Simplify Asset Management chief strategist Mike Green hit the nail on the head on his Substack post on why so many Americans feel like they’re drowning these days. Green also delved into how we measure the federal poverty level, and why it’s completely inadequate in today’s society.
Here’s a portion of his post, titled Part 1: My Life Is a Lie, How a Broken Benchmark Quietly Broke America, and after all of the facts and figures in the beginning, here’s some of the meat of it:
This week, while trying to understand why the American middle class feels poorer each year despite healthy GDP growth and low unemployment, I came across a sentence buried in a research paper:
“The U.S. poverty line is calculated as three times the cost of a minimum food diet in 1963, adjusted for inflation.”
I read it again. Three times the minimum food budget.
I felt sick.
After discussing that the number was based on the fact that most families at the time spent roughly a third of their income on food, and during that time housing was relatively cheap. So was healthcare. Most women stayed at home and both parents did not need to work, and then things changed:
Housing costs exploded. Healthcare became the largest household expense for many families. Employer coverage shrank while deductibles grew. Childcare became a market, and that market became ruinously expensive. College went from affordable to crippling. Transportation costs rose as cities sprawled and public transit withered under government neglect.
The labor model shifted. A second income became mandatory to maintain the standard of living that one income formerly provided. But a second income meant childcare became mandatory, which meant two cars became mandatory. Or maybe you’d simply be “asking for a lot generationally speaking” because living near your parents helps to defray those childcare costs.
The composition of household spending transformed completely. In 2024, food-at-home is no longer 33% of household spending. For most families, it’s 5 to 7 percent.
Housing now consumes 35 to 45 percent. Healthcare takes 15 to 25 percent. Childcare, for families with young children, can eat 20 to 40 percent.
If you keep Orshansky’s logic—if you maintain her principle that poverty could be defined by the inverse of food’s budget share—but update the food share to reflect today’s reality, the multiplier is no longer three.
It becomes sixteen.
Which, as Green discussed, takes the poverty threshold from just over thirty thousand to somewhere between$130,000 and $150,000.
Green was making the rounds on some of the cable news shows this week, and surprisingly his interview with Fox Business Network’s Charles Payne (see above) was better than the one he did on CNN.
Payne asked Green what made him go down this rabbit hole to begin with, and Green proceeded to explain what made him look into how poverty is measured and dug into some of the numbers in the piece:
GREEN: Well what actually sent me down this, we’d actually talked about a couple of the pieces that I’ve done before on this where I was just candidly horrified by the reaction that we saw on Twitter to a right-wing influencer posting a somewhat inaccurate picture of a house saying, in 1950, a single income could afford this.
There was an incredibly coordinated and messaging backlash that basically boiled down to, what possible right do you have to expect this? You’re nothing, right? That framework ultimately sent me down the path of saying, hey wait a second, this is actually really missing something that people are trying to convey.
And as I dug into the numbers, and I wrote this on my piece, I was candidly horrified, because as somebody who comes out of the financial world who has done very well and is an incredibly appreciative for it, and whose children have been successful right I look at this and I’m like this is something I never really spent a lot of time thinking about.
The minute you dig into it you discover that there’s actually a terrible story out there.
PAYNE: So maybe you were living in an ivory tower and didn’t know it?
GREEN: I absolutely knew I was living in an ivory tower. My life is like, you know, very few people have this.
PAYNE: The real math of survival though. So we’re talking about real survival, real poverty line, childcare, $32,000, housing, $23,000, food, almost $15,000, transportation, almost $15,000, healthcare, almost $11,000, other essentials, $22,000, add-in taxes.
You’re saying the real poverty line is $140,000, essentially.
GREEN: It is very close. And I want to just be clear that that $140,000 doesn’t mean you are literally poor, right? We’re not talking about, you know, country poor sort of stuff. What I’m describing there is that’s really the threshold at which you can cover all of the expenses without government assistance and start saving, right? Start preparing for your future. That’s a very, very different place than most people think it is.
PAYNE: Now, obviously, people hit you and saying, and you talked about this a little bit in the piece that hey, know, it’s a lot different in Mississippi than it is in Manhattan.
GREEN: It’s a lot different in Mississippi, and what’s been so interesting to me is actually the anger and frustration and resentment of that number is typically coming from people who don’t have kids. I see a lot of young, informed, intelligent commentators like, this is absolutely ridiculous, $32,000 for childcare.
And in the meantime, the vast majority of my comments that are coming in are from people who are actually in that situation saying you’re 100 % right. This is exactly my experience.
During the CNN interview, Green further explained what’s happening to families due to the poverty line being set so low:
SIDNER: You talk about the fact that the way it was calculated was three times the amount of your food budget, and it didn’t take into account many other things that are modern now that people have to deal with, like child care. I do want to ask you about this term, valley of death. What do you mean by that term? Who is in this valley of death?
GREEN: The vast majority of American households, unfortunately. So, what’s really happening is that use of the poverty line is the point at which we start declaring, you’re doing OK. You no longer need tax benefits, assistance, et cetera. At roughly $35,000 a year, slightly above that poverty threshold for a family of four, two earners, two children, you start losing food benefits. At about $45,000, you start losing housing benefits. At about $50,000, $60,000, you start losing child care benefits. And so, at every point in that process, people are having more income benefits taken away from them than they’re earning in incremental income. That makes it effectively a valley that they’re trying to climb out of, and one slip, one period of unemployment, one transmission broken on your car can be enough to send you right back down into the pit.
Sidner asked Green what the fist step was in trying to fix this, and rather than give any solutions, Green said he was trying to raise awareness on the issue and then dished up a big heaping helping of both-siderism.
The main thing missing from Green’s article and both television interviews was any sort of solution, although I believe he’s going to follow up with suggestions in another post on his Substack. We’ll see whether it’s paywalled, and whether it’s anything worth considering given this comment he made during the CNN interview:
GREEN: All right. At the extreme end of it, seniors who are operating off of fixed pensions and who paid into the system and did the right things are looking at this, and they also can’t imagine it because it’s a world that didn’t exist.
So, really, I would just emphasize that more than anything else, this piece is just trying to make people aware and start the process of conversation so that those in the middle are actually feeling heard. Those at the extreme right are suddenly actually aware. Those who have done very, very well, my peers in this space, need to be aware of this stress and strain that is coloring the electorate and driving things like the election of Mamdani here in New York City, to which most people are like, well, that’ll show them they’re going to get communism, right? We never asked why. We just didn’t stop and say, why are they voting this way?
And here’s the both-siderist follow up to that:
GREEN: And I do want to emphasize, this is a bipartisan issue. Part of the reason I started on this path was my anger and frustration at the response that came typically from the left mocking many of the concerns around affordability. The entire series started when a right- wing influencer put up a post that said, in the 1950s, a single income could afford, right? And it turned into this giant mocking campaign. We’re doing it on both sides. On the right, we’re pretending the problem doesn’t exist. On the left, we’re pretending the problem doesn’t exist. We need to actually listen to what people are telling us.
SIDNER: Best advice of the day. Thank you so much.
Yeah, no. We all know what’s caused this, and if you want some advice on how we got here and what needs to happen to change it, I’d highly recommend these articles by Paul Krugman:
Understanding Inequality, Part I
Understanding Inequality, Part II
I’m happy to see Green bringing some attention to how poverty is measured in the United States and how that’s doing real damage to people with qualifying for help. I’m not optimistic about what his solutions will be, but we shall see.