“For people earning between $40,000 and $100,000 (i.e. not the very poorest), 44 percent said they could not come up with $400 in an emergency (either with cash or with a credit card whose bill they could pay off within a month). Even more astonishing, 27 percent of those making more than $100,000 also could not. This is not poverty. So what is it?”
“As people move up the income ladder, they escape material shortages and consume more. They have “things”—goods, houses, and, most importantly, education—to show for their higher earnings, but they do not have healthy finances.”
“Having those “things” is of course an improvement over not having them, but only for the very, very rich (or the very, very unusual) is there any real escape from the pressure-cooker of American household finances.”
“At its core, this relentless pressure to spend any money available comes not from a desire to consume more lattes and own nicer cars, but, largely, from the pressure people feel to provide their kids with access to the best schools they can afford (purchased, in most cases, not via tuition but via real estate in a specific public-school district).”
“When understood mainly as a consequence of this rush to provide for one’s children, the drive to maximize spending is not some bizarre mystery, nor a sign of massive irresponsibility, but a predictable consequence of severe inequality.”
“The failure to put a proper name on this dynamic is a part of a broader failure to understand it—and to see it as a problem at all. (Cognitive scientists have a great term for this—“hypocognition”—which refers to when, as linguist George Lakoff puts it, “the words or language that need to exist to frame an idea in a way which can lead to persuasive communication is either non-existent or ineffective.”)”
“But a measure of income alone completely misses the fact that few are getting off this earn-and-consume hamster wheel, even as they earn more.”
“What is that something that is preventing people from turning their earnings into prosperity? Many have pointed to wage stagnation as the culprit, arguing that of course Americans can’t get ahead—they don’t have enough money to get ahead! And making more money would certainly help Americans afford better quality goods, housing, services, and so on—all of which are incredibly important. But there is little reason to think that higher wages would enable families to build up a financial cushion that would allow them to sleep easy at night. In fact, even the very richest largely do not put away what economists would consider a healthy retirement savings. For the vast majority of people, higher wages do not seem to translate into financial security.”
“So it stands to reason that the problem—insofar as it is in any real sense a definable, single problem—is driven by something that is happening on the spending side of the equation. Why can’t people live below their means, save up some money, and kick up their feet?”
“Housing and education appear to be two distinct categories of spending, but for many families they are one and the same: For the most part, where a family lives determines where their kids go to school, and, as a result, where schools are better, houses are more costly.”
“This is both cause and effect: Where houses are expensive, the tax base is bigger and schools have better resources, and where schools are better, there is more demand for housing.”