“This meal just cost me $78 at Newark Airport,” tweeted Brooks. “This is why Americans think the economy is terrible.”
The post quickly went global and was seen by more than 40 million people. Brooks was in trouble because the diner and smart readers figured out that he must have been drinking a lot to run up a $78 bill. (The burger and fries cost $17, so either Brooks leaves big tips or he ordered a second double bourbon that wasn't shown.)
As William Brangham of PBS pointed out, Brooks said there is a big difference between "an upper-middle-class journalist having a bourbon at an airport" and "a family living paycheck to paycheck." He's right, but statistics show that a surprising number of wealthy people really do live from paycheck to paycheck.
According to a recent report from Moneywise, "32% of Americans earning at least $150,000 a year are currently living paycheck to paycheck." This was based on a survey from the personal finance software company Quicken.
It may seem strange, but new data from the Federal Reserve Bank of New York shows that people are borrowing more. In the second quarter of 2023, credit card debt went over $1 trillion for the first time. Credit cards are helping people of all income levels make ends meet, even though the interest rates are high. More than two-thirds of U.S. families now have credit cards, and amounts are more than 16% higher than they were a year ago, according to the New York Times.
It may come as a surprise, but households with better incomes say they depend on credit cards more than ever.
Moneywise said, "The Quicken survey found that 46% of higher-income groups are more dependent on their credit cards than they've ever been." This is in contrast to 39% of lower-income groups and 40% of middle-income groups.
A third of people who make more than $150,000 a year say they won't be able to pay off their bill this year. This could be expensive, since LendingTree says the average interest rate on a credit card right now is 24.45%.
Millions of people are in debt because they don't know how to use their credit cards properly. And when people start paying back their student loans again on October 1, things will only get worse for millions of families.
It's not a secret why so many people are having a hard time.
It's often called "the silent killer" because it slowly takes away wealth. The Federal Reserve's goal of 2% inflation is so low that most people don't notice it in their shopping bills. However, the sky-high inflation people have been experiencing over the last few years is a different story. Inflation will reach 9% in the summer of 2022.
It may not seem like a big difference between 2% inflation and 9% inflation, but a simple financial planning tool can show you why Ronald Reagan once said that inflation was like being robbed.
If inflation stays at 2% per year, a 35-year-old who makes $50,000 a year would have to make $90,568 just to keep up the same level of living when they retire. He'd need to make $663,384 at 9%!
This is proof of how bad inflation can be. It's the force that brought down powers and installed tyrants. This makes me wonder: If inflation is so bad, then why does our country have it?
Many people will say that the answer lies in the Federal Reserve's "dual mandate": keep prices "stable" (wonderful job!) and unemployment low. But three of the most famous economists in history have a better answer.
There were many things that John Maynard Keynes, Milton Friedman, and Murray Rothbard did not agree on, but they all agreed that central banks gave the government a sneaky way to steal money.
Keynes, who was one of the most important economists of the 20th century, once said, "By a continuing process of inflation, government can take away an important part of their citizens' wealth in secret and without being seen."
Both Friedman and Rothbard said similar things.
People with higher incomes are taking on record amounts of credit card debt to make ends meet. This includes people who aren't drinking $30 bourbons. The answer lies with central bankers and supporters of monetary growth.