Elizabeth Warren Interview: Conversations with History; Institute of International Studies, UC Berkeley
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All the literature in comparative politics, writings about democracy, democratization, point to the importance of the middle class as the foundation of a working democratic system. What are the long-term implications of what you're saying? I mean, obviously bankruptcy is one, but it would seem to suggest that, just as in foreign policy, our domestic policy system is not working very well, if at all, and it has long-term consequences for what we're going to be in the future.
Absolutely. A strong middle class is what gives us a strong democracy, it's what gives us a strong economy, it's what makes us flexible and able to compete in the world, it's what makes us who we are. Here's what I fear. Here's what I think these data point toward. I think they point toward a larger upper class -- I don't want to take away from that, there are more people who are doing well, and I'm not just talking about at the billionaire level, I'm talking about at the $150,000 - $200,000 level. It's a bigger group. If you don't get sick, if you don't lose your job, if you don't have a divorce, if you don't have a death in your family, none of the stumbles hit you, and you've got a good job and you hang on to it for forty years, you've got a good chance to be in a new upper class that is larger. But the rest is just one big underclass. It's families that are living paycheck to paycheck, who are dealing this week with debt collectors and next week with late fees and 29% interest on the credit card, who are on a treadmill that they can never get out of debt, never put anything aside in the way of savings. They have sort of better moments and worse moments, but it's no longer the differentiation between the poor and the middle. It's between the upper and everybody else, because everybody else lives on a financial cliff, and some are getting pushed off, some are just going to hang on the edge of the cliff. I fear we are moving toward a two-tier society and that government policies have pushed us in that direction, have encouraged that division, have made it more comfortable for those in that larger group of well-to-do, and much more dangerous for those who are the big underclass in America.
If one were to address this as a political problem, I hear in our conversation two elements that strike me as rather important, if one is going to change the political configuration. One we talked about, which is the religion, which is articulating a set of ideas about virtue and goodness which don't address the problem at all, as you pointed out. The other is America's role in the global economy. We're spending ourselves into debt, and to make it appear that we are doing economically better than we are, we're essentially giving people as much money as they want at adjustable-rate mortgages which we will now discover may create problems. But in fact, the Japanese and the Chinese are willing to finance this, so long as we continue to buy their products. So, these are two very powerful political configurations, what we're doing internationally and the way we're presenting a narrative at home, that strike me as quite formidable, and that only collapse will change things.
I'll tell you both my hope and my fear, as I draw these together. I put my nickel on education. If Americans are going to remain competitive, that that's our only shot. We can't afford to waste a single young person in America. We need to get as many of them as well educated as we can, and that means on through college. That has become the new secular religion. Twice as many people believe that the moon shot landing was faked than believe you can make it in America without a college diploma. So, we have this huge appetite for, "That's the final thrust to get my children a chance to be in the middle class: college." And yet, what's happening with college? We don't pay for it collectively. We make families pay for it individually and we make the students load up on debt so that the next generation's huge division is that the children of well-to-do families, who can afford to pay for the college education for their children, have a leg up. They start their adult lives, if nothing else, at least dead flat broke -- right? -- at least at even. The children of that huge underclass start with tens, sometimes hundreds of thousands of dollars in debt. For some it'll be a good investment, and for some it will be the rock that will sink them. They start the great American race fifty yards behind the starting line, much less the finish line. They're got all this debt that they've got to manage and all this debt they've got to pay off. And we've written the laws to make it that these debts are non-dischargeable -- you can't get out of these debts. If you get sick you still have to pay these debts, if you don't have a job you still have to pay these debts. Really tough.
To put this in a global context, we need an educated America to help us compete around the world, to make good jobs, to make there be a reason to have good jobs here in America. What I fear is that we not only have mortgaged our homes, have mortgaged our incomes going forward, between the sub-prime mortgages and the credit card debt and the payday loans, but that the way we're financing college educations right now, we are mortgaging our very future in this world, and that the America that I knew, that I grew up in, will be something that will be confined to the history books. It won't be there for my grandchildren.
One last question -- we have not much time left, so a brief answer. What can people do about all this, the audience out there watching? Should they become part of consumer groups, should they get involved in campaigns? What do you advise them, to help change it?
Yes. That's part of it. They need to think globally and act locally. Partly they need to do it with their own spending. I ended up writing a book we didn't talk about today, and that's fine, but that I never thought I would write, All Your Worth, that talks directly to families about how to budget, how to get out of debt, how to get out from underneath this giant credit machine that wants to eat families alive.
It is partly about politics. If you don't email your congresswoman or your congressman and your senator, then you are part of the problem today. You've got to tell them that this is an issue that matters to you, that this really, truly matters. We may finally do something about global warming because enough people said, "This one matters to me." The same thing has got to be true about the economics of the middle class, about debt, about credit card companies and mortgage lenders who are writing all the rules and running the show. So, yes, you've got to let people in government know that this matters to you, and you've got to do what you can to stay away from these vultures.
Professor Warren, on that note I want to show your book one more time, one of your books for the general public, The Two Income Trap, and the other one is called -- I forgot, what is the other one called?
All Your Worth.
All Your Worth, which is a manual for managing your own finances. Thank you very much for being on our program and for doing all this good work.
It's a pleasure to be here. Thank you.
Thank you. And thank you very much for joining us for this Conversation with History.
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