Incomes up in 2024, but higher costs led more to feel poor, and choose Trump. Can't think it's better now

This week featured the release of the Census Bureau's annual reports on US incomes, US poverty, and health insurance in America.

On the income side, real US median household incomes lost ground to inflation in 2021 and 2022, but regained all of those losses as inflation ebbed in 2023 and 2024. This enabled a new all-time high for real median household income to be reached by the end of Joe Biden's term in office, at $83,730 (in 2024 dollars).

Also worth noting, there was inflation-adjusted income growth for all deciles in the US income range in 2024, from lowest 10% to highest 10%.

Wisconsin also saw it's inflation-adjusted median household income go up last year, from $81,750 to $82,680 (1.1%). But that wasn't the case for half of the other Midwestern states last year, and interestingly, higher-income Minnesota and Illinois were the only 2 states in our region that had lower real median household incomes than they had in 2020.

While it was true that many Americans were better off than they were 5 years ago due to higher incomes and wealth, as they went to the voting booths, many didn’t think things were better because they were paying more. And all of the states that had higher real household incomes in 2024 vs 2020 ended up voting for Donald Trump last November.

It’s why I think another one of the Census Bureau’s reports is instructive as to why some might have felt this way. The US poverty report has two separate measures - the "official" poverty rate, which has been measured for more than 60 years, and the Supplemental Measure of Poverty (SPM), which was more recently developed. Note the difference in the two rates in the 2020s.

The SPM adjusts for various costs of living for Americans in different parts of the country, and also accounts for various welfare policies that help provide needs and services that might keep someone from being destitute.

The SPM allows us to estimate how including different resources and expenses affects the number of people in poverty and the poverty rate. Figure 10 (Tables B-6 and B-7) shows how adding or subtracting different factors from the resource calculation would affect the number of people in poverty in 2024. Some of the programs in the figure—cash programs such as Social Security and unemployment insurance benefits—are included in both the official poverty measure and the SPM. Others—such as refundable tax credits, SNAP, and housing subsidies—are only included in the SPM. Necessary expenses—such as taxes, medical expenses, and work-related expenses—are also deducted from SPM resources but are not considered in the official poverty measure.

To evaluate the effect of programs that add to resources (e.g., Social Security and cash and noncash transfers), we subtract the value of each component from a unit’s resources and recalculate poverty status. In contrast, to evaluate the effect of expenses, we add back the value of each component to a unit’s resources. Poverty status changes if subtracting a program benefit decreases individuals’ resources below their poverty threshold or if adding an expense takes them above their poverty threshold. These additions and subtractions are done independently and assume no behavioral changes such as shifts in employment status and expenses.

On the other hand, the SPM also accounts for expenses that weren’t looked at when the original poverty measure was figured more than 60 years ago.

The SPM subtracts amounts paid for child support, income and payroll taxes, work-related expenses, and medical expenses from resources, which increases the number and percentage of individuals in poverty. Of the subtractions, medical expenses had the largest effect, pushing 7.5 million individuals into poverty in 2024. This effect varied by age. For those 65 years and older, subtracting medical expenses raised the poverty rate by 3.7 percentage points. The effect was smaller among 18- to 64-year-olds (1.8 percentage points) and children (2.1 percentage points).

Notice that big decline in the SPM in 2020 and 2021 and then the big jump up in 2022? That’s the result of expanded SNAP subsidies and child tax credits as well as boosts to unemployment benefits that we saw during the COVID pandemic, and then those forms of assistance ended as the pandemic faded. Combined with the jumps in prices that happened in the first part in 2022, and you can see where a lot of people feel they fell behind and never caught up – even if their incomes would tell you they did.

You can really see it when you take a look at the state-level poverty numbers, which came out on Thursday.

See how states like California, Arizona, Texas, Georgia, Florida, New York, and Massachusetts are in a higher tier of poverty on the SPM scale? Those are states with large metro areas that are more likely to have people with higher incomes (so they don't show up in the "official" poverty number), but also more likely to have higher everyday expenses that may make people with above-poverty incomes qualify under the SPM. Likewise, some more rural states with high levels of SNAP, Medicaid, and elderly-based assistance had lower SPMs than the official poverty rate.

Wisconsin scores well on both measures, with an "official" poverty rate of 8.3% in 2024, and an SPM of 7.7%. Only Minnesota has lower levels in both measures in the Midwest, and Wisconsin had the 3rd lowest SPM rate and 8th lowest official poverty rate in America last year. Pretty good spot to be in.

But if the SPM-coded issues of affordability were a reason some voters decided to return Donald Trump to the White House last November, I can't think things are better for those people in 2025. Many cost-of-living expenses continue to rise, inflation-adjusted wages aren't going up as much as they were this time last year, and health insurance costs are set to spike this Fall while government assistance for benefits will decline.

Gee, no wonder why consumer sentiment numbers are back near multi-year lows, and down 21% from where they were in 2024. We may not be seeing as much of the bad stuff in Wisconsin, but nationwide, things are not good at all when it comes to what Americans think about the economy. And knowing that things are worse than the already not-great situation we were in for 2024 explains a lot.