People Can't Pay Rent, Debt Is Insane, and the Economy Is Somehow 'Great'
Decades of the government helping the rich are coming home to roost.
President Donald Trump and Speaker of the House Paul Ryan last year. (Photo by SAUL LOEB/AFP/Getty Images)
It's not exactly a secret that the way America measures economic growth can leave regular people wondering why and how they're still struggling just to survive. Unemployment, as President Trump took care to remind us with another unhinged and hyperbolic tweet this week, is at an almost 50-year low. After a spectacular 2017 and iffy early stretch this year, the stock market is once again trading high. Banks just enjoyed their most profitable quarter ever, encouraging the chair of the Federal Reserve—Wall Street vet and Trump pick Jerome Powell—to declare the economy in "great shape" Wednesday, and even raise interest rates on the debt owed by millions of Americans. On the surface, things look good, right?
Maybe that's why a new report from the Low Income Housing Coalition, a liberal advocacy group working in partnership with Senator Bernie Sanders, landed with such a resounding thud Wednesday. The chief takeaway wasn't even the most breathtaking, even if it still felt like a gut punch: There is not a single county in America where someone earning minimum wage can afford to rent a two-bedroom apartment while working a normal 40-hour week. More shocking: You would have to work 122 hours a week for all 52 weeks of the year to afford rent on a two-bedroom at the national average rate on the federal minimum wage of $7.25. You don't need to be a democratic socialist firebrand or an advocate for the poor or even a policy wonk to see that something is deeply, deeply out of whack here.
Part of what's going on is that even as unemployment is extremely low and the macroeconomic picture looks rosy, actual workers' incomes aren't necessarily rising the way they should be. And as Eric Levitz noted at New York, inflation—now higher than it's been since 2012—is gobbling up any extra money that is being brought in these days by those who aren't extremely wealthy. Meanwhile, many Americans are spending whatever extra income they might be enjoying during these so-called boom times making a dent—and not necessarily a very large one—in their credit card debt. Their $40.3 billion in credit-card payments last quarter, according to MarketWatch, represented the second-biggest outlay toward digging themselves out of that hole since early 2009. The problem is that their new credit-card debt at the end of last year was the highest in a decade, at $91.6 billion.
More broadly, the divergence between the performance of the overall economy and the lot of the average American worker has exploded over the past few decades. Even if the economy really is humming on all cylinders right now, it's not exactly shocking that basic necessities like rent and escaping debt would still be out of reach for many Americans.
"We decided on all these policies that had the effect of redistributing income upward—that's a four decade long story," Dean Baker, co-founder of the left-leaning Center for Economic and Policy Research, told me. "You're not going to reverse that in two or three or four years."
And it's not like the Trump administration is actually trying to reverse it. The tax cuts passed last year represented an historic gift to the super-rich, and are sure to explode income inequality. When it comes to housing, traditionally a talisman of adulthood and maturity and independence, and often one of the largest expenses for individuals and families, looking to the overall inflation rate is misleading. Housing prices, especially but not exclusively in West Coast cities like San Francisco and Portland, are just getting more expensive, faster, than just about anything else.
This is actually a relatively novel phenomenon.
"That hasn't generically been true—wasn't true in the 80s, wasn't particularly true in the 90s," Baker told me. "It's mostly been a very recent story. So if we talk about 2011 to the present, housing prices have—rental prices—have been outpacing the inflation rate."
One thing to keep in mind is that not everyone in America pays for rent solely with their wages—millions of us get help from the feds or other government entities. Or at least we have been. Ben Carson, Trump's housing secretary, recently proposed savage cuts to rental assistance for low-income people—effectively tripling their rent, as the Washington Post reported in April. A democracy that cared for its citizens might be able to fill the gap between a weak minimum wage and middling incomes generally and the high cost of living, but that's not the country we live in.
Looking ahead, there are some reasons for cautious optimism. Wages really have been increasing. Unemployment really is low, even if those numbers are misleading to some extent because many Americans dropped out of the workforce—that is, they stopped trying to find a job. Much of the rent explosion is confined to a handful of cities on the coasts, and there's hope that revitalizing (if also gentrifying) cities like Detroit might help ease some of the pressure on those elite housing markets. But the broader picture is a darker one.
"There are many places in this country where low-income people go through tremendous economic stress to afford housing," Jared Bernstein, an economist and senior fellow at the liberal-leaning Center on Budget and Policy Priorities who advised Vice President Joe Biden, told me. "I don't see that changing any time soon."
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