Michael Green: Where the Real Poverty Line Is | Why Lower Inflation Isn’t Fixing the Cost of Living
Summary
Poverty Metrics: The guest argues the official poverty line is outdated, highlighting a "procarity line" where families can actually begin saving and investing.
Household Costs: Childcare and housing are the biggest burdens, with childcare often $32k–$50k and real housing costs exceeding official measures.
Inflation Measurement: Aggregate CPI understates the cash experience of lower-income households, and hedonic adjustments don’t alleviate real out-of-pocket costs.
Economic Bifurcation: Growth is concentrated in AI/data center capex benefiting a narrow segment, with limited spillover to the broader economy.
AI Theme: Excluding AI-related spend, growth would be roughly flat; adjusting for imputed IP investment could imply recession risk.
Inequality Dynamics: Those tied to the technology space are thriving while many others struggle, exacerbating relative and absolute poverty concerns.
Tickers Mentioned: No specific public companies or tickers were pitched during the discussion.
Investment Perspective: Narrow growth drivers and affordability pressures suggest caution and stress-testing portfolios for potential downside.
Transcript
we really were not paying attention to what people were trying to convey to us is that they were already underwater. And so any further increase in inflation or price levels puts them further underwater. It doesn't matter if it's 3% or 2 1/2% or 1%, they're still drowning. Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.comfree. >> Mike, thank you very much for joining us today. How are things in Baltimore? >> Well, if I'm actually not in Baltimore, I'm in New York City right now, but I I do live in the Annapolis area and uh last time I left it was snowy and cold. That's surprising. I'm in Toronto and we have a little bit of snow here. Inch, maybe two inches, but >> it's quite livable. So, why don't we get into it? And you recently wrote a Substack on poverty and you outlined why the government's definition of poverty and how it's calculated is completely outdated and it went viral and it created a lot of responses, some positive, some negative. And just for the benefit of those who aren't familiar with the article, why don't you provide us with a brief overview of that? >> Yeah. So just very quickly I I wrote a piece called my life is a lie and I evaluated the uh poverty line from the perspective of how accurate is it where did it come from etc. Um the federal definition of the of the poverty line was initially created in 1963. It was observed by uh an economist that the um level of spending for a household was roughly three times that of food. And they found that very valuable because among other things, it allowed them to build up a food budget using the USDA minimum budget component. They tripled that and called that the poverty line. It's then adjusted for inflation. The problem is is that that takes you today to a level of about $32,000 for a family of four, two earners, two children. And when I dug into the math behind that, I discovered that that was so far away from anything approaching reality of the expense level that it has created conditions called benefit cliffs or what I described as the valley of death in which households that are making more than the poverty line have benefits withdrawn from them that reduce their cash compensation to the point that between about 40,000 and $100,000, you end up really not benefiting in any meaningful way. that creates marginal tax rates or effective marginal tax rates that exceed 100% in some situations. And I I really just tried to draw attention to this that people that people didn't understand it. I didn't understand it candidly and it spurred a lot of discussion from people both as you said there was criticism that came from institutional representatives who said this is silly. The poverty line isn't $140,000. Maybe it's $125,000. Right? And you know the the type of analysis that was ultimately done around criticizing it really came to the same underlying conclusion that the poverty line itself was incredibly too low creating these conditions of benefit cliffs. And the feedback that I got from individuals basically you know people who read the article was this astonishing outpouring of oh my gosh this is my life this is exactly what it feels like. The really key thing that I was identifying is basically what's what I would really more accurately describe as a procarity line. It's that point at which you can start to save for your future. You can start to invest and do other things with your life rather than simply existing. And you know it really resonated and it's had a significant impact on the discussion that largely had been missing from that point up to that point. >> And why is this number did you say it hasn't changed since 1963? Well, the the methodology was developed in 1963. In 1969, it was formalized. By that point, they had already they were already aware that it had diverged from the minimum requirements enough that it was starting to draw attention. Um, regardless, for political reasons, they they instituted it in 1969 and then they adjusted for inflation. And it was one of the more interesting components seeing many of the economists who ultimately defended that process as saying well CPI captures all the other expenses and therefore it's fine. The problem is is that CPI is an aggregate price level index. It reflects the behavior of all participants in the market and it really doesn't do a very accurate job of capturing the price experience of somebody who's existing on a largely cashbased budget at the low end of our economy. Uh I mean the simple math was that it just doesn't work right and that that that is ultimately kind of where we've ended up is we've discovered that that process has created many of the challenges that people experience in the United States today >> and Canada because uh I'm experiencing the same thing and as you mentioned you did garner a lot of hate which I really don't understand because anyone who has a basic understanding of economics I don't even think you need a basic understanding of of economics you realize in the last five years, things have changed drastically. And all you got to do is look at the money supply is measured by M2. In January of 2020, before all this craziness started, it was