The Bethlehem Project: America's affordability squeeze

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0:33Uh, bagels? Yes, please.

0:37Sonja Hutson: Tiffany Chase is going grocery shopping, not at a store, but at a food bank. This is your meat. I have one more bag. We're in Easton, Pennsylvania, one town over from Bethlehem in the Lehigh Valley. Tiffany's wheeling a plastic cart around the warehouse and a volunteer is picking food off the shelves for her. Do you want any? Just one or two for Blake. I don't want to take them to everybody else. Tiffany has a young son named Blake and a daughter in college. Tiffany's 43 years old, and she started coming to the Lynx Food Pantry about three years ago after she was diagnosed with Crohn's disease.

1:11Sonja Hutson: It's a chronic inflammatory bowel disease, and it meant she could no longer work her job at her son's school anymore. Her family became totally dependent on her boyfriend's salary. He works for the Postal Service. When I first came here, I came here with tears in my eyes, completely humiliated, because I work hard every day and never thought I would have to come here to depend on this. She's since been able to go back to work part-time, but rising grocery prices have made the financial squeeze even tighter for Tiffany and her family. So, you know, these fruits, these vegetables, you go to Giant right now, it's like$19.99 for fruit.

1:48Sonja Hutson: I don't know who in the American economy can afford that. And it's not just Tiffany. A steady stream of people wind through the shelves and pick up other necessities from a line of folding tables. As you can see, it's very busy out there today. That's the food pantry's director, Lisa Breidinger. She says she's seen more and more people who have jobs come in for extra help.

2:15Sonja Hutson: And overall, the food bank has seen a 140 % increase in people using the service since 2022. We may have 50 people standing out there. and they're lined up at 9.30 in the morning. Some people come at 6 o 'clock and they sit in their cars and they park down the street. Tiffany, the shopper we heard from earlier, says the people who come here are worried that the increased demand means they won't be able to get enough food. And as you can see right now, things are dwindling right down here at the food pantry. Things are almost completely out of fruit. The boxes at the bottom are all empty. There's a lot of traffic outside right now.

2:57Sonja Hutson: People trying to get in and out. But we're all waiting patiently. There's no issues, no fighting. I have seen at some food banks people verbally and physically attacking each other just to get food, which is really devastating to see.

3:16Sonja Hutson: This trip to the Lehigh Valley has got me thinking a lot about how we talk about the economy. There's the big headline numbers that get a lot of attention. Inflation has cooled since the pandemic. The stock market is hitting record highs. And unemployment is still relatively low. But behind all of this good news are people that are still struggling to afford basic necessities. Today, we're hearing stories about how people in this community are dealing with the high cost of living, from food to health care to housing.

3:55Sonja Hutson: I'm Sonia Hudson, and this is Swamp Notes, the Bethlehem Project, the series where we look at the biggest U.S. political and economic issues through the lens of one city.

4:09Sonja Hutson: Before we get to our next story, I want to bring in the FT's U.S. economics correspondent, Miles McCormick, to give us some context here. He went on the trip with me. Hey, Miles. Hey, Sonia. Yeah. So stepping back, what are the factors that are contributing to this affordability crisis we're seeing in the US? You know, what's behind it? So there's really a confluence of factors behind it. I mean, first and foremost is inflation. We've had years of high inflation since the COVID-19 pandemic. And while it's come down significantly since then, it's still elevated. And the nature of inflation means that prices are rising.

4:48And then I would say on top of that, you've got a scenario where wage growth has slowed, especially among lower income Americans. And then one final thing I'd throw in on top of that is that the government is dialing back a lot of the supports that used to exist for lower income people, be that on health care or be that on food stamps. So all three of these factors are kind of melding together to create a scenario where for a lot of people in this country, it's becoming more and more difficult just to get by.

5:18Sonja Hutson: Now, Miles, obviously people are struggling to pay to put food on their table. We heard that from Tiffany. We heard that from the folks running the food bank. But, you know, this is not just happening in Bethlehem in the Lehigh Valley, but across the country. Is there anything that is being done about it? Anything that can be done? It's a tricky one because, I mean, the levers that exist for government, be it state, local, federal, to pull on this are limited. We've seen various examples of how the federal government here has kind of tried to limit, for example, some of the spikes we've seen in food prices by kind of tackling the bird flu epidemic, by kind of dialing back some of the tariffs that were slapped on imports from other countries to try and curb beef prices, for example.

