At the national level, the middle class is typically defined as households with an annual income ranging between $53,740 and $161,220. But middle-class Americans like Kyle Connolly from Pensacola, Florida, say life has quickly grown unaffordable. Financially, things have definitely been a struggle for me. I don't know how, but every single month I somehow manage to get by, and I'm left with maybe... This past month, I was left with $125 in my checking account. And that's it. As of June 2024, 65% of middle-class Americans said they were struggling financially and don't expect their situation to improve for the rest of their lives. It's a part of the income distribution that has felt a lot of pain in the wake of the pandemic, and it wasn't something that just economists were tracking. It was something that was really felt on the household

level. You know, people felt it in their grocery bills. People felt it at the gas pump. In their own neighborhoods and in their own lives, they have their own expectations for what they can do, where they can go, where they can eat, where they can live, and to the degree that they're facing those pressures on an individual basis, it really is causing quite a bit of an alarm. 75% of middle-income families say they are actively cutting back on nonessential expenses, with 73% finding it difficult to save for the future. I have had to reduce all nonessential spending. I have gotten one haircut because it just got out of control and that's it. That's all that I can afford. We can do so much better. To all of you watching, we can get back to an America that's affordable again. There's a strong role for policy in affecting the

prices of all these essential goods, from housing to child care to health care expenses. I think there's a lot of scope to have government programs that help the middle class quite a bit more. So how has the middle-class life become so unaffordable for Americans? Housing is always going to be typically the biggest bite of a household's budget. I think that's probably a primary issue in terms of why people are feeling that crunch. I am currently renting, and I would say that the housing is probably about 65% of my monthly expenses, where it should be the other way around, it should be 33%. The median rent for middle-income families has risen by 18%, to $1,300 per household between 2001 and 2022. We've just seen this intense upward pressure on the cost of rent, and that filters through to the cost of buying a house.

Existing home prices hit a record in June 2024, with existing homes selling at a median price of $426,900. According to the most recent analysis, the US is facing a shortage of 4.5 million homes. In 2022, families in the US increased by 1.8 million, but only 1.4 million housing units were built to meet the demand. We've got lots of families who are trying to form. You know, people leave college, they leave their parents' house, they want to buy their own house. And we just haven't seen housing construction. If you don't build more housing, then housing becomes more expensive. And that's exactly what's happening in a lot of coastal cities, and increasingly more and more cities across the United States, so that it's become very unaffordable to buy a house. What it amounts to are state and local policies that have

really operated over the course of several decades to restrict housing supply. You know, it's the old story that people in single-family homes, in desirable neighborhoods really push back against efforts to build more housing in those neighborhoods. They complain about the parking, they complain about pressure on infrastructure. Experts say policy intervention is essential to tackling the affordability crisis. There's an opportunity today to rethink how the federal government interacts with housing markets. We already see this in markets like health care in the United States. It's not a purely privatized market. There is a government role, both in terms of investments and also just in terms of thinking about how we organize policies. We don't need to build public housing in the suburbs, but we do need to build more densely near the city center, allow for duplexes and triplexes, and at least some amount of light-touch density that

allows more people to live near where their jobs are. And that brings down rents and home prices a bit, even if that's going to not be as good for existing homeowners. Add to that, we see childcare costs that have also exploded over the years. In some parts of the country, you have households paying upwards of $25,000 per year. The cost of childcare has risen at more than twice the rate of inflation in the U.S., increasing by 273% between 1990 and 2024. We expect these families to go and participate in the labor market, but they need this vital support. We have a system in the U.S. that is just so much you're on your own unless you're very, very poor and can get a subsidy. I'm very fortunate that what I do to earn an income does not require me to have childcare. I would basically be making the equivalent of $7.50 an

hour over the summer if I had to pay for full-time childcare for three children. It doesn't make sense. In 2023, 67% of parents reported spending at least 20% of their annual income on childcare, while 89% said they spent 10% or more of their household income on childcare. We see here is really a marketplace that's still in a bit of disarray. We have shortages in childcare centers. We have childcare workers who really report being underpaid, which then exacerbates the problem. You sometimes have states or localities insisting on regulations that just don't make sense for childcare, that make onerous restrictions on child-to-staff ratios, or certain zoning restrictions on where you can have a childcare facility. And so again, here there is an opportunity to prop up this labor market and this overall marketplace. We saw some of this effort taking place during the

