A growing number of Americans are reaching financial breaking points as years of high inflation, rising living costs, and a war-driven cost crunch strain household budgets, while capital accumulation continues for the highest earners. Kris Massey, a 57-year-old nurse practitioner earning a six-figure salary, resorted to selling her grandmother’s jewelry last month to cover bills, after a monthslong bout of unemployment drained her retirement savings.
Massey, who worked two jobs from 2012 to 2023, stated, “I’m just trying to hang on,” after back surgery made a second job impossible. This individual struggle reflects a broader crisis where consumer sentiment has fallen to an all-time low this month, surpassing levels seen during the Vietnam War, the 1970s oil crisis, 9/11, the Great Recession, and the Covid-19 pandemic.
Bankruptcy filings have increased for the past three years, debt levels have grown, and delinquency rates have moved higher, while the personal savings rate is at its lowest in over three years. Everyday goods and services have risen approximately 25% since 2021, disproportionately impacting lower-income households who allocate a larger share of their earnings to basic needs like groceries and gas.
The K-Shaped Divide
David Ortega, a food economics professor at Michigan State University, noted that as higher-income shoppers shift to cheaper alternatives, demand for lower-cost goods rises, leaving those already buying conventional products with “nothing to switch down to.” This dynamic exacerbates the K-shaped economy, where different income brackets experience vastly different economic realities.
Consumer spending, excluding gasoline, ran at a 4% annual growth rate in April, marking the fastest growth in over three years, according to David Michael Tinsley, senior economist at the Bank of America Institute. This growth was fueled in part by higher tax refunds and the persistence of the K-shaped economy, which concentrates wealth upward.
The gaps between higher-income wage growth and middle- and lower-income wage growth are the largest in Bank of America data, which spans about 10 years. After-tax wage growth for higher-income households above $130,000 is running at 6% annually, compared to 1.5% for lower-income households below $70,000 and 2.3% for middle-income households between $70,000 and $130,000. The gap in spending growth, while less stark, is also the widest in three years.
Mounting Food Insecurity and Imperial Costs
New Federal Reserve Bank of New York research released Wednesday revealed a “remarkable” increase in Americans struggling to put food on the table, contributing to record-low consumer sentiment. Researchers found a greater share of Americans are now “food insecure” than in May and June of 2020, dipping into savings, struggling to access food, reporting children missing meals, or receiving food donations or federal nutrition assistance.
This increase in food insecurity is particularly pronounced among lower-educated and lower-income households and households with young children. In February 2026, 10% of households surveyed reported not having enough food, up from 4% in June 2020. Shares of people receiving food donations increased to 15.8% from 10.6%, and SNAP participation rose to 17.9% from 10.6%. More than one-third of respondents, 36.8%, used their savings to cover expenses, up from 21.8%.
Sian Slater, 59, who works multiple jobs in the Phoenix area, faces severe financial strain from spiking gas prices. The premium gas her car requires now costs about $5.50 a gallon, compared with below $4 before the U.S.-Israeli war with Iran. This imperial conflict has directly translated into higher costs for workers, with Slater stating, “At the end of the week with the price of fuel added, I have roughly $15 a week to buy groceries and medications.” She has halted retirement contributions, canceled doctor’s appointments due to unaffordable copays, and cut grocery items, adding, “But right now, I’m feeling very poor, and I’ve never felt that way before.”
The State's Priorities
Minneapolis Federal Reserve President Neel Kashkari stated Thursday that bringing down inflation remains his top priority, asserting that consumer prices are “much too high.” Kashkari acknowledged that inflation has remained above the Federal Reserve’s 2% target for more than five years, while describing the labor market as being in “decent shape,” despite widespread reports of worker precarity and financial distress.
Kashkari emphasized focusing “heavily on inflation,” stating that if inflation expectations become “unanchored,” the central bank would have to “respond even more aggressively.” This suggests a willingness to implement policies that could further suppress wages and employment in the name of price stability for capital. He also noted that global inflationary pressures have been fueled by the Covid-19 pandemic, tariffs, the war in Ukraine, and the conflict in Iran, with the current surge attributed to energy and fertilizer prices.
Bloomberg reported that grocery prices are poised to rise further due to weather-related supply issues, tariffs, and a shrinking cattle herd, signaling renewed inflationary pressure at the consumer level. Reuters reported that supply shocks and debt may threaten central bank independence, suggesting political incentives to favor short-term relief over disciplined long-term policy, indicating the state's role in managing crises for the benefit of the existing economic order.
Kashkari also speculated that if artificial intelligence leads to sustained higher productivity, “higher rates could be sustained as the economy is so productive,” linking technological advancement to the potential for continued high interest rates that benefit creditors. The Fed begins a new chapter under Chair Kevin Warsh, with discussions on how the central bank communicates with markets and the public, underscoring its primary role in managing capital flows and expectations.