TEXT OF INTERVIEW
Tess Vigeland: Here's a benchmark you'll often hear in discussions about the middle class: are we collectively better off than our parents or are we largely burdened by the so-called "middle class squeeze?"
For answers, we turn to Elizabeth Warren, author of "The Two-Income Trap: Why Middle Class Mothers and Fathers are Going Broke," and Gregg Easterbrook, author of "The Progress Paradox: How Life Gets Better While People Feel Worse."
Vigeland: And let's start, as we've been doing throughout the show, by getting your parameters for the middle class. Elizabeth, who do you define as the "middle class"?
Elizabeth Warren: It's all those people who declare themselves middle class and that means it goes from some pretty low incomes to some pretty high incomes and I think that's important. A lot of people want to bound it at around $20,000-$25,000 a year up to around $100,000 a year, but I really do think it's a lot more about enduring criteria. You know, a third grade teacher who gets laid off may not have any income right now, but I would still regard her as middle class.
Vigeland: All right. Gregg, how would you define it, either with a number or a description?
Gregg Easterbrook: I would be more simplistic and just say it's people who are neither rich nor poor. A lot of it's sociological but I would say education probably cuts more across it than any other single defining factor for the middle class. Education in a lot of cases just means a high school diploma, but everybody who's in the middle class now in the United States, the European Union and Japan is a product of a successful educational system and believes in education as a life goal and you couldn't say that of the average person 100 years ago.
Vigeland: Let me address a phrase we've been hear more and more recently, especially from the presidential campaign trail, which is this notion of a "middle class crunch." Elizabeth, are families today struggling more than their counterparts did a generation ago?
Warren: Yes, they are. A generation ago, one paycheck would buy housing, health insurance, pay taxes, transportation and still have 50 percent left over to spend on all the discretionary expenses. Today, it takes two-thirds of two paychecks to buy those same housing, health insurance, transportation, taxes and of course, now child care is thrown in. I think families are under a lot more squeeze than they were just a generation ago.
Vigeland: Gregg, on the other hand, you've written that Americans are better off today than ever before. Do you believe there is a middle class crunch?
Easterbrook: Liz is certainly right that the paycheck stress is on everybody's mind today, but you can't factor out of the equation that what that money is buying is a higher quality of life. The health care that Liz mentioned: health care spending is a big concern but health outcomes are also so much better today. The question that I would ask is would you say "you know, I don't want to live in 2008; I'd rather live in 1958 when women, for intents and purposes, weren't allowed to work out of the home. If you're willing to trade the present for some year of the past, then you have a fundamental complaint. If you're not, then what we're arguing is the reforms necessary to improve the present.
Warren: Well, I don't get why you don't have a complaint. We have 47 million people without health insurance, half of all Americans haven't saved a single dollar towards their pension. I just think it misframes the problem to say "do you want to live in 1958?" the question is "Are families today under a financial crunch, are they in a squeeze?" And the answer is "Yes, they are."
Vigeland: I wonder if this gets to the question of "What are the things that you should expect to have if you are in the middle class?" Is it a house? Is it two cars? At what point do we say "OK, there is a baseline for what your life is like when you are in the middle class."
Easterbrook: Well, I don't think it's so much material possessions, but your position in life. I think the reason people feel these issues so keenly now is that we've equated reaching middle class existance with achieving security. We now have a larger middle class than we've ever had before, but we have far less security than before in the sense that "you've reached the middle class and now everything is fine" does not exist for most people and doesn't even exist for a lot of upper middle class people and that's why I think we feel so keenly the faults in the current system when objectively almost all trends are positive.
Vigeland: Let me ask you then how it is that people who make $100,000, even $150,000, up to $200,000 will still classify themselves as the middle class?
Warren: You bet and that's partly because those folks are trying to replicate what their parents had and at $100,000, at $150,000, in many major metropolitan areas in America today, you simply can't do that. Think about this: a generation ago, in the early 1970ss, the average one-income family was putting away 11 percent of their take-home pay in savings. For the last five years, families have been going negative. They've borrowed more than they've spent and they have zero savings. They can't do it.
Vigeland: And you wanted to respond to something Elizabeth said?
Easterbrook: Liz said that people are struggling just to replicate what their parents had. Statistically, they're not, they're struggling to live at a significantly better level than their parents did and I'm glad -- I think everybody should do that -- but the preponderance of people who go to grad school, who have two computers, have one car per person, they're trying to live at a better level than their parents did. No wonder it's stressful.
Warren: But the point is, what does it take to launch a child into the middle class today? In the 1950's -- shoot, in the 1970's -- you look at the survey data and about 85 percent of families said "a high school diploma and a willingness to work hard will give my child a place in the middle class." You reach the year 2008 and the overwhelming majority of Americans say it takes a college diploma just to have a chance to make it into the middle class. Parents today say it takes two years of preschool to get a child ready to go to school. That's six years of additional education. It now takes a lot more money to launch a middle class child than it did a generation ago.
Easterbrook: Well, there isn't any doubt that stress on the middle class constantly rises and it takes more money to achieve things, but remember your outcome is also better; let's not lose sight of that. Families today that aspire to put their children into white collar positions are aspiring to a fundamentally better life. You could still have the lifestyle of the 50's at a much lower price, but we would all say it's not sufficient.
Vigeland: Gregg Easterbrook is a fellow at the Brookings Institution and author of "The Progress Paradox." Elizabeth Warren teaches law at Harvard University and is the author of "The Two-Income Trap." Thank you both for helping us out today.
Easterbrook: Thank you.
Warren: It was a pleasure.