We have this idea that bankruptcy numbers have been on the rise because people spend frivilously. But that's not really the case when you look at incomes versus the cost of living. medical bills, not overspending, account for most bankruptcies. As a society there are a lot of areas where we've all cut back since the days we're so nostalgic for... even my parents have said that when I was a kid there weren't these discount places to get cheap shoes for us. Very few people wear 3-peice wool suits to work every day.
A big reason we've had to be thrifty is because housing costs have increased in cities with good school districts. It's a competitive world of haves and have nots, people feel pressured to move out to the newer areas so their kids can get ahead, pick their side of the divide. But that competition drives up the cost of living on the "right" side of the tracks, where areas without good schools get worse and worse.
One solution is to have both parents work. You would think this would lower bankruptcy because more money is coming in, but the numbers aren't reflecting that. Here's the problem she describes: with both parents working to make ends meet, if one parent loses his/her job it's up to that one person to get a new job FAST, and the existing mortgage/daycare/car expenses aren't going away while that search is going on.
Back in the day when only one parent worked, if that parent lost their job, both parents hit the street to try and replace the income. Yes it's scary to have no income, but it reminds me of the awful quote you hear in the aircraft industry: "An airplane with two engines has twice the chance of losing an engine."
This all makes it very clear why, in "All Your Worth", she recommends living on half your income. Add up all your mandatory expenses (mortgage, insurance, contractual obligations, USDA food budget minimums) and keep it under 50% of your take home pay. Having a second income is great if you're using it to save up or get ahead, but if you depend on the majority of your income just to make ends meet, that's a risky situation.
Of course, take all this from me being biased. Right now we do NOT live in a nice school district that Warren labels as so important... time will tell, maybe in two years josie will be in school, I'll snap and have to move out someplace pricey, my lofty goals of raising my child in among economically diversity cast aside.