measured at $15.4 trillion. Here we are just 5 years later, it's at $22 trillion. And there was one time, not too many years ago, I would go to Costco and drop 500 bucks on a groceries. And now I'm probably looking at $1,000. But how do you think the money supply has changed all of this? >> Well, it's interesting because I don't actually fall into the camp of monetarist, right? So, I think the money supply, it's important how you define it. M2 is one of many ways that you define it. The reason for the expansion of M2 was that we effectively equitized a number of loans. You know, when you convert liabilities into effectively cash through an equitization process, it's going to expand M2 simply by virtue of how it's calculated. The more interesting question for me is ultimately, you know, what has transpired with the price level? And I think this is one of the real challenges that people with formal training in economics struggle with. You know, we understand that inflation is formally defined is the year-over-year change in the general price level. That has actually retreated to a point where we're around 2 and a.5% average annual increase in that that component. And so for many people, you know, we look at this from an economics framework and we say, well, inflation has retreated. What's your problem? I think the most interesting thing for me was realizing that it really was a price level issue that what we were actually describing or what people were trying to describe to us and we were not listening to, right? And I want to be very clear on that. We really were not paying attention what people were trying to convey to us is that they were already underwater. And so any further increase in inflation or price levels puts them further underwater. It doesn't matter if it's 3% or 2 and a.5% or 1% they're still drowning. And that's really kind of the key component. Just mathematically think through what happens if the current basket of goods and services that you need to buy at that procarity line is $100,000 and your income is $90,000. If inflation is two and a half percent and wages rise two and a half percent that feels like everything is okay in economic theory, but the reality is is that now your income has gone to give or take 92 93 and your spending level has gone to 103. You're just as far underwater as you were before and you're paying the interest expense etc that is not captured in the traditional purchasing budget. People are trapped in this environment and they're asking for help and by and large the economics profession is looking at them and saying, "I don't know what you're talking about. This is silly. You're so far above the poverty line. You're doing just fine." >> If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hard Assets Alliance, at hardassetsalliance.com. That's hardassallalliance.com. I I know and this is one of the points that really resonates with me. Uh when I look at just the last five years, the cost of every good service and asset has gone up 30 40 50%. Uh and yet meanwhile my wages, I don't work for a union, so my wages are stagnant, right? They haven't changed in 10 years. And so that's why your article really resonated with me. So why don't we do a deeper dive on it? And the government currently defines poverty or the poverty line at 31,200 and you believe the real number is somewhere between 136,000 to 140,000. So why don't we break that down? And I know you use the basic needs budget to define that, but what are some of the largest components of that? >> Well, I want to be very very clear. First, there's multiple poverty lines. So the one we're referring to when we say 31,200 is a family of four, two income earners and two children. Um, when I built up the basic budget using the MIT Living Wage Index, I found that based on the region that you were in, it was anywhere from about $90,000 to about $140,000, you could get as high in areas like San Francisco or New York City to $180,000 before you began saving any money in that household configuration. Those are just astonishing outputs. Um and it also very specifically addresses you know the the area that we are all concerned about. Why aren't people getting married having children etc. One of the most surprising was the cost of child care. And that was an area that was it was really interesting because my conclusion my finding was it was roughly $32,000 that if that family would be expected to spend on child care. Again, it was one of those areas where people who were not familiar with it or don't face that genuinely had no idea like they just they flipped out on it, right? Um and you know made all sorts of assertions. Well, child care is optional, etc. No, it's not optional if you have two if you have two children and two earners, you know, you have to have somebody take care of the children, otherwise you're going to go to jail under a modern configuration. Um, and it was, you know, just one of these shocking numbers where I think people don't fully appreciate how expensive child care is. Childare is a heavily regulated industry for fairly obvious reasons. You don't want to leave your children with people who you have absolutely no knowledge of. That means that the workers who are being paid low wages, have to be certified by government agencies. There are rules around how many children can be in a particular facility. Again, this is for fairly obvious reasons. and the insurance costs as a child care facility operator are substantial and so the net impact is really quite high. I would receive, you know, I received roughly 10,000 emails from this article, the vast majority of which saying something like I make $140,000. This is exactly the experience. I think you're too low on child care. My wife and I pay $50,000 for child care, which basically consumes all of her wage. And people's reaction again to that tends to be, well, then why would she work? Well, the simple answer is is that if you see that child care period, that early child life period as a temporary component, if a woman leaves the labor force for 5 years, she's impaired her future earning capability dramatically. And so there's costs associated with this all over the place. That really is kind of the really key finding is is that the cost of having a child is astonishingly expensive and it's creating barriers to people moving on to that next stage in life. you've read any number of articles