Why Is the Cost of Living so Unaffordable?

The mainstream narrative is “the problem is low wages.” Actually, the problem is the soaring cost of living. If essentials such as healthcare, housing, higher education and government services were as cheap as they once were, a wage of $10 or $12 an hour would be more than enough to maintain a decent everyday life.

Here are some examples from the real world. In 1952, it cost $30 to have a baby in an excellent hospital. If we adjust that by official inflation as measured by the Bureau of Labor Statistic’s inflation calculator to 2017, the cost would be $275. ($1 in 1952 = $9.16 in 2017).

What does it cost to have a baby delivered in a hospital today? $5,000? $10,000? Who even knows, given the convoluted billing process in today’s sickcare system?

The pharmaceutical cartel jacks up medication costs per dose from $3 to $600, even when the medication has been around for decades: the Pinworm prescription jumps from $3 to up to $600 a pill Parents, doctors angry over drug price gouging (via John F.)

My father paid 1.8% of his wages for “hospital group insurance” in the early 1950s (for a household of four kids and two adults.) For someone earning $1,000 a week, the equivalent today would be $72 a month out of a monthly gross income of $4,000.

My spouse and I pay $1330 a month for barebones healthcare insurance in today’s sickcare system. Factor out subsidies paid by the employer or state, and minimal healthcare insurance costs tens of thousands of dollars per household annually.

Here’s a chart that illustrates the breathtaking rise in healthcare costs. Wages are the nearly flat line:

In the early to mid-1970s, my university tuition was $89.25 per semester (the University of Hawaii was a two-semester system), and student fees were $27 a semester, for a grand total of $232.50 per year. Books added another $170 per year, for a total cost of $400 to $450 for a university education.

$1 in 1975 = $5.51 today, so if tuition, fees and books had gone up along with official inflation, it would now cost $1,800 to $2,000 to attend a large state university annually–including tuition, fees and books.

An entire 4-year university education would cost $8,000. Instead, students now borrow $50,000 and up just to attend state university.

I’ve covered the skyrocketing cost basis of everyday life for a decade:

Lowering the Cost Structure of the U.S. Economy (August 29, 2008)

My recent exploration of soaring costs for everyday items, The Burrito Index: Consumer Prices Have Soared 160% Since 2001 (August 1, 2016), received quite a bit of interest, along with the companion piece on the source of much of the higher costs: Inflation Hidden in Plain Sight (August 2, 2016) Can we be honest and say that many of the reductions in value, quantity and quality are actually instances of fraud?

No Wrongdoing Here, Just 6,300 Corporate Fines and Settlements (May 2015)

Here’s a snapshot of urban rents. Recall that wages for the bottom 90% have been flatlined for decades.

Apologists claim these services have improved greatly in the past 30, 40 and 50 years, but this is only occasionally valid; university education, housing, burritos and conventional preventative care have often declined in quality and quantity, not gotten better.

Other apologists claim that Baumol’s Cost Disease explains all these tremendous increases in price; while this may be a factor in some price increases, it is more an excuse than an explanation.

Here’s what’s going on: cartels that have government backing can jack up prices at will, year after year, decade after decade, while wages have stagnated. Cartels have zero pressure to raise wages, while their immense profits fund vast propaganda/public-relations machines that translate into equally vast political influence.

Have you ever seen a non-profit foundation or a politico that didn’t support “more funding for healthcare and higher education”? Of course not. The healthcare, defense industry, Federal Reserve/banking sector and higher education cartels are all entrenched and self-serving.

The cartels have unlimited power to raise their prices, while the average wage-earner has essentially zero power to create non-cartel alternatives or influence central-state/central bank support of rapacious, parasitic cartels.

The “consumer” is supposed to have power, but that power only exists in an environment that enables level playing fields and transparent competition.Cartels buy political influence so the central state protects their pricing power and funds their rentier skims.

Strip away the centralized power that protects and funds cartels, and prices would plummet. I explain how this would work in higher education in my book The Nearly Free University and the Emerging Economy: The Revolution in Higher Education. The same dynamics would radically transform the cost structure of housing, healthcare, defense and everything else currently controlled by monopolies or cartels.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

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  • Many people are spending more per month for phone+Internet+Cable/Video/something than they used to. They may start to feel like that is a utility cost of living that was not there before, though obviously they are getting extra benefits too.

