Family Affordability in America: A Story of Decline or Achievement?

good morning I'm Scott Winship senior fellow here at AEI and director of the new center on opportunity and social Mobility cosm seeks to conduct rigorous research and develop creative policy proposals to expand opportunity America by boosting economic growth increasing upward Mobility out of poverty and reversing the deterioration of social life and Civil Society I'm excited that so many of you came out this morning to hear us drone on about inflation measures consumer substitution and the finer points of employer health coverage I kid of course the purpose of today is to answer a much more interesting and important question has it become less affordable to support a family and a middle class lifestyle this question lurks behind so many of our policy debates these days trade regulation industrial policy immigration the safety net and family policy all our issues on which people's positions draw at least in part on how they view the economic status of families and how they view the economic status of families draws in part hopefully on the facts of how families are doing figuring out how families are doing turns out to be quite a contentious exercise this is where some wonkiness has to come in for a long time the debate turned on questions like what should be included in income should we look at pre or post-tax income if assessing Trends how do we pick starting points and ending points and how should we adjust for increases in the cost of living over time most of these issues have been thoroughly debated there's perhaps more agreement on them than there's ever been but critics have emerged who question whether the conventional methods that rely on adjusting incomes for inflation offer the most accurate answer to the question of how families are doing today we'll hear from one of the smartest of these critics and from two of us at the American Enterprise Institute who believe convention still offers the best way to think about family affordability we'll have three brief presentations after which we'll discuss these issues further I'm delighted that Idris collun has agreed to moderate that discussion bringing within the sharp analytic perspective that comes through consistently in his writing for The Economist before we begin let me introduce today's participants I've already introduced myself our first presenter will be Angela rashidi Angela is a senior fellow and the rose scholar here at AEI Angela is an expert on the safety net and on poverty from 2007 to 2015 she was Deputy Commissioner in New York City's Department of Social Services where she oversaw the agency's policy research and program evaluation efforts she was has also evaluated policies at Mathematica next will be Oren Cass Oren is the executive director of American compass and author of The influential 2018 book The Once and Future worker a vision for the renewal of work in America previously Oren was at the Manhattan Institute and before that he was domestic policy director for Mitt Romney's 2012 presidential campaign he's been at the Forefront of conversations around conservative policy reform over the past five years after my presentation we'll sit for a discussion moderated by Idris he is the Washington bureau chief at The Economist Idris is especially well qualified to guide the discussion today as he originally was a data journalist at The Economist and subsequently is thoughtfully analyzed in his writing social trends and issues around policy and opportunity so with that I'll invite my colleagues to the stage and Angela will be giving the first presentation foreign thank you Scott um and Oren and Idris it's great to be with you today um I'm really excited to see so many faces and so many young faces here today because as Scott mentioned this I think is an issue family affordability that has gotten a lot of play a lot of discussion and it's of particular concern I think to young people just thinking about how to form families and how to afford those families um so I'm going to spend about five-ish minutes talking about a paper that I wrote a report that I put out about a month ago and it was called family affordability the evidence and so I'm going to talk a little bit about that paper and kind of go through it but I wanted to start with kind of the motivation for writing that paper from my perspective and part of it was I was asked to kind of take a look at this issue of family affordability from the lens of not only the prevailing view but also how things like social capital in particular uh kind of play into this idea of family affordability so part of the motivation for the paper was to address and kind of assess this prevailing view that it has gotten harder to afford a family and perhaps maybe too expensive to afford a family in this country and obviously that's important because if it is becoming too expensive that not only has created hardship for families that currently exist but it also might be influencing behaviors around forming families and so um this is just I just have a few slides but this is just a chart that shows U.S birth rates which I think everyone in the room is probably fairly familiar with that fertility in the U.S has declined quite dramatically and has declined across the board in terms of age groups of women although among older women it's increased to some extent although women in older age groups have lower lower overall for fertility so in general there's been a decline in fertility and that has created some concern among all sorts of people not only just because family is kind of kind of the foundation of a society but also from an economic perspective and what that potentially means for our economic future so we obviously have a desire to try to figure out what is going on in terms of family formation and again the prevailing view has been that it's just become too difficult to afford a family and then that naturally translates into if that prevailing view is true then what's the solution and then the solutions oftentimes are well what can government do about it how can government try to reverse these Trends so my motivation was actually to take a step back and to just look at kind of a high level of what are the trends in terms of family affordability and are they contributing to this perception that it's gotten more challenging to afford a family or do we maybe have some of the data incorrect so I'm going to spend a little bit of time just talking about how I approach approached the issue and then the data that I looked at uh so if you think about this issue of affordability at a very basic level it's looking at have the costs what are the costs of things and then how much income or resources are available to meet those costs and obviously if those costs over time have outpaced income families might feel an affordability crunch but there's other things that I wanted to bring into the equation in terms of how have preferences maybe changed or how have things that might affect income or perceptions of income and costs such as Social Capital meaning availability availability of help from family from friends from institutions how has that changed and how does that affect this issue of family affordability so those are kind of that was my frame of thinking and kind of approaching approaching this question um so what I did is I first just looked at Trends in income and as we'll hear a little later from our other panelists there's many ways to think about income how do you measure income is it household level is it family level is it actually is it wages should we be focused more on wages and earnings or income so there clearly are many ways to look at income I just looked at a couple one I think which is a very good measure of resources in a household is actually looking at after tax and transfer income because that in my view is the resources that are available to households and really speaks to this affordability issue and if you look at that these are uh you know data from the the CBO Congressional budget office it shows that there's been a fairly strong Community cumulative growth in income measured at the household level again after tax and transfers over time if you look at it from a family income perspective and this does not fully capture all resources in the household because it doesn't capture a lot of government benefits for example that are in kind and not captured in income but even so if you look at family income and by different family structures so married couples single parent families you also see a general increase kind of a trending Trend upwards that's not quite the same across family type but again even if you look at single mother families which is the bottom line a slight increase and this does not count the vast majority of government benefits that would go to these households so that increase if it was an after tax transfer Trend would be it would be even more upward so um you know again very simplistic way to look at income but just trying to get a sense of the of this if this view of you know is income kind of keeping Pace with costs um the least the evidence on income household and family suggests that income has actually increased um for for the vast majority of households and Families uh then I took a look at costs because I wanted to get a sense of well are the the trends in costs either outpacing those Trends we see in income or is there a different pattern um I focus just on kind of three major cost areas um and I largely picked these three because it's kind of what you hear when you hear discussions about family formation so it's housing child care and higher education there's certainly a lot of other categories that you could look at but these were kind of the main three that I was interested in looking at when we looked at housing um you know their their this starts in 2010 and so provides kind of a different picture when you look even earlier DeLisle Jason DeLisle has looked at this uh there actually was a slight increase in housing cost burden but since 2010 kind of the you know end of the the housing bubble uh we've seen actually cost burdens remain relatively stable and this is uh rent to as a percentage of income or mortgage payments as a percentage of income which is how we Define cost burdens so we've seen that remain relatively stable and even maybe declining since 2010 for those that that have a mortgage so again this idea that you know costs have just increased so dramatically that it might be affecting perceptions of