Social Security - It's Sooner, Not Later

Long time readers of RTE will remember the graphic below that I have posted several times over the years.  Its far-seeing accuracy has been a guide to the few who recognized the danger & took appropriate steps in their own personal finances because sometime in the 2030s mandatory spending will exceed government revenues.

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Long term readers will also remember the graphic below that is updated every year in the Social Security Trustees Report with the latest being for 2025.  The Trustee's report presents the current & projected financial status of the Social Security retirement & survivors trust fund: "The OASI Trust Fund (i.e., - old-age & survivors insurance) reserves are projected to become depleted in 2033, at which time OASI income would be sufficient to pay 77 percent of OASI scheduled benefits."   DI stands for disability insurance on the graphic - a separate account from retirement & survivors benefits.  OASDI stands for the formal name of the U.S. Social Security program: Old-Age, Survivors, and Disability Insurance.

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This type of warning has been made available to eligible beneficiaries for decades either online with a reminder to review your "Social Security Statement" online three months before your birthday or mailed to people over 60 who do not have an online account.  Yet I have never met a TV or radio host on any program I have been on or any attendee @ one of my FairTax seminars who was aware of this. 

The nearness of the shortfall should project the matter into the 2028 presidential race.  But Trump, Congress, & Biden continued to not only not address the problem but in 2025 made it worse.

First, Congress passed & Biden signed the Social Security & Fairness Act of 2023 on January 5, 2025.  This law repeals the Windfall Elimination Provision and Government Pension Offset, which reduced or eliminated the Social Security benefits of individuals receiving a pension based on work that was not covered by Social Security.  Therefore, implementation of this law increases Social Security benefits for people who worked in jobs that were not covered by Social Security thereby contributing to the acceleration of the depletion of the OASI Trust Fund.  

Second & more recently Trump promoted & signed into law the OBBBA that included a new senior deduction meant to represent no tax on Social Security benefits for tax years 2025 through 2028 (Trump's current term).  Total revenue generated from income taxes on Social Security benefits totaled $54.4 billion in 2024.  Trump's no tax on Social Security pledge will take money away from this total thereby exacerbating the poor condition of Social Security's finances.   It was estimated by the Chief Actuary of the Social Security Administration's Office after the Trustee's report was issued & the OBBBA was signed into law that the "No Tax on Seniors' Social Security Benefits" provision of the OBBBA accelerates the cash flow insolvency of the Social Security Trust Fund from 2033 to late 2032.   This is a classic "pay now or pay later (when I'm out of office)" charade that shows that not only is Trump not working on solving Social Security's solvency problem, his policies are hastening the Trust Fund's demise.

Since Trump has made it clear that he will not touch Social Security (other than no tax on benefits) this means that the United States will sooner, not later, need Congress & the 2029 or 2033 new president to take appropriate action.  The following graphic shows the net present value of Social Security's unfunded obligations over the long range projection of the program with the zero line crossed in 2033. 

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The following graphic shows the urgency of the problem even clearer in that the minimum level for the test of short-range financial adequacy is breached in 2028 - the year before the next president takes office.  Notice the graphic is for the hypothetical  "OASI & DI Combined Trust Funds."  The OASI Trust Fund, taken by itself, declines to 89% by the beginning of 2029 & remains below100% for the remainder of the short-term period, until reserves become depleted in the first quarter of 2033.  Therefore, OASI fails the test of short-range financial adequacy.

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The graphic below shows the financial dynamics that will be encountered when the Trust Funds are depleted if no action is taken by Congress.

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The above graphics tell the story that you need to know for yourself if you are near or already participating in Social Security.  But also your adult children trying to raise a family or your young children & grandchildren all of whom will be affected by the facts in the Trustee's report starting in the very near future & then staying in play for the rest of their lives too.  We are all in the same boat regardless of current age.

In addition to the above graphics, I present the following narrative directly from the Trustee's report that further explains the information shown on the graphics:

The OASDI program was providing benefit payments to about 68 million people at the end of 2024:

- 54 million retired workers & dependents of retired workers

- 6 million survivors of deceased workers, & 

- 8 million disabled workers & dependents of disabled workers.

During the year, an estimated 184 million people had earnings covered by Social Security and paid payroll taxes on those earnings. Total program cost in 2024 was $1,485 billion. Total income was $1,418 billion, which consisted of $1,349 billion in non-interest income and $69 billion in interest earnings. Trust fund reserves held in special issue U.S. Treasury securities declined from $2,788 billion at the beginning of the year to $2,721 billion at the end of the year. 

