America is experiencing the aftermath of an economic boom, in which the stock market rose dramatically and every commercial strip grew a mile. This boom, as well as the expansions of the 1980's was fueled by an increase in consumer debt, which exploded after deregulation in 1993. This increase in debt brought with it an increase in bankruptcy...
Authors: Theresa A. Sullivan, Elzabeth Warren, Jay Lawrence Westbrook
Publisher: Yale University Press
ISBN: 0-300-07960-5
Libraries: TCPL
Year: 2000
Pages: 380
The Fragile Middle Class is based on studies the authors did on banrkuptcy filings in 1981 and 1991. Unusualy well written for a recent book, it combines statistics and personal stories to create a vivid and sympathetic image of Americans in debt.
Bankruptcy is mostly a middle-class phenomenon. Pressured to maintain a certain standard of living, middle-income Americans take on debt to support their lifestyle. Although some arrive at bankruptcy court because of a credit addiction, more often, a divorce, accident, sickness, or loss of a job pushes a debtor over the edge. In some sense, America uses a combination of easy credit and bankruptcy law as a kind of privatized social aid program, substituting for welfare and guaranteed health care.
After WW II, a mortgage on a home was one of the best investments that most people could make. During the 1980's, high real interest rates made homeownership impossible for most young couples. Many have become "house poor", unable to make the payments on their homes, but too proud to sell. Since that time, colleges have been increasingly giving "aid" in the form of loans rather than grants, leaving many young people with a crushing burden before starting their careers -- doubly crushing, because student loans cannot be annuled by a bankruptcy court.
The Carter, Reagan, Bush and Clinton administrations steadily deregulated the finance industry, enabling a vast expansion of credit. The high inflation and economic turbulence of the 1970's led to the end of state ursury laws that limited interest rates. Advances in computer technology make it easier to find, track, and harass people who are poor credit risks, leading a boom in "subprime lending." New products such as home equity loans have made it easier and easier to get into debt. The subject covered by The Fragile Middle Class is essential for us to reduce the suffering that economic instability wreaks on individuals and families, and also for building a stable, sustainable economy.
