"Middle Class Collapse"

Here is an interesting video I found on Gary North's site: Its really a great talk and makes some great points, but it is very long (a 1 hour lecture), so I'll try to hit the highlights. A professor studies the effects on the middle class over the period 1970 to 2005 of moving from being composed primarily of one-income families to two-income families. The more interesting findings:

• while average household income increased significantly, savings actually dropped dramatically and debt skyrocketted
• when looking at how the money was spent, it was found that almost all expenditures adjusted for inflation either remained the same or decreased, except for five, which skyrocketted. The five were: childcare, taxes, healthcare, cars, and by far the largest, servicing mortgage debt
• when these five costs are compared between 1970 and 2005, it is found that they absorb the entirety of the increase in income of having both parents in the workforce. All other expenditures were almost identical
• Because these costs are "fixed," and because the second income is "already spent," families are now more vulnerable to financial shocks such as a sickness or death in the family or the loss of a job. There is no "fallback" wage-earner, and the lion's share of the bills are fixed costs which cannot be cut easily
• Single parent families are even worse off
• Income volatilities and family bankruptcies are much higher than 30 years ago
• She predicts the destruction of the middle class

Yes, yes, I have a tendency to post very depressing things. But there are several important points here that I can think of. First, by knowing what is happening to the family, folks can avoid many of the mistakes. Notice the specific costs which increased. Three are related directly to the choice of having both parents work: childcare, taxes, and car expenses. The cost of owning a single car actually went down, but since most families now have two of them so that everybody can get to work, the cost increased substantially. Childcare is completely unnecessary if somebody stays home with the kids. And taxes are going to increase substantially thanks to the progressive income tax. Earn more, fork over more. The other two, healthcare and housing, are a direct result of government meddling! Housing was by far the biggest burden. I've talked at length about how Uncle Sam drove up house prices in the name of making housing more affordable. Everybody knows, or at least thinks they do, how the government drives up healthcare costs. It's not exactly controversial, so I won't bother going into it. Food costs went down. Clothing costs went down. Most others did the same. These non-controversial, politically insensitive markets are functioning just fine. The free-market appears to be satisfying these needs pretty darn well. But in those politically hypersensitive markets where the government finds every excuse to interfere, and the free-market is not allowed to operate, costs are skyrocketing. The point is: meddlesome government is largely to blame for immiserating the public and destroying the middle class. Which is to say, that "we the people" are largely to blame. Having said that, I'll try to leave you with a silver lining. If you think about it, many of these costs could be contained by making one simple decision: have one parent stay at home and homeschool the kids. The professor also talks at length about education and how it impinges on the family finances, but this can also be offset in large part with this same decision. It is not necessary to live in the most expensive neighborhoods to have your kids go to the best public schools if you are educating them yourself. It is also not necessary to attend all four years of a good college if you already have the background to study on your own. Gary North has a great book and a website on ideas to help cut the costs of going to college. So really, by taking responsibility for your and your family's future with this one simple, though still very great and difficult decision, you have cut out almost every cost associated with the middle-class bind she has talked about! The only one left is healthcare. And I appologize, but I have no solution for this. Furthermore, the reader of this blog will hopefully have acquired at least a passing sense of the economics of incentivization at this point. If the decision to homeschool is increasingly paying off and looking like a better and better way to do things over time, it stands to reason that more and more people should be doing it. As it turns out, that is exactly the case! I can think of nothing better for America's future than a movement such as this: the strengthening of the family, cutting the state out of education and family life, and increased self-reliance and independence of the people as a result of a burgeoning homeschooling movement. So in the larger sense, this is really very good news indeed.