family formation you know maybe not quite borne out in in the housing data in terms of child care costs you hear this a lot from families about the the and you hear it in public polling about um uh you know what is preventing people from wanting to have children when you look at the child care data um child care costs have increased you know one study finds a 14 increase which is actually less than I think General people generally believe but much as that of that is because of who is paying for child care it's increasingly people paying for preschool-aged children and higher quality child care so again child care costs have increased but uh it's largely gone towards a preschool-aged children and families that can afford that care um and then just the final thing I looked at higher education and I don't want to I you know didn't get into too much detail there's a lot of nuance in higher education costs as well but I think the main kind of takeaway I took from that literature is that there's a lot of ways to represent higher education costs as well and it's really important to focus on what people are actually paying once you factor in financial assistance grants other things and to the extent that preferences come into play in terms of what families are and students are willing to uh the education they're willing to pay for so the final point I'll just make and bringing it back to this fertility rate issue is that um people identify in polls and the prevailing view is that people are not having kids not forming families because it's too expensive but when you look at just again a high level of the trends data Maybe doesn't necessarily support that and there was a study recently done by Melissa Kearney and Philip Levine that actually looked at the data and tried to identify the causes of our declining fertility and their conclusion also was that it was not necessarily economic issues that it actually likely was more kind of Shifting preferences about what young people want in terms of their own education their own career and how that balances with families so I will end it there because I'm sure we will get into that more in our discussion [Applause] thank you well good morning everyone thank you for being here thank you Scott and Angela for inviting me this is one of my favorite places to be here in Washington I think there are tremendous amount of important debates going on within conservatism about how to understand what's happening in America and as Scott explained in the intro based on how we understand that what if anything we need to do about it um as Scott alluded to a little bit you know the the paper that I published in 2020 called the cost of thriving index I think was uh somewhat disruptive entry into the debate over what has been going on with household finances because it sought quite explicitly to move beyond the traditional economic measures um my motivation doing this actually started with with my book in 2018 The Once and Future worker that focused very explicitly on this strange dichotomy on the one hand the economic data suggested that everyone in America should be very happy material living standards across all income strata were at all-time highs GDP was at all-time high we all had iPhones in our pockets and so forth um and yet there was clearly very widespread frustration with economic conditions there was as Angela was describing this widespread perception that has in fact become harder to raise a family particularly on a single income and I was very curious about this I and concerned that particularly on the right of Center we had fallen into a habit of sort of saying to the world who are you going to believe me or Your Lying Eyes um if the statistics say you're doing well and you say you have problems well then you're the problem and that that strikes me as neither substantively nor politically wise as as an approach to governing um and so the the paper that I I published with the Manhattan Institute at the start of 2020 had this departure point economic data show wages holding steadier Rising modestly material living standards all-time high yet perception exists that middle class families are under increasing pressure so what's going on it seemed to me there were three possible sources of Disconnect what what could be going on that the traditional inflation measures weren't capturing one of these is the question of quality adjustment do we think cars have become more expensive as an example now for an official inflation measure what you want to know is what you are paying for a car of comparable quality or utility so if cars get nicer and have more widgets in them and heated seats you should expect them to get more expensive that's not actually seen as a cost increase in terms of inflation and you see this in the data so this is the the Consumer Price Index measure for new vehicles and what you'll notice is from from roughly 1996 to 2018 there was according to the Bureau of Labor Statistics no increase in the price of a car if you actually look at a Dodge Caravan entry-level minivan for your family the sticker price had risen about eight thousand dollars now with the BLS economists are saying is but there's eight thousand dollars more content in the van so there's no inflation here and that's true you do get a much better car in 2018 than you do in 1996. it can also be true that if you're a family that would like to buy a minivan in 2018 it costs more than it did in 1996. these these are two ideas that we have to be able to hold in our head at the same time the second one and this comes up particularly in in the context of health insurance is is a problem of of risk pooling we have some important products and health insurance is by far the largest where the whole premise is we all pay in and only some people actually use it and with Healthcare in particular if you think about Healthcare has proceeded in recent decades a lot of the gains are in very sort of high-end expensive care that only some people typically very very few people need and so from one perspective from The Economist perspective that's an incredible game if you if your Healthcare premium is three times as high as it used to be but if you have that rare form of leukemia they can treat it that's amazing it's also true that if you are the 99.9 percent of families who do not need the million dollar treatment you also pay the same premium and don't use any of those services and so the two values I'm contrasting here are on one hand in the orange the health insurance premium and then on the other hand in blue the median Health consumption what your typical family actually uses in healthcare now Scott and others have been correct in pointing out that this is slightly apples to oranges in that the healthcare premium is is a mean it's the overall average whereas the blue bar is a median and typically comparing means and medians is a No-No the reason I'm fairly comfortable doing it here is because the whole premise of health insurance is that we all pay roughly the same amount um and so I I imagine if we had a good measure of median health insurance premium it might look slightly lower but it would not change the reality that a significant amount of the increased cost in health insurance which economists would say is not a cost increase because the higher and more expensive and better Quality Healthcare is embedded within it it's still something that everybody is paying for and very few people ultimately use we need to keep in our head bolt the idea that we are all better off because we have access to the Leukemia treatment if we need it and the typical middle class family may feel much greater cost pressure than they did in the past third social norms how is utility experienced and and one thing I really appreciate about Angela's paper is that IT addresses this directly that economists quite explicitly do not consider the social lens through which we all consume and experience life right giving your child a brand new 1977 bicycle for his birthday in 1977 is a different experience than giving your child a brand new 1977 bicycle for his birthday in 2022. I believe economists would say that's not what inflation measures I would agree that's not what inflation measures and I would say we still need to care about it and this is just my favorite example of this there's there's this great little category of writing on the libertarian right that argues things like actually Louis XIV was worse off than someone earning twenty five thousand dollars today and it's like yes I guess that's true and it can also be incredibly not true um this is my friend Donald Boudreaux from Mercedes looking at John Rockefeller and arguing that he would not for a billion dollars trade places with John Rockefeller a century ago and in fact nearly every middle class American day is richer than was America's richest man a mere 100 years ago there is a perspective from which that is true if that is the only perspective through which we try to understand what is happening to American families I think we will end up very very wrong so what we did with with the cost of thriving index was to say what could we develop that tries to get to this intuition that life feels more expensive even though the inflation data says it's not and so this very explicitly does not try to be an inflation measure it does not care about quality adjustment it does not care about the things that economists very carefully measure to get the inflation numbers right because we already have those inflation measures and the concentrating index is very explicit those measures are useful too that is part of the conversation but this can add something as well and so what we do is we take these five elements and we can talk more about why we chose these five uh but a health insurance premium renting a house near the median operating a car saving for college typical basket of food look at what that costs and compare that to the median male wage and what you see is it took about 40 weeks of income to cover all of that in 1985. let's check back in a generation later 2022 now these are not the same Goods in the inflation sense what you get for your health insurance in 2022 way more advanced treatments what the house and the 40th percentile looks like much nicer countertops probably a lot bigger the car has heated seats College different experience all true but if you think about the comparable 2022 version to the 1985 version this is roughly what those things would cost about seventy five thousand dollars and you think