$140,000 Is the New Broke: The Hidden Cost-of-Living Crisis

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Is the new poverty line, the real poverty line $140,000? There was a very, very interesting piece put out by Michael W. Green and I’ve gone over his numbers and they look pretty good. Okay. Might they be off a little bit?

And also depending upon where you live in this country, absolutely. But you take a look at the numbers that he has run. Okay. And they’re pretty conservative. Yeah. Poverty line in the United States, should it be $140,000 a year? It’s crazy. Okay. Okay. He took a look at the poverty line and how it was.

originally calculated. The U.S. poverty line, okay, when they started calculating this, is calculated as three times the cost of a minimum food diet in 1963 adjusted for inflation. Three times the minimum food budget. That’s how we calculate the poverty line. That’s how the government does it.

The formula was developed by Amali Orshansky, an economist at the Social Security Administration. In 1963, it’s fascinating, she observed that families spent roughly one third of their income on groceries. Since pricing data was hard to come by for many items, housing, if you could determine or calculate a minimum adequate food budget at the grocery store, you could multiply by three and establish a poverty line. She was careful about what she was measuring.

In her January 1965 article, she presented the poverty threshold as a measure of income inadequacy, not income adequacy. If it’s not possible to state unequivocally how much is enough, it should be possible to assert with confidence how much on average is too little. Basically putting in a floor, a line which families were clearly in crisis.

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Now, 1963, her floor, I guess, made sense. Housing was relatively cheap. Family could rent a decent apartment or buy a home on a single income. Health care was provided by employers and cost relatively little. Blue Cross coverage averaged $10 a month back then. Child care didn’t really exist as a market. Mothers stayed home. Family helped neighbors.

Again, people watched each other’s kids. Cars were affordable, even if they were more prone to be breaking down at that time. Local neighborhoods, kids, kids in VOTEC, they could fix problems around the house. College tuition could be covered with a summer job. Retirement at that time was more pensions rather than 401Ks. Now, the food times three formula was

a crisis threshold, a measure of too little. It corresponded to reality. A family spending one third of its income on food would spend the other two thirds on everything else. And those proportions more or less worked. Below that line, you were in a crisis situation. Above it, you had a fighting chance. Things changed between 1963 and today. Housing costs exploded.

Healthcare became one of the largest household expenses for many families. Employer coverage shrank while deductibles grew. Child care all of a sudden became something, became a market and very expensive. College went from affordable to crippling. Transportation costs rose. Labor model shifted. Second, income all of sudden became necessary.

Okay, mandatory to maintain the standard of living that one income formerly provided. But this is the rules here, so pay close attention. You have a second income, well, you gotta have the childcare. Childcare meant, you had to, that’s what’s gonna watch your kids. So you’ll set up two cars, okay. Basically,

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you know, or you know, maybe lived closer to your parents and they helped out whatever it may be. The composition of household spending transformed. Okay. And 2024 food at home is no longer 33 % of household spending for most families. It’s five to 7%. Housing now consumes 35 to 45 % health care takes 15 to 25 % child care for families with young children can eat 20 to 40.

percent. Now if you keep the same principle this Orshansky’s logic basically the multiplier is not there it’s 16 times not three times 16 times. So if you measured income in adequacy today the way Orshansky measured it in 1963 the threshold for a family of four wouldn’t be 31,200

It would be somewhere between 130 and 150 thousand. And again, Molly Orshansky was only trying to define too little. She was identifying crisis, not sufficiency. basically, we’ll put in the middle, $140,000. What does that tell you about the $31,200 line that we still use? Basically, it tells you that we are measuring

Starvation.

Right now the official poverty line for family of four and 2024 31,200 the median household income is roughly $80,000 Okay, so we’re told that okay someone family earning $80,000 is doing fine safely above poverty solidly middle-class maybe even comfortable

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No, but if you’re using the same logic from 1963, the same model, $80,000, you’d actually be in poverty.

Think about this. He puts together, Michael in this article, he puts together a basic needs budget for a family of four, two earners, two kids. Not counting vacations, no luxuries or anything like that. Basically participation tickets required to hold a job and raise kids, 2024. Child care, $32,773.

Housing 23,267. Food 14,717. Transportation 14,828. Healthcare 10,567. Other essentials 21,857. Required net income $118,009. Then again, you take into account federal state FICA taxes, that’s 18,500. You got a gross income of 136,000.

