In their pursuit of the good life, Michigan couple Mary and Tom Clark appear to be doing everything right. Both work — she as a middle-school teacher, he as an insurance claims adjuster — to support their two girls, ages 6 and 9. When the Clarks bought their four-bedroom house in Battle Creek six years ago, they put 20% down to get the best interest rate. They have no credit-card debt, economize every way they can — yet can't escape the feeling that they are just a pink slip away from financial disaster. "If Tom lost his job, we'd be hurting fast," says Mary. "I guess it would mean moving in with the folks."

The Clarks' middle-class angst is shared by a generation of Americans who expected prosperity, or at least financial security, to be almost assured for the two-paycheck family. That assumption is increasingly misguided, according to the two-income trap: why middle-class mothers & fathers are going broke (basic books; 255 pages). Authors Elizabeth Warren, a Harvard Law School professor and bankruptcy expert, and Amelia Warren Tyagi, a business consultant and Warren's daughter, offer a startling account of the elusiveness of the American Dream. They conclude that modern families are no better off than the Ozzie-and-Harriet household of the past. In fact, they are in worse shape.

Working couples with kids today rake in 75% more than the typical single-breadwinner family did in the 1970s. But the cost of owning a home has risen at a faster clip, leaving these families with nearly half the discretionary income (as a share of total income) of the '70s crowd. the explanation for this is the "trap" of the title. Parents naturally want their kids to get a good education. Trouble is, with so many failing schools, they have to be selective about where they live. The result: bidding wars for homes in the best school districts have pushed up the median price of housing for couples with children 79% between 1983 and 1998, handily outpacing income growth over the same period. (Prices for homes suitable for childless couples rose only 23% during that time.)

To buy into the right locale, couples must take on far more debt than their parents did to provide the same standard of living — and even more debt to send the kids to college. The only way to cover that debt is for both parents to work, and still they are stretched too thin. It is this phenomenon, Warren and Tyagi argue, that has made having a child "the single best predictor" of financial ruin. Married couples with children are more than twice as likely to file for bankruptcy as childless couples; they are 75% more likely to be late paying bills and also more likely to face foreclosure on their homes.

The authors insist that most families are falling behind because of economic trends beyond their control. Some readers may find that view overly sympathetic to folks who lack the fiscal restraint to put away their credit cards. But Warren and Tyagi dispel what they call the "overconsumption myth." They claim, for example, that the average family of four spends 22% less on food, 21% less on clothing and 44% less on household appliances than it did a generation ago. And they argue that many families buried under credit-card bills are using plastic to cover the basics. "They make a good case that the epidemic of bankruptcy is not about people being irresponsible," says Paul Krugman, economics professor at Princeton University and author of the recently published the great unraveling: losing our way in the new century.

For families looking for ways to cope, Warren and Tyagi mainly offer palliatives: Buy a cheaper house. Squirrel away a six-month cash cushion. Yeah, right. But they also know that there are no easy solutions. Readers who are already committed to a house and parenthood will find little to mitigate the deflating sense that they have nowhere to go but down.

• Maryanne Murray Buechner