think of the incredible growth and increases in prosperity we have had over the generation weekly income was one thousand two hundred and nineteen dollars that must have easily covered these expenses shouldn't it it doesn't if the typical mail earners median wage in 2022 you would need 62 weeks of income to cover those expenses so what is this telling us and what isn't it telling us who has more income doesn't tell us that you'll need a good inflation index to figure that out who has a higher standard of living even an inflation index is probably going to understate it because of lots of new things we have that we didn't used to have but who can comfortably afford to provide middle class security for a family I would argue this makes a fairly compelling case it's the 1985 family so what's going on here I think the core of this debate is whether we prefer a static or a dynamic Benchmark for well-being and Scott actually had a wonderful paper in December bringing home the bacon that made this very explicit I don't agree with his conclusion but I I very much like the way he framed it which is he took a 1969 wage for someone ages 25 to 29 and said well how many people in the 2020 still have a 1969 wage and he concluded it is not that a male Breadwinner can no longer support a family at a 1969 standard of living totally agree the question is is that the right question and I think the best way to understand that it's not is to recognize that 1969 is a totally arbitrary standard what if we cross that out oh no on my slide different dimension slide imagine the X was over the 1969 and that we've put in a 1769 instead would it be reasonable to say well whatever you needed to support a family in 1769 that's the right question to ask about 2022. stretch out a little longer it starts to sound pretty ridiculous to me but the reality is that 1969 is an awfully long time ago too at this point and at some point we're going to have to recognize that modern America requires something different for what it's worth we also asked Americans this question I was sufficiently inspired by the report to throw the question into a poll that we did we asked a thousand American parents many other things but we also gave them this fact after adjusting for inflation young men earned roughly the same wages in 2019 that they did in 1969 and asked Americans is this a big problem helps to explain why men are leaving the workforce marriage rates are declining we should not expect people in 2019 to accept a 1969 standard of living or do you think it's not a big problem because if men were eager to work and start families in the 1960s they should do the same today and this is the result big problem by about three to one across Democrats Independence Republicans across lower working middle and upper class interestingly our upper class dual income college-educated households are least likely to think it's a problem uh but everybody else does and so again you could say and when our economists are defining their inflation measures I would want them to say it's not really a question of how the American people feel but if you want to know what has actually happened in the economy and whether or not it has succeeded and delivered on its promise I think we should ask and we should care final point I'd like to make this debate has been going on for about three years now and there's a frustration that I want to focus in on as as squarely as I can and I'm hoping this forum will be a good one to move past it so within a month of releasing cost of thriving index I had to post a long response with many clarifications and this was the biggest one misconception number one Cody claims to quote overturn Decades of research by expert economists or show quote an ongoing deterioration in the standard of living orange response Cody does not reject existing statistics it emphasizes they are valid and useful it underscores the material living standards have clearly risen it offers coding not as a replacement but as a supplement that can depict a dimension other statistics don't claim to measure and as I quoted from the report the report itself specifically says alongside formal inflation and a technical cost of living measure that aims to hold constant absolute material consumption an accurate depiction of economic Trends would track a more Dynamic basket so that's what that's what we're trying to do and how the debate has felt to me is roughly like this this is the best metaphor I could come up with helpfully figure it out while staring out the window on the flight down and on my Slide the sky is blue which is actually very important to the metaphor it seems to me we have two sides to this debate one that says the sky is blue and the other that says yes that's true but there are also a lot of clouds today those are gray now notice the two sides are not speaking past one another one is not saying the sky is blue and the other is saying the sky is gray one is saying the sky is blue and the other is saying yes but that is not the only thing we should want to know and it feels like the first person gets very frustrated and says why do you say the sky is gray the sky is blue and you can say no no I agree this guy is blue but those clouds look worrying and then the first person says maybe you are colorblind or perhaps you don't understand what blue means and I become exasperated at this point I say again I understand the sky is blue behind the clouds but I'm afraid we're about to get rained on and then we get into a very technical definition about how Color Works and the way light is diffracted through the atmosphere and the composition of the atmosphere and then we get rained on and so I just want to conclude with a few points that I hope will help the discussion we have today the first is that everyone here can do math and the debate is about assumptions there has been criticism of cost of thriving index that it is bad math we actually I don't know that anyone has ever done this we released an entire workbook with the update this year all of the underlying Excel all of the raw data all of the alternative assumptions you could make and a tool to make any assumptions you want to see how it changed it as far as I know there is nothing wrong with any of the data or the calculations and if there is I will gladly admit it and we will update it the question is this conceptual one about what we should care about the second point is that nobody here disagrees that living standards are up it is the equivalent of saying the sky is blue if there's any doubt about it I've included a statement here I or in cash agree that material living standards are up and I have signed it but is a dynamic Benchmark vital to our understanding that is a critical question and it's one I hope we will discuss further thank you very much foreign well it's a pleasure to uh be here with my co-panelists um I'm going to talk about a paper that just came out this week that I co-authored with Jeremy horpidahl um uh called the cost of thriving has fallen correcting and rejecting the American Compass cost of driving index you know there's there's an element of some some weird I think we are sort of talking past each other in in some ways because what I hear Oren say on the one hand is that he agrees that living standards are at an all-time high across the income distribution right and there's been a quote catastrophic erosion of middle class life in America so to me what Oren is saying is the sky is blue and the sky is gray um Oren thinks that we're having a different conversation um but but I struggle uh with reconciling the two things that he believes are true that living standards are an all-time high and that there's been a catastrophic erosion in middle class life in America so I'm gonna present our work quickly uh and you know the the first step that Jeremy and I took uh was to sort of work within the framework of the cost of thriving index and say okay we we may not agree with this and we don't um but if we did um do we agree with the conclusion um that that Oren came up with is it the case uh that affordability in some way that that Oren is defining it in a way that's not about uh living standards being at an all-time high that affordability has declined over time um so we make a few improvements first um to the cost estimates we fix what I what I would really say pretty comfortably are just errors um in terms of how you think about costs one is that uh when he looks at the cost of health insurance he's including the share of a health insurance premium that employers pay for as a cost to employees um now you can think that maybe that is actually coming out of employee paychecks a lot of economists uh believe that I actually believe that so if it wasn't the case that uh that employers were paying for this share premium your income would be higher um but if you do that you also have to add the value of that employer cost to the person's income right so now you've got it on the income side uh and then and then you're including it as a cost also Oren doesn't do that he puts it in the cost but he doesn't put it any income which is which is definitely wrong um so we exclude it from both uh another I think just straight error is that um when he looks at uh the cost of higher education he's using sticker prices that colleges advertise um but hardly anybody pays the sticker price uh for higher ed there's all sorts of redistribution that happens between upper income families who do pay the sticker cost and families lower down who do not there's institutionally there's federal aid as well so we look at the cost after taking uh these grants into account because that's the real cost that families experience we also think there are some conceptual issues that I'm not going to dwell on much uh the easiest one to explain is that orange housing costs are looking at renters and the increase in rent if you're a homeowner and the cost of housing goes up then you're experiencing that partly is an increase in wealth right imagine you're a homeowner without a mortgage at all he's straight out on your house and housing prices go up you're dancing in the street that that means that your wealth has gone up and so we try to take into account how costs have changed for homeowners we try to incorporate the fact that cars and homes uh as as uh durable goods provide a stream of services for people who own them they'd have to pay for them if they didn't own their car or didn't own their house and the fact that they don't have to pay for them actually constitutes