that tell you it'll cost, you know, between $400,000 and a million dollars to raise a child in the United States today. We'll just reverse engineer that into a roughly 18-year time period and figure out exactly how much you're going to be paying per year per child. And a lot of families are doing that calculation and choosing not to have as many children as they would like to have. >> And Mike, just to clarify, the $32,000 number that in you're talking about taking your kids to a daycare. Yeah, that would be daycare, that would be after school programs, that would be tutoring services, etc. These are all the ancillary costs associated with raising children that people tend to not take into account. >> Particularly, by the way, I think the older generation, it's just they they never experienced elements of this, right? They never experienced the idea that you would send your child to competitive sports programs because there's the local AYso soccer league or there was, you know, something that was really not that big of a deal. Today's world is radically different, right? We have club sports in which kids are pushed to compete at the highest level if you want to be competitive for sports at the NCAA level, which is really important in terms of getting into colleges with very low admission rates, etc. Like the entire process has turned into an extraordinary rat race that many families look at and they just don't know how to navigate it. >> And I was going to ask you if it included sports because my kids, they've been into hockey, which is expensive. Skiing, that's another expensive sport. And so I guess it also depends on what sort of activities or sports your kids are involved in. >> Yeah, I think that's right. And I think that's important to to acknowledge, right? Families that are truly poor are not taking their kids to hockey or to skiing. And so they are avoiding that. But that also is lowering the human capital that's available to that next generation as well. Right? This is that procarity line exists for basically the lower middle class. There's an entirely different group of stress groups of stress associated with kind of that 150 to 400 range where you feel fantastically wealthy, but at the end of the day, you can't afford to basically guarantee that your child is going to pass through those next steps, right? You don't have the resources to write a $2 million check to get them into Harvard or wherever. And I and and I want to be very clear like I'm not suggesting that everybody should be in a position to write a $2 million check to get their child into Harvard, but the the key point that I will reemphasize again and again and again, we have made raising children, which is a critical feature of society, not only for enriching the lives of parents themselves, but also for creating the next generation of taxpayers, the next generation of workers, the next generation of teachers and doctors, etc. We are penalizing that to the extent that we're you know, we're running a very real risk that many of those resources will not be there. >> Yeah. So, so I have a few friends that uh have sent their kids to university in the US, uh some of these private universities, and I can't get over the cost. Like depending on the school in the state, anywhere from 80,000 to $100,000 US. I don't know how the hell anybody can afford that. But, uh the second thing I want to ask you about is there the second largest component within your budget is housing. It's measured at $23,000. And this compares to the C CPI U number which is 44% of their index. And I'm surprised this is the second largest one because I would just assume housing would be the largest. >> Yeah. I think and for most households it is right because once you get through that initial push of child care and daycare, etc. Some of the other costs drop off. But the simple reality is is that as a family with two children and two working adults, you need a minimum of a two-bedroom apartment. you likely want to have an additional bathroom so you're not in a two-bedroom, onebedroom, two-bedroom, one bath apartment. And these are all nice things to have, but I think we'd struggle to say that any family with two earners and two two children is like living large if they're in a two-bedroom uh place. When I looked more closely at the data, you know, again, the living wage data would suggest it was around 24,000. If I looked at the actual available units, it was closer to that 2700 $3,000 level at which it would again become the largest share of the budget. The simple reality is that just makes the analysis worse. Right? If I actually look at what was actually available in the communities that I looked for, the reality was that the $140,000 was somewhat conservative in many ways. When we look at a lot of the numbers the government puts out, of course, they're trying to control the narrative, right? Let's just take inflation or the CPI number, right? They they don't want us believing or knowing that inflation is the real number is 5% or maybe it's 10%. Do you think the when we look at a lot of the num numbers or even what's with h what's happening within the BLS uh I don't even think they had have a head now but President Trump actually fired the head of the BLS back in August because he did not like the numbers he saw in July >> and you said the numbers were rigged but do you think these government institutions have become politicized? Well, I think there's a degree of politicization, but I I also want to be very very clear that the independent private sector sources that we have for inflation measurement are telling us very similar numbers to what we're getting from the BLS. I don't think that there is a giant conspiracy and I don't think that there is a they in this component, right? I think at the end of the day, the people at the BLS are doing working very hard to produce numbers that are accurate for the purposes that they're being designed for. The problem is is that the experience anyone individual is going to have is very different than what you're going to see within the aggregate population. And secondly, many of the adjustments that are made, things like hydonic adjustments to capture improvements in quality, um can be misleading, particularly if you're at the lower end of the spectrum. They effectively represent luxuries that hadn't been available before that are now suddenly available