A WSJ Opinion Article Tries to Explain “Why Everything Feels More Expensive”

The WSJ explanation is hugely lacking. Let’s discuss.

The snide answer is “Because everything is more expensive, stupid” which is true.

However, that’s a superficial answer that fails to address real world issues and contributing factors.

The Journal discusses a New York Times article that details a family of three in New Your City struggling to get by on $500,000 annual income.

That’s our starting point for discussion.

How a Family of 3 Lives on $500,000 on the Upper West Side

Please consider How a Family of 3 Lives on $500,000 on the Upper West Side. That’s a free link.

How can people possibly afford to live in one of the most expensive cities on the planet? It’s a question New Yorkers hear a lot, often delivered with a mix of awe, pity and confusion.

Rent is not the largest monthly expense for Anala Gossai and Brendon O’Leary, a couple who live on the Upper West Side of Manhattan. That would be child care.

They spend $4,200 each month on day care for their 1-year-old son, Zeno.

“We really liked the center,” Ms. Gossai, 37, said. “Neighbors in our building love it. It’s actually pretty middle of the road for cost. Some were even more expensive.”

The rent for their one-bedroom apartment is $3,900 per month. Space is tight, but the location is priceless.

“We’re right across from Central Park,” she said. “We can walk to the subway and the American Museum of Natural History.”

Their Priorities Are Their Problem

OK so what? They want to live in NYC. They want to walk to Central Park.

They are willing to blow most of their money on an 800 square foot apartment and daycare. They do save $10,000 a month hoping to buy a place.

None of this has anything to do with why the average person feels squeezed. The average person certainly is not saving $120,000 a year.

Why Everything Feels More Expensive

Next, please consider the Journal Opinion article Why Everything Feels More Expensive by Roland Fryer.

The New York Times recently profiled a family of three earning $500,000 a year and living in a one-bedroom apartment on Manhattan’s Upper West Side. The husband is a software engineer, the wife a data scientist. Their largest monthly expense—$4,200—is daycare for their 1-year-old. Rent is $3,900. They save $10,000 a month. “I think we’re middle class for this area,” the husband said. “We’re doing OK.”

The internet reacted predictably: Half a million dollars is middle class? These people are out of touch. The Times is out of touch for running it.

The reaction misses the economics. A recent CBS News/YouGov poll found that 83% of Americans say it’s harder to buy a home than it was for previous generations, and 77% say it’s harder to raise a family. They aren’t wrong. But the explanation is more complicated than either side’s populists admit.

Since 1975, median family income has risen by more than half, from about $68,000 to $106,000 in inflation-adjusted terms—a gain of roughly $38,000. But much of the difference comes from one of the most important social shifts of the past half-century: Labor-force participation among married mothers rose from about 45% in 1975 to 72% in 2025.

But for families with young children, much of that $38,000 gain is spoken for before it ever hits the bank account. A year’s worth of mortgage payments, adjusted for inflation, has risen from about $16,000 in 1975 to $25,000 in 2024, an increase of $9,000. Workers now contribute about $7,000 a year in premiums for family health insurance, roughly double the real cost in 1999. Full-day care for a single child typically runs $6,500 to $15,500, depending on age and location, a cost most families in the 1970s didn’t incur. Add it up and these three expenses absorb most of the $38,000 gain, leaving many families—especially those with young children or in high-cost cities—with roughly the same disposable income their parents had, despite earning more.

The culprit is structural, not political: Economists call it Baumol’s cost disease. Productivity gains tend to concentrate in goods—cars, clothing, televisions, food—as technology steadily drives prices down. But many services, like teaching a kindergarten class, change little over time. As incomes rise, wages must rise across the board; otherwise employees leave for higher-paying sectors. Labor-intensive services grow more expensive not because something went wrong, but because everything else became more productive.