pandemic. In 2021, the United States embarked upon a historic expansion in the refundable child tax credit. Expanded not just in its generosity, but also in the number of families it reached. It went deep into the middle class. Like often, the child tax credit in previous years has just really been a low-income program. This one really spread out, didn't start phasing out until $100,000 or more for a bunch of families. That was a one-year experiment that expired. You've had policymakers advocating for making this 2021 expanded child tax credit permanent, but it has faced resistance in the Congress. Health care is another major factor making the middle-class lifestyle unaffordable for many American families. In 2021, about 12.4 million middle-class families had unpaid medical bills, the highest among all other income groups. Health care expenses weigh heavily on me because I

don't have health insurance personally. My children do, but I don't. Every time I sit down to go ahead and look for a health plan that would make sense, I get discouraged because what I can afford has like a $15,000 deductible, but I'm giving them $600 a month. It's pretty well known by now that if you like, compare the US to almost any other advanced country, we spend a ton more on health care, and we do not get better health outcomes. The US spends about $12,742 per person on health care, the highest cost per capita compared to other wealthy OECD countries. However, the country still ranks lower on key health measures like life expectancy and infant mortality when compared to similar nations. Everything costs more. Doctors cost more. Drugs cost more. Devices cost more. And that, to me, just seems to be a clear problem of

market power in the health-care sector. And so you've got pharmaceutical companies that unambiguously have market power. That's what patents are. And unlike other countries that really try to leverage some kind of monopsony power against pharmaceutical companies to sort of countervail their monopoly power, we don't do that much in the US. Besides drugs, you've got growing consolidation in sort of hospitals and specialty providers. A study by Harvard University discovered that hospital prices in markets with a monopoly are 15% higher in areas with four or more hospitals. And research from UCLA revealed that monopoly protection increased consumer costs by $52.6 billion across a sample of 355 brand name drugs. In response to these concerns, the Justice Department launched a task force in May 2024 focused on specifically addressing monopolies and collusion in the health-care sector.

You want to leverage the power of public buyers of health care, you know, to bargain with them and countervail. But then you also want to do antitrust to say if you're going to buy up every anesthesiologist in a given area and start price gouging, we're not going to let you do that. We're actually going to regulate or we're going to disallow the mergers. Prices are also rising for essential expenses other than the big three. The utilities that are just slowly increasing. It's like every month. It's like my usage is down but why is my bill higher? Obviously groceries are more expensive. It hurts. It really does hurt when I have to tell my children no, when I have to tell them that sorry, we can't go to this activity because I don't have the extra $120 to spare this month. As a mother, that's kind of like the hardest part.

Rising prices have been a major talking point for the 2024 election. For Harris and Trump, focusing on the middle class, speaking directly to promises of building the middle class or rescuing the middle class, these are promises that in some way offer an umbrella pitch for why they are the best candidate for the health of the US economy. I was raised as a middle-class kid, and I am actually the only person on this stage who has a plan that is about lifting up the middle class and working people of America. She wants to build 3 million new homes over the course of her potential administration, increase the supply of housing, and lower the price. She has pledged to crack down on hidden junk fees and other corporate pricing practices that she sees as the reason for high prices. For Harris, a lot of boosting the middle class comes down to putting more money in the middle class' wallet.

I have a plan. $6,000 for young families for the first year of your child's life. $25,000 down payment assistance for first-time home buyers. For Trump, he's painting his candidacy as sort of the change campaign. People are sick of the economic status quo, and he wants to be the person to relieve them of the economic pain that he sees as the result of a disastrous Biden-Harris administration. I had no inflation, virtually no inflation. They had the highest inflation, perhaps in the history of our country. For him, lowering prices and ending inflation is a matter of growing the economy as a whole. A lot of his proposals, economists have analyzed and said they could threaten to reheat inflation in the short term, things like his tariff proposals that would increase producer costs for manufacturers, which could then translate to higher consumer prices. We're doing tariffs on other countries, other countries

are going to finally, after 75 years, pay us back for all that we've done for the world. He says, look at the long term. Once we grow the economy in the long term, that value is going to trickle down and outweigh any short-term costs or pain that you feel from the immediate implementation of some of his plans. The middle class is really a component of the American experience that many people aspire to. It really does connote a feeling of opportunity, not just for that family, but for their children's and really future generations. I think government policy is really central to thinking about the challenges facing the middle class today, and it would be beneficial if more Americans had a feel for how these policies interact with and really affect the well-being of their families.

Why The American Dream Became Unaffordable For The Middle Class

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