In 2019, then Senator (and now Vice President) Kamala Harris said:

It’s clear, in our country right now, almost half of American families are a $400 unexpected expense away from complete upheaval. Four hundred dollars. That could be the car breaks down. That could be a hospital bill you didn’t see coming.

PolitiFact generously rated Harris’ claim as “half true.” My AEI colleague Michael Strain more persuasively broke down the reasons why claims like Harris’—which have been repeated by other politicians—are simply false.

But whether half true or flat out wrong, it’s hard not to be reminded of such claims on learning that the average US household is now paying $450 more per month for the same goods as last year due to today’s 40-year-high inflation. What’s more, that unexpected expense is far from an isolated event, like a car repair or hospital bill. Instead, Americans are now being forced to pay this added expense every month. For many, that is causing painful tradeoffs between filling their tank, buying groceries, or covering rent, utilities, and other expenses.

For millions of lower-income families, the pain is especially acute. Last month the Federal Reserve released its latest annual report on the “Economic Well-Being of U.S. Households in 2021,” which provides background on Americans’ ability to withstand a $400 unexpected expense. The report includes the following chart, which displays adults who in 2021 would have had difficulty managing a $400 emergency expense by income and race/ethnicity:

Among adults with incomes under $50,000, an
unexpected $400 expense would have resulted in an additional 20 percent of
Black adults and 21 percent of Hispanic adults not being able to fully pay
their current month’s bills last year. Accounting for those who already could
not pay their current month’s bills, such unexpected expenses would push the overall
share of lower-income Black and Hispanic adults who were unable to pay their
current month’s bills to 53 percent and 48 percent, respectively.

The report notes that Americans’ ability to withstand a $400 unexpected expense improved overall in 2021, including due to “the additional COVID-19 relief measures enacted in 2021.” But with generous pandemic unemployment benefits and expanded monthly child tax credit payments expiring at the end of last year, and inflation soaring above wage gains, those figures are likely worse today.

Back in 2019, in response to a query from PolitiFact, the Harris campaign defended Senator Harris’ claims about the “complete upheaval” caused by a $400 unexpected expense this way:

Millions of hard-working Americans can’t cover an unexpected $400 expense. They are a medical bill, a car repair, or a rent increase away from having to make painful choices like turning to a neighbor hat in hand to ask for a loan, putting themselves in spiraling credit card debt, selling their car, or heading to a pawn shop with their wedding ring. To presume any of these things would not upend someone’s daily life is out of touch.

One wonders whether Vice President Harris regrets those remarks now that the average US household is paying $450 more per month for everything they buy. Because if her 2019 claims about $400 unexpected expenses are to be believed, then today’s greater inflation-driven unexpected expenses must be causing even more “complete upheaval” for millions of hardworking Americans every month—including a disproportionate share of lower-income and minority adults.

The post The Average US Household Is Now Paying $450 More per Month in ‘Unexpected Expenses’ Due to Inflation appeared first on American Enterprise Institute – AEI.