American Life: Less Ordinary

It’s a poverty where you may still have most of the accoutrements of middle-class life. But your relationship with the financial elite has changed: you are indentured to the credit industry — for life

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Tuesday, December 2^nd, 2025

Bill Bonner, from Baltimore, Maryland

Fortune Magazine reports:

Wall Street strategist explains today’s political rage with a poverty line that should be $140,000 and the ‘Valley of Death’ trapping people below it

Analysts believe the election of Mamdani in New York City hingedo on the ‘affordability’ issue.

The feds report decent numbers — unemployment, inflation, GDP etc. But out on the street, it’s becoming more and more difficult for ordinary people to afford an ordinary life. On the surface, the reason for this is that an ‘ordinary’ has become much more expensive. Deeper down, the ‘ordinary’ life has become a trap.

So, when Mamdani proposed giveaways — lower rents, free transportation, childcare etc. — voters went for it.

The feds’ numbers don’t tell the real story. While people still have jobs...and places to live...the cost of an ‘ordinary’ life is much higher. And when you look at it through a realistic, street level lens, you see that millions of Americans are trapped. Michael Green calls it a ‘Valley of Death.’

The poverty line, he points out, was calculated in 1963 and defined as three times the cost of a minimum food diet.

Green:

‘The formula was developed by Mollie Orshansky, an economist at the Social Security Administration. In 1963, she observed that families spent roughly one-third of their income on groceries. Since pricing data was hard to come by for many items, e.g. housing, if you could calculate a minimum adequate food budget at the grocery store, you could multiply by three and establish a poverty line.’

That seemed like a pretty reasonable way to look at it — at the time. If people could cover their food with a third or less of their income, they would be free to spend the rest of their income as they pleased.

Trouble is, since 1963, ‘ordinary’ expenses have greatly expanded. Housing is now much more expensive. A typical house sells for $420,000. But the typical family can only qualify for a house costing less than $300,000.

And healthcare insurance barely existed in 1963. Blue Cross/Blue Shield cost families about $10 a month back then. Now you expect to pay about $600 a month on the ACA marketplace.

Childcare, too, is now regarded as a necessary expense. In 1963, mothers stayed home. In the ‘60s, too, we paid our tuition at the University of Maryland with a summer job. Now, tuition for in-state students is $11,000…out-of-state students pay $40,000.

And when you retired in the ‘60s, you had usually already paid off your mortgage and your car was yours, free and clear; with a modest pension and Social Security, you could be fine.

Today, food is only 5% to 7% of the typical family budget. Housing now costs 40%. Healthcare is about 20%. And for young families with children, childcare takes another 20% or more.

This leaves us with a whole different calculation of the poverty line. Green:

If you measured income inadequacy 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 $130,000 and $150,000.

Green lays out the math, beginning with the average ‘ordinary’ costs per family:

• Childcare: $32,773

• Housing: $23,267

• Food: $14,717

• Transportation: $14,828

• Healthcare: $10,567

• Other essentials: $21,857

• Required net income: $118,009

• Add federal, state, and FICA taxes of roughly $18,500, and you arrive at a required gross income of $136,500.

Everything not subject to import competition got marked up – childcare, tuition, healthcare…and housing.

And then, in the modern world you need to stay connected – to your work and your family. In 1955, says Green, the cost of ‘participation’ in modern life was $5 a month for a landline telephone. Now, you will need broadband and a smartphone. Expect to pay $200 a month, he says.

Of course, it varies with location. In some parts of the country — San Francisco or New York, for example — you would need more than that. In Arkansas and Mississippi, maybe substantially less.

But Green is describing more than just a new calculation. He’s talking about a new form of misery.’ It’s a poverty where you may still have most of the accoutrements of middle-class life. But your relationship with the financial elite has changed: you are indentured to the credit industry — for life.

When the children get older, they may go to college. As explained by the above math, relatively few families are able to save enough to pay the tuition. So, they borrow.

And the kids come out of school facing a lifetime indenture — first for tuition, then for cars... next for housing...and then for the rest of the necessaries of an ‘ordinary’ life. They will spend their whole adult lives trudging through the Valley of Death…and may never get to the other side.

More to come...

Regards,

Bill Bonner