For my whole career in finance, I have distrusted the obvious. And yet, for many years there was one number I assumed was an actuarial fact: the U.S. poverty line. Yes, I saw Americans feeling poorer every year, despite economic growth and low unemployment. But ultimately, I trusted the official statistics. Until I saw a simple statement buried in a research paper. And I realized that number—created more than 60 years ago, with good intentions—was a lie. The statement was this: “The U.S. poverty line is calculated as three times the cost of a minimum food diet in 1963, adjusted for inflation.” When I read it I felt sick. And when you understand that number, you will understand the rage of Americans who have been told that their lives have been getting better when they are barely able to stay afloat.

In 1963, Mollie Orshansky, an economist at the Social Security Administration, observed that families spent roughly one-third of their income on groceries. Since pricing data was hard to come by for many items (e.g., housing), if you could calculate a minimum adequate food budget at the grocery store, you could multiply by three and establish a poverty line. Orshansky presented her findings in 1965. She was drawing a floor, a line below which families were clearly in crisis. For that time, that floor made sense. Housing was relatively cheap. A family could rent a decent apartment or buy a home on a single income. Healthcare was provided by employers and cost relatively little (Blue Cross coverage cost in the range of $10 per month). Childcare didn’t really exist as a market—mothers stayed home, family helped, or neighbors (who likely had someone home) watched each others’ kids. Cars were affordable, if prone to breakdowns. College tuition could be covered with a summer job. Orshansky’s food-times-three formula was crude, but as a crisis threshold—a measure of “too little”—it roughly corresponded to reality. But everything changed between 1963 and 2024. Housing costs exploded. Healthcare became the largest household expense for many families. Employer coverage shrank while deductibles grew. Childcare became a market, and that market became ruinously expensive. College went from affordable to crippling.

The labor model shifted. A second income became mandatory to maintain the standard of living that one income formerly provided. But a second income meant childcare became mandatory, which meant, for many, two cars became mandatory. The composition of household spending transformed completely. In 2024, food-at-home is no longer 33 percent of household spending. For most families, it’s 5 to 7 percent. Housing now consumes 35 to 45 percent. Healthcare takes 15 to 25 percent. Childcare, for families with young children, can eat 20 to 40 percent. If you keep Orshansky’s logic—if you maintain her principle that poverty could be defined by the inverse of food’s budget share—but update the food share to reflect today’s reality, the multiplier is no longer three. It becomes 16. Which means if you measured income inadequacy today the way Orshansky measured it in 1963, the threshold for a family of four—the official poverty line in 2024—wouldn’t be $31,200. If the crisis threshold—the floor below which families cannot function—is honestly updated to current spending patterns, it lands at close to $140,000.

Consider this: The median household income is roughly $80,000. We have been told, implicitly, that a family earning $80,000 is doing fine—safely above poverty, solidly middle class, perhaps comfortable. But if Orshansky’s crisis threshold were calculated today using her own methodology, that $80,000 family would be living in deep poverty. To understand why, you need to look at the real costs of sustaining a family today. I wanted to see what would happen if I ignored the official stats and simply calculated the cost of existing. I built a basic needs budget for a family of four (two earners, two kids). No vacations, no Netflix, no luxury. Just the “participation tickets” required to hold a job and raise kids in 2024. Using conservative data for a family in New Jersey:

• Childcare: $32,773
• Housing: $23,267
• Food: $14,717
• Transportation: $14,828
• Healthcare: $10,567
• Other essentials: $21,857
• Required net income: $118,009

Add federal, state, and FICA taxes of roughly $18,500, and you arrive at a required gross income of $136,500. This is Orshansky’s “too little” threshold, updated honestly. This is the floor. The single largest line item isn’t housing. It’s childcare: $32,773. This is the trap. To reach the median household income of $80,000, most families require two earners. But the moment you add the second earner to chase that income, you trigger the childcare expense. If one parent stays home, the income drops to $40,000 or $50,000—well below what’s needed to survive. If both parents work to hit $100,000, they hand over $32,000 to a daycare center. Then take housing. Critics will immediately argue that I’m cherry-picking expensive cities. They will say $136,500 is a number for San Francisco or Manhattan, not “Real America.” So let’s look at “Real America.”

The model above allocates $23,267 per year for housing. That breaks down to $1,938 per month. This is the number that serious economists use to tell you that you’re doing fine. I analyzed a modest “starter home,” which turned out to be in Caldwell, New Jersey—the kind of place a Teamster could afford in 1955. I went to Zillow to see what it costs to live in that same town if you don’t have a down payment and are forced to rent. There are exactly seven 2-bedroom+ units available in the entire town. The cheapest one rents for $2,715 per month. So when I say the real poverty line is $140,000, I’m being conservative. I’m using optimistic, national-average housing assumptions. If we plug in the actual cost of living in the zip codes where the jobs are—where rent is $2,700, not $1,900—the threshold pushes past $160,000. The housing market isn’t just expensive; it’s broken. Seven units available in a town of thousands? That isn’t a market. That’s a shortage masquerading as an auction.

Then there is everything else you need to function in society, the cost of the “participation ticket.” Back in 1955, that included a $5 phone line. Adjusted for inflation, that would be $58. Except that in reality, to function today—to factor authenticate your bank account, to answer work emails, to check your child’s school portal (which is now digital-only)—you need a smartphone plan and home broadband. That’s not $58. It’s $200 or more. Economists will look at my $140,000 figure and scream about “hedonic adjustments.” And yes, cars today have airbags, homes have air conditioning, and phones are supercomputers. The quality of many goods has gotten markedly better. But we are not calculating the price of luxury. We are calculating the price of participation. Now run this kind of participation audit across the economy. In 1955, Blue Cross family coverage was roughly $10 per month ($115 in today’s dollars). Today, the average family premium is over $1,600 per month. That’s 14x inflation. In 1955, the Social Security tax was 2 percent on the first $4,200 of income. The maximum annual contribution was $84. Adjusted for inflation, that’s about $960 a year. Today, a family earning the median $80,000 pays over $6,100. That’s 6x inflation. And childcare? In 1955, this cost was zero because the economy supported a single-earner model. Today, it’s $32,000. That’s an infinite increase in the cost of participation. The only thing that actually tracked official Consumer Price Index was… food. Everything else—the inescapable fees required to hold a job, stay healthy, and raise children—inflated at multiples of the official rate when considered on a participation basis. Yes, these goods and services are better. I would not trade my 65″ 4K TV mounted flat on the wall for the 25″ TV that dominated a living room, but I also don’t have the choice to pay less money and buy the old model.