ATWT Series one: The Two-Income Trap by Elizabeth Warren and Amelia Warren Tyagi
Finishing up with financial advice in Chapter Seven and a bit of info from the Appendix about the sample of bankrupt people used for "storytelling".
Chapter Seven
This chapter involves a "financial fire drill", in which Warren attempts to give financial advice on avoiding the Two-Income Trap. The only thing she needed to say is on page 165, though: "Don't stretch yourself to buy a house you can't afford." This is explicitly the problem in all the example couples. Over and over they are described as stretching to buy a house in a "safe neighborhood" with "good schools".
But since Warren has to fill up a whole chapter, she mentions various other financial fitness tips and tricks like, oh, living on one income while earning two or simply having some kind of clear backup plan if financial problems arise like job loss or health problems (or, for pro-divorce divorcee Warren, divorce). It's really not worth exhaustively repeating the usual sorts of things any personal finance book would say and which Warren repeats, with an added dollop of "don't blame each other".
It is extremely funny, following page 165, to see Warren advocate spending the second income on fun and extras. This was a common accusation leveled by pro-SAHM conservatives throughout the 1980s regarding entry of mothers into the workforce, and 20 years later, Warren closes out her financial tips to avoid bankruptcy chapter with that exact plan.
Warren caps off the unintentional humor value of this chapter by suggesting that working women simply not have any children at all. She also claims (using that regression logic again) that if trends continue then about 1 in 7 children would see their parents' bankruptcy by 2010. Spoiler: this did not in fact happen as trends did not in fact continue. This book was a big factor in the 2005 bankruptcy reform bill passing, which did reduce bankruptcy overall but appears to have not dented foreclosures or credit card default rates, based on looking at all these things over the intervening 20 years since the book was published.
One section of this chapter is not funny and that is Warren's attempt to essentially displace the harms of divorce and family breakup solely onto bankruptcy. Divorce is justifiable, nobody can see it coming. But bankruptcy you can plan to avoid entirely. That is the frame and it is an interesting one since the harms of divorce and the harms of bankruptcy are extremely commingled in terms of what a child would be likely to face. She even says more children would see bankruptcy than divorce without admitting that they generally run together and overlap. It is a bit of a down note.
Since there's so little to really say about this chapter, I'll move on to the Appendix and the footnotes discussion for both.
Appendix: The Consumer Bankruptcy Project
This is really just a quick rundown of the sample pool of bankrupt families used to construct the example families throughout the book. This was a large research project, and it involved sampling bankruptcies from five metro areas in five states. The states were California (LA metro), Illinois (Chicago metro), Tennessee (Nashville metro), Pennsylvania (Philadelphia metro) and Texas (Dallas metro).
Since these states represnted about 1/4 of bankruptcy filings, this was presumed to be a solid sample pool (250 filings were pulled for each state). The samples had a lot of variation in bankruptcy filing rates, with the Nashville sample being highest at nearly 10 per 1000 adults and Philadelphia and Dallas both being much lower at around 5 filings per 1000 each. There was an additional sample skewed towards homeowners and including some rural debtors from Tennessee and Iowa. The response rates were 50-70%.
The sample does not appear to have any particularly flawed aspects beyond being a bit on the small side. But one of the dogs that didn't bark in Warren's book remains no discussion of the dotcom bubble computing and the increasing inclusion of technology work in the economy, among other substantial shifts in economic and family structure during the 1990s. I mention this because to assess employment, 1970 occupational codes are used, even though there were more recent revisions at the time the project was undertaken.
Footnotes Discussion for Chapter Seven and Appendix
The footnotes for Chapter 7 are mostly notable for being on the redundant side, repeating bankruptcy rates, among other "factoids". I left out the discussion from Chapter 7 that bankrupt people receive lots of credit offers because the reality is that multiple bankrupts are extremely rare even among high-risk debtors and thus the fact that high risk borrowers *who declare bankruptcy* receive credit solicitations is not that big a deal. It's worth noting in a general sense but is a bit counterintuitively not relevant to Warren's arguments or critique of her arguments.
The footnotes for the Appendix are mostly just justifying metro area choices and the decision to use the 1970 occupation codes.