The ‘Headline Economy’ Looks Good. The Real-Life Economy Sucks | Opinion

Headlines across the nation this week reported seemingly good economic news to the American people: “Inflation Rates Continue to Cool.” That may be great news to Wall Street, investors, and economists at the Federal Reserve, but hard-working Americans aren’t breaking out the champagne glasses. They aren’t even cracking open an extra beer or ordering any extras at McDonald’s. And there’s a reason for that: Despite what the media may tell you, they can’t afford to.
The fact is, there are two economies in America right now, one that’s looking good to a slim percentage of Americans, which I’ll call the Headline Economy and which is represented by the Consumer Price Index (CPI), the Dow Jones, and the NASDAQ. And then there’s the Real-Life Economy that’s putting the squeeze on families living paycheck to paycheck. And there’s a huge gap between the two.
The dissonance between the Headline Economy and the Real-Life Econmy is stark for two simple reasons: The cost of things that are essential to American life—fixed cost items we can’t cut or substitute—is not adequately represented by the CPI. Moreover, the CPI measures month to month and year over year costs, but it doesn’t capture how much more Americans are paying for things compared to, say, 2020.
The Real-Life Cost Index, not the CPI, is the number most Americans are really feeling. It’s the number Americans are really experiencing, one that no amount of economic happy talk or government data can cure.
Earlier this week, The Wall Street Journal did a story on precisely this subject, chronicling the rise in fixed costs that are crushing household budgets. Items like rent and electricity are up 10 percent over the last two years, and hard-to-cut expenses like water, sewer, and garbage collection are up almost 11 percent in the last two years.
Then there’s the cost of transportation, which includes maintenance, car payments and insurance. That number has risen a staggering 18 percent in the past two years alone, with Americans driving older and older cars; the average car on the road is now a record high of 12 years old. And Americans are financing those cars longer than ever—67 months for a new car loan and close to that length on used car loans, too.
And then there’s the cost of owning a home. According to the National Association of Realtors, the average monthly mortgage payment was $2,209 in April of 2024, up from $1,957 just one year before. Worse still, home insurance costs have risen over 11 percent in just the past year, and over 40 percent in the past five years, according to S&P Global Market Intelligence. And the number of Americans choosing to forego home insurance altogether has more than doubled, from 5 percent to 12 percent.
The Wall Street Journal talked to Jasmine Moore, a 32 year-old operations manager at a nonprofit and a single mom to a 10 year-old son. She’d recently missed a payment on her auto insurance because it had doubled, from $195 to $395. She described her bank account status as often near overdraft, and talked about skimping on things like tutoring for her son (she does it herself now) and shopping for groceries at discount grocery chains or food pantries (she no longer shops at Publix).
“I have middle-class pay,” Moore told The Wall Street Journal. “But I feel like I’m lower income.”
She’s not alone. Millions of Americans feel the same way, and are not happy about it, no matter how much chirpy talk surrounds the economy, and the sky-high stock market.
Americans are even cutting back on discretionary spending, including how much they spend on fast-food. McDonald’s, America’s largest restaurant chain, extended it’s $5 “Value Meal” through August. Appearing on The Today Show when the plan was first introduced in June, the president of McDonalds USA, Joe Erlinger, explained the offering. “I’ve zig-zagged the country, I’ve been in our restaurants, I’ve sat in focus groups. Customers are telling us that they’re really stretched,” Erlinger said of McDonald’s customers. “They’ve felt the stress of the inflation over the last few years, and so this is a great opportunity for McDonald’s to bring them value.”
The company that brought the world the Happy Meal is not engaging in the type of happy talk we’re hearing from pundits, politicians, and economists about the latest inflation and CPI numbers. Because they know the Real-Life Cost Index is stretching family budgets. And stressing out millions of hard-working Americans.
This tale of two economies continues to play out across America. The politicians who understand the difference between the two and who speak plainly and bluntly about the causes and solutions to the problem with clarity will in all probability control of not only the White House, but Congress too.
To paraphrase Jim Carville, this election is about the Real-Life Economy, not the Headline Economy, stupid.
Lee Habeeb is vice president of content for Salem Radio Network and host of Our American Stories. He lives in Oxford, Mississippi, with his wife, Valerie, and his daughter, Reagan.
The views expressed in this article are the writer’s own.