some income we have an appendix B that I would refer you to in our paper because that's not an intuitive way of thinking about things so when we do that when we improve uh the measure again this is working within sort of the Kodi framework rather than an increase in costs between 85 and 2022 of 22 weeks that drops to 10 weeks the the levels change also so now rather than there not being enough weeks in the year to afford this basket there are enough weeks in the year now to afford it um from there uh we we move further we say um you know when you're looking at uh what's typical of what people buy in 2022 and how much that costs and you're looking at what's typical uh for people to have bought in 1985 and what that cost is um that's not uh that's not actually an increase in cost it's an increase in spending I'm going to come back to that later on um if you uh had a Dodge Caravan in 1985 um and you see that the price of a Dodge Caravan in 2022 is a lot higher you're not forced to buy that 2022 Dodge Caravan because I don't know if Kia makes a caravan but there are Caravans out there that are as cheap as the 1985 Dodge Caravan was and probably actually provide better features as well so that problem sort of afflicts everything that's in this cost of thriving index you don't actually have to purchase the typical thing in 2022 you can purchase something cheap something that's less high quality but is higher quality than what somebody could have gotten in 1985 and may even be cheaper than what somebody got in 1985. so we adjust the 1985 figures using price indexes for some of the uh of the costs when you do that the cost of thriving increases by just four weeks the next thing we do is we adjust for federal taxes people pay these costs and they're out of their after-tax income right taxes have declined over time uh when you do that suddenly now it's gotten easier to thrive the cost of thriving is decline so even in Orange framework uh the cost of thriving is now lower than it was not higher than it was and then finally we expand all full-time workers Oren looks at men who are at least 25 years old who are full-time workers now if we weren't looking at full-time workers it might make sense to exclude younger workers because a lot of them would be students and not necessarily working full-time uh it might make sense to exclude women because some of them are taking care of Home raising kids they may take different jobs not work as much but if we're restricting to full-time workers it doesn't make any sense to exclude women and it doesn't make any sense to exclude younger workers either so when we do after tax and look at all full-time workers the cost of thriving declines by seven and a half weeks okay so uh all that aside we say this is not the right way uh to go about assessing whether uh family uh a family of four has become more affordable um ultimately you need to use uh price indexes the way that economists have developed uh these methods over you know more than 100 years address a bunch of issues with Oren's approach uh that Oren sort of shrugs off um you know for one uh Oren's looking at five categories of goods and services that excludes nearly half of what people actually buy and by the way you know the other the other stuff in that group that's excluded got cheaper relative to incomes over time and in some instances it got cheaper period uh things like clothing cell phones you know not uh an orange basket household equipment household Furnishings are left out those would seem to be at least as important as some of the things that are in there there's some arbitrary in terms of what the the sort of Benchmark is for these five categories why it's uh you know for housing a rental the three bedroom in Raleigh in 2022 at the 40th percentile you know those are there's a bunch of choices in there that could have been different there's also an assumption that thriving uh you know sort of involves having a married family with two children if fewer people want that over time then the cost of thriving does not increase as much as it would if everybody wanted to be in a married family with two children and as Lauren mentioned in a couple places he's comparing medians to means um means are affected by outliers so if you're looking at health insurance the mean spent on that includes a bunch of people or a small number of people that have very large expenses you should be comparing that mean to mean earnings which includes a small number of people with really large earnings to compare means to medians isn't right but I think this is really the the sort of Crux of the matter the Cody is looking at spending not not cost earnings gains can lead to more spending on better stuff but Cody interprets that as an increase in cost um that's just not true just like the Dodge Caravan example if you don't like the more expensive but nicer Dodge Caravan in 2022 you can get something that's not as nice that's a lot cheaper and it's probably nicer than what you could have gotten in 1985. so in the end there's just no getting around the need to adjust things for Quality um Oren might say well you're talking about static and I'm talking about Dynamic we need a dynamic basket over time I think what that really says you know he wants uh to look at he basically says the typical amount of he wants a soul uh earner um a soul bread winner uh family to be able to afford what's typical in any year if what's typical in 1985 and in 2022 is what dual earner families are spending um then really what Oren's say which is true the a majority of of families have two earners in both 1985 and 22 rather than a soul earner um that's really saying he thinks that a soul male Breadwinner should be able to afford what the typical dual earner family buys now you can believe that if you want I don't think many people would agree with you that just a solar in your family has a right to afford the things that a Dueler in her family has um and if you do believe that by the way then anything you do to raise the wages of Learners is probably going to raise the wages of dual earners as well they're going to go out and spend more and you're going to be right back where you started the only way that you can reduce koti is if you get fewer dual worker families now in practice getting fewer dual worker families means convincing fewer wives to work so I'd be curious if that's sort of the policy goal that Oren endorses it seems to me it's really the only way that uh that we can reduce the cost of thriving as it's defined uh by Warren so what we do is conventional inflation adjustment um and this sort of sums up uh the contrast over time according to according to Oren's measure the cost-adjusted income uh for his family has declined by over a third when we uh sort of look at conventional price adjustment which takes care of these problems with orange measures look at after taxes look at all full-time workers there's been an increase of over 50 percent those are very big differences in how you view what's happened since 1985 and I think the case for something closer to 50 percent is just much much much stronger than the case for something that's like a decline a catastrophic erosion of over a third thank you [Applause] thank you so much for those presentations and I'm very excited to officiate this inflation index cage match between us right now rather than adjudicate who the winner is I'd like to probe a bit of the reasons for the differences between these and then discuss you hinted it what are how do you reduce Cody I don't think Oren is saying that women will have to stay at home but what what specifically could happen I think we should get into the policy implications there but maybe Oren um we could start with you and just to get your response to the critiques that that Scott made why look at mail income rather than household income uh why you know include the employer's share of health insurance and these sorts of things yeah sure I I should say I see a huge distinction between that first bar that Scott moved over and then all the others um the first the first bar he moved over where we talked about how should we what's the right health insurance Benchmark to use I think that's a great question and I just want to be clear that I think you have to draw a very sharp line after that bar when you say improving the cost of thriving index requires incorporating quality adjustment we're just back to not using the cost of thriving index anymore and and we're into that Dynamic versus static question so I I want to put everything past that first bar to the side for the minute um with the exception I want to acknowledge I think the tax point is excellent It's actually number one in our queue to add next year and has saved us a lot of time because you've now done the math um and we it gets to the question about policy at the end of the day so I think the tax adjustment is very good um in terms of those initial adjustments he makes on on things like Health Care um I I guess I would say two things about it first of all I again wish we would we would stop just using terms like straight error right the quantum driving index says here's the one we are using and here's why we're using it and you can disagree and think we should use a different one but it's not an error it's a disagreement about the right way to look at it and the reason we use the full cost of a health insurance premium is because for your typical median family they do not have confidence that they have good consistent employer health insurance this is this is the sort of basic mistake that we make sitting here in Washington confident that we always have good employer health insurance that we don't have to worry about what it would cost if we didn't have employer health insurance and the reality is you know I for a lot of this stuff I have to use pre-covered data because everything is nuts over the past few years but going back to the the 2020 numbers um you know only 60 percent put the elderly aside only 60 of a non-elderly household had employer-sponsored coverage um less than 50 percent of full-time workers under 250 percent of the poverty line so about 62 000 for a family of four had employer sponsored health insurance and that's at any point in time if you ask how many are going to have a gap at some point in a five-year window how many people are going to have to think what happens if I have a gap what happens if I switch you start to talk about the typical family and just to give an example let's say it's the early 1990s and you just