Cass on Our Diminished Income

Way back in The Before Times, in the Long, Long Ago, before The Age of The Virus, Oren Cass presented a series of sixteen tweets, asking this question:  “How is that our economic statistics suggest workers have been making slow but steady progress in recent decades, while popular perception is that their family finances are coming under increasingly untenable pressure?”

Cass also wrote about the issue in greater detail in American Affairs and in a lengthy paper for the Manhattan Institute.  That question—why does it feel like it’s harder to make ends meet now, even though inflation is low and we’re wealthier?—is one of the gnawing concerns of modern-day America.

Cass offers a brief explanation in his second tweet:

A key line:  “In 1985, the typical male worker could cover a family of four’s major expenditures… on 30 weeks of salary.”  Now it takes fifty-three weeks, meaning there literally aren’t enough weeks in the year for the average male to earn enough to support his family.

Part of the problem, per Cass, is that while we may earn more inflation-adjusted dollars than we did in the 1970s or 1980s, the costs of our goods have grown.  Cass uses the example of an automobile:  vehicles now are far more feature-rich than their earlier counterparts, and last longer.  That’s great, but it means the cost of a newer vehicle can be prohibitively expensive:

You probably could find a 1996 Grand Caravan still running somewhere (if anyone is interested, I know where you get a good deal on a 2006 Dodge Caravan), but it’s not really a practical option.

To offer an anecdotal example:  I recently bought a very inexpensive 2017 Nissan Versa Note SV that had been used as a rental car for its entire existence.  I really had to pound the pavement to pay less than $10,000 for a small vehicle with reasonable mileage (around 45,705 miles when I bought it in January), and I think I got a good deal.  I was able to pay cash (I essentially paid for the vehicle with what I earned, before taxes, from teaching lessons and playing gigs in 2019), but it put a serious dent into my emergency fund (the silver lining: it stalled my 2020 IRA contribution of $6000, which would have likely evaporated with the shutdowns).

I’m a single, unmarried man with no dependents.  I’ve hustled and worked multiple jobs for nearly a decade, slamming as much as legally allowed into retirement and my HSA.  With support from my folks and God’s provision, I’ve been able to do well enough—I own a house outright; I own two vehicles free-and-clear; I still have a decent, though diminished, emergency fund.  I’ve negotiated hard for a decent wage for the work I do.

But if I were married and had children, it would be extremely difficult to cover everything.  I would have to scale back retirement contributions, which would be a necessary sacrifice, and would help (about 2/3rds of my paycheck goes towards HSA and 403(b) contributions; my IRA contributions are the results of careful saving all year, and usually come from my side gig earnings), but that would cause the costs of my health insurance to skyrocket.

Even now, without children, if I cut back on my retirement contributions, it would cause my health insurance rates to shoot up.  I currently deduct my 403(b) contributions ($19,000 a year), HSA contributions ($3550 a year, I believe), and traditional IRA contributions ($6000 a year) from my gross income to arrive at my Modified Adjusted Gross Income (MAGI), which in the eyes of the Department of Health and Human Services is what matters for subsidies under the Affordable Care Act.  If I didn’t do any of that, I would pay around $375-400 a month for a catastrophic health insurance plan with a $6750 deductible (after which, mercifully, 100% of expenses would be covered)—a deductible so high, even breaking my wrist in 2017 wasn’t enough to reach it.  Instead, I pay around $20 a month (and, for years, nothing) for a policy that would have cost a reasonably healthy man in his mid-30s around $40 or $50 a month—totally reasonable.

Add a spouse and some tykes to that, and the costs would get prohibitively expensive fast.  Presumably, my spouse would have to work; maybe we’d get health insurance that way.  Regardless, it would require some major adjustments, and become a huge chunk of our monthly budget.

Again, from Cass:

A premium increase of $13,000 a year?! No wonder people are clamoring for “Medicare for All.”  Socialized medicine is a phenomenally bad idea, but people think our current regime (and the one that immediately preceded the ACA) is “free-market”—it isn’t—so the proposed solution is to let government pay for it.

That will lead to horrible healthcare, and rationing of it—death panels—but people are willing to do it out of both ignorance and desperation.

As I’ve written, I’ve been very blessed.  If I got married and didn’t have kids, and my spouse worked, we’d do pretty well.  But there are so many structural disincentives against family formation, it’s little wonder we’re seeing declining birthrates.  Job prospects are just going to get worse due to these extended shutdowns.

I know God is in control, and I’ll live a very financially comfortable life when I’m 70.  But does that mean I and most other Americans will have to struggle perpetually for the next thirty-five or forty years?  Most folks aren’t in the blessed position I enjoy, where they can sock away money for retirement or emergencies (indeed, most Americans can’t even meet a $500 emergency, which is one reason we all got inflationary TrumpBux—well, I’m still waiting on mine).

Yes, we’re way better off than anywhere else in the world.  That doesn’t mean our situations don’t suck here.  We sacrificed social stability and family on the Altar of Efficiency, and now we have childless two-income couples scraping by instead of happy, child-filled families where a father can work as a gas station attendant and feed his kids.

Something’s gotta give.

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