August 29, 2015 - admin
Volume 40, Issue 5: The Legacy of Debt
Readers of this journal are familiar with the nature of consumer debt, and the role it played in destroying much of the equity of middle class families after the housing crisis caused by the financial meltdown of 2008 and the collapse of real estate prices. Starting in the late 1970s, to make up for stagnant real wages while sustaining consumption, households relied more and more on consumer debt or extracted fictive equity from their homes. Tracking expenditures, most families continued the upward trend of buying more, living better and expanding their quality of life. But it was all built on a false hope that the debt burden would never come to haunt them.
This is a well-rehearsed narrative of the collapse of the middle class, and the realization that real wages had not improved for the better part of four decades. Income inequality vaulted into our consciousness, mainly through the activities of the Occupy Movement but also through the day-today privations faced and the increasing foreclosure crises as people everywhere lost their homes or saw their savings in the form of home equity wiped out. Communities suffered as property values declined, and with them the revenues most communities relied upon to fund local services. Schools in major cities, already generally starved for funds, were forced to consolidate buildings and reduce their teaching staffs, resulting in overcrowding and an increasingly deteriorating system driving out those who could flee to suburban communities. Cities like Detroit were often referred to as a place occupied by families whose children were under 6 or over 18, reflecting the dismay over the poor quality of the educational system.