had your third kid your middle class guy and you get laid off maybe you were starting you know had started to start a business on the side that you hoped could succeed hadn't really done a lot with it yet in the early 1990s picking up that Healthcare Tab while you try to get that business going you could do it today forget about it okay and the question is do we care that that's a difference and the premise of the cost of thriving index is that we do care it's a difference and importantly and the reason I started with 1985 is it's fascinating to see the things we take for granted today that you can't afford that in 1985 you could right in 2022 we say full cost of a health insurance premium by yourself come on that's not a plausible middle class standard just paying the sticker price for higher education for your kids what are we talking about in 1985 you could do those things and now you can't and you can say well we that just doesn't matter because Tada inflation index I would say it actually matters a lot Angela I wonder what you think you mentioned um you know in your slides post tax and transfer right and families are probably paying for education they're playing for health care they're paying the actual cost that's given them right and over over this period we've seen an increase in the generosity of the social safety net and that extends to middle-class families if you include you know the eitc expansion the child tax credit expansion um these sorts of things so I I'd be curious for your thoughts on on that question yeah I think the health insurance I mean to to your example um you know I think you didn't talk about the availability of public health insurance which then there's no out-of-pocket costs so your traditional family that maybe is starting a business and has zero income in most States they're going to be eligible for Medicaid and then they will get coverage and even if they don't get coverage they likely have health care through you know emergency care for example so I I'm not sure I you know can completely agree with the argument that that eighteen thousand dollars is a realistic out-of-pocket health insurance cost so to the point I think that safety net um you know does provide a lot of benefits especially for households who are facing costs when they don't have any income and that's why it is crucially important to kind of consider those resources after tax and after after transfers um I will say I think that you know I I really appreciated Oren's overview and description because because I think conceptually you know it's really it is fascinating it's kind of I think it's been an important addition to the discussion of how do we think about some of these things I think in the end though it's the you know the the number of weeks is what kind of gets to me and it is because of this idea that my understanding maybe to oversimplify as Oren is saying that a single earner in 1985 could afford a certain living standard in 2022 we have a much higher living standard that's based on two earners but Oren's saying one earner should be able to afford that living standard and if one earner can't afford that living standard that's the middle class crisis government should do something about that that's what makes me a little bit uncomfortable I would be more comfortable if you looked at the number of weeks from two earners because that's who's contributing to those living standards in 2022 so I think conceptually I'm with you I think it's super interesting to think about the question that way it's just maybe this issue of should one earner be able to afford um that that kind of standard of living is what gets me and then it's an issue of should it be one mail earner if you Inc what if it's one female earner because you know women's have experienced a pretty large increase in in wages since uh the period you look at so those are just kind of some of my thoughts as well as kind of looking at the government government's role in all of this you want to respond to that yeah no I I think it's a great point I think you know Angela and I are probably relatively speaking closer on on some of the conceptual points you know like I mentioned I think the the sort of social Norm analysis she did was really important I think this this single versus dual learner thing is is fascinating and super important and and I just want to pick out something Scott said in his comments which is most households were dual Learner in 1985. you said that so what has changed from 1985 to now is not that we have gone from an economy wherever in a single earner to an economy where everyone is dual learner we've gone from an economy where you could be dual learner but you didn't have to to an economy where you do and so this idea that like well it's a mythical world we can't achieve where the single earner could afford it even though we have a lot of Learners is false Scott just said it was false we had it that that is that's part of the Baseline and so so I would so a couple of things about this first of all it's just not true that you can't have an economy where two people can choose to work but a single person can also afford a middle class standard of living I totally reject that premise and if and if that were the case then my gosh we better really dig in on um on the economic changes we're going to have to make because the second point is that when you look at people's preferences they're very clear and we've done a lot of survey research on this the industry for family studies has done a lot of research on this um most families outside of the upper class dual income college educated folks in places like this want to have a parent at home with young kids I don't as far as I know that is that is the consistent finding however you ask the question always who most wants that is mothers married mothers um and typically speaking it is both parents perspective that um that they would want the mother at home now it is not my view at all a little bit to Scott's question that that is therefore an explicit policy goal the explicit policy goals that we make it possible and so we always Define the goal is not that you have a single worker supporting the family the goal is that a single income is sufficient to support the family because when you have that condition as I think the data shows you did in the 80s then the family truly does have the choice and you can say with a straight face what we see out in the world reflects people's preferences when you get to a world where the single income is not sufficient you can't say with a straight face that you have that and and if we feel like that used to be the case and it's not anymore then I think that gets exactly to the heart of what's changed Scott um you know you obviously disagree about the utility of of this index but what it does confirm is that you know Democrats and Republicans don't agree on very much these days but they do agree that the middle class is getting a raw deal right uh so President Biden puts that bill back better because the middle class is in such a bad predicament president Trump's um argument is uh is that he's going to restore Vitality to the middle class so uh what you know what are people's Lying Eyes not not saying what's the disconnect such that you know your your perception your your calculations are very different image image yeah that's a great question um and you know I think Americans have very reasonable concerns about cost increases I mean the data clearly shows that health care costs higher ed costs housing costs have increased more than incomes have so I'm not here to tell you that policy has no business uh seeking to reduce those costs I'm just saying that uh the increase in those costs is not large enough uh that the middle class is actually worse off today than it than it used to be um I think there are a number of reasons for why people tend to take a gloomier view of how things are going um I think there's a complicated issue about polling that asks uh people how how folks are doing generally versus how they're doing themselves David Whitman was a journalist I think a U.S news and World Report who had a book uh quite a while ago at this point uh that basically talked about the I'm okay they're not syndrome um so if you ask people for instance what's life going to be like for the next Generation you get pretty pessimistic results if you ask people about how their own kid is going to do you get much more optimistic results same as quality of schools everybody thinks American schools are terrible except for their own School uh is is great um so I think there's there's an interpretive issue there I think another thing that's happening is that um you know the world has changed and and and people have made choices uh that are very different than the choices that were made a generation or so ago I was recently in a debate uh about whether Millennials uh were going to be left behind or not um and the point I was trying to make uh in that debate was that uh many fewer people marry today than in the past and people stay in school longer than they did in the past well if you combine those two things things like oh I can't afford to buy a house well that's because people are living with somebody else and splitting the costs and realizing economies of scale and being able to save because of that the number of folks who can do that is going down because they've made other choices um and uh and similarly uh kind of the fertility debate is really about a decline in the number of kids that people want I've sort of shown this in a different paper that it's not the case that when you look at uh 30-something women and you compare how many kids they've had to how many kids they said they wanted as 18 year olds that hasn't gotten worse at all so I I think they're just a lot of misperceptions um about about what has changed over time and in a little bit of as a society not really um uh sort of understanding that some of this is just trade-offs for choices that we've made Angela you mentioned the fertility decline right and uh one could say that you know in the language of economists that the choice is endogenous to costs right that uh the families are responding how do we know that there is really a preference Shift versus simply uh you know Oren's right and it's too expensive to raise kids that certainly seems to be my perception of how people talk about this issue um and so therefore they delay childbearing um for for a while yeah and it's an interesting question because when you do look at