Even the least discerning among us are aware that "affordability" is the catchword for 2026.
The 2025 Deloitte Holiday Retail Survey found 77% of the 4,270 surveyed shoppers expected higher prices on holiday goods & 57% expect the economy to weaken in the next six months (versus 30% in 2024) - the most negative outlook Deloitte has reported in 28 years of conducting the survey. Specifically, a larger share of Gen Z (39% in 2025 compared to 31% in 2024), Millennials (39% to 30%), & Gen X (41% to 39%) all thought, by the percentages indicated, that their household financial situation was worse in 2025 than in 2024. Baby Boomers were 40% in both years.
79% of the 1,684 U.S. adults who participated in a Yahoo/YouGov poll conducted November 21-24, 2025 say they are paying more money for the same goods & services compared to a few years ago & 60% said inflation is getting worse.
Things quickly became unaffordable following the federal government's irresponsible stimulus deficit spending binge under both Trump & Biden enacted to combat the government's lockdown & restrictions caused by the Wuhan coronavirus Covid 19 pandemic starting in March, 2020. Trump signed $3.6 trillion of such spending into law in 2020 & Biden $1.9 trillion in 2021.
The Trump & Biden combined spending binge included direct cash payments to adults & qualifying children in virtually every American household, additional & extended unemployment compensation that made going to work less attractive than collecting these new enhanced benefits, increases in food stamp benefits, assistance to help renters pay for past due rent, future due rent, & utility bills to prevent power shutoffs, among a long list of other government dependency schemes that even Zohran Mamdani had not included in his socialist mayoral platform for NYC.
Just what could we expect from this but the greatest bout of inflation in forty years - a more rapid increase in the quantity of money than an output. In this case, due to a countrywide lockdown or partial lockdown there was significantly less output & people had no place to spend the money so prices didn't start to increase until February, 2021 when the hapless Biden was in office - but Trump's part of the damage had already been done starting in April, 2020 when the first pandemic relief payments were made (the paper checks had Trump's name on the memo line). By June, 2022 the CPI had reached 9.1% YoY & the U-Mich's Surveys of Consumer's Sentiment Index hit its all time low of 50 (after starting 2025 @ 71.7 the December, 2025 & January, 2026 respective readings were 52.9 & 54.0). From January, 2020 through November, 2025 the consumer price index increased 26% & the grocery CPI increased 31% so the 3rd quarter annualized PCE inflation rate of 2.8% is applied to a $131 grocery bill instead of $100 cruelly meaning that compounding is working against grocery shoppers.
The Bureau of Labor Statistics (BLS) CPI inflation report for November, released on December 18, included a section that determined the average hourly wages for all private workers increased 3.5% YoY comparing favorably to the overall CPI increase of 2.7% but that the cost of coffee (up 18.8%), audio equipment (up 10.2%), motor vehicle repair (up 9.7%), utility piped gas service (up 9.1%), household insurance (up 7.0%), hospital & related services (up 6.0%), day care & preschool (up 4.7%), eating out (up 3.7%), & used cars & trucks (up 3.6%) are still increasing faster than earnings as of November. Average annual wage growth was 3.8% in December. The Commerce Department's 2nd quarter report that showed excellent annualized GDP growth of 4.3% also showed that inflation adjusted disposable income was flat meaning that overall income is barely keeping up with inflation. Biden's nemesis was good economic numbers that people did not feel in their lives which is still the case. Check how your own experience compares with the following November national averages: ground beef chuck @ $6.50 per pound, fresh whole milk @ $4.20 per gallon, white bread @ $1.95 per pound, & large grade A eggs @ $3.65 per dozen.
During the 2024 campaign Trump pledged numerous times to bring down prices: 1) “Starting on day one, we will end inflation and make America affordable again, to bring down the prices of all goods,” 2) “A vote for Trump means your groceries will be cheaper,” 3) “Prices will come down. You just watch: They’ll come down, and they’ll come down fast, not only with insurance, with everything,” 4) “Starting the day I take the oath of office, I will rapidly drive prices down and we will make America affordable again. We’re going to make it affordable again,” 5) “Starting on day one, we will end inflation and make America affordable again. We’ll do that. We’ve got to bring it down,” & 6) “We’re going to have prices down - I think you’re going to see some pretty drastic price reductions.”
As we all know none of these pledges came true & the above Yahoo/YouGov poll finds people think Trump is not doing enough to address inflation (61% to 24%), that Trump (49% to 24%) has actually done more to raise prices than lower them, & by 38% to 31% Trump is more to blame for the current inflation than Biden. See questions 16,17, & 18 of the poll for more detail.
The annual rate of change of the CPI has fallen from 3.0% when Trump took office to 2.7% in November. But what Trump is actually talking about in the above pledges is deflation - a situation of generally falling prices like we had in the Great Depression. Deflation is trickier than inflation in that there is more complexity with deflation. Farm prices are maintained by the government & wage & benefit increases of long term labor contracts make it impossible for companies to lower prices & stay in business since they won't be able to cover their fixed costs. Output will be cut rather than prices which leads to unemployment which in turn means more layoffs & less spending - I calculate that relative to July, 1929 prices stayed in a deflationary state until March-April, 1943.
