As political pundits dissect the election results, one message has become abundantly clear: the economy is not working for many Americans. Across the country, across demographic categories and geographies, voters came out en masse to voice their discontent with the status quo.
We should have seen it coming.
The Financial Health Network’s research has consistently demonstrated the financial precarity of many people’s lives. Just over half of Americans say they spend more than their income. And 44% of people don’t have enough money saved to cover three months of living expenses, turning a broken leg, a flat tire, or missed time from work into a financial catastrophe.
Yes, the median family’s income grew 140% over the last thirty years, but the cost of childcare grew more than 200%, prescription drugs about 175%, and higher education almost 400%. Increasingly, people are being priced out of the middle class.
How did we miss it? Despite the reams of data the government collects and analyzes, policymakers lack a holistic view of people’s financial lives. The federal government relies on a range of standard macroeconomic indicators that appear to work well for tracking the health of the overall economy, but those measures tell us very little about how individuals and families are faring day to day.
A low unemployment rate suggests a strong overall labor market, but it doesn’t mean much to the recent college graduate working as a barista or the store clerk who can’t seem to get scheduled for more than 25 hours a week. Reductions in the Consumer Price Index signal when inflation is under control, but they can’t tell us about the lived experiences of individual households struggling with the cost of basic necessities. GDP growth may be an indicator of a strong overall economy, but the spoils of economic growth accrue in greater measure to those with greater assets.
Collecting the right data is only part of the issue. During the COVID-19 pandemic, when the government realized it lacked the data to understand how people were managing the crisis, the Census Bureau introduced a new Household Pulse Survey to fill the gap. Four years later, the now monthly survey continues to gather valuable information on whether, for instance, respondents have enough food or whether they are able to pay their rent. But all that data – dozens of tables that land every month on a government website – doesn’t add up to insight that can be used to guide policymaking.
Americans deserve a national economic policy regime that places their financial health at the very center. How might an end to taxes on tips affect household budgets? What about the potential rollback of student debt relief? And how do we make sure that decisions about macroeconomic policy, like increasing tariffs, are influenced by the potential impacts on everyday people?
To truly understand how families are faring, the federal government should create a holistic measure of how well families can meet their basic needs, absorb and recover from financial shocks, secure their future, and improve their financial situation over time. These key elements speak to the totality of people’s financial lives, and whether they are spending, saving, borrowing, and planning in ways that create financial success both today and in the future.
Perhaps more importantly, the government needs a data collection and reporting system that translates the numbers into insights that policymakers can easily understand and use. Ultimately the goal should be to generate headline measures on the state of financial health in America that receive the same treatment as the monthly jobs report or the quarterly GDP release.
The incoming administration has the opportunity to show voters that it truly sees them by creating a consumer financial health measure and using it to enact policies that are both good for the economy and good for the individuals and families that power it.
The author would like to thank Meghan Greene, Policy & Research Advisor, Financial Health Network, for her contributions to this article.