Before indicting the economy, consider what 50 years of growth actually delivered. The car in your driveway is far less likely to kill you than its 1975 counterpart—traffic fatalities per mile driven have fallen by roughly 62%. The average American reaching 65 today can expect to live 3.6 more years than in 1975. The air is 79% cleaner by the Environmental Protection Agency’s measure. Researchers at the Massachusetts Institute of Technology estimate that Americans value access to search engines, email and digital maps at roughly $30,000 a year, none of which shows up in income statistics.

The 1975 middle-class family may have had more cash left at the end of the month. But they also faced higher risks of violent crime, breathed dirtier air, and waited for the evening news to learn what was happening in the world. The progress is real—it just doesn’t pay the daycare bill.

The composition of spending has shifted to amplify the feeling. It isn’t only how much families spend, but what they spend it on. A family’s budget once went to things they could see and enjoy. Today a large share of monthly spending disappears into medical premiums, deductibles and copayments that produce nothing visible unless catastrophe strikes. An $800 insurance premium you never use doesn’t feel like $800 of middle-class life. It feels like $800 gone—a tax on the possibility of illness rather than the consumption of anything tangible.

The $500,000 family in the New York Times piece is bougie but not entirely out of touch. They save $120,000 a year—not for vacations, but for an apartment they may never be able to afford. Their fixed costs are genuinely punishing. Some of what looks like indulgence is infrastructure; some of it is indulgence. But each additional dollar of income arrives bundled with costs required to earn it—an implicit infrastructure tax that makes the return on that last dollar far smaller than the headline number suggests. At the median family income of $106,000, the math is simpler and worse. There is no infrastructure tax. The basic costs of middle-class life simply don’t fit the income.

The middle class is simultaneously better off and more financially strained than it has been in decades. The services that define 21st-century middle-class life—healthcare, child care, education—have risen two to three times as fast as overall consumer prices since 2000. This is the structural consequence of an economy that became extraordinarily productive at making goods but not at raising children or treating the sick. Meanwhile the gains—safer cars, cleaner air, longer lives—have quietly disappeared into what we consider normal. Psychologists call this hedonic adaptation: the tendency to absorb improvements into our baseline until they no longer feel like gains.

The antidote psychologists prescribe is mental subtraction: deliberately imagining life without what you take for granted. Try it with 1975. No air bags. A much higher risk of being robbed. Three television networks. We’ve adapted to these gains so completely they no longer feel like gains. The greatest threat to middle-class happiness may not be the cost of child care. It may be that they can’t afford to notice how much better life has become.

Mr. Fryer, a Journal contributor, is a professor of economics at Harvard, a founder of Equal Opportunity Ventures and a senior fellow at the Manhattan Institute.

Leave it to economists to over-simplify the problem while missing the big picture.

But I do agree with some of his points. Cars are better and homes much bigger. You don’t really want to drive a 1940s or 1920s car do you?

Some of the expense is all of the materials that go into cars and homes. But Fryer misses the big picture.

The Big Picture

1. Everything government touches is dramatically more expensive.
2. Tariffs and protectionism.
3. Unions, especially public unions.
4. Undercounting inflation
5. The Fed’s 2 percent target is flawed with asymmetric policy on top of it.

Fryer put a spotlight on cars. OK point made, and I agree. But let’s discuss a few things that have not changed.

Food 1968 to Now

I worked in a grocery store for several years in high school and junior high. The timeframe is 1968-1972.

In 1968 the loss leader on bread on sale was 18 cents a loaf. The regular price was 22-24 cents a loaf. That works out to about 4 percent annualized.

Round steak was a loss leader ay $0.99 per pound. The current (April 2026 BLS) price is ~$9.83/lb. I got some on sale recently for $4.99 a pound.

From $0.99 to $9.83 is ~4.04% per year.
From $0.99 to $4.99 sale price is ~2.83% per year
From $0.99 to a $5–$6 typical sale/lower-grade price is ~2.8–3.2%.

The CPI Itself is approximately 3.97% annualized (CAGR) from 1968 to 2026.

That’s about as good as it gets on anything but electronics N/A at any price in 1970.