within the general purchasing basket. Things like air conditioning for example. The reason that that does that that that inclusion matters on a national perspective is we do ultimately have to say look we have to recognize that the quality of housing and the features associated with housing have improved over time. If prices are increasing to reflect those improvements, that's not really inflation and that's accurate. The problem is that that doesn't change the cash outlay. And so if I am looking at housing in 1960 and the vast majority of homes don't have air conditioning and new homes are all being built with air conditioning, that actually creates a pocket of housing that is available to me without air conditioning that's likely trading at a discount. as that population of housing disappears, that that discount that I'm able to take advantage of if I'm poor begins to disappear and my cash prices actually rise significantly, which is really what I care about if I'm at the lower end of the spectrum. And so, it's less that I think the BLS is attempting to control a narrative or lie to us about what the actual inflation is. I think it's more important to understand that it's really a function of not being the right index for the right purpose. >> So why don't we use this as a segue into the US economy? I want to hear what your thoughts are. And the economy is measured by GDP. It's growing at around 3%. The unemployment rate, I think the last number was 4.4%. So it's uh it is ticking higher, but it's still relatively low historically speaking. Uh you mentioned inflation's around 2 and a.5% but what's your view on the US economy here and do you have any concerns as we head into 2026? >> Well I think the really critical component is part of what is captured in this analysis. We've got an economy that is largely bifurcating. We're seeing an extraordinary amount of spending in a capital area AI data centers etc. um that benefit a very limited segment of the population. Right? When you build housing, for example, or have an economy that is reflecting large-scale construction that's going to residential housing or even commercial uh construction, that can have a very tangible impact on the experience that the average person is having. when it's concentrated in an area like data centers, it's really not having the sort of feed through to the overall economy that you might expect given the levels of growth that we are reporting. There's also components within the growth that I think unfortunately are mclassified. And so if you look at the largest segment of growth is what's called intellectual property investment. It's actually an imputed number that basically is used to reflect what the franchise value of corporations must be in order to capture the profit margins that they have. As corporations get more profitable, it is presumed that they have made investments in goodwill that you know and intellectual property to support that profitability. Um there's no reason that has to be the case if it's actually being derived from market power of corporations. It's not investments that they're making. It's actually the opposite. It's underprovisioning and under supply of goods and services that they're then extracting a premium price for. And we're miscatategorizing that as growth. And unfortunately, I think that that's a critical component of the difference in how things feel. I think the last thing that I would emphasize about the US economy in addition to the inequality which is one of these interesting factors that influences both absolute measures of poverty and relative measures of poverty the relative measure of poverty often is more important from a social standpoint. The absolute level of poverties of poverty um matters very much from a a health and human uh flourishing standpoint. Most western societies have largely solved the absolute poverty level. There are pockets of our society, particularly in the United States. This is also true in Canada with homelessness, addiction, etc. where we have true desperate outcomes and people are being underserved. But the overall in the in these economies is that people are are you know far better off than if they were living in Africa or anywhere else, right? Um, you know, that inequality of development that we're seeing and inequality of incomes though is is a meaningful factor in in what we're experiencing and that characterizes the growth we're seeing in the economy. If you're rich and you're tied into the technology space, things have never looked better, right? If you are poor and tied into almost anything else, things don't look so good. And, you know, we have conduct we've established a narrative, right? you used that phrase earlier that the economy can get by with only 10% of the population doing well. There's just not a lot of good evidence for that actually. >> Interesting points and I tell my kids all the time if they were born a 100 years ago they'd be in the fields picking rocks instead of scrolling Tik Toks. >> Yeah. Or clearing rocks. They might have been picking something else. But yeah, um yes, I think that's true. And I think that that's a legitimate complaint that people have is that the younger generation is not being put to particularly productive use and they're not being given the educations that are required to succeed um in this modern world. But they, you know, Tik Tok's addictive and smartphones are are fantastically entertaining. I can't I can barely put mine down. How can I expect a 12-year-old to put theirs down? >> So, a lot of the points you made reminded me of an article I read in the New York Times by a professor at Harvard. His name's uh Jason Burnham and he basically said according to his calculations if you X out all the AI spend the economy would be relatively flat in terms of growth. >> Any thoughts on that? >> No, I think that's right and that's certainly what the evidence suggests. If you go a step further and you adjust for things like the imputed investment in intellectual property, we'd actually be in a recession. So, let's talk about the financial markets now because uh I'm sure you would agree with me what we see. Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.com/free. With markets hitting all-time highs, now is a great time to stress test your strategy and be prepared for what comes next. Thank you all for watching. We'll see you again next time.
