Public debate often treats economic disruptions as short-lived problems—sharp swings in prices, employment, or growth that settle once the broader economy finds its footing again. Early November’s election results suggest voters may see things somewhat differently. Candidates who focused squarely on affordability did well because households may be responding, at least in part, to something far more persistent: years of declining economic well-being that do not roll back once the headlines move on.
For decades, policy conversations have too often accepted a simple assumption: that it is only rational to tolerate short-run turmoil in exchange for long-run stability. In this model, policymakers adjust course—sometimes modestly, sometimes not at all—while workers, small-business owners, jobseekers, and caregivers are expected to weather the turbulence. In theory, these shocks are supposed to fade, and the greater good is served by merely bandaging the complaints of lower-income groups until the headline metrics herald an apparent return to normalcy. In practice, however, households experience these shocks—and their aftermath—very differently. And while some economic turbulence is truly inevitable, appreciating the disconnect between the picture painted by the aggregate indicators and the ripple effects households feel is a necessary step towards identifying policies that can improve affordability.
Everyday Americans certainly feel the effects of economic shocks that are captured in the headline statistics, but there are many reasons why an improvement in those headline numbers doesn’t map to an improvement in a household’s financial situation. For example, most people don’t budget for the 80,000 goods and services tracked by the Consumer Price Index (CPI). They manage a much smaller set of expenses, e.g. rent, groceries, childcare, utilities, insurance premiums, and a few others. If the weekly grocery bill jumps by $40, that often becomes the new number they have to live with.
Even when market forces eventually push prices down, the clock is rarely fully wound back and wages often fail to keep pace with the new cost realities. A rent increase does not automatically reverse when inflation cools. Childcare prices do not necessarily fall just because CPI moderates. Shocks to essentials are rarely one-time disturbances that disappear when the crisis fades, even if the price increases only once—more often, they become lasting additions to the cost of living, raising the baseline from which working Americans make every subsequent financial decision.
Recent price surges underscore how rare true reversals are. The CPI for food shows prices decelerating but not reversing from their 2022 spike, a frustration grocery shoppers have experienced firsthand. Milk prices, for example, fell briefly from $4.20 per gallon in January 2023 to $3.86 by May 2024, only to stabilize around $4.00 by August. By November 2025, consumers were paying 25% more for the same purchases than they had in 2019. Egg prices tell a similar story: despite easing from their most serious spikes in January 2023 and March 2025, they remained roughly double their pre-inflation level as of September 2025.
Housing offers little reassurance. The Zillow Observed Rent Index (ZORI) shows rents jumping more than 15% in 2021. The increases slowed down between 2022 and 2025, but rents did not plunge back to their 2019 level; instead, they resumed climbing at roughly their pre-pandemic pace from a much higher baseline. The end of the inflation shock does not mean a return to affordability—it means the return to typical price movement. For many working households, that means a continuation of the faster-than-CPI-U accumulation that characterized the cost of necessities for the previous two decades.
Even if a one-time shock dissipates, the damage households sustained in the interim can slow their progress for years. A temporary hit to purchasing power may force a household to take on additional debt or postpone savings for college or retirement—effects that do not show up clearly in present-day headline indicators. From that perspective, a one-time shock at the macro level can easily become a permanent shift in a household’s financial position.
This distinction explains, in part, why voters responded so strongly to affordability-focused campaigns. They may not be rejecting long-run thinking entirely; rather, they are likely reacting not just to today’s “sticker shock,” but to the reality that the long run they have been living is defined by accumulated, irreversible shocks—none of which appear clearly in top-line indicators.
For policymakers, the implication is straightforward: there is often no such thing as a one-time effect for households. A shock might disappear from the inflation tables or unemployment charts, but everyday Americans continue to feel its consequences long after the data normalizes. Further, even when a shock resolves at the national level, local communities may continue to struggle if critical employers have downsized or if reduced spending within the community has resulted in a more permanent slowdown.
