How Did The Middle Class Get So Far From The Middle?

in-debt-we-trustA few months back I read an Atlantic Monthly article that gnawed at me and ultimately became the inspiration for this blog.

The article by Neal Gabler caused quite a stir when it was published in the May issue. Writing about his own financial struggles, Gabler referenced a 2014 Federal Reserve report on the financial well-being of American consumers after the Great Recession that among other things made famous the following disturbing statistic, “48% of survey respondents making between $40,000 and $100,000 couldn’t come up with $400 is the case of an emergency.”

Perhaps worse, of those earning in the $100,000 range, 27% couldn’t scrape together the $400 with either cash or credit they could pay off within the month. Gabler, a well-educated, upper middle class guy who happens to be a successful writer (NY Times best-selling biographies, screenplays made into movies, an impressive list of publications he’s written for) and who has put two children through college confessed to being a member of that 48%.

How did someone so successful find himself in such a precarious predicament? In a country that at times seems to be dripping with money, how did almost half of all Americans find themselves in the exact same boat?

I put the piece aside and moved on to tackling various writing assignments, but in the end, I couldn’t get the article out of my head. Gabler was a writer like me (albeit a far more successful one) and yet I definitely had $400 for an emergency (at least for now).

But the more I thought about it, the more I realized that even if they had $400 extra dollars, many friends and family members worried about, at worst making ends meet and at best, saving enough for retirement. I did, too. We all have one thing in common—children we’re either trying to put or have put through college, something that Gabler admits in the article was a source of money drain not just for he and his wife but for his parents, too.

Thinking about all of us in the same leaky boat made me realize why Gabler’s article seemed to pinch a national nerve; late stage boomers and their millennial children are two huge cohorts who for better or worse are struggling financially under the weight of spiraling college tuition costs, out of control healthcare costs and a mountain of debt from years of living beyond their means.

How they got there will be the subject of this blog but suffice to say that a tech bubble bust, an addiction to credit cards, a hollowing out of the manufacturing sector, a housing bust that lead to the Great Recession from which folks are still recovering (no more using your house as an ATM) are all culprits. Sure we’ve all been beaten to a pulp by forces in many cases beyond our control.  But we’ve also been sucked into the academic industrial complex–college tuition has gone up — percent since — and the healthcare industrial complex that has skyrocketed— since —. All while wages have stagnated.

I don’t know about you but that sounds like a recipe for disaster to me.

I’ve always been in business for myself and along with my late husband, made a living in real estate. Economics is a hobby and I certainly don’t pretend to be an expert at anything other than surveying the economic landscape and forming my own humble opinions about what’s going on.

But I am an expert at being a late stage boomer with millennial children. And though I’ve been lucky enough to pay the freight on their very expensive educations (4 years of private high school and large public universities) so that neither is carrying any debt as they launch, it was a sacrifice that took a significant financial toll and will take some doing to recover from.

I guess that means I’m one of the lucky ones.

At least for now.