6:08We've seen them try and get drillers, oil drillers, to go and drill for more oil to bring down prices at the pump. But all of these things take a while to trickle through. So the ultimate impact of some of these kind of high level measures is kind of limited in the near term.

6:26Sonja Hutson: And then you have, you know, arguably the most powerful lever that the federal government has, which is interest rates. Yeah, absolutely. And we've seen a massive clash of kind of an unprecedented scale between the White House and Federal Reserve recently with Donald Trump trying to convince the Fed to slash interest rates at a much quicker pace than it has been doing. But I mean, ironically, the Fed's big fear in cutting interest rates too quickly is that could actually drive up inflation. So there's kind of this, I don't know, catch 22 scenario that could ultimately lead to an exacerbation of the problem rather than any kind of solution.

7:16Sonja Hutson: So, Miles, another pain point that we heard from a lot of folks was the cost of health care. And I think for our non-American listeners, some parts of this section might be a little confusing. So would you mind just walking folks through how the health care system in the U.S. works, which is something you had to learn when you moved here? Absolutely. Nice, nice, easy question to kick off this section. I suppose the key way of explaining the US healthcare system to non-Americans is that in America, healthcare is treated as a market product where you kind of buy insurance from insurance companies, be that through your employer or through a limited amount of government programs.

7:57as distinct from most other rich, developed democracies where it's treated as a public good. And the government largely ensures that people are looked after when they get sick. And that leads to a system of, I suppose, high levels of inequality in terms of people's access to basic health care in this country, where they're having to pay varying levels of premiums to insurance companies. It's quite confusing for a lot of people, but it is one of the key issues when it comes to this affordability crisis and people's ability to get by on a day-to-day basis is how they can actually afford to pay for health care.

8:41Sonja Hutson: You know, even as someone who grew up in the States, like all of these concepts and weird vocabulary were really confusing to me. And my dad actually like sold health insurance. So I should have been like the most primed and I still was totally clueless when I became an adult and had to start paying for my own insurance. Which brings us to the next people that I want to introduce our audience to, 43-year-old Brian Buchanan and 35-year-old Rose Baldino.

9:12This will be riveting listening to us tune.

9:17Sonja Hutson: We're in Brian and Rose's home around 20 minutes outside Bethlehem. Their living room is warm and inviting with a big colorful rug and soft lighting. Brian and Rose are professional musicians. He plays the guitar and she plays the fiddle. They're in a Celtic folk band together called House of Hamel. Brian and Rose are sitting on two leather chairs and getting ready to play us a little music. What do you want to do? Just like some? Cheers.

9:57Sonja Hutson: Brian and Rose moved here from Philadelphia in 2019 because they wanted to buy a house and they could afford to do that here. Now, their big financial concern is health care. They're on an insurance plan that's subsidized by the Affordable Care Act, or Obamacare. But those subsidies expired at the end of 2025, which means health insurance costs are going up for more than 20 million Americans. Rose got a concerning piece of mail about it in November and brings it into the living room to show me. And the premium is$422.47. So that exact same plan with like a few kind of minor changes is going to be$704.04 next year.

10:42Sonja Hutson: The document shows that the monthly cost of her insurance plan is going up by almost 70%. There is a plan she can choose with a lower monthly fee, but it would cost about$65 each time she wants to go to the doctor. So yeah, honestly, that last plan would probably prevent me from going to the doctor. How did you feel opening this? To be honest, I knew it was coming because they had sent me like 500 forms in the mail saying, there's going to be changes to your thing. It's going to go up. So I was ready for it, but then I kind of wanted to die when I saw it. It's especially confusing and frustrating for Brian, who's not originally from the U.S.

11:21Sonja Hutson: And so the sting for me as a Canadian coming from socialized insurance to coming to the U.S. and being on an ECA marketplace plan, it wasn't quite as bad. That's the Obamacare insurance plan. because we were getting such generous subsidies but now we're sort of looking at those expiring and so we're going to wind up with just catastrophic coverage essentially and that's a real you'll have to find a better word for this but a real mindfuck thinking about just situations where something could go wrong you know we drive so much that could be any unpredictable little car accident or any you know piece of gear falling on your foot when you're loading it out of a car and that's a stress that I've never had to think about my whole life living in Canada, because if you needed health care, you could get it.

12:09Sonja Hutson: Would you ever move back to Canada? If either of us had any kind of significant medical problem, we would definitely move. Brian and Rose are making it work financially right now, but the rising cost of health care, food, utilities has eaten into their ability to save for a rainy day or for retirement. It's also been