The recent election results indicate a widespread discontent among Americans regarding the state of the economy, as voters across various demographics and regions express their frustrations. This unrest should not have come as a surprise. Research conducted by the Financial Health Network has consistently shown that financial insecurity affects a significant portion of the population. Alarmingly, over half of Americans report spending beyond their means, and nearly 44% lack savings to cover three months’ living expenses, making even minor financial setbacks a potential disaster. The disparity between rising wages and escalating costs in essential areas such as childcare, healthcare, and education has further exacerbated this issue, pushing many individuals and families out of the middle class.
While it may seem that economic indicators paint a positive picture with a median income increase of 140% over the past thirty years, the reality is more complex. The costs associated with fundamental needs have skyrocketed; for instance, childcare costs have surged over 200%, prescription drugs around 175%, and higher education has increased nearly 400%. This growing economic chasm reflects a significant disconnect between macroeconomic metrics and the daily realities faced by average Americans, culminating in their feeling of being left behind. The overall health of the economy can often be misleading when considering the lived experiences of those who are struggling to make ends meet.
A key reason for this disconnect is the lack of a coherent framework for analyzing individual financial circumstances among policymakers. The federal government relies on traditional macroeconomic indicators, such as unemployment rates and GDP growth, to assess economic vitality. However, these indicators often fail to capture the true economic struggles of citizens. For example, a low unemployment rate does not account for underemployment or low wages in service jobs, nor does it address the difficulties faced by those juggling multiple part-time positions. Even a favorable GDP growth figure can obscure the fact that the benefits of economic advancement disproportionately favor wealthier individuals, leaving many without sufficient means to cover basic needs.
Efforts to collect and interpret relevant data are underway, especially highlighted by the COVID-19 pandemic, which exposed significant gaps in understanding people’s economic situations. The introduction of the Household Pulse Survey by the Census Bureau aimed to gather real-time data on consumer experiences regarding essentials like food security and housing payments. Nevertheless, despite the availability of extensive datasets, the information frequently exists in silos, lacking actionable insights that can effectively inform policymaking aimed at improving Americans’ financial health.
To address these issues, there is a pressing need for the federal government to develop a comprehensive framework that evaluates families’ financial health holistically. Such a model should not only assess the ability of households to meet basic needs but also their capacity to absorb financial shocks, build savings, and secure their financial futures. By creating a unified measure of financial health, policymakers could gain a clearer understanding of how families manage their finances and identify areas needing urgent attention, such as potential changes to tax policies or student debt relief programs.
Ultimately, the incoming administration has a significant opportunity to reconnect with the electorate by prioritizing the creation of a consumer financial health measure. By consistently capturing and reporting indicators reflective of everyday financial realities in America, the government can design policies geared towards fostering not only economic growth but also improving the financial stability of the families that underpin it. Achieving this goal requires a robust data collection framework, translating financial statistics into insights that inform effective policymaking, and reinforcing a commitment to addressing the core financial challenges faced by millions of Americans today.