who have the same[br]jobs, bringing in two incomes,

0:54:57.840,0:55:01.269
who don't get sick, who don't lose a job,

0:55:01.269,0:55:03.036
who in that income volatility,

0:55:03.036,0:55:05.129
and the things that go[br]wrong in the medical world,

0:55:05.130,0:55:07.940
who don't divorce, who don't[br]have a death in the family,

0:55:07.940,0:55:10.780
who don't hit any of life's bumps,

0:55:10.780,0:55:12.500
they stay with the upper group.

0:55:12.500,0:55:13.840
They put away some savings,

0:55:13.840,0:55:17.122
they don't get deep in debt, they do okay,

0:55:17.121,0:55:22.121
and then the rest is just[br]one long trail of underclass

0:55:22.340,0:55:25.610
that stays on a constant debt treadmill.

0:55:25.610,0:55:26.769
Sometimes it's a little more,

0:55:26.769,0:55:29.739
sometimes it's a little[br]less, but never out of debt,

0:55:29.739,0:55:32.049
never any real economic security.

0:55:32.050,0:55:33.660
I could change my metaphors,

0:55:33.659,0:55:35.230
people who are just costantly living

0:55:35.230,0:55:36.820
on the edge of a clif,

0:55:36.820,0:55:40.500
some falling over, some[br]scratching back up a little,

0:55:40.500,0:55:43.840
but never with the kind of security

0:55:43.840,0:55:47.559
that for the first three[br]quarters of a century,

0:55:47.559,0:55:51.279
were associated with being middle class.

0:55:51.280,0:55:53.570
I worry about what that means.

0:55:53.570,0:55:56.530
I worry that the middle class,

0:55:56.530,0:55:59.187
which used to mean solid and boring

0:55:59.186,0:56:03.686
and not worth studying, only[br]worth making fun of, you know,

0:56:03.686,0:56:07.373
"My parents were hopelessly[br]middle class", sort of remarks,

0:56:08.349,0:56:11.920
that that's kept us from seeing a problem

0:56:11.920,0:56:14.769
in the middle class that threatens

0:56:14.769,0:56:18.030
not just these families with[br]children that I've identified,

0:56:18.030,0:56:22.343
but really threatens the[br]fabric of our country.

0:56:23.190,0:56:26.393
We have a middle class today[br]that is newly weakened,

0:56:27.239,0:56:31.859
and I think what this means[br]is that it's time to realign

0:56:31.860,0:56:36.860
both our academic and our[br]political interests and alliances

0:56:37.650,0:56:40.389
to talk more about what's[br]happening to these families.

0:56:40.389,0:56:41.609
So with that, I'm gonna quit,

0:56:41.610,0:56:44.485
and take as many questions as people have.

0:56:44.485,0:56:47.617
(audience applauding)

0:56:47.617,0:56:50.450
(dramatic music)