And the Fed’s target is 2.0 percent.

Education 1971 to now

I finished high school in 1971.

The cost of tuition at the University of Illinois for engineering was $250 per semester, $500 a year.

For the 2025-2026 academic year at UIUC’s Grainger College of Engineering (Urbana-Champaign):

• Illinois Resident tuition (annual): Approximately $18,372 (this is the guaranteed rate for the full academic year; engineering has a higher differential than base programs). cost.illinois.edu
• Per semester: Roughly $9,000–$9,200 (tuition is typically billed per term, but the annual figure is the standard quote).
• Non-resident: Around $41,444 per year.
• International: Around $44,688 per year.

From $500/year to $18,372/year is about 7.5% annualized (CAGR).

Q: What the hell are you getting for your money?
A: Nothing but a big pile of debt.

Everything that government touches, but especially housing, education, and health care have skyrocketed in price.

Unions

Don’t get me started. Illinois and many state pensions are insolvent.

The culprit is public unions inflating costs. The teachers, police, and fire departments are all in on the scheme.

Property taxes keep going up and up and up to pay the unions.

The Fed

The Fed has a two percent target and seldom meets it. The one time the Fed actually met its goal, the Fed chairs actually wanted to make up for lack of inflation.

Now they are concocting absurd measurement schemes like trimmed mean inflation to explain why it’s not as bad as it looks.

Academics like Fryer are on board.

Undercounting Inflation

The big grandaddy of them all is undercounting inflation.

The Fed and the academics do not include the price of a home in their measure of inflation. They do not count property taxes or homeowners insurance either.

To these ivory tower academics, a home is a capital expense not a consumer expense, as if consumer expenses are all that matters.

The BLS says Tenants’ and household insurance is 0.289 percent of the CPI.

Sound right?

If you own a home, how much is your homeowner’s insurance?

The BLS and academics call homeowners’ insurance other than contents a capital expense.

Five Housing Costs Not In the CPI

• The Price of the Home Itself
• Homeowner’s Insurance
• Property Taxes
• HOAs
• Special Assessments

Ridiculous Measures of Inflation

Every month we have CPI and PCE reports, and they are never realistic because of what’s excluded.

Is Homeowners Insurance Understated in the CPI?

On August 11, 2025 I asked Is Homeowners Insurance Understated in the CPI? Shop Around!

Our Insurance went up by $2,000. Then another $2,000. Here’s our story.

On April 17, 2026, I noted Median Monthly Condo Fee Was $420 in 2025, up 29% from 2019

Not a penny of that is in the CPI or PCE. Nor are property taxes, homeowner’s insurance, or special assessments.

And please note HOA Numbers Are Seriously Understated.

The median monthly fees shown (+26% for single-family HOAs and +29% for condos since 2019) do not include special assessments.

To the academics those don’t matter. Tip inflation does not matter either. And the BLS underweights food away from home too, even ignoring tip inflation.

Ivory Tower Occupants vs the Real Word

Neither Trump, nor the Fed, nor academics like Mr. Fryer, live in what most would consider the real world.

They all have absurd measures of inflation and make excuses why people should be happier than they are.

On top of that, Trump launches a highly inflationary and idiotic war to stop Iran from getting a weapon that Trump bragged many times he had already stopped.

The economists cannot figure out why people are angry, then write ridiculous explanations for the WSJ.

They are walking after midnight, in the dark, looking for inflation that is visible to anyone in the real world.

Related Posts

January 14, 2026: The Fed Has Missed Its Inflation Target on Ten Different Measures

The Atlanta Fed tracks various inflation targets. Let’s have a look.

March 30, 2026: Powell Warns the Markets and Trump that His Patience with Inflation Has Limits

Powell’s speech was to Harvard students but read between the lines.

April 9, 2026: Inflation Has Been Above the Fed’s Target for 5 Straight Years

The Fed’s preferred measure of inflation has been above 2 percent since March of 2021.