My Morning Coffee, the New York Times, and American Families

I’m often teased by my family for my
morning addictions: strong coffee and a slow reading of the New York Times, ideally while sitting on our back patio,
weather permitting, enjoying the sunrise and the birds. Yet that routine
enabled me to notice a common theme among these recent Times articles:

•  “A
  Looming American Baby Bust is Rooted in Economic Insecurity”
• “Going
  for Broke, the Middle Class Goes Broke” (a review of Squeezed: Why Our Families Can’t Afford America.)
• “Why the Wealth Gap Hits Families the Hardest”

The common thread is that families
with kids are struggling, so much so that many families delayed or stopped
having kids altogether. Why? First and foremost, kids are seen as being too
expensive, as a Morning
Consult/New York Times survey found. And, the story continues: These families’ decisions
have contributed to the U.S. fertility rate dropping to a record low: 1.8 for
two years in a row, well below the replacement rate of 2.1. 

Around the time these articles
appeared, I arrived at work where my Center
for Household Financial Stability research
team—William Emmons, Ana Hernández Kent, and Lowell Ricketts—greeted me with a
draft of their latest report, “A
Lost Generation? Long-Lasting Wealth Impacts of the Great Recession on Young
Families.” I opened it and saw that the
potentially “lost” generation is made up of those born in the 1980s, though my
colleagues note that things have really started going downhill even earlier,
beginning with those born in the 1960s.

Specifically, Emmons, Kent and
Ricketts found that someone born in the 1980s had wealth (or
net worth: all assets minus all liabilities) 34 percent below what we would
predict them to have based on earlier generations a similar age. Wealth was 18
percent lower if born in the 1970s, and 11 percent lower if born in the 1960s.

This reminds me of a startling observation that Phil
Longman (like me, a former New America employee) made in What It’s Worth
a couple of years ago: Up until about 1970, the gap between generations was
growing for a good reason: Kids were regularly doing better than their parents.
Since then, the gap between generations is still growing, but for the opposite reason: Kids are doing much worse than their parents. It’s hard for
me to fathom such a reversal of fortunes in so few generations.

So it’s not surprising then that
younger families, especially, are struggling and having fewer kids (a threat,
of course, to our economy and social contract as well, one where younger
workers support retired seniors). And what’s behind these declining levels of
wealth and economic fortunes? In the report, my Center colleagues and other researchers point to:

• the rising cost of
  college, leaving many with higher student loan balances, which both make
  college possible for many but can displace other forms of building wealth;
• the taking on of more
  credit card and auto debts, neither of which lead to more wealth;
• the sheer luck of what
  moment in economic history you were born—did you, for example, come of age when
  the stock market rising, college was affordable, and the safety net was strong?;
  and
• the enduring negative
  effects on employment, wages, and wealth following the Great Recession.

And, if you share Washington Post columnist Catherine
Rampell’s assessment, things are likely to get
worse for these younger families and, especially their kids. Citing a recent
Congressional Budget Office estimate that the recent tax bill will add $1.9
trillion to the federal debt over the next decade, she asked: “Who will be
stuck paying the tab for that, through some combination of higher taxes and
reduced government services? You guessed it: millennials, our children and
those who will come after us.”

Things are not grim for all families
and kids: If you buy the arguments of Richard Reeves (author, Dream
Hoarders), Matthew Stuart (author,
“The 9.9 Percent Is the New American Aristocracy”), and Steven Brill (author, Tailspin), there are plenty of kids, great schools and opportunities
for the top, overwhelmingly college-educated, 9.9 to 20 percent of families (depending
on which publication you prefer). For those in this upper quintile, the American
dream couldn’t be better. In fact, my Center colleagues also found that
college graduates own about three-fourths of our nation’s wealth while comprising
only about one-third of the U.S. population.

Now, Americans have
generally not been troubled by folks doing well at the top; we tolerate a lot
more inequality than most nations do because, well, many envy those at the top and
believe successful people worked for what they have. But Reeves and these other
authors argue that the “hoarding” of opportunity among the upper middle class crowds
out opportunity for everyone else, or creates a “moat” that separates the
“protected” few from the “unprotected” masses.

We can debate whether
dreams are hoarded or how well moats protect opportunities for those at the
top—but what’s undeniable is that it’s a tougher time for many and especially for
younger U.S. families to get a financial foothold, to raise economically
successful kids, and to pass on wealth and opportunities to future generations.

Yet Americans have been here before
and managed to make things significantly better for families and kids. As Longman
and I observed in The Next Progressive Era, gaping economic inequalities in the late 1890s spawned a
30-year burst of new institutions and public policies that were primarily motivated by the protection and
economic security of families and kids.

For example, massive corporations were
busted up not because of their effect on prices or “consumer welfare”—which is the
rationale today—but to protect families, communities and their small enterprises
or, simply stated, to protect their way of life. They also protected families
from the pay-day lenders of their time, instilled an ethic of savings and
thrift to foster economic independence, and created the Federal progressive
income tax system to help share the bounty of a growing economy with workers
and families.

Protecting families and kids—starting with their economic and social
well-being and building out policies and institutions from there—seems like a
great motivation for changing things now as well.

Now that’s a story I would love to see
in my morning New York Times.

The views expressed here are those of the author and do not necessarily reflect the views of the St. Louis Fed or the Board of Governors of the Federal Reserve System.