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When someone tells you that they are struggling, it is generally a good rule of thumb to take them seriously. So it was not the best political move for President
At the same time, it is important to note that there is not a widespread "affordability crisis" in the
Affordability has been an issue for years, but it became an acute problem when inflation spiked after the pandemic and there was a drop in real income. Inflation is still high, about 3%. But real income growth is still positive for most Americans, suggesting that income is rising to cover many of the goods and services that are increasing in price.
There are caveats. For the bottom quartile, real wages are not rising as fast as for the other two. And even for the middle class, real wages haven't risen enough to keep pace with the increase in some critical goods and services.
Measuring the overall impact of all this is a challenge, because different households have different needs and priorities. There have been some high-profile estimates that show the middle class falling behind, but they make some questionable assumptions.
For example, they typically assume that a middle-class family has two children who require care. Child care is expensive, and it is often necessary even after children start school (though once they do, costs do go down significantly). These costs are a real burden for many families, and more can and should be done to help them.
But this is not a nationwide crisis that affects a majority of Americans. In fact, only about 11% of American households contain at least one child under the age of six.
Another big expense facing Americans is housing. In urban areas, the rental value of a primary residence has increased nearly 30% since 2020, and higher interest rates on mortgages have made it harder for a lot of people to buy a home. But about two-thirds of American households are already homeowners, and about half of outstanding mortgages have a fixed interest rate that is less than 4%.
Yes, these conditions make it harder for these families to move, and it is more expensive for everyone who is not a homeowner. Yet it's difficult to argue that most households can't afford the cost of housing.
What about the cost of food? Food prices are up 27% since 2020 and are still rising about 3% a year. For lower-income Americans, this is a real burden and helps explain why their real incomes have fallen or are flat. The impact of tariffs is no doubt making things worse. For the average household, however, food remains a small part of the budget.
My argument is not that affordability is not an issue. It is that we should be more precise about what affordability means, and for whom. Many of the more vocal complaints about affordability come from young childless households in large metro areas or those in the upper-middle or even upper class, and what they're complaining about is how they can't afford the trappings of affluence.
True, housing in cities has become more expensive than ever. Undoubtedly there are young people looking to build their careers in large cities who can't afford to do so. Like other generations before them, they may have to endure the hardship of not living in their ideal city or dealing with unpleasant roommates. Some of the challenges they face are new, but they are not remotely comparable to those of people on fixed incomes who struggle to afford food.
Another source of affordability anxieties is the residual sticker shock of high inflation from a few years ago. Prices went up a lot, and while the rate of inflation has since fallen, actual prices have not come down. Incomes may have risen since then too, but not for all families. More generally, inflation is just a bigger risk than it was before, and the job market is worsening. All of this makes consumers more wary and darkens the economic mood.
Affordability is a genuine problem that requires more attention from policy makers. Expanding child-care options, for example, or reducing tariffs and housing regulations, would go a long way toward helping struggling families. But it's just as unhelpful to refer to the affordability crisis as it is to call it a hoax.
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Allison Schrager, a Bloomberg columnist, is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
Previously:
• America gets retirement wrong. Can Vanguard fix that?
• The American middle class is shrinking, and that's OK
• Want to buy a home? It's OK to wait till you're 40
• Mamdani is benefiting from New York City's changing workforce
• How can an economy this good feel this bad?
• Why boomers have more money than everyone else
• Democratize private investment?
• Lab-grown diamonds are testing the power of markets
• Inflation ate your free lunch, but you're still better off
• Good debt? Bad debt? There's no such thing
• Megabills didn't break the economy before and won't now
• America's broken politics is breaking economics, too
• A college degree is no longer a risk-free investment
• Break up Columbia? Maybe, and the rest of the Ivy League, too
• Even Dems might like MAGA accounts
• Reality Check about possibile volatility in trade war
• Is this really how American exceptionalism ends?
• The free-market conservative is a vanishing breed
• Shareholder capitalism is back
• Europe's risk aversion comes with consequences
• The Oxford curriculum that American universities need
• Private equity won't diversify your portfolio
• The era of declining interest rates may have come to an end, and many investors don't seem to realize it
• This one weird trick could save the U.S. economy
• The Fed's damage to the housing market may last years
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• To bring back the office, bring back lunch
• Does it really matter who gets into Harvard?
• Our pensions shouldn't be used to juice the economy
• A soft landing won't mean the economy is safe
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• Say it with Rubio: Changing clocks is stupid
• Sure, we'll return to the office in 2023 but not to stores
• How to manage the biggest risk of all: Uncertainty
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• Harry and Meghan and the perils of superstar culture
• Norman Rockwell's economy is never coming back
• Burned by crypto? Don't learn the wrong lesson
• Quiet Quitters are looking in the wrong place for meaningful work
• America's MBAs are the latest skeptics of capitalism
• Generation Z is getting a harsh lesson in stock risk
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• Buck up, boomers. You're still better off than your parents
• How to manage the biggest risk of all: uncertainty
• Startup boom is the kind of risk-taking Americans need
• Gen Z is too compliant to achieve greatness
• A bigger child tax credit isn't the poverty solution we need
• Finding your power in a higher-priced world
• The Biden administration's plans to double the tax rate on capital gains will prove costly to all Americans, not just the wealthy
• WARNING: Feel Good Now --- Pay Later: Stimulus is crammed with goodies but makes no economic sense
• The 'Stakeholder' Fallacy: Joe Biden's vision of capitalism is a recipe for failure