From a macroeconomic perspective, shocks do often look temporary. The unemployment rate eventually fell after the 2008 financial crisis. Gross Domestic Product (GDP) rebounded after the 2020 lockdowns. The CPI surge in 2022 slowed as supply chains recovered. From that vantage point, the economy appears to move past each disruption in turn, reinforcing the idea that these are temporary events.
But this “recovery” story breaks down at the household level much more than policy leaders take into account. In 2021, households reported surviving the initial COVID slowdown by postponing their progress towards financial goals: either by drawing on savings set aside for something else, by taking on additional debt or putting off bills, or making plans to delay retirement. But by 2023, when the slowdown was replaced by inflation, consumers once again leaned on the savings to cover the rising costs of groceries—with nearly one in five relying on funds they had not intended to use for everyday purchases.
Aggregate indicators do not show how much financial well-being households lost during those periods, how long it will take them to rebuild, or whether they ever will. This is a critical blind spot: the metrics policymakers rely on were never designed to measure the compounding, non-reversible nature of household-level shocks.
Research from my colleagues at the Ludwig Institute for Shared Economic Prosperity (LISEP) and others shows just how large this gap has become. When inflation rose in 2021, much of the debate framed price increases as a temporary concern overshadowed by the risk of recession. But for many, the pressure had been building for years. Essential expenses had outpaced median wages over the past two decades. For a family of four, between 2001 and 2023:
- Rent: 40th percentile rents rose 125%.
- Healthcare: Annual health-insurance premiums borne by middle-income workers more than tripled.
- Childcare: The average price of center-based childcare doubled.
- Wages: Median wages for typical workers rose by only 92% in nominal terms, resulting in a 4% decline in purchasing power for families whose budgets are dominated by necessities.
These aren’t short-term fluctuations. They are structural and cumulative increases in the cost of essentials, compounded by wage growth that lagged behind. That combination steadily eroded families’ room to maneuver. So, when inflation in groceries and consumer goods spiked in 2021—even for a relatively brief period—low- and middle-income Americans had precious little slack left to absorb it.
This is why focusing on headline inflation misses the larger, persistent threat. Rising unavoidable expenses have been pushing up the household cost structure for decades. CPI understates the rise in many essentials, and labor-market metrics often overstate the prevalence of living-wage jobs. Add in higher barriers to homeownership and education, and the financial path forward becomes even steeper. Consumer behavior reflects this reality. New tariffs introduced in 2025 were described as temporary “trade adjustments,” yet analysis from the Budget Lab at Yale University estimates they will raise consumer prices by roughly 1.7% and cost the average household $2,300 this year alone. Even if those increases eventually unwind, the impact will fall on households that have already been squeezed for decades, and many households are no longer assuming prices will fall back—they’ve been burned too often.
In a recent survey, 44% believe tariffs have already increased the price of goods and services, and a quarter reported switching to generic or private-label goods in response. These are not the behaviors of households expecting a quick return to pre-shock conditions.
Against this backdrop, new shocks—whether from AI-driven disruptions, federal layoffs, or additional trade-policy changes—may well land on households that are already stretched thin. Even well-intentioned policies can have unintended consequences if they are not evaluated through the lens of a household balance sheet. Focusing only on short-term affordability or only on long-term reform which may never come misses the point; both matter, because families must make both short- and long-run decisions at the same time.
After more than two decades of declining well-being for most middle- and low-income households, it is clear that structural reforms are needed to bring costs back in line with wages. Short-term fixes alone are unlikely to address the root causes of affordability and, if misguided, could even prove counterproductive. Effective leaders should recognize that working-class households need both immediate breathing room and policies that make long-term stability possible.
Ultimately, policy must be judged not only by aggregate performance of the economy as a whole or political resonance but by its ability to strengthen household financial resilience of all income groups—helping families make progress in good times and avoid lasting setbacks in bad. Until our measurement tools capture these realities directly, policymakers will continue to rely on short-termism, intuition, and ideological prejudices rather than evidence.
And while intuition and such prejudices may shape elections, and too often do, effective policy and the country’s well-being require something more precise: an economic framework that recognizes that very few shocks are ever truly “one-time” for the households who have to bear them.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
Politics8 years ago