Life is harder now, some experts say

‘They feel squeezed because they are squeezed’
"Consumers are asking, ‘If the economy is doing so well why am I feeling so squeezed?’” he said. “Well, they feel squeezed because they are squeezed."

Identifying the source of the squeeze requires more than simply comparing overall inflation to overall wage growth, Bernstein said. 

"You have to look at a basket of key goods,” he said, like housing and college costs. “If you compare income growth to growth in prices of key goods, that stuff is growing 10 percent faster than income. ... Perhaps (consumers) are beating overall inflation but are they beating inflation in key components of their market basket? No."

More to the point, Bernstein said, rising housing costs have quietly broken a social contract with consumers that promised that a good job with a good income would guarantee a good place to live. While that may have been true in the 1970s, it is often not true today, he said.

"Lodged in the minds of those who come from the middle class is the idea that the middle class is a safe haven. It's not," he said.

That notion is changing. People no longer feel certain they will be better off than their parents, for example. "What really messes with your economic mind is when your expectations and aspirations are violated, Bernstein said. “You think, my parents died in a much better home than they grew up in. Will I?"

Generational trade-offs
Bernstein is not as pessimistic as Tyagi in his interpretation of the data. A comparison of then vs. now needs to be a little more subtle, he said. Clearly, middle class Americans are better off in some ways: larger homes and availability of what were once luxury items, like air conditioning, for instance.

“If a person is arguing that middle class families are worse off in every way, that person hasn't spent enough time at the mall,” he said. “But these are things you don't see at the mall:  housing, health care, child care, saving and saving for college. The price of those (are) rising more quickly than inflation in general, rising more quickly than family income. And they are largely responsible for the squeeze that families report feeling."

Middle-class squeeze skeptics often point to rising credit card debt as evidence that consumers have themselves, and their spending habits, to blame for any economic anxiety.  But there’s a problem with that theory too — it’s an exaggeration, says Liz Pulliam Weston, author of “Deal With Your Debt” and an MSN Money columnist. The majority of American consumers carry no credit card debt from month to month and very few carry large balances, she notes.

Last year, Americans held about $900 billion in credit card debt, leaving the average household with a bill of about $9,300, according to Federal Reserve data.  That sounds like a lot, but a few consumers with very large debts can skew the average. The median balance is — the point at which half of consumers have more debt, and half have less — is a better indicator. The median credit card balance is $2,200, a fairly manageable amount. Only 8.3 percent of households owe more than $9,000 on their credit cards. Meanwhile, one-quarter of all Americans don’t even have credit cards, and another 30 percent pay them off in full every month.

Notion of heavy credit card debt called overblown
“Our national discussions about consumer indebtedness and bankruptcy are being distorted by the idea that we're waddling around with four- and five-figure credit card debts,” Weston wrote recently. “That makes us sound like spendthrifts, when that's not the norm."

Nevertheless, overconsumption and excessive credit card spending persist as explanations for middle-class debt angst. Tyagi has a theory why.

“Frivolous spending is visible, and it’s easy to pass judgment on, she said. “There is a comforting notion that if you are not spending wildly you are safe. If you are deeply invested in the belief that if everyone can solve their problems on their own, then there's no systematic problem, it would be important to think that if anyone is in trouble financially it’s because they did something stupid.”

It might be something their parents would never have done, such as taking out a negative-amortization mortgage or taking out a $100,000 home equity loan to pay for a child’s college, or spend as much money on child care as food.

But you can’t blame that on extravagant living, Warren said.

“Perhaps the most important thing we can do is persuade people that it's not about the lattes,” she said. “I think the "latte factor" is a way to distract people from real changes in the economy. Those who shake their fingers over lattes can feel good about themselves, both for their own economic prosperity and for the fact that those who are in trouble are there because of their own personal failings.”

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