There is an enormous literature on the “living standards” question, and most of it comes down to a debate over method. If our living standards are measured by consumption, the question of whether the current generation is better off than any previous one is easy to settle (Cox and Alm take this approach in “Myths of Rich and Poor”). But matters are complicated by looking at family living standards as the average American household with children began bringing in two paychecks instead of just one. This situation became more typical than not following the great inflation of the late 1970s. Elizabeth Warren and Amelia Tyagi, in their book “The Two-Income Trap” seem to take a common-sense approach and conclude that it takes two incomes to provide what one income provided 30 years ago: a middle class home in a safe neighborhood with a decent school. Some news stories on the book from: CNN, NYT, USA Today (including book excerpt), MSNBC, and CBS. The book came out Sept 2 and it is now at #257 at Amazon.Publishers Weekly reports that the authors recommend (among other bad ideas) mandatory caps on interest rates for credit cards issuers, more anti-red-lining controls, and the imposition of public-school choice (the abolition of school districts). Reviewers at Amazon say the authors overlook the role of taxes.
As the debate rages, the Fed has reported that household net worth increased 4.2% in the second quarter of 2003. However, Frank Shostak comments that this has nothing to do with an increased pool of real wealth; rather it is due to loose monetary policies and the debt they encourage. He draws our attention to the sharp increase in the non-financial sector debt-to-GDP ratio.