polling data the economic issues do come out when when people are specifically asked about you know having children or meeting their their fertility needs I think to kind of build on what Scott was saying in in to this question but the earlier question as well you know how can we have increasing income um which is mostly on Pace with increasing costs and still we have this perception and people saying you know it's becoming too expensive to afford kids in my view it's it's and I touched on this in my page paper it's one just what people's preferences what they want people want more and part of Reason part of the reason they want more is because people have been told you can have more and you can expect more that's particularly true among women I mean I grew up in the 80s and the 90s and young people today I mean we were told as women you can have it all you can work you can have kids you can have the big house you can have all these things so the I think just the perception of what people can actually have has certainly changed and the other thing and this is what I touched on the paper is that social capital I think is a key component of this meaning supports that are not necessarily an income Source but that help you afford and form a family living near your parents because grandparents can take care of your kids living near siblings because they can help having strong relationships with neighbors so that you can leave your kids there because you have to go somewhere having institutions that support you Church School parent teacher associations those things from you know a lot of work Scott has done has shown that that maybe has declined and has declined in these communities so you can imagine even if you have the same amount of income or even more income if you don't have these other social supports I can understand how you would feel like you don't have as much in common you feel like it's harder to afford a family because you don't have those supports so I think a lot of it is economic in the sense that people are Translating that into an economic issue which is why they're responding that way to some of these polls I'd be curious yeah I want to pick up on that because I think it gets to a really nice point about how we talk about preferences um and and one you know it strikes me that that a lot of comments in this debate are just not especially respectful of or empathetic to the actual challenges that you know a family earning 50 or 60 K probably faces and you know just I mean even even in this conversation I think you know I think one of the comments was you know imagine if you're a homeowner with no mortgage like totally agree if you're a homeowner with no mortgage you're probably doing okay but I'm not sure how relevant that is to this debate um or you know Scott mentioned like cell phones are not in my basket well who cares what a cell phone cost in 1985 right from from the perspective of a family having the technology to participate in Modern Life is a massive new cost that didn't exist it's not some miraculous savings um and I think you know I take Angelo's point that well today if you lose your health insurance you can get on Medicaid or go to emergency care I take that as true I I reject vociferously the idea that we should take that seriously as as a substitute that a middle-class household should feel comfortable with or not or not worry about and and where I see this coming through most in the data you know we did survey data on this Quest we did a survey on this question of um fertility Trends and something that was really interesting that we found is that the share of the population that that undershoots that says they have fewer kids than they want it's it's about half you typically about half who say undershoot half about where they want to be very few say they have more kids than they wanted but it's surprisingly consistent across classes so we sort of defined classes by education level and income and you see the same 40 to 50 percent reporting fewer kids than I wanted lower working middle upper class you ask those people well what's the primary reason for that lower working and middle all say affordability upper says lifestyle career choice now Scott is technically correct when he says those things are actually synonymous right at all four of these levels you are making trade-offs in your life I mean there are people out there with lower working class incomes that are raising lots of kids on one income you can do it um but it's very interesting to me that that those first three groups which are the vast majority of the population perceive and describe this as an affordability issue whereas that last group perceives and describes it as a preference Choice issue and I I think that's a really important um distinction that it is one thing to say well you formally have the choice you don't sure in 1985 you could go get the new Dodge Caravan we'll now just go find a cheaper used Caravan like yes that's that's true but the the set of options that people have is being constrained in different ways and the the seriousness and impact and stress and effect on their quality of life on those choices is very different than it is for the Dual income college educated family that's that's pretty much just trading off of among a bunch of Fairly good options um and I pledge that I've rambled a little bit on this one but I want to make one final point just I thought you know Angela made said something really important which is like part of the problem here is that we're promising people more like people's expectations have raised risen and that's absolutely part of the Dynamic versus static discussion part of the premise of the dynamic standard is that people's expectations have gone up but I think we have to recognize that that is part of the promise and social compact of our political system you cannot particularly here at AEI Advance a vision of of pro-bridgeness enterprise-led growth that's going to work for everybody have it only work for some people and then tell everybody else stop complaining you're not any worse off than you were that that just ain't the deal when we say we don't care about the dynamic standard and we're concerned that people's expectations are raising what we're really saying is we reject this right to Shared prosperity and a full stake in the growth that we're getting and and even if you want to say that has no actual Economic Consequences that's purely a political matter I'd first of all say the political bleach into the social into the economic pretty quickly but even as a purely political matter it's still a non-starter and a catastrophic problem for conservatism in the right of Center if our pitch is pro-growth works great for some people and everyone else you're no worse off so head down to the used car dealer Scott um you know my take is that you don't think that people in the in the middle class are dramatically worse off than they were in the 1980s but how do you address that point and do you think that Angela's uh you know very good you've done a lot of work on Social Capital yourself that uh part of what might be going on to resolve the Paradox you see where you don't see that much decline but everyone perceives it as such is that it feels harder to to to raise a family that these kinship networks um that I personally benefited from my aunt you know babysat me uh for many years um but that you know with the nuclear family that we have now the kind of unstable family structures that we have now increasingly that um people feel more precarious even if the resources available to them might not have changed that much yeah I think there's been a lot of talk up here about the people feel more precarious than they used to or they feel like things uh are worse than they used to no one's actually cited any Trends in public opinion um Oren has a survey uh with a pretty leading question uh about how men's earnings have changed over time uh that starts in 1969 on uh and and rightly says that men's pay hasn't increased that much uh what that hides is that it fell for a number of decades and then it Rose if you would phrase the question men's earnings have increased 30 percent since 1996. um you know you get a very different answer but more importantly like you don't have that same question asked in 1985 right you think that over this period things have become catastrophically eroded for the middle class that's a statement about change you can't you can't confirm that by looking at a public opinion poll uh in 2022 without having the same kind of poll in 1985 it may be that you would have found you know the exact same responses that you that you got in 2022 in 1985. uh similarly uh um when you when you talk about uh I forgot my point um yeah the main point is we we you know we just haven't talked much about Trend data we've talked we've had a lot of assumptions that people think things are getting worse um and and all the research that I've looked at uh which is tricky because all these polling shops have their own kind of In-House effects on questions lots of times the questions are subtly different over time but when you really look at the stuff carefully it's not obvious at all that people are any pessimistic or any more pessimistic these days than they ever were um so to say like you're out of touch with the American people things have gotten so much worse that's just an assertion um we don't no one's actually brought evidence to bear on that um another thing that you can do I think to to sort of look at whether Oren's case makes any sense you know if Warren's right we should see fewer Soul earner breadwinning families over time right it's become harder to do you should see a catastrophic drop in the number of soul-breadowing families if you look at the current population survey and you look at men between the ages of 26 I'm sorry 25 and 54 who are married parents and ask how many of them are sole Breadwinners that number was 30 in 1985 in 2022 it was 30 percent so you know somehow uh it the the number of of Soul earner uh Soul breadwinning Men didn't decline over time despite this catastrophic increase in costs that Oren's claiming happened um I I think that's much more relevant than the sort of assertions about public opinion changing over time and I I we could obviously talk about this uh for an hour or more but I want to leave some time for policy and um would like to ask Oren what he thinks uh uh you know public policy ought to do in response to to these increasing costs that that he detects and