Michael Green: Where the Real Poverty Line Is | Why Lower Inflation Isn’t Fixing the Cost of Living
Summary
Transcript
we really were not paying attention to what people were trying to convey to us is that they were already underwater. And so any further increase in inflation or price levels puts them further underwater. It doesn't matter if it's 3% or 2 1/2% or 1%, they're still drowning. Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.comfree. >> Mike, thank you very much for joining us today. How are things in Baltimore? >> Well, if I'm actually not in Baltimore, I'm in New York City right now, but I I do live in the Annapolis area and uh last time I left it was snowy and cold. That's surprising. I'm in Toronto and we have a little bit of snow here. Inch, maybe two inches, but >> it's quite livable. So, why don't we get into it? And you recently wrote a Substack on poverty and you outlined why the government's definition of poverty and how it's calculated is completely outdated and it went viral and it created a lot of responses, some positive, some negative. And just for the benefit of those who aren't familiar with the article, why don't you provide us with a brief overview of that? >> Yeah. So just very quickly I I wrote a piece called my life is a lie and I evaluated the uh poverty line from the perspective of how accurate is it where did it come from etc. Um the federal definition of the of the poverty line was initially created in 1963. It was observed by uh an economist that the um level of spending for a household was roughly three times that of food. And they found that very valuable because among other things, it allowed them to build up a food budget using the USDA minimum budget component. They tripled that and called that the poverty line. It's then adjusted for inflation. The problem is is that that takes you today to a level of about $32,000 for a family of four, two earners, two children. And when I dug into the math behind that, I discovered that that was so far away from anything approaching reality of the expense level that it has created conditions called benefit cliffs or what I described as the valley of death in which households that are making more than the poverty line have benefits withdrawn from them that reduce their cash compensation to the point that between about 40,000 and $100,000, you end up really not benefiting in any meaningful way. that creates marginal tax rates or effective marginal tax rates that exceed 100% in some situations. And I I really just tried to draw attention to this that people that people didn't understand it. I didn't understand it candidly and it spurred a lot of discussion from people both as you said there was criticism that came from institutional representatives who said this is silly. The poverty line isn't $140,000. Maybe it's $125,000. Right? And you know the the type of analysis that was ultimately done around criticizing it really came to the same underlying conclusion that the poverty line itself was incredibly too low creating these conditions of benefit cliffs. And the feedback that I got from individuals basically you know people who read the article was this astonishing outpouring of oh my gosh this is my life this is exactly what it feels like. The really key thing that I was identifying is basically what's what I would really more accurately describe as a procarity line. It's that point at which you can start to save for your future. You can start to invest and do other things with your life rather than simply existing. And you know it really resonated and it's had a significant impact on the discussion that largely had been missing from that point up to that point. >> And why is this number did you say it hasn't changed since 1963? Well, the the methodology was developed in 1963. In 1969, it was formalized. By that point, they had already they were already aware that it had diverged from the minimum requirements enough that it was starting to draw attention. Um, regardless, for political reasons, they they instituted it in 1969 and then they adjusted for inflation. And it was one of the more interesting components seeing many of the economists who ultimately defended that process as saying well CPI captures all the other expenses and therefore it's fine. The problem is is that CPI is an aggregate price level index. It reflects the behavior of all participants in the market and it really doesn't do a very accurate job of capturing the price experience of somebody who's existing on a largely cashbased budget at the low end of our economy. Uh I mean the simple math was that it just doesn't work right and that that that is ultimately kind of where we've ended up is we've discovered that that process has created many of the challenges that people experience in the United States today >> and Canada because uh I'm experiencing the same thing and as you mentioned you did garner a lot of hate which I really don't understand because anyone who has a basic understanding of economics I don't even think you need a basic understanding of of economics you realize in the last five years, things have changed drastically. And all you got to do is look at the money supply is measured by M2. In January of 2020, before all this craziness started, it was measured at $15.4 trillion. Here we are just 5 years later, it's at $22 trillion. And there was one time, not too many years ago, I would go to Costco and drop 500 bucks on a groceries. And now I'm probably looking at $1,000. But how do you think the money supply has changed all of this? >> Well, it's interesting because I don't actually fall into the camp of monetarist, right? So, I think the money supply, it's important how you define it. M2 is one of many ways that you define it. The reason for the expansion of M2 was that we effectively equitized a number of loans. You know, when you convert liabilities into effectively cash through an equitization process, it's going to expand M2 simply by virtue of how it's calculated. The more interesting question for me is ultimately, you know, what has transpired with the price level? And I think this