The Two-Income Trap - Elizabeth Warren [10]
Many maladies are explained away by the Over-Consumption Myth. Why are Americans in debt? Sociologist Robert Frank claims that America’s newfound “Luxury Fever” forces middle-class families “to finance their consumption increases largely by reduced savings and increased debt.”4 Why are schools failing and streets unsafe? Juliet Schor cites “competitive spending” as a major contributor to “the deterioration of public goods” such as “education, social services, public safety, recreation, and culture.”5 Why are Americans unhappy? Affluenza sums it up: “The dogged pursuit for more” accounts for Americans’ “overload, debt, anxiety, and waste.”6 Everywhere we turn, it seems that over-consumption is tearing at the very fabric of society.
The Over-Consumption Myth rests on the premise that families spend their money on things they don’t really need. Over-consumption is not about medical care or basic housing; it is, in the words of Juliet Schor, about “designer clothes, a microwave, restaurant meals, home and automobile air conditioning, and, of course, Michael Jordan’s ubiquitous athletic shoes, about which children and adults both display near-obsession.”7 And it isn’t about buying a few goodies with extra income; it is about going deep into debt to finance consumer purchases that sensible people could do without.
The beauty of the Over-Consumption Myth is that it squares neatly with our own intuitions. We see the malls packed with shoppers. We receive catalogs filled with outrageously expensive gadgets. We think of that overpriced summer dress that hangs in the back of the closet or those power tools gathering dust in the garage. The conclusion seems indisputable: The “urge to splurge” is driving folks into economic ruin.
But is it true? Intuitions and anecdotes are no substitute for hard data, so we searched deep in the recesses of federal archives, where we found detailed information on Americans’ spending patterns since the early 1970s, carefully sorted by spending categories and family size.8 If families really are blowing their paychecks on designer clothes and restaurant meals, then the expenditure data should show that today’s families are spending more on these frivolous items than ever before. (Throughout our discussion, in this chapter and elsewhere, all figures will be adjusted for the effects of inflation.9) But we found that the numbers pointed in a very different direction, demonstrating that the over-consumption explanation is just a myth.
Consider clothing. Newsweek recently ran a multipage cover story about Americans drowning in debt. The reason for widespread financial distress and high bankruptcy rates? “Frivolous shopping is part of the problem: many debtors blame their woes squarely on Tommy, Ralph, Gucci, and Prada.”10 That certainly sounds reasonable. After all, Banana Republic is so crowded with shoppers we can barely find an empty fitting room, Adidas and Nike clad the feet of every teenager we meet, and designer shops rake in profits selling nothing but underwear or sunglasses. Even little children’s clothes now carry hip brand names, and babies sport “GAP” or “YSL” on their T-shirts and sleepers.
And yet, when it is all added up, including the Tommy sweatshirts and Ray-Ban sunglasses, the average family of four today spends 21 percent less (inflation adjusted) on clothing than a similar family did in the early 1970s. How can this be? What the finger-waggers have forgotten are the things families don’t spend money on anymore. I (Elizabeth) recall the