This week, headlines across the country reported smart economic news for the American people: “Inflation Rates Continue to Calm. ” This would likely be wonderful news for Wall Street, investors and Federal Reserve economists, but working Americans aren’t breaking out their champagne glasses. They don’t even open an extra beer or order extras at McDonald’s. And there is an explanation for this: despite what the media may say, they cannot do it.
The fact is that there are two economies in the United States lately, one that seems smart to a small percentage of Americans, which I’ll call the global economy and which is represented through the Consumer Price Index (CPI), the Dow Jones, and the NASDAQ. And then there’s genuine economics that puts pressure on families living from one paycheck to another. And a huge hole between the two.
The dissonance between the aggregate economy and the genuine economy is striking for two undeniable reasons: The burden of the things that are important to American life (the constant burden pieces that we cannot reduce or replace) are not adequately represented through the CPI . , the CPI measures monthly and annual rates, but does not take into account the extra amount Americans pay for goods compared to, say, 2020.
The real cost index, not the CPI, is the number Americans feel the most. This is the number that Americans literally know, a number that no amount of positive economic communication or government knowledge can cure.
Earlier this week, the Wall Street Journal published an article on exactly this topic, reporting on the constant prices that are crushing family budgets. Items like rent and electric power have risen up to 10 percent over the past two years, and hard-cutting expenses like water, sewer and garbage collection have risen nearly 11 percent over the past two years.
Then there’s the transportation charge, which includes maintenance, car payment, and insurance. That number has risen to 18 in the last two years alone, and Americans are driving older cars; The average car on the road is now a record age of 12 years. And Americans are financing those cars longer than ever before: 67 months for a new car loan and close to that term for used car loans as well.
And then there’s the charge of owning a home. According to the National Association of Realtors, the average monthly loan payment was $2209 in April 2024, up from $1957 the year before. Worse, home insurance prices have risen more than 11% in the past year and more than 40% in the past five years, according to S
The Wall Street Journal spoke with Jasmine Moore, a 32-year-old lead chief operating officer at a nonprofit organization and a single mother of a 10-year-old son. He had recently missed a payment on his car insurance because it had doubled from $195 to $395. She described the prestige of her bank account as close to overdraft and talked about skimping on things like tutoring her son (she now does it herself) and buying groceries at supermarket chains or pantries (no longer at Publix department stores). ).
“I have a middle-class salary,” Moore told the Wall Street Journal. “But I feel like I have less income. “
She is alone. Millions of Americans feel the same way and are dissatisfied with it, no matter how much cheerful communication surrounds the economy and the soaring stock market.
Americans are even cutting back on their discretionary spending, especially on fast food. McDonald’s, America’s largest restaurant chain, has extended its $5 value meal through August. Appearing on The Today Show when the plan was first introduced in June, McDonald’s USA President Joe Erlinger explained the offer. “I’ve been zig-zagging all over the country, visiting our eateries, participating in rally groups. Customers tell us they’re overwhelmed,” Erlinger said of McDonald’s customers. “They have felt the strain of inflation in recent years and so this is a wonderful opportunity for McDonald’s to offer them pricing. “
The company that brought the Happy Meal to the world doesn’t engage in the kind of satisfaction chatter we hear from experts, politicians, and economists about the latest inflation and CPI numbers. Because they know that the real burden index puts pressure on household budgets. And stressful for millions of hardworking Americans.
This tale of two economies continues to spread throughout the United States. Politicians who see the difference between the two and who speak obviously and directly about the reasons for and responses to the challenge will likely reach not only the White House, but Congress as well.
To paraphrase Jim Carville, this election is about genuine economics, the economics of headlines, stupid.
Lee Habeeb is vice president of content for Salem Radio Network and host of Our American Stories. He lives in Oxford, Mississippi, with his Valerie and his daughter Reagan.
The perspectives expressed in this article are those of the author.
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