is one of the real challenges that people with formal training in economics struggle with. You know, we understand that inflation is formally defined is the year-over-year change in the general price level. That has actually retreated to a point where we're around 2 and a.5% average annual increase in that that component. And so for many people, you know, we look at this from an economics framework and we say, well, inflation has retreated. What's your problem? I think the most interesting thing for me was realizing that it really was a price level issue that what we were actually describing or what people were trying to describe to us and we were not listening to, right? And I want to be very clear on that. We really were not paying attention what people were trying to convey to us is that they were already underwater. And so any further increase in inflation or price levels puts them further underwater. It doesn't matter if it's 3% or 2 and a.5% or 1% they're still drowning. And that's really kind of the key component. Just mathematically think through what happens if the current basket of goods and services that you need to buy at that procarity line is $100,000 and your income is $90,000. If inflation is two and a half percent and wages rise two and a half percent that feels like everything is okay in economic theory, but the reality is is that now your income has gone to give or take 92 93 and your spending level has gone to 103. You're just as far underwater as you were before and you're paying the interest expense etc that is not captured in the traditional purchasing budget. People are trapped in this environment and they're asking for help and by and large the economics profession is looking at them and saying, "I don't know what you're talking about. This is silly. You're so far above the poverty line. You're doing just fine." >> If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hard Assets Alliance, at hardassetsalliance.com. That's hardassallalliance.com. I I know and this is one of the points that really resonates with me. Uh when I look at just the last five years, the cost of every good service and asset has gone up 30 40 50%. Uh and yet meanwhile my wages, I don't work for a union, so my wages are stagnant, right? They haven't changed in 10 years. And so that's why your article really resonated with me. So why don't we do a deeper dive on it? And the government currently defines poverty or the poverty line at 31,200 and you believe the real number is somewhere between 136,000 to 140,000. So why don't we break that down? And I know you use the basic needs budget to define that, but what are some of the largest components of that? >> Well, I want to be very very clear. First, there's multiple poverty lines. So the one we're referring to when we say 31,200 is a family of four, two income earners and two children. Um, when I built up the basic budget using the MIT Living Wage Index, I found that based on the region that you were in, it was anywhere from about $90,000 to about $140,000, you could get as high in areas like San Francisco or New York City to $180,000 before you began saving any money in that household configuration. Those are just astonishing outputs. Um and it also very specifically addresses you know the the area that we are all concerned about. Why aren't people getting married having children etc. One of the most surprising was the cost of child care. And that was an area that was it was really interesting because my conclusion my finding was it was roughly $32,000 that if that family would be expected to spend on child care. Again, it was one of those areas where people who were not familiar with it or don't face that genuinely had no idea like they just they flipped out on it, right? Um and you know made all sorts of assertions. Well, child care is optional, etc. No, it's not optional if you have two if you have two children and two earners, you know, you have to have somebody take care of the children, otherwise you're going to go to jail under a modern configuration. Um, and it was, you know, just one of these shocking numbers where I think people don't fully appreciate how expensive child care is. Childare is a heavily regulated industry for fairly obvious reasons. You don't want to leave your children with people who you have absolutely no knowledge of. That means that the workers who are being paid low wages, have to be certified by government agencies. There are rules around how many children can be in a particular facility. Again, this is for fairly obvious reasons. and the insurance costs as a child care facility operator are substantial and so the net impact is really quite high. I would receive, you know, I received roughly 10,000 emails from this article, the vast majority of which saying something like I make $140,000. This is exactly the experience. I think you're too low on child care. My wife and I pay $50,000 for child care, which basically consumes all of her wage. And people's reaction again to that tends to be, well, then why would she work? Well, the simple answer is is that if you see that child care period, that early child life period as a temporary component, if a woman leaves the labor force for 5 years, she's impaired her future earning capability dramatically. And so there's costs associated with this all over the place. That really is kind of the really key finding is is that the cost of having a child is astonishingly expensive and it's creating barriers to people moving on to that next stage in life. you've read any number of articles that tell you it'll cost, you know, between $400,000 and a million dollars to raise a child in the United States today. We'll just reverse engineer that into a roughly 18-year time period and figure out exactly how much you're going to be paying per year per child. And a lot of families are doing that calculation and choosing not to have as many children as they would like to have. >> And Mike, just to clarify, the $32,000 number that in you're talking about taking your kids to a daycare. Yeah, that would be daycare, that would be after school programs, that