Trump has done nothing to improve the cost of living & people know it - after imposing tariffs on products we don't make in America like coffee & bananas, Trump did remove some of those tariffs, as well as sharply reducing tariffs on Italian pasta makers & delaying tariffs by one year on upholstered furniture, kitchen cabinets, & vanities. In addition Trump is bailing farmers out to the tune of $12 billion after China cut U.S. soybean imports to zero in retaliation to Trump's tariffs on China, but none of these moves can be considered what people thought would be a help to the American economy in January, 2025 when Trump took office. At the post Fed December meeting news conference Chairman Jerome Powell blamed Trump's tariffs for the current elevated inflation rate saying that inflation would be much closer to the Fed's 2% target if not for the tariffs. The above poll that found Trump more to blame for the current inflation than Biden also found that 9% of respondents blame tariffs the most which is another way of blaming Trump since he was the one who imposed the tariffs. See question 16.
The affordability problem started when the inflation rate outpaced wage gains in the early 2020s. For instance in June, 2022 people in the American labor force needed a 9.1% pay increase just to keep up with CPI inflation over the past year. For 25 straight months (April, 2021 - April, 2023) inflation dramatically outpaced wage growth. The modest real wage growth since May, 2023 hasn't been enough to overcome the cumulative purchasing power loss since the pandemic, meaning that households still do not have the resources to pay for many essential goods & services @ current prices - like groceries (beef, bananas, coffee) utility bills (average electricity costs up 11% from January through September), housing (up 3.6%), home-insurance (up 8% on average), childcare, healthcare, & healthcare insurance premiums. Source of 2025 price percentage increases - William Galston with projections from Insurify website.
Healthcare premiums that increase faster than wages every year were the reason the government shutdown for 43 days starting October 1. Specifically, Trump's OBBBA signed into law last July purposely did not renew the enhanced ObamaCare subsidies that were passed in 2021 to provide temporary pandemic relief from unaffordable ObamaCare premiums & to extend this relief to more people by removing the 400% federal poverty level income cap qualification. This move by Biden was so popular that the number of people buying ObamaCare insurance more than doubled to 24 million. And what's not to like - in 2023 taxpayers paid nearly 74% of premiums for subsidized plans according to a Bai & Plummer study.
The enhanced subsidies were scheduled to expire after 2025. Congress detestably pushed the issue into the new year when they uncaringly adjourned for the Christmas holiday two week break. A pair of poor, dueling healthcare plans are being debated in Congress while millions of the Covid era new signees will have their ObamaCare coverage dropped due to the income cap qualification being reinstated. Also, low & moderate income earners will still receive a subsidy but it will be the pre-Covid era subsidy which is much less than the temporary enhanced subsidies so these people will see an increase in their costs as well.
But it's not just the millions of people who were attracted to ObamaCare by the enhanced Covid-era subsidies that will see a large impact on their finances because of healthcare costs.
Sixty-five year old seniors will see the standard Medicare Part B premium rise 9.7% from 2025 & those on traditional Medicare will see the Part B deductible increase 10.1%. The Part A deductible increases 3.6% in 2026. The Social Security cost of living adjustment for 2026 is 2.8% meaning that senior healthcare costs are rising faster than senior cost of living adjustments.
For most years of the past several decades the nearly half of the population who receive their healthcare under an employer benefit policy has seen healthcare premiums increase faster than both general inflation & their wages. The average cost of an employer family plan reached $27,000 in 2025 up from $21,400 @ the start of the pandemic - employers' share went from $16,050 in 2020 to $20,140 in 2025 & the respective employee contribution went from $5,560 to $6,850. The average general annual deductible for single coverage in 2025 was $1,886 up from $1,617 in 2020; for small firms the respective deductibles were $2,631 up from $2,262 & for large firms $1,670 up from $1,418 meaning an average employee puts out a substantial amount of money in contributions to premiums & payments of deductibles before collecting any significant benefit thereby helping to create an unaffordable perception.
In the early 1990s, GM's healthcare costs per vehicle surpassed its cost of steel per vehicle. This condition only worsened over the years as healthcare costs climbed as described above. You can just wonder how much of employee potential wage increases went into paying employee healthcare costs thereby exacerbating the affordability problem.
Rent & home buying costs that have increased to consume 30% of income (with reports of up to 50% with 25% being the affordable standard for decades) crowd out other purchases adding to the affordability problem. Putting this another way: Household income of $75,000 per year would qualify a buyer for about half of all house listings in 2019. This number shrank to 21% of listings as of March, 2025 according to the National Association of Realtors. Nearly 30 million households have primary mortgages of 4% or less & these mortgagors are reluctant to sell & give up their low mortgages thereby contributing to a supply shortage that adds to the cost of housing.
Add to the increase in housing costs residential electricity rates that increased in 2025 more than wage gains. Did you notice that there were far fewer residential Christmas lights this past holiday season? Many homeowners thought Christmas lights were a luxury that could be forgone to save money. New Jersey saw residential electricity rates increase 21% in September from the previous September. A typical increase is 9.6% from 2024 to 2025.