500 okay, this is you’re using the same Formula same idea that they put together in 1963 that’s the floor And again the the single largest line item. It’s not housing. It’s childcare and Talks about this being the trap You have you know the 80

$80,000 income. Okay, saying most American families, not all, okay, but most required to earners to start to get to that point time. One parent stays home. Okay, the income drops to let’s say 50,000. Okay, that’s not enough. Both parents work to hit 100,000. Well, you got to hand over 32,000 plus to the daycare center. So you can say the second earner is not, you know, looking to pay for a vacation or a boat.

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is basically most of the money is going to pay a stranger to watch the kids so you can make an extra, you know, two thousand bucks a month.

Get it? Now, again, he says here, so well, people are gonna say, well, I’m cherry picking expensive cities. They say 136,500 is a number for San Francisco or Manhattan, not real America. Well, the model that he puts together allocates $23,267 per year for housing. That breaks down to $1,938 a month.

That’s the number that they say that you’re doing just fine. He did a piece where he went to, know, Caldwell, New Jersey, which was a place where, you know, a teamster could afford to live back in the 1950s and the 60s. Went on Zillow to see what it cost to live in that same town if you don’t have a down payment and are forced to rent.

There are exactly seven two-bedroom units available in the entire town. The cheapest one rents for $2,715 a month.

Wow, that’s a $777 gap between the model and the reality. 9,300 a year in post-tax money. Okay, you gotta earn additional $12,000 to $13,000 to afford that. So his point is that his $140,000 number is conservative. He’s being optimistic. And again, you plug in certain zip codes, certain areas of the country, you know,

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you can get up to $160,000. So the market’s not just expensive, it’s broken. It’s broken. And one of the other things that we hear as well from, again, economists, economists out there talking about, you oh, you know, you look at how much better everything is at $140,000. Okay. Oh, geez. Improvement in the quality of life. Okay.

For example, they’ll say, okay, you can’t compare a 1955 car, 1963 car to a car today because today’s cars have airbags and air conditioning and the phones you use today compared to the ones used back then are essentially supercomputers. And that’s true. They are. Okay. But you’re pricing things in wrong.

You’re making a category error when you think that way. You’re not calculating the price of a luxury. You’re calculating.

an entry ticket. Okay, basically the price to participate in our economy. To function in 1955 society, to have a job, call a doctor and be a citizen, you need a telephone line. $5 a month. Let’s adjust for standard inflation. $58 today. Right?

You can’t run a household today on a $58 landline. Okay? Well, you gotta have two factor authentication for your bank accounts. Gotta answer work emails, check on your kids’ school portal, everything like that. You have to have one, okay? You have to have one and you’ve gotta pay for it. That’s what? 200 bucks a month?

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Well, them.

But again, you’ll get an economist and well, you know, look at all the power that you have. Look at the computing power you have. that’s amazing. Okay. Well, what is the computing power you actually need? Makes the point. It’s genius actually. The utility I’m buying is connection to the economy. The price of that utility just didn’t just keep pace with inflation.

it tripled relative to it.

Now you have a participation audit across the entire 1955 budget. Okay. NASK is the car better. I said, I asked what does it cost to get to work? Healthcare, 1955 Blue Cross family coverage was roughly $10 a month, $115 in today’s money. Today, the average family premium is over $1,600 a month. That’s 14 times inflation.

FICA taxes, yeah, 1955 social security tax was 2 % on the first $4,200 of income. The maximum annual contribution was 84 bucks. Adjusted for inflation, that’s about $960 a year. Today, a family earning $80,000 pays over $6,100. That’s six times inflation. Child care, 1955, basically zero.

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The economy supported a single earner model. Now it’s 32 grand. So that’s an infinite increase in the cost of participation. Food. Contract that. Everything else. The inescapable fees required to hold a job, stay healthy, raise children, inflated at multiples of the official rate when considered on participation. Without a doubt.

Are all of these things, goods and services, are they better? Okay? No, I’m not going to want to trade my, you know, flat screen TV in or my iPhone in for a model from back at that point in time. But again, you don’t have a choice either. That’s the point. Now, the issue we have here, and I’ve talked about this before, is how we structure things in society. You talk about labor participation and why labor…

dissipation so weak people can’t get their arms around that. The safety net that we have in this country, okay, we have it there is supposed to catch people at the bottom, right? Again, want to help people out. But it makes it very difficult for people trying to climb out. As income rises from 40,000 to 100,000 benefits disappear faster than wages increase. Now,

Thirty-five thousand dollars, okay? Family is struggling. Family of four is definitely struggling. State provides a floor. You get Medicaid. You get SNAP. Heavy childcare subsidies, okay? The deficits are real, but capped, okay? Then you get to forty-five thousand dollars. Family earns, makes ten thousand dollars more. Is that good news? Well, at that point in time, parents lose Medicaid eligibility.

