Understanding the Impact of a Cost-of-Living Crisis on Individuals
President Joe Biden recently addressed the nation to discuss his economic agenda, highlighting his plans to bring high-speed internet to rural America. While this may be a positive step forward, many Americans who are currently grappling with a cost-of-living crisis are seeking more immediate relief. Economic polls have consistently shown that millions of Americans have become increasingly frustrated with the state of the economy over the past three years. Despite positive numbers such as gross domestic product (GDP) and consumer spending, the reality is that many individuals are worse off now than they were in previous years.
The data reveals a troubling trend – annual inflation has consistently outpaced earnings growth for the past 26 months. This has led to a decline of approximately 4.5 percent in real incomes since January 2021. President Biden, however, maintains that the country is doing well economically. Yet, just hours before his speech, the Bureau of Labor Statistics (BLS) released data indicating that real earnings have actually fallen by 1 percent for the bottom half of workers during his tenure.
Such economic struggles have left many Americans struggling to make ends meet. The record-breaking credit card debt, standing at $1.1 trillion, is evidence of their financial strain. Additionally, a staggering 60 percent of Americans live paycheck to paycheck. Even with multiple jobs, individuals are finding it challenging to boost their incomes and improve their financial situations.
To cope with their financial burdens, many Americans have turned to alternative financing options like buy-now-pay-later plans. In fact, the holiday season saw individuals maxing out their credit cards to cover their expenses. Shockingly, a quarter of Americans have yet to pay off their holiday debt from 2022. This reliance on credit has led to an increase in defaults and delinquencies on consumer debt, including credit cards, at a rate not seen since the Global Financial Crisis.
The situation is further exacerbated by the underestimation of inflation in official metrics like the consumer price index (CPI). Methodological changes over the years have led to an inaccurate representation of the true cost-of-living crisis, particularly in housing. Affordability has plummeted in the past three years, and according to the Federal Reserve Bank of Atlanta, only one metropolitan area in the entire country has a median-priced home that is affordable with the median income. Families are resorting to maxing out their credit cards just to pay their rent.
What is alarming is that this debt-driven consumer spending spree mirrors the federal government’s spending habits. The national debt has surpassed $34 trillion, with an additional $1 trillion being added every 100 days or so. Interest on the debt now stands at $1 trillion annually, making it the third-largest budget item, trailing only the Social Security Administration and the Department of Health and Human Services.
The explosion in both government and consumer debt is not a coincidence. Rampant federal spending has forced the Federal Reserve to create trillions of dollars to help the Treasury Department pay its bills. This has led to a surge in inflation, reaching levels not seen in 40 years. Consequently, workers have lost purchasing power, compelling them to take on debt in order to maintain their standard of living.
Ironically, President Biden cited his American Rescue Plan and the infrastructure bill as key elements of his economic strategy that have supported the expansion of high-speed internet access. However, these multi-trillion-dollar spending packages have also fueled inflation. While the President predicts that everyone in North Carolina will have high-speed internet access by the end of the decade, the reality is that the explosion in government spending will result in a federal debt exceeding $52 trillion by that time.
The relentless influx of government debt will only exacerbate inflation and further worsen the financial situations of American families. Rather than focusing on internet speed, the primary concern of Americans today is their inability to afford basic necessities such as food and housing. To address this cost-of-living crisis, it is crucial to reverse the underlying cause – runaway government spending.
In conclusion, the cost-of-living crisis in America has left millions of individuals struggling to make ends meet. Despite positive economic indicators, such as GDP and consumer spending, real incomes have declined, and inflation has outpaced earnings growth for an extended period. Americans are burdened by record-breaking credit card debt and are resorting to alternative financing options to cover their expenses. The underestimation of inflation in official metrics contributes to the severity of the crisis, particularly in the housing sector. This alarming situation is further aggravated by runaway government spending, resulting in a surge in both consumer and government debt. The impact of this crisis is felt by families across the country, who are unable to afford basic necessities. Reversing this cost-of-living crisis requires a fundamental shift in the approach to government spending.