The BLS reports the median weekly earnings of the nation's 122.6 million full-time wage & salary workers in the third quarter was $1,214 ($63,128 annually) & with companies investing so much money in artificial intelligence it is not hard to conclude that employers' don't think they are getting their money's worth. All you have to do to confirm this for yourself is call a bank, insurance company, doctor's office, or go to the post office - you ask yourself "someone is paying money to these people?" Well, maybe not for much longer.
Automation is really nothing new. I have seen a computer controlled automatic warehouse of flammable & combustible liquids that was built in Switzerland in the 1970s. And a fully automated facility with robots in New York state in the early 1990s. So this trend to more AI has been in the works for quite some time.
The root cause for the push to AI Iies in the general failure of our education system. Over the years I have presented documentation from the National Assessment of Educational Progress (NAEP) report cards showing abysmal test results for K-12 students. From 1992 to 2022 the number of 8th graders that could not read @ an NAEP basic level ranged from 22% to 31%. Now the basic level denotes partial mastery of prerequisite knowledge & skills that are fundamental for performance @ the NAEP proficient level (i.e., being able to read so that you can function in the world). In 2022, the percentage of 8th grade public school students performing @ or above the NAEP Proficient level in reading was 29 percent nationally, with 10 states having a lower percentage of proficient 8th grade readers than the national level: AK & KS - both @ 26%; DE @ 24%; TX @ 23%; MS, AL, WV, & DC - all @ 22%; OK @ 21%; & NM @ 18%.
These 8th graders in 1992 who could not read @ the proficient level are now 47 years old & by definition can't function in the world. Is it any wonder that employers have turned to AI with over 71% of K-12 students the last 34 years poorly educated & barely literate? In 2017, 20 % of small businesses said the quality of labor was their biggest problem with 44% saying they could find few or no qualified applicants for job openings & 29% saying they were not able to fill positions @ all.
Twelve years ago I posted that The Economist presented an engineering report of a study of 702 different detailed occupations in order to estimate the susceptibility of these occupations being eliminated by computerization – i.e., job automation by means of computer controlled equipment. The study resulted in an estimate that 47% of total U.S. employment is @ risk of being automated during the next twenty years (meaning only eight years left) & that occupations with low incomes & low education requirements are the most probable of being eliminated as technology & automation leaves more poorly prepared people behind.
The conclusions of the engineering report have been confirmed as more & more CEO's plan to increase capital spending on AI (half of GDP growth in the first half of 2025 can be attributed to AI investment). CEO's are not firing but they are not hiring either.
The above conditions illustrate the hardship poorly educated people in their 40s already have making ends meet & the conclusions of the aforementioned engineering report shows the impracticality for many in their 40s receiving the costly technological retraining necessary to maintain employment. Nevertheless the National Center for Education Statistics reports that over one million people in their 40s have enrolled in schools to make themselves less vulnerable to automation & AI - both white collar work as well as learning plumbing, carpentry, construction, & healthcare. All I can say is good for them. They can't start sooner than today to improve their lives.
And college graduates are finding difficulty finding professional work in their fields. One of the main challenges is finding an entry level job because employers prefer someone with a few years of experience. Grade inflation is not a help either. Employers just don't believe that all applicants are "A" students & neither do I.
Just like The Economist's report of 2014 was thought provoking, so was NewsNations telecast on back to back nights in November featuring economist Michael Green's column where he calculated a much higher poverty line than the government's that shows why people with the 2024 median household income of $83,730 find the cost of living unaffordable.
NewsNation explained that Mr. Green studied the government's derivation of the poverty threshold as a measure of inadequate income - the floor or line below which families could not function because they did not have enough money - something like what we call the affordability crisis today.
The original 1963 poverty line determination adjusted to today's dollars equals $31,200 for a family of four according to the federal government. Mr. Green explained that if the poverty threshold was updated using costs of what it takes to participate (what Mr. Green calls the "cost of existing") in today's world using current spending patterns to hold a job & raise two kids that the real poverty line is $140,000 - a number that explains why the median household income family finds things unaffordable.
NewsNation displayed a graphic that showed the categories from Mr. Green's column:
Childcare: $32,773
Housing: $23,267
Food: $14,717
Transportation: $14,828
Healthcare: $10,567
Other essentials: $21,857
Required net income: $118,009
Price of a family of four to participate in today's economy: $140,000You can adjust the $140,000 participation price for a family of four to other family sizes to get the point. For instance a single person earning the median full-time wage & salary of $63,128 (different from median household income that includes income from all family members from all sources) would have a lower participation price for living in the modern world also but would still find things unaffordable because the costs are higher than the income.
Now whatever your own experience with grocery prices, housing costs, healthcare premiums, or personal participation rates they all combine today one way or another into an unaffordable cost of living for a significant portion of the population & insufficient income, inflation, & poor education are why.
What are the underlying forces & sequence of events that gave rise to people not being able to afford all the groceries they need?
These are the very points I will take up in the next post.