    • diogenes

      Gasoline cost 18 cents a gallon in 1970, and a house cost under $20,000 in California and a spacious one bedroom apartment in a good neighborhood in San Jose could be had for $70 a month. $20 worth of groceries spilled over the top of a supermarket shopping cart, hamburger was under 20 cents a pound, a new car cost $2000 and under, a used one could be had for $200 and less.

      All these shifts reflect purely predatory increases of TAKINGS by the financial-corporate elite enforced by their monopoly economy and their total oligarchic control over the government which OUGHT to be protecting Americans from these VICIOUS THIEVES. It’s INVESTORS who are wringing out America, bleeding it dry, strictly for the sake of their own psychopathic greed.

      And then there’s their volunteer apologists, who if not nearly as blood soaked, are surely more pathetic and craven. “But oh, oh my, oh my goodness, think of all the extra benefits to consumers.” Excuse me while I puke.

      • kimyo

        extra benefits:
        factory farmed food laden with pestiherbicides and devoid of nutritional value
        cell phone induced brain tumors with bonus 24/7 surveillance
        sunscreen and cfl induced skin cancer
        lead and legionnaire’s in the tap water
        hollywood remaking the avengers for the seventeeth time
        ‘vegetarian’ chickens. (prior to the advent of cheap soy, for gabillions of years, fowl ate bugs/worms. that is their job.)

        mcmansions in decay from day 1
        subway’s alternative definitions of ‘chicken’ and ‘footlong’
        takata airbags waiting for the right moment to kill you
        every made in china hardware/electrical/plumbing part certain to die a relatively quick death and require a re-purchase

        • diogenes

          and let’s not forget the tremendous benefits of the highest incarceration rate and rate of police killing on earth — doesn’t that make you feel so much safer? And safety is expensive!

          • diogenes

            And then there’s the highest infant mortality rate of all “developed” countries, and a plummeting life expectancy, and the murder rate and the overdose rate and so many other great benefits of progress that Josh forgot to remind us of. Yessir, we certainly do get more bang for our buck these days, us lucky lucky Americans. Thank god for free enterprise. Thank god for freedom liberty and justice for all. God bless us every one.

  • Southern

    Another aspect is the current economic model which is based on perpetual economic growth…. for the investment class not that of the working class.

    Another major causing factor is the sheer reluctance by governments around the world to tax the financial elite properly, it’s the working class that contributes most of their wages back into any economy while corporate profits and the staggering salaries of fat cat CEO’s sit dormant like in a murky pond.

    All of that further confirmed by the decreasing number of ultra rich people that have a combined wealth equal to the poorest 3,6 billion people on the planet.

    • diogenes

      It’s not “reluctance”, it’s that financial elites CONTROL governments, here and abroad.

      The Roman Empire saw exactly the same dynamic in play, as the burden of taxes was shifted from the wealthy to the poor.

      • Southern

        You’re absolutely correct it has nothing to do with being reluctant, the fix was already in which explains why the most succesful politicians tend to use their time as public servant as a stepping stone into the lucrative corporate world.

        I’ve read a very interesting book on this matter, which came to my attention because MLK quoted from it during one of his famous and powerful speeches in a video that’s banned in the US. here’s the link hope it works for ya — https://www.youtube.com/watch?v=VxegOjwPfjw

        I’ve tried to memorize as much as I could — it’s possible I ended using some of the phrases and key words such as that.

        The book is available online — None Dare Call It Conspiracy – Chapter Three – The Money Manipulators – para 12

        While looking through my archives I found this interesting quote.

        “The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of a pen they will create enough deposits to buy it back again. However, take it away from them, and all the fortunes like mine will disappear, and they ought to disappear, for this world would be a happier and better world to live in. But if you wish to remain slaves of the Bankers and pay for the cost of your own slavery, let them continue to create deposits.” — Sir Josiah Stamp, President of the Bank of England in the 1920s, the second richest man in Britain

        • diogenes

          Yes, it’s a book worth reading,no doubt.

          • Southern

            The book is recommended, and was real eye opener as how the bankers operate.

