Thanks to the Census Bureau and Bureau of Labor Statistics, we have tons of data on consumer spending in the US. Long story short: Americans of all income groups are spending more than ever. But are they better off? Consider the following:
Source:
http://www.usinflationcalculator.com/inflation/historical-inflation-rates/ https://www.bls.gov/cex/csxreport.htm#annual
So far, so good. After controlling for inflation, it looks like the low-income and well-off have been doing better these past few years. At least they're buying more stuff. Middle-income, not much change.
But inflation is only part of the story. Some expenses matter more than others. Housing is the most important expense of all. Housing is the biggest component of the Consumer Price Index and the hardest to spend less on in the near term, because costs like rent and mortgage are fixed (unlike food, where buying fewer prepackaged or fast-food meals can generate considerable savings). What people spend on housing pretty well reflects what they think they can afford over time. So how much has the cost of housing changed since 1999? Glad you asked:
Given that households paying more than 30% of income for housing are considered “cost burdened”, it does appear that lower-income households are doing worse now than in 1999. The data on trends in the growth of rents relative to income bears this out:
It's clear that, except for the most affluent households, housing costs are eating up an increasing portion of our budgets. Even though Americans across all income groups are spending more than ever, most are not seeing much bang for their buck. Too much is going to keeping a roof over their heads. Not much of an American Dream.
Next: What is the American Dream?