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My extra spicy, super hottest take of all time: housing, education, and health care are all cheaper today than the 1970s Yes, you can show me a graph with lines going up over time faster than wages or CPI, but to see why that's a bad measure read this THREADhttps://twitter.com/jeffspross/status/1122661431432892416 …
First, I should note that this goes against both libertarian/conserative arguments (it's the government's fault!) and progressive arguments (market failure/positional goods) and what seems like just common sense. Everyone is wrong!
A Nintendo released in the early 1990s actually cost more in today's dollars than a PS4. Things can and should get better without their costs going so high that they render family budgets unsustainable. When that happens, something has gone horribly wrong.
But you don't have to buy a 2400 square foot house! Half the new houses are smaller than that
Put the point is you *should* be able to, if housing was a normal functioning market that responded to innovations and efficiency increases the way normal functioning markets do.
So you don't think houses are better, on a cost-adjusted basis, than in the 1970s? Because clearly they are better (see my A/C example), not just bigger
At the average hourly wage, it takes almost the exact same number of hours of work (so same share of family budget) to buy the median home: 13700 hours in 1973, 13900 in 2017. But the house is 60% bigger, has A/C, etc.!
In the Victorian era, wages for the bottom tier went up 3x in 30 years. After world war 2 , wages went up 4x till around the mid 70's. For the last 30 years , wages have been flat
And before the Victorian era, wages were flat for millennia!
What's your point?
What do the numbers look like if adjusted to include the impact of federal, state and local taxes vs raw wages?
Good question! I'll have to think about how to incorporate that. I would love the conclusion that "taxes are responsible for the two income trap." But I suspect it's not the case (e.g., effective federal tax rates are flat or lower than the 1970s/80s for most income groups)
I agree on the federal side. I think you'll find the opposite is true on state and local. I think the two income trap is mostly about a much different standard of living than was considered normal in the 70s.
I could try to use Tax Foundation's Tax Freedom Day, since it accounts for all levels of taxation. But it's pretty flat (about 30% burden) since 1970, though this is NOT the rate that applies to the median household
@GS_Watson and @NKaeding may be interested in this.
The tax wedge on labor (including state and local taxes) is nearly flat since 2000, ticking down in 2018 due to TCJA. https://www.oecd.org/unitedstates/taxing-wages-united-states.pdf …pic.twitter.com/fycfHOW3Cx
This roughly matches the Tax Freedom Day movements, which includes the overall tax burden. https://taxfoundation.org/publications/tax-freedom-day/ …pic.twitter.com/fl7OpIdoem
New housing prices is not an accurate way to measure housing costs. New houses represents only about 1% of housing, and new houses are produced at much higher rates in lower cost areas. You're comparing low cost housing to national incomes.pic.twitter.com/RczxNooCEh
Having lived in the SF Bay Area for the past 25 years, it's hard to believe the numbers. But my perspective could be skewed based on my environment.
Yeah, you are not the median!
In terms of metropolitan environment, the median American lives in Oklahoma City or Syracuse, depending on whether we're looking at median metro area or county.
It seems like declining rural and small-town housing prices (opportunities are leaving) may balance out the rapidly increasing prices in large cities, but the “median new home price” story probably obscures two different struggles.
That seems logical. There are certainly parts of the country that are lighting up. I think people think that's more of the norm than it is, though. I live in a growing county in the exurbs of DC and our home value growth has been pretty modest.
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