Under the Trustees’ intermediate assumptions, Social Security’s total cost is projected to be higher than its total income in 2025 and all later years. Total cost began to be higher than total income in 2021. Social Security’s cost has exceeded its non-interest income since 2010. 

Considered separately, the OASI Trust Fund fails the test of short-range financial adequacy, but the DI Trust Fund satisfies the test. The OASI reserves are projected to become depleted during 2033 under the intermediate assumptions. The DI reserves along with projected program income are sufficient to cover projected program cost over the next 10 years.

Expressed in present-value dollars discounted to January 1, 2025, the open-group unfunded obligation for OASDI is $25.1 trillion over the 75-year projection period 2025-99. This is $2.5 trillion more than the measured level in last year’s report of $22.6 trillion over 2024-98, discounted to January 1, 2024. 

The actuarial deficit increased significantly in this year’s report primarily due to: (1) the implementation of the Social Security Fairness Act, (2) the extension in the assumed year the ultimate total fertility rate is reached, and (3) the reduction in the ultimate assumption for the ratio of total labor compensation to GDP. These changes are described in detail in section IV.B.6 of the report.

To illustrate the magnitude of the 75-year actuarial deficit, consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period ending in 2099: 

• revenue would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 3.65 percentage points to 16.05 percent beginning in January 2025; 

• scheduled benefits would have to either be reduced by an amount equivalent to an immediate and permanent reduction of 22.4 percent applied to all current and future beneficiaries effective in January 2025, or by 26.8 percent if the reductions were applied only to those who become initially eligible for benefits in 2025 or later; or 

• some combination of these approaches would have to be adopted

If substantial actions are deferred for several years, the changes necessary to maintain solvency for the combined OASI and DI Trust Funds would be concentrated on fewer years and fewer generations. Significantly larger changes would be necessary if action is deferred until the combined trust fund reserves become depleted in 2034. For example, maintaining 75-year solvency through 2099 with changes that begin in 2034 would require: 

• an increase in revenue by an amount equivalent to a permanent 4.27 percentage point payroll tax rate increase to 16.67 percent starting in 2034, 

• a reduction in scheduled benefits by an amount equivalent to a permanent 25.8 percent reduction in all benefits starting in 2034, or 

• some combination of these approaches

* * *

The unfunded obligations described in the Trustee's report came about due to substantial demographic shifts that saw the number of workers per beneficiary fall from 16.5 in 1950 to 2.7 in 2024 with continuous declines projected as lower-birth-rate generations replace workers of the baby-boom generation.  The ratio of workers to beneficiaries reaches 2.3 in 2040, when the baby-boom generation will have largely retired, & will generally decline thereafter to about 2.0 due to increasing longevity.

The unfunded obligations came about because of the demographics detailed above - but these unfunded obligations were caused by an oblivious citizenry that let short term politicians tell them they would never let anyone touch their Social Security benefits.  The demographics are a natural phenomenon.  The politicians are master manipulators who just hope to be out of office when their constituents realize the imminence of one of the painful solutions detailed in the report falls on them either as an unsuspecting senior citizen ripe for benefit cuts or as a worker who will see their Social Security payroll tax rate increase over 34% applied to every dollar up to $184,500 in 2026, such sum increasing thereafter. 

In addition to increased payroll taxes the unfunded obligations will be paid by today's children in the form of a markedly decreased standard of living such as the inability to buy a house or inability to send their kids to college - we are off to a terrible start regarding both of them already.  There is no leadership in either party willing to solve our problems.  Democrats are more interested in funding boondoggles like the Green New Deal where sea levels might increase millimeters during the next 100 years rather than strengthen Social Security which will have the problems described above become more noticed during the next presidential election.  Republican Members of Congress are only too happy to take marching orders from Trump whose political career should end @ age 82 in three years leaving these poor fools holding more than one bag.

In answer to the charge that Congress needs to work together better, the late Oklahoma Senator Tom Coburn said that Congress is working together way too well – that is why the country's financial problems are not being solved as described above.  In essence we have One Big Government party with Democrat & Republican wings whose jobs are so rosy Members have to be carried out of office on a stretcher.

Every politician knows that Social Security, Medicare, Medicaid, other entitlements, & interest on the national debt comprises @ least two thirds of the federal budget.  And yet every congressional charade @ financial responsibility focuses on cutting the remaining one third as if therein lies the problem.  And even this pretend effort never really cuts anything in the here & now but rather slows increases on future spending that still increases.