one question from me that that I have is a thought experiment you know there's this well-known problem with the official poverty measure where it doesn't take into account safety net a lot of safety net spending um you know I wonder if for example a new policy were rolled out that said um that all Private health insurance premiums were to be reimbursed by the government in a tax credit um that might have the effect of of increasing premiums maybe uh which might show up as an increase in the cost of driving index how would it capture um that change and would you need to modify it actually to to show uh register a change in response to the right kinds of policies that you think should be place well I if I understand the question I think it gets to a really important point which which speaks to Angela raising the you know the wider range of safety net benefits and and the inclusion of the the tax data in generally which is that there's no question that one way we have made things workable for families is through greater transfers and and this is part of something I would say to Scott's point about the the thirty percent thirty percent first of all I would say it it directly contrasts contradicts the prior argument that we went from a single earning world to a dual learning World um but the other thing that that's part of the point that Cody makes is that it's obvious that everyone is still finding ways to get by right like the in theory you could look at this and say like well then everyone must be starving on the street or something and that's clearly not what's happening but I think that that should really focus the attention of conservatives even more that that for conservatives when we think about and this is why it's called the cost of thriving and not yet another cost of living index we have this concept of of human flourishing that we we want to set as the goal and aspire to and a significant piece of it is is the idea of sort of self-sufficiency and agency and a way to kind of feel that you are the productive contributor who is supporting a family just as sort of a good unto itself and as something that is going to have really important social consequences for the choices people make um which are in part economic but a bit to part Scott's point about the three percent part in response to a lot of other things you can have an awful lot of people who are trying to make the same thing work and finding it harder to do so um and so what that what that all boils down to for me is I think there's sort of a short-term policy discussion a long-term policy discussion the short-term policy discussions I think we should get more resources to Working Families um American companies has proposed what we call the Fisk which is a child benefit for Working Families very similar to what um Senator Romney Burr and and Danes have proposed um Scott and yvala Bin wrote favorably about the the Romney version last year and my hope is that that's something that's building a lot of momentum on the right of Center the way that we scope the size of that benefit was directly proportioned to this problem basically how how much money would you need to get to families to to fill that Gap um and I think we have to think about that in the short run in the long run we have to ask what has gone on in the trajectory of our economy that all that growth that we are seeing has not been widely shared um that that we have gotten this system where we create all the new stuff the rising cost of living Etc but the typical wage did not keep up with that and that's the much bigger agenda that the American compass works on that you know we call rebuilding American capitalism and that would be at least a one additional panel that's God's point it starts from the premise that there is a problem if you say like well actually this is going great then you'd be like well that book was a waste of time and so um but if you see it's a problem then I I don't think you want well let's just give more resources to everybody to be the long-term solution I think you have to actually be willing to ask why that basic social compact that that Democratic capitalism is built around has broken down somewhat um and and what we have to do to get it working again Angela what's interesting about the set of factors in the Kodi Index right housing education Higher Education Health Care uh they're all sectors in which there is already quite a lot of messy kind of governmental subsidy uh in play there are a lot of rules and oftentimes the way that safety net benefits work is that they are basically demand subsidies for these things that are Supply constrained right so I remember Kamal Harris and her presidential campaign you may remember she pitched a rent subsidy basically we're going to you know basically anything above the fair market rent we're going to return to you what would the effect of that be in a supply constrained City would probably be an aggregate increase in rent maybe an increased amount of spending on the governmental side You could argue that um this similar Dynamic has happened in higher education so given that our propensity is to reach for Solutions like this when you think about that increase in costs uh do you do you alight on another kind of set of solutions for it I do um for exactly the reasons you say I don't think so even if you buy into the arguments that this is a problem in terms of middle class you know lifestyle being unaffordable even the fertility issue um which I do believe is a problem declining fertility I don't think the answer is more government intervention more spending because I'm not I don't think that's going to solve the problem and it only creates more problems um you know we're already facing a financial crisis in the country that's impending like just adding more you know into the deficit and you know making government larger I don't think that's the answer um and especially it's you know not the answer to just add on to programs we already have that are already disjointed and we already have housing programs and you know why create another one so that does though beg the questionable what is the answer and I I do kind of turn to this issue of more of a cultural issue and you know how do we kind of change society that places more value on how having children and having a family especially for women and then it does on having a successful career because that narrative shifted tremendously over the last 20 years and you know should we shift it back a little bit and that they're equally important maybe but again that's not a that's not a government solution I think it's it's much bigger than that and then orange just to do a final point before we open it up for questions um other countries are more worried about uh fertility and have tried to launch Suites of pronatalist policy I think Hungary has tried that France is some I think if you have five children you get like a badge from the government and some tax subsidies and stuff and and my my sense I think you're called a mother of the Republic or something like that um but my sense is that there's been a mixed um actual effect on on actual fertility um if you know given that what can be done to make actually uh this Choice easier for families to make and in your view and do you think that it's within the wrong possibility for America to get there well I should say I I bet is primarily one about how do we get fertility higher I agree entirely with Angela that it is a problem I would probably lean more toward saying the economic piece of component of it and we could expect better economic we could expect higher fertility rates with a better economic picture um but I would also agree with her that it it is hugely a broader cultural issue and and one of the reasons that for all of the sort of play you know let's let's poo poo culture war and only focus on you know technocratic policy things like cultural fights matter and and this has to be something that that the right has a much better cultural message on hard to have that cultural message when your economic message is these things are just a choice and if you prefer more vacations to more kids then good job optimizing your utility um but I do think that the best way to understand this problem is about what is happening to the families that do exist um and that rather than sort of think about the future social engineering we should recognize that family well-being is I think Angela was saying the building block of of society in so many ways and if we believe that it it has gotten harder that should be cognizable in and of itself without some like what is the long-run demographic trend it's a problem that it that that these folks are facing this Challenge and so I think the best way to understand the the policy goal is to ask well how can we address that um and I think that the the mechanism by which It ultimately Cascades into the culture side of things the fertility isn't through well now we've created this incentive and so people at the margin become X percent more likely it's that you shift from a world where having the family is understood as requiring these huge sacrifices and being really hard into one where you see the families in your communities as thriving in something that you aspire to and so I think it's best understood in those terms how do we make sure that families are thriving and see what follows from that well um I'd like to open up for questions now um I think there's a microphone that's going to be going around so yeah we'll start right there thank you hey I'm Daniel Lee Martino with the Manhattan Institute um one question I have about is whether we're asking the right question right with the coding uh because it seems that the only way for a single earner family with a male to rise in Kodi is to rise in the relative income distribution given that of the way the costs are measured right because we're imposing changing a dynamic living standard which is affected by the rising incomes of women in dual learning families and as a result don't you think that therefore the only way to rise in Kodi would be to reduce the relative earnings of dual income earners to single income earners and if so then putting the only policies that change that would be policies that only increase their earnings of men relative to women I don't think so I I think that's a very sort of malthusian analysis um that's sort of like any efforts that growth will ultimately be foiled by population growth that sends us all back into poverty I mean if if we have a theory