          • diogenes

            Other books on this subject where are also worth reading are

            Louis Brandeis, Other People’s Money (the key fundamental first text on this subject)

            G. Edward Griffin The Creature From Jekyll Island

            Eustace Clarence Mullins, A Study of the Federal Reserve

            Ellen Brown, Web of Debt

            Margrit Kennedy, Occupy Money

            But banking isn’t the whole story. We also need to take into the account the operations of corporate finance. On this, see especially

            Lewis Corey, The House of Morgan

            Ted Nace, Gangs of America

            Thorstein Veblen, The Vested Interests

            John Moody, The Masters of Capital

          • Southern

            Thanks for suggesting the titles, I will see if I can order them via the nearest library.

            I’ve visited Ellen Brown’s website for some time now, and signed up for the newsletters.

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          • diogenes

            Start with Brandeis, he’s key. Then Veblen. Occupy Money is short and brilliant, you can read it in a sitting. Brandeis is also pretty easy to digest. So is Moody. Veblen requires more careful reading and thought, but goes deeper. Corey is extremely revealing history, and eminently readable. The others are more for background, and specific to the issue of the Fed, which is a key institution but a tool of the system, not the system itself.

            It’s amazing that most Americans have never heard of Brandeis or Veblen, and there’s a reason.

          • Tom Kimmel

            Any particular for excluding Das Kapital ?

          • diogenes

            outdated (it precedes the rise of finance capitalism by decades), based on european hierarchical not american democratic premises, and it’s unreadable — that’s three reasons — and its ineffectual, totalitarian, schismatic true believers makes four.

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    • Tom Kimmel

      A concept analogous to planned obsolescence is engineered scarcity.
      DeBeers, the international cartel limiting supply of diamonds, is the classic example of this.
      As I consider this notion I wonder whether it is not the elemental mechanism of all hierarchy.
      What scarcity cannot be manipulated, engineered and even invented out of whole cloth.
      Nothing material cannot be excluded, of course, but can anything? Knowledge, hope, confidence, the numinous, anything? Be careful, you could grow hair on the palms of you hands.

      Just kidding, but you get the idea.

      Cheers

      • Southern

        Planned obsolescence, now there’s a terminology I haven’t heard in a while.

        Still all goes back to back for the demand to satisfy corporate greed, not to mention the shareholders which could also be linked back to retirement funds etcetera, it leads back to how the interests of investment class are placed above that of the electorate.

        The other side of the coin are poorly manufactured products, in the end these are simply wasting the energy plus the materials needed to produce them before they end up in a landfill site.

        As an viable alternative, quality products that will last and made with materials that can be recycled back into the environment.

        You might have already read these really good articles on these topics Beyond Growth or Beyond Capitalism?

        Sleepwalking to Extinction

        • Tom Kimmel

          Wow, you really know how to make a fella feel old. You are correct of course, I am old. Intimations of mortality reflect my own obsolescence.

          But I was maybe fifteen when I noticed that cars could be made to last much longer at very little cost. Preventive maintenance on inexpensive but critical systems is economical, even profitable. The least expensive model of the 1958 Chevrolet BelAire did not include an oil filter. . (!) Today failure is more subtly engineered but just as prevalent if not more so.
          But you did not comment on what I think is the more important idea of scarcity in general being carefully controlled.

          Still thanks for the links. I expect they will reinforce my grim bias.
          Remember that line from Superstar ” To conquer death you only have to die.”
          Ennjoy, Tom

      • diogenes

        Yes, engineered scarcity all up and down the line. Notably, scarcity of credit, and all of it in the hands of one person in ten thousands. Funny how that works.

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  • jadan

    Smith is a believer in the free market, but the screaming irony never goes away: it is a strong regulatory environment created by government that creates ” level playing fields and transparent competition”.

    • diogenes

      Yes, he doesn’t understand that the rentier economy he shills for requires a government to pass and enforce its legalizing enablements. He could be introduced to this fundamental fact in my essay posted elsewhere on this site, The Distribution of Wealth In America, if he were educable. but of this he gives no sign.

      The essay is at

      http://www.washingtonsblog.com/?s=distribution+of+wealth+in+america