The real poverty line should be $140,000, Wall Street strategist says

This is despite economic data showing cooler inflation, steady income gains and resilient consumer spending.

But according to Michael Green, chief strategist and portfolio manager at Simplify Asset Management, traditional metrics don’t capture how Americans are struggling with the cost of living, even families earning six figures.

In a viral Substack post last week, he specifically took aim at the federal government’s poverty line, which dates back to the early 1960s and was calculated by tripling the cost of a minimum nutritional diet at the time.

“But everything changed between 1963 and 2024,” Green wrote. “Housing costs exploded. Health care became the largest household expense for many families. Employer coverage shrank while deductibles grew. Child care became a market, and that market became devastatingly expensive. College costs went from affordable to crippling. Transportation costs rose as cities expanded and public transportation withered under government neglect.”

At the same time, a two-income household is now needed to sustain what one income once provided, but this imposes childcare costs and the need for two cars.

As a result, the poverty line’s narrow focus on food ignores how much other expenses are now absorbing incomes and reducing the minimum Americans need to get by.

Green estimated that food makes up only 5% to 7% of household spending, but he estimated housing at 35% to 45%, child care at 20% to 40%, and health care at 15% to 25%.

He added: “If the crisis threshold – the minimum below which families cannot work – were updated faithfully to current spending patterns, it would reach $140,000.” “What does this tell you about the $31,200 line that we still use? It tells you that we are measuring famine.”

“Death Valley”

On the other hand, Americans below Green’s version of the poverty threshold continue to lag behind, even as they move up the income ladder.

This constitutes a harmful disadvantage, since the poor, by contrast, are not punished with increased burdens when support is withdrawn from them.

“Our whole safety net is designed to catch people at the bottom, but it sets a trap for anyone who tries to get out,” he explained. “As income goes from $40,000 to $100,000, benefits disappear faster than the wage increase. I call this the valley of death.”

Lockdowns during the COVID-19 pandemic provided a respite for many families because working parents didn’t pay for childcare or gas to commute while working from home. Stimulus checks also added to their incomes.

But after the economy reopened, those costs returned and inflation rose. Although they have fallen significantly since 2022, overall price levels have not declined and remain high.

“This mathematical valley explains the anger we see among American voters, specifically the hostility that the ‘working poor’ (middle class) feels toward the ‘actual poor’ and immigrants,” Green said.

He added that the anger does not stem from racism or lack of empathy. Instead, it is about dissatisfaction with the government.

“When you’re drowning, and you see the lifeguard tossing the life jacket to the person treading water next to you – someone who’s not a strong swimmer like you – you don’t feel happy for them,” he said. “You feel a murderous rage toward the savior. We have created a system where the only way to survive is to be poor enough to qualify for aid, or rich enough to ignore the cost. And everyone in between gets eaten.”

Life is expensive

To be sure, Green acknowledged that his calculations were based on costs in suburban New Jersey. Its threshold is also higher than the median household income for a family of four in 37 states, according to The Washington Post.

But MIT’s Living Wage Calculator and the Economic policy Institute also estimated household expenditures in some states at more than $100,000 per year.

Meanwhile, financial pressures from rising costs of living also help explain why discount retailers like Walmart report seeing more higher-income customers shopping at their stores.

In Green’s view, the important point is that food is relatively affordable, despite the recent rise in grocery prices. Life in general is expensive.

“The true poverty line — the point at which a family can afford housing, health care, child care, and transportation without relying on means-tested benefits — is not $31,200, but roughly $140,000,” he wrote.

His Substack post also echoed a recent Harris Poll poll that showed that many Americans who earn six figures, up to $200,000 a year, are particularly struggling.

Among the findings is that 64% of those with six-figure incomes said their income is not a benchmark for success but just the bare minimum to stay afloat.

“Our data shows that even high-income earners feel financial anxiety, living with the illusion of wealth while privately dealing with credit card debt and survival strategies,” Libby Rodney, chief strategy and futures officer at Harris Poll, said in a statement.