Think $32,000 Is Poverty? New Analysis Says Families Need $140,000 Just To Stay Afloat – Financial Freedom Countdown
Michael Green, portfolio manager and chief strategist at Simplify Asset Management, generated some controversy this week with his analysis trying to explain why the middle class is being squeezed.
He warned that a long-ignored flaw at the heart of U.S. economic measurement has quietly broken the country.
A Benchmark From 1963 That Froze in Time
A growing number of economists say one of the most important numbers in U.S. public policy has barely been updated in 60 years; and it’s distorting how the country understands economic hardship.
The official U.S. poverty line still rests on a framework created in 1963 by Social Security economist Mollie Orshansky.
Her approach was simple: calculate the minimum adequate food budget for a family and multiply it by three. At the time, families spent about one-third of their income on food, so the formula felt intuitive and reasonably accurate.
Why Orshansky’s Math No Longer Matches Modern Life
According to Michael Green, portfolio manager and chief strategist at Simplify Asset Management, that formula has collapsed under the weight of modern costs that didn’t exist; or barely existed in Orshansky’s era.
Food is no longer the anchor expense.
Household budgets today are dominated by housing, healthcare, childcare, transportation, and education. As a result, food at home represents just 5% to 7% of spending, not 33%. That single shift alone means the original poverty formula has lost any meaningful connection to economic reality.
The Real Poverty Threshold Could Be $130,000 to $150,000
If policymakers updated Orshansky’s methodology to reflect today’s spending patterns, Green argues the crisis threshold for a family of four would land somewhere between $130,000 and $150,000; far above the official federal poverty line of roughly $32,000.
Orshansky’s intention wasn’t to define comfort; she was defining desperation. And if that “desperation line” were recalculated today, Green says the true floor under which a family cannot function would be about $140,000.
A Modern Cost Breakdown That Shocks
To test his theory, Green built a model using national average costs for the essentials a typical family of four must cover. His breakdown:
Childcare: $32,773
Housing: $23,267
Food: $14,717
Transportation: $14,828
Healthcare: $10,567
Other essentials: $21,857
Once federal, state, and FICA taxes are added, the required gross income balloons to around $136,500; again aligning with a poverty threshold more than four times higher than the government’s official figure.
Meanwhile, Median Income Has Stalled Far Below
The median household brought in $83,730 last year; barely 60% of what Green says a modern family needs just to stay above water. That gap between official policy metrics and lived economic reality helps explain why so many Americans who are “not poor” on paper still feel profoundly financially strained.
Why Families Feel Like They’re Falling Behind
Green acknowledges that life today is qualitatively better in many ways than life in the 1950s or 1960s. Homes are safer. Technology is more advanced. Medical care has improved.
But those improvements come with higher baseline requirements to function in society. Smartphones, broadband, home laptops; none of this existed when the poverty line was created, yet today they’re prerequisites for schoolwork, job hunting, or even verifying a bank account.
The cost of simply participating in modern life has escalated far beyond the assumptions built into the 1963 model.
The Welfare Cliff That Punishes Economic Progress
Green also highlights a long-running structural flaw in the U.S. safety-net system: the abrupt loss of benefits as incomes rise.
A family earning $45,000 can lose Medicaid.
At $65,000, childcare subsidies evaporate.
The result is what economists call the “welfare cliff,” where families can effectively lose 70% to 100% of each additional dollar they earn.
“In option terms, the government has sold a call option to the poor, but they’ve rigged the gamma,” Green writes. As families approach self-sufficiency, the system works against them instead of with them. In his words: “No rational trader would take that trade.”
The Hidden Reason Lockdown Savings Surged
Green points to one more factor shaping today’s public frustration: the experience of the lockdowns. During lockdowns, many of the most punishing expenses; childcare, commuting, transportation; temporarily disappeared.
Households saved money at rates not seen in decades. For a brief period, everyday Americans felt as though they were finally gaining ground.
A Sudden Return to Reality, With a 20% Markup
But when the economy reopened, all those costs returned. And most were inflated by at least 20%. That sudden snap-back wiped out the temporary breathing room and left families angrier than before. “The rage we feel today,” Green argues, “is the hangover from that brief moment where the American Option was momentarily back in the money.”
A Crisis Bigger Than the Official Numbers Admit
Whether policymakers accept Green’s $140,000 benchmark or not, his core warning is hard to ignore: the official poverty line no longer measures the country’s actual economic hardship.
If the foundational metric is broken, the policy decisions built atop it may be misaligned as well; leaving millions of Americans struggling in ways Washington simply doesn’t register.
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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