Suddenly, they gotta pay premiums and deductibles. So you gain $10,000 in income, your expenses increase over $10,000, $10,567 was his calculation. You’re basically poorer than before. So the effective tax on your $10,000 raise is over 100%. Then, well, you work harder. You get to $65,000.

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Now they’re called working class. But at this level, child care subsidies vanish. Now must pay the full market rate for daycare. Income gain $20,000 from $45,000. Expense increase $28,000. Going backwards.

Going backwards. And using the numbers he came up here, essentially, a family earning $100,000 is effectively in a worse monthly financial position than a family earning $40,000. At $40,000, says the family is drowning, but the state gives you a life vest. At $100,000, you are drowning, but the state says you are a high earner and ties an anchor to your ankle called market.

price. So basically, you want to talk about it in terms of options. The government has sold a call option to the poor, but they’ve rigged the gamma. As you move closer to the money, self-sufficiency, the delta collapses. For every dollar of effort you put in, the system confiscates 70 to 100 cents. Now, if you were a trader, this was an investment thing.

Would you make that trade? And you wonder why, you we wonder why sometimes why some of this labor force participation lags. And I’ve talked about this before in certain states, the various different aid that they put out and the donut holes and the issues that it causes. Yeah, an excellent piece, okay? And it goes on in a myriad of different other things. And like I said, I’ve looked at some of the numbers.

You know, some may scream, it’s too high for childcare. can get it, whatever it may be. I think you get the point. I you get the point. And it’s just been getting progressively worse in this country without a doubt.

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without a doubt and we’ve been beating this drum for some time. You know, it was interesting. There was a meeting of the minds at the White House on Friday, had Trump and Mamdani meet there and I got a lot of emails, snarky emails from people out there making jokes in regards to this meeting. Yeah, they both want to bring prices down and Trump says he hopes he’s going to do well.

We need more capitalism, less government in order to get the country moving and grooving again, we really do. know, Mamdami’s ideas, they’re not gonna work. But what we’re doing right now as a country in regards to the regulatory capture,

Regulation all of the the hoops and everything that everyone has to go through the high taxes That we have to pay here making it very very difficult and again when you lose that much buying power and you take a look at these numbers and what people have to spend even to participate gives you a different kind of Outlook and what’s really going on out there and how difficult it is? Families are gonna need to really you know, okay have to stick together

have to stick together to kind of work your way through this reality. Again, know, I throw it out to everyone out there to challenge, you know, some of the numbers or push back, you know, on some of this. And again, I can hear it. know I’m going to get, oh, you know, health care is much better today. I understand that. I get all that. But it’s so ridiculous. It’s so bad. We all know.

that the healthcare system now is horrible here in this country. We all know what we have to pay. I can’t even get around. mean, I constantly, you know, I’ve got insurance, I’ve got high level, got health, safe account, all this stuff. You know, I’m, constantly getting bills in mail. I can’t even keep track of what’s been paid, what’s out the door. It’s crazy. So once I got a higher full-time account just to handle your own healthcare. Okay. This is, this is what we have. This is what people have to deal with. Again, what we’ve done.

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to food here in the United States and how expensive food costs are. It’s nonsensical. Figuring out the other day, know, someone was talking about the fact they get all the, they talk about the meat pack here in the United States. They’re almost all owned by Blackstone, different companies, but owned by Blackstone. These are the type of processes that I’ve warned about going back to when they repealed Glass-Steagall, the end of the Clinton administration pushed forward by both Democrats and Republicans.

where Wall Street owning entire processes. can go back to, it’s probably the oil problems back and they actually containers owning where the storage was. You can go back to all of these things, to corner market, to Enron. And it’s we the people that are always getting hit on these things. Again, free market capitalists.

Simple, straight rules. We have to do everything in our power to get the cost of living down here in the United States. Trump had some good ideas in his first term. He had some excellent ideas in the first, his Republican platform going back to 2016. Now, I don’t know, you tell me. Lot of meetings with.

with CEOs on a regular basis in the same way Obama had a lot of meetings with CEOs or Biden had a lot of meetings with CEOs. Why? Let the CEOs do what the CEOs are gonna do. Why don’t you just go out there and allow business to be had? Don’t allow them to continue to get larger with various different special deals and public private partnerships and all this other crap, okay? Because it’s not working. Not working.

Okay, affordability crisis is that they’re throwing that term around all the time. Don’t tell me it’s not real. Watchdogonwallstreet.com