of rising living standards and improving middle class security we should aspire to a situation where those core Goods that are necessary to establishing that security remain attainable now one thing I'll say about the Kodi standard is that you wouldn't expect it to rise the way material living standards do right if I got up and said in 1985 your typical worker could support a family on 30 weeks of 30 30 35 where we've weeks of income uh and in 2022 it's still 35 weeks we've made no progress that that would be a really that would be a really bad argument right it would actually be like well that's great we can still afford middle class security and at a higher standard of living right thumbs up it you wouldn't describe a level Cody as stagnating the way wages that go nowhere would be stagnating um so I think what we should aspire to and again historically we see we can aspire to is to be in a situation as I said where the single income does attain middle class security and we've seen it it can happen and then it would be great to get back to world where we recognize we can even be improving on that I mean if in 1910 I'd said well here you can see what the picture looks like in attaining middle class security and you'd said well according to that definition I don't see how things will be any better in 1980 I would have said well boy were you wrong there is clearly a formula for economic growth and progress that we have achieved in America in in in time rememberable um where these things did work the way we wanted them to and probably speaking I would say that has been the history of capitalism at its most successful what's so strange about this most recent period is that you see that Rising material living standard you see the technological gains you see the GDP growth and yet ultimately because that was not broadly shared you see this increasing Challenge and pressure on the middle class and so I don't see any reason why we couldn't have a situation where we were doing much better yeah sorry it's Mike foreign ball from the Cato Institute um both because uh some of the goods in the koti index are things that as we get richer we tend to want to spend more money on uh and the fact that many of them are seem to be very heavily Supply constrained Industries I'm quite surprised by you know you've seen the answer as more kind of income distribution to certain families because one would imagine that that would do more to kind of bid up some of these prices especially where these uh these markets are most uh inelastic but I wondered if there's a chance here to kind of reach out to we fund Market fundamentalists at the Cato Institute and perhaps you know identify areas Within These Industries where there are Supply constraints that could be relaxed regulatory reforms that could actually bring down the costs rather than looking at the incomes yeah absolutely and that is you know saying that the the conclusion of the original cost of thriving index report is there are obviously two important policy areas to focus here one how do we make sure wage growth in the middle is keeping Pace with overall growth and two what do we do about some of these cost categories um housing like build more housing that's a great one totally agree and it's important to emphasize by the way that I would be the first to say one of the reasons this has happened is because of our constrained housing Supply right that that's absolutely part of the story doesn't change how it's being experienced by a middle class family um so on housing I think more Supply is obviously needed on education this is a place where I just getting away from the college for all model is so important I think some folks have misunderstood the inclusion of saving for college in the basket as saying well sending your kids to college is the definition of thriving that's not I don't think that's true at all I think the opposite should be true it is the case today that middle class families feel and this will be one of the survey questions we asked I was shocked by how high up saving to put your kids through college is on how Americans Define being in the middle class and so recognizing that that is just like a huge unnecessary cost sync and that if we had much better non-college Pathways and people felt like yeah for some people especially those who are going to get the higher return later in life College makes a ton of sense and even borrowing for college can make sense but we'd better be sure we have a lot of other options available that's a great way to address some of it also I think healthcare is the hardest one because I think what's driving health care and this is that um consumption versus premium thing it's not the actual amount of Health Care that the typical family consumes it is the extremely high cost um sort of edge case elements in the healthcare system that drives so much of the cost up and on one hand are an incredible value to us and on another hand don't actually deliver anything to the typical family day to day um and so I'm not here with an answer to that one for you I would just say I think it's harder I also think there are huge problems with the way we regulate health care and one of them is the way we've standardized the health insurance product means that even to the extent that I might accept the quality adjustment Point elsewhere I wouldn't in healthcare because we've regulated we've said you must buy the 2022 health care plan even if you you cannot go buy a 1985 healthcare plan so there's some deregulatory there but I think the health care problem is by far the hardest but totally agree with you on some of those that that there's certainly a cost Side Story also I mean I think I think you're pointing to sort of an irony in I think American compass you know sort of uh using this epithetic Market fundamentalism um and thinking that we've got a catastrophic problem that requires trade restrictions and Industrial policy when really what we've got are some things where the cost is increased more than incomes have it turns out those are in sectors that need more markets rather than fewer markets right these are areas that government is heavily involved in health care higher education uh and housing uh and the answer to that if you will you know maybe more Market fundamentalism um that if we had well-functioning markets in these areas where we didn't have tax subsidies and regulations and things like zoning that are driving up the costs of some of these basic Goods that would help middle class families more than anything we might do if we assume that people are a third worse off than they were in 1985. other yeah one more here uh hi uh Dominic Pino National Review um at various points in the conversation we've used 1969 as a starting point we've used 1973 I believe as a starting point 1985. um uh Scott mentioned briefly 1996. so uh clearly you know when you're picking uh when anybody's picking a date to start it's always going to be a kind of arbitrary date which we've said um but uh that's a pretty big range of dates and from someone who was born in 1999 those all seemed like a long time ago so uh why don't we pick 20 years ago 2003 right I mean uh so um I would like to hear just from each of you uh what the right starting point is uh to make these comparisons and what the rationale is behind picking certain starting dates at certain points uh depending on the comparison my guess is that uh he wouldn't look at everything but uh why don't we quickly go through well I can go really quick if you want us all to speak I mean so much of it's based on data availability like what you have available to you and at one year but it's a good point like kind of putting it in a perspective you were born in 1999 why are we looking at 1985 if we're thinking about people who are making decisions now about forming a family so I definitely take that point yeah data availability I wish Cody started earlier than 85 even to get to 85 I have to start imputing values from the 87 growth rate and stuff so um if anyone wants to take on a multi-year unpaid research internship we could I'm sure push that back a couple decades um the the one thing I don't know that's that's interesting you know Cody is an annual value so we do the full Trend and there's there's an interesting story in there which is that it actually Peaks around like 2015-2016. and has been flat to almost even declining a little bit in in the most recent years um and and I think that speaks to a couple things it speaks to the the much higher wage growth that we saw in the sort of 2016 to 2019 period um it also speaks to some real slowing and cost growth in healthcare in particular and the Obamacare debate would have to be a totally separate 90-minute one and there's a lot wrong with it but for what it's worth rate of growth in healthcare premiums in the 15 years leading up to Obamacare looks very different than the rate of Premium growth since the passage of Obamacare um I think you're starting to see more downward pressure on on or at least slowing of the upward pressure in in higher ed prices um which is a good thing as well uh and so you know my view is the the best thing to do is have the best data series you can and then look at all the trends within it foreign I think it's important to compare uh comparable points in the business cycle to 1969 and 1973 were both Peaks which is why you see them a lot um if you can do all sorts of funny stuff you know comparing Peaks and troughs and sort of tell different stories 1973 unfortunately for all of us is like the year when the wage Series starts uh and they Peak because Richard Nixon had price controls which did all sorts of weird things um but uh but yeah it sort of does come down to data availability lots of times there are fun things you can do with economic history I was uh reading and Thomas mcketty's uh capital in the 21st century he calculated that living standards in France increased by a factor of six between 1900 and 2010 and he computed this in terms of carrots so in in uh in 1900 you could get with a day's wage 10 kilograms of carrots and in 2010 you could get 60 and if you used a banana for scale your living standard has increased by 20. so um you know depending you know what you pick you can get very different results so anyway thank you all for taking the time [Applause]

Channel: American Enterprise Institute

Views: 1,578

Keywords: AEI, American Enterprise Institute, politics, news, education

Id: HSCPLEy7rAY

Length: 90min 56sec (5456 seconds)

Published: Fri Jun 23 2023