would be tutoring services, etc. These are all the ancillary costs associated with raising children that people tend to not take into account. >> Particularly, by the way, I think the older generation, it's just they they never experienced elements of this, right? They never experienced the idea that you would send your child to competitive sports programs because there's the local AYso soccer league or there was, you know, something that was really not that big of a deal. Today's world is radically different, right? We have club sports in which kids are pushed to compete at the highest level if you want to be competitive for sports at the NCAA level, which is really important in terms of getting into colleges with very low admission rates, etc. Like the entire process has turned into an extraordinary rat race that many families look at and they just don't know how to navigate it. >> And I was going to ask you if it included sports because my kids, they've been into hockey, which is expensive. Skiing, that's another expensive sport. And so I guess it also depends on what sort of activities or sports your kids are involved in. >> Yeah, I think that's right. And I think that's important to to acknowledge, right? Families that are truly poor are not taking their kids to hockey or to skiing. And so they are avoiding that. But that also is lowering the human capital that's available to that next generation as well. Right? This is that procarity line exists for basically the lower middle class. There's an entirely different group of stress groups of stress associated with kind of that 150 to 400 range where you feel fantastically wealthy, but at the end of the day, you can't afford to basically guarantee that your child is going to pass through those next steps, right? You don't have the resources to write a $2 million check to get them into Harvard or wherever. And I and and I want to be very clear like I'm not suggesting that everybody should be in a position to write a $2 million check to get their child into Harvard, but the the key point that I will reemphasize again and again and again, we have made raising children, which is a critical feature of society, not only for enriching the lives of parents themselves, but also for creating the next generation of taxpayers, the next generation of workers, the next generation of teachers and doctors, etc. We are penalizing that to the extent that we're you know, we're running a very real risk that many of those resources will not be there. >> Yeah. So, so I have a few friends that uh have sent their kids to university in the US, uh some of these private universities, and I can't get over the cost. Like depending on the school in the state, anywhere from 80,000 to $100,000 US. I don't know how the hell anybody can afford that. But, uh the second thing I want to ask you about is there the second largest component within your budget is housing. It's measured at $23,000. And this compares to the C CPI U number which is 44% of their index. And I'm surprised this is the second largest one because I would just assume housing would be the largest. >> Yeah. I think and for most households it is right because once you get through that initial push of child care and daycare, etc. Some of the other costs drop off. But the simple reality is is that as a family with two children and two working adults, you need a minimum of a two-bedroom apartment. you likely want to have an additional bathroom so you're not in a two-bedroom, onebedroom, two-bedroom, one bath apartment. And these are all nice things to have, but I think we'd struggle to say that any family with two earners and two two children is like living large if they're in a two-bedroom uh place. When I looked more closely at the data, you know, again, the living wage data would suggest it was around 24,000. If I looked at the actual available units, it was closer to that 2700 $3,000 level at which it would again become the largest share of the budget. The simple reality is that just makes the analysis worse. Right? If I actually look at what was actually available in the communities that I looked for, the reality was that the $140,000 was somewhat conservative in many ways. When we look at a lot of the numbers the government puts out, of course, they're trying to control the narrative, right? Let's just take inflation or the CPI number, right? They they don't want us believing or knowing that inflation is the real number is 5% or maybe it's 10%. Do you think the when we look at a lot of the num numbers or even what's with h what's happening within the BLS uh I don't even think they had have a head now but President Trump actually fired the head of the BLS back in August because he did not like the numbers he saw in July >> and you said the numbers were rigged but do you think these government institutions have become politicized? Well, I think there's a degree of politicization, but I I also want to be very very clear that the independent private sector sources that we have for inflation measurement are telling us very similar numbers to what we're getting from the BLS. I don't think that there is a giant conspiracy and I don't think that there is a they in this component, right? I think at the end of the day, the people at the BLS are doing working very hard to produce numbers that are accurate for the purposes that they're being designed for. The problem is is that the experience anyone individual is going to have is very different than what you're going to see within the aggregate population. And secondly, many of the adjustments that are made, things like hydonic adjustments to capture improvements in quality, um can be misleading, particularly if you're at the lower end of the spectrum. They effectively represent luxuries that hadn't been available before that are now suddenly available within the general purchasing basket. Things like air conditioning for example. The reason that that does that that that inclusion matters on a national perspective is we do ultimately have to say look we have to recognize that the quality of housing and the features associated with