There are tens of trillions of dollars in unfunded entitlement obligations that never appear on the government's balance sheet but these are liabilities just like the national debt.  Although the national debt & unfunded obligations are distinct financial concepts, they are cumulative with each adding to the government's total liabilities.  The national debt represents money the government borrowed in the past & owes with interest to its creditors, while unfunded obligations are projections of future financial commitments for which there are insufficient assets or dedicated future revenue to cover the promised benefits.  According to Professor Alexander William Salter of Texas Tech University the present-value costs of these liabilities range between $100 & $200 trillion - equal to one to two times the world's GDP.

This bill will start to come due in 2033 when the unfunded obligations are accounted for by large payroll tax increases or real cuts in benefits.  The burden will not ease on all of us, one way or another, until it is paid off.

The Social Security problem has worsened from long term neglect by the politicians & indifference by We the People of the United States for decades, thereby showing it is getting harder by the day to find people who understand the issues they are fighting for or should be fighting against.

Reference Post - The Solution To Social Security's Funding Problem

Affordability Part B - The Underlying Forces & Sequence Of Events

In the last post I described how a significant portion of the population is plagued by an affordability crisis centered on grocery prices, housing costs, healthcare premiums, & cost of living participation rates that raise the poverty level above the median household income.  This post identifies the underlying forces that made the affordability crisis happen as well as the sequence of events that show how it happened.

Please look @ the green line on the graphic below, depicting the real median male earnings in 2024 dollars, from the September, 2025 U.S. Census Bureau report entitled Income & Poverty in the United States: 2024.

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You'll notice that the green line is on a steady upward trajectory from 1960 through 1973 when it flattens out for the next 51 years.  Annual inflation for the six years from 1960 through1965, under Eisenhower but mostly under the JFK presidency or its supply side economic influence, was well under control averaging 1.3%.  

But LBJ's Great Society got under way in 1965 with landmark government spending healthcare laws - Medicare for seniors & Medicaid for the poor - followed by Nixon's easy money policies so that for the period 1966 to 1972 inflation started to pick up averaging 4.1% annually.  In 1971 Nixon implemented a 90-day freeze on all wages, prices, rents (54 years before Mamdani), & salaries; announced a Keynesian type government spending plan to stimulate the economy; & worst of all on Sunday August 15, 1971 took America off the gold standard including refusing to exchange 35 paper dollar bills for a troy ounce of gold. The Federal Reserve increased the growth of the M2 money supply by 79% from 1970 to the period 1971 & 1972 (7.3% growth in 1970 to 13.2 average growth of 1971 & 1972).

Couple all of the above self inflicted selfish political Death Of Democracy government dependency moves, that are in direct opposition to our founding principles, with food shortages, government spending on the Vietnam War, two OPEC oil embargoes that led to lines of cars around the block to get gasoline, & the inept Jimmy Carter presidency, & it should be no surprise that CPI inflation went from 6.2% in 1973 to 11.1% in 1974 & 13.5% in 1980.  It was in the 1970s that America learned the term "stagflation" where the Phillips Curve was turned on its head when inflation & unemployment simultaneously moved higher & we suffered under the misery index. 

The deterioration in the dollar's purchasing power today compared to the early 1970s is displayed by the government exchanging one troy ounce of gold for $35 in 1970 to gold trading on the COMEX, LBMA, & SGE markets starting on October 7, 2025 @ over $4,000 for that same troy ounce of gold & less than four months later @ over $5,000.  The dollar's value over this period as defined by the price of gold has dropped by 99.3%.  Talk about affordability!

All of the above problems to our economy occurred under an income tax system & a Federal Reserve central banking system, both of which were created in 1913, as well as FDR's two New Deals from 1933 to 1938 from which the Cato Institute has identified the derivation, either directly or indirectly, of 126 welfare programs in effect today.  The Great Society & ObamaCare followed suit.

The income tax system has damaged America because it taxes work, savings, & investment & as such is the basis of so many ill-advised incentives that have nothing to do with our prosperity except for destroying it.

The dollar has lost 97% of its purchasing power to inflation since 1913 when the Fed's two original goals were to be "a lender of last resort" for the nation's lending institutions & to preserve the value of the dollar.  Testimony of the Fed's failure - it takes $33.07 today to buy what $1.00 did in 1913. 

