The affordability crisis that has rippled through American politics saw voters abandon Democrats for another Donald Trump presidency last year, while this year a democratic socialist was elected mayor of New York.
This is despite economic data showing lower inflation, steady income gains and resilient consumer spending.
But according to Michael Green, chief strategist and portfolio manager at Simplify Asset Management, conventional metrics don’t measure how Americans are struggling with the cost of living, even for households earning six figures.
In a viral article on Substack last week, he took particular interest in the federal government’s poverty line, which dates back to the early 1960s and was calculated by tripling the cost of a minimum diet at the time.
“But everything changed between 1963 and 2024,” Green wrote. “Housing costs exploded. Health care became the largest expense for many families. Employer coverage declined while deductibles rose. Child care became a market, and that market became extremely expensive. College went from affordable to crippling. Transportation costs rose as cities sprawled and public transportation withered under government neglect.”
Meanwhile, a two-income household is now necessary to maintain what a single income once provided, but that means child care costs and the need for two cars.
As a result, the poverty line’s narrow focus on food leaves out the extent to which other expenses are now sucking up income and reducing the minimum amount Americans need to support themselves.
Green estimated that food accounts for only 5 to 7 percent of household spending, but estimated housing at 35 to 45 percent, child care at 20 to 40 percent, and health care at 15 to 25 percent.
“If the crisis threshold – the floor below which families cannot function – is honestly scaled to current spending habits, it will land at $140,000,” he added. “What does that tell you about the $31,200 line that we’re still using? That tells you we’re measuring starvation.”
“Death Valley”
At the same time, Americans who fall below Green’s version of the poverty line continue to fall behind, even as they move up the income ladder.
This creates a perverse dissuasive effect, in that the poorest, on the other hand, are not penalized by increasing burdens when support is withdrawn.
“Our whole safety net is designed to catch people at the bottom, but it’s a trap for anyone who tries to get out,” he said. “As income increases from $40,000 to $100,000, benefits disappear faster than wages increase. I call it the valley of death.”
Lockdowns during the COVID-19 pandemic provided respite for many families, as working parents weren’t paying for child care or gas to get around while working from home. Stimulus checks also increased their income.
But after the economy reopened, those costs returned and inflation soared. And although they have fallen significantly since 2022, overall price levels have not fallen and remain high.
“This mathematical valley explains the anger we see among the American electorate, particularly the animosity that the ‘working poor’ (the middle class) feel toward the ‘real poor’ and immigrants,” Green said.
The anger does not come from racism or lack of empathy, he added. It’s more about resentment towards the government.
“When you’re drowning and you see the lifeguard toss a life jacket to the person walking in the water next to you – a person who isn’t swimming as hard as you – you don’t feel happiness for them,” he said. “You feel a murderous rage against the rescuer. We have created a system in which the only way to survive is to be poor enough to qualify for help, or rich enough to ignore the cost. Everyone in between is cannibalized.”
Life is expensive
To be sure, Green acknowledged that his calculations are based on costs in suburban New Jersey. Its threshold is also higher than the median income for a family of four in 37 states, according to the Washington Post.
But the Massachusetts Institute of Technology’s Living Wage Calculator and the Economic Policy Institute have also estimated family expenses in some states at more than $100,000 a year.
At the same time, financial stress from the higher cost of living also helps explain why discount retailers like Walmart have reported seeing more high-income customers shopping at their stores.
According to Green, the fact is that food is relatively affordable, despite the recent rise in food prices. Life in general is what’s expensive.
“The true poverty line—the threshold at which a family can afford housing, health care, child care, and transportation without relying on means-tested benefits—is not $31,200, but about $140,000,” he writes.
His Substack article also echoed a recent Harris Poll survey that showed many Americans earning six figures or even $200,000 a year were struggling privately.
Among the findings, 64% of six-figure earners said their income was not a step toward success but simply the bare minimum to stay afloat.
“Our data shows that even high earners are financially anxious — they live the illusion of wealth while privately juggling credit cards, debt and survival strategies,” Libby Rodney, Harris Poll’s chief strategy officer and futurist, said in a statement.