housing have improved over time. If prices are increasing to reflect those improvements, that's not really inflation and that's accurate. The problem is that that doesn't change the cash outlay. And so if I am looking at housing in 1960 and the vast majority of homes don't have air conditioning and new homes are all being built with air conditioning, that actually creates a pocket of housing that is available to me without air conditioning that's likely trading at a discount. as that population of housing disappears, that that discount that I'm able to take advantage of if I'm poor begins to disappear and my cash prices actually rise significantly, which is really what I care about if I'm at the lower end of the spectrum. And so, it's less that I think the BLS is attempting to control a narrative or lie to us about what the actual inflation is. I think it's more important to understand that it's really a function of not being the right index for the right purpose. >> So why don't we use this as a segue into the US economy? I want to hear what your thoughts are. And the economy is measured by GDP. It's growing at around 3%. The unemployment rate, I think the last number was 4.4%. So it's uh it is ticking higher, but it's still relatively low historically speaking. Uh you mentioned inflation's around 2 and a.5% but what's your view on the US economy here and do you have any concerns as we head into 2026? >> Well I think the really critical component is part of what is captured in this analysis. We've got an economy that is largely bifurcating. We're seeing an extraordinary amount of spending in a capital area AI data centers etc. um that benefit a very limited segment of the population. Right? When you build housing, for example, or have an economy that is reflecting large-scale construction that's going to residential housing or even commercial uh construction, that can have a very tangible impact on the experience that the average person is having. when it's concentrated in an area like data centers, it's really not having the sort of feed through to the overall economy that you might expect given the levels of growth that we are reporting. There's also components within the growth that I think unfortunately are mclassified. And so if you look at the largest segment of growth is what's called intellectual property investment. It's actually an imputed number that basically is used to reflect what the franchise value of corporations must be in order to capture the profit margins that they have. As corporations get more profitable, it is presumed that they have made investments in goodwill that you know and intellectual property to support that profitability. Um there's no reason that has to be the case if it's actually being derived from market power of corporations. It's not investments that they're making. It's actually the opposite. It's underprovisioning and under supply of goods and services that they're then extracting a premium price for. And we're miscatategorizing that as growth. And unfortunately, I think that that's a critical component of the difference in how things feel. I think the last thing that I would emphasize about the US economy in addition to the inequality which is one of these interesting factors that influences both absolute measures of poverty and relative measures of poverty the relative measure of poverty often is more important from a social standpoint. The absolute level of poverties of poverty um matters very much from a a health and human uh flourishing standpoint. Most western societies have largely solved the absolute poverty level. There are pockets of our society, particularly in the United States. This is also true in Canada with homelessness, addiction, etc. where we have true desperate outcomes and people are being underserved. But the overall in the in these economies is that people are are you know far better off than if they were living in Africa or anywhere else, right? Um, you know, that inequality of development that we're seeing and inequality of incomes though is is a meaningful factor in in what we're experiencing and that characterizes the growth we're seeing in the economy. If you're rich and you're tied into the technology space, things have never looked better, right? If you are poor and tied into almost anything else, things don't look so good. And, you know, we have conduct we've established a narrative, right? you used that phrase earlier that the economy can get by with only 10% of the population doing well. There's just not a lot of good evidence for that actually. >> Interesting points and I tell my kids all the time if they were born a 100 years ago they'd be in the fields picking rocks instead of scrolling Tik Toks. >> Yeah. Or clearing rocks. They might have been picking something else. But yeah, um yes, I think that's true. And I think that that's a legitimate complaint that people have is that the younger generation is not being put to particularly productive use and they're not being given the educations that are required to succeed um in this modern world. But they, you know, Tik Tok's addictive and smartphones are are fantastically entertaining. I can't I can barely put mine down. How can I expect a 12-year-old to put theirs down? >> So, a lot of the points you made reminded me of an article I read in the New York Times by a professor at Harvard. His name's uh Jason Burnham and he basically said according to his calculations if you X out all the AI spend the economy would be relatively flat in terms of growth. >> Any thoughts on that? >> No, I think that's right and that's certainly what the evidence suggests. If you go a step further and you adjust for things like the imputed investment in intellectual property, we'd actually be in a recession. So, let's talk about the financial markets now because uh I'm sure you would agree with me what we see. Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.com/free. With markets hitting all-time highs, now is a great time to stress test your strategy and be prepared for what comes next. Thank you all for watching. We'll see you again next time.