Since January, 2012 I have offered solutions to four of our intractable problems that are unsustainable.  Namely, 1) replace the Medicare plan with one of premium support to buy private insurance using a nominal dollar demogrant, unadjusted for inflation, for people younger than 55, 2) change the basis for the initial Social Security benefit to the CPI instead of the national average wage index to ensure that benefits do not grow faster than the cost of living, 3) cut, cap & balance federal spending @ 18% of GDP, & 4) replace the federal income tax & IRS with the FairTax Plan.    Implementing any one of these four would do wonders for changing the government dependent mindset that effectively is a bureaucratic anchor that separates us from our founding principles of limited government, personal responsibility, & free enterprise.  These four are long term solutions needed to reset America's sail before we completely go adrift.

We can see the importance of having a stable currency from the above history of what set up our latest chapter of economic trouble - affordability.    Alexander Hamilton laid a solid foundation for the gold standard & the following graphic summarizes the main sound dollar points of this post.  Notice the flat line for low CPI growth from 1800 into the 1960s that starts to dramatically increase in the early 1970s as described above. 

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Inflation averaged 0.2% a year from 1790 to 1913 when the Fed was created.  From 1914 to 1971, under the Fed managed gold standard, inflation averaged 2.7% per year, & from 1972 to 2025 it averaged 3.9%.  At 0.2% annual inflation it would take 348 years for prices to double.  Now that's stability! 

In 1913 the United States was the wealthiest country in the world.  Since then the government has become much more involved in everything we do & I'm only talking economically in this post.  I leave personal pronoun selections & the like to others.

Almost unbelievably, the Fed has the conceit to think it can manage & control the monetary system of the $30 trillion United States economy, let alone do this still using the discredited Keynes' ideas that led to the Phillips curve inverse relationship between unemployment & inflation.  This despite the stagflation lesson of the 1970s that proved unemployment & inflation can both move in the same direction - in that case higher.  Shouldn't we have long ago questioned an inflation fighting model that deliberately slows growth & raises unemployment?  Reaganomics proved that growth is good & not inflationary.  

The effective way to cure inflation is to stabilize the value of the dollar by linking it to gold.  Returning the dollar to a gold standard system can be started by the President placing a phone call to the Treasury Secretary to initiate discussions with central banks on stabilizing the price of gold, even around broad bands much like Fed Chairmen Volcker & Greenspan did from early in Volcker's term to 2006 in what was essentially a de facto gold standard.  These men focused on the value of the currency & not just the quantity of money alone.  To stabilize & support the value of our money from sliding lower, the government should publicly state their intention to do so followed by the affirmative action of shrinking the monetary base - the most liquid component of the money supply consisting of the total amount of currency in circulation plus the reserves held by commercial banks in their accounts at the central bank.  This is done by selling government bonds in exchange for domestic currency through open market operations & letting these markets determine the level of interest rates after dollar stabilization.  The Fed will no longer set interest rates.  This type of gold standard would assure investors who lend money to other people that they will get sound money back 10, 20, 30 years later with the same purchasing power as the money they originally lent.  Sources - Inflation by Steve Forbes, Nathan Lewis, & Elizabeth Ames pages 79 to 85 & Wall Street Week transcript Hey Jude (Wanniski) - November 13, 1981.

The above information & information from the last post shows the events (including current events concerning the Fed's operations) that cumulatively produced the affordability issue distressing the American consumer today as well as the reasons the American worker, especially those with limited education, should be petrified of AI.  AI is directly aimed @ replacing these people in the workforce.

 

All inflation is made in Washington & the current manmade unaffordability humiliating blunder came right out of the pandemic era government programs that flooded the nation's money supply with direct deposits & personal checks to 175 million Americans. 

But the most bitter pill to swallow comes when we find out we were once on track to completely avoid this affordability mishap - Using Table A-7 of the above referenced Census Bureau's income & poverty report, the growth in real median annual earnings for men for the 13 years from 1960 through 1973 was $19,550 in 2024 constant dollars.  The growth for the next 51 years was only $4,960 in constant 2024 dollars.  Had the growth in income continued @ the same rate as the period 1960 to 1973 to the present I calculate that the typical male worker would today be making $275,569 per year thereby not only precluding the affordability crisis from ever happening but bringing about a prosperity far greater than we have ever realized.

Does this calculation of enhanced prosperity quantify how much we have been cheated out of?  I used to feel that way, but have come to realize it is just another shameful example of what we have let happen to ourselves.

Affordability Part A - What Happened

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: $140,000

You 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.