If you don’t think something is very wrong, you’re not looking very hard. Recently, the cost of the average new car in the US topped $50,000. The median household income in the US (meaning the half way point, if you arrange all peoples’ incomes from lowest to highest) was about $83,000. The mean was about $66,000, suggesting a lot of skew from a bunch of very high incomes at the top end of the data set. So the “average,” under some definition of average, American household would pay about 70% to 80% of their income for the average new car.

If we go back 30 years, to the mid 1980s, median income was about 24,000 in 1985. (Not adjusted for inflation). If you adjust it for inflation, we have to face the ugly fact that 40 years has only taken us from $64,000 of 1985 median household income in today’s dollars to $83,000. Meaning that with all the advancements we’ve seen, and all the gains in productivity, our earning power grew just 35% or so. That’s less than a 1% improvement per year. But in the 1980s, a nice Buick or Dodge set you back less than $10,000. You could get economy cars for $5,000 – $7,500 price range. The average new car set a family back less than 50% of its income. Less than a third, if the bought an economy car. Even if you adjust for inflation, the average new car should be in the $25,000 to $30,000 range. To get to that that “less than 50%” range in today’s actual prices., you need an income of at least $100,000, if not slightly more.

This is the difference between purchasing power, wealth, and income. Partly it’s inflation, and partly it’s not inflation (to the degree inflation measurements aren’t arbitrary). The price of an “average” new car has risen faster than inflation. So has housing. So has medical care. So has education. If you could easily afford an average car in 1985, but struggle to buy an average car in 2025, you are poorer as far as cars are concerned. If you could afford to go to the doctor’s office in 1985 but not 2025, you are poorer along that axis. However, an IBM PC computer or original Macintosh cost maybe 10% of your 1985 median household income. Today, that (relatively) high-end computer is in the 3-4% category. We’re much richer on that axis. The necessary stuff is more expensive, but escapism is cheap.

I would argue that the things that matter, like food, housing, and transportation are why we feel poorer today. Setting aside the paltry growth in inflation adjusted median household income (while upper incomes have grown much faster than inflation), having to put yourself in deep debt to do “normal” things hurts.

The fact we are drowning in televisions, computers, and other gadgets doesn’t compensate for not being able to afford college. If I were to ask most people struggling to buy a house, would you rather have: more expensive TVs and computers or cheaper houses? They would opt for the house. If I asked the person trying to get one more year out of the ride that gets them to their job, if they wanted cheaper cell phones or cheaper cars, they’d opt for cheaper cars. Or a public transportation system that didn’t feel punitive in its cost and inefficiency.

You need transportation, you need a house, you need to go to the doctor and the dentist. Those seem more and more like luxury items. That’s what feels so wrong about today. I caught a passing notice about Paul Krugman saying China has passed the US in purchasing power parity. They may have. I haven’t read it. I’m a little tired of Krugman, who lost credibility with me as an economist, for focusing on too many nakedly partisan issues. But we all feel it. If you make more money next year, it doesn’t really feel like you got ahead. In fact, it feels like you’re falling further and further behind.

So you tell me, after 40 years of progress, with companies worth trillions of dollars, and with two people in a race to be the first trillionaire, does it feel like we’ve advanced? Do you feel wealthier? Does that seem like a system that’s working for the benefit of most people? Do numbers like GDP and a soaring stock market paint a rosy picture, so we we learn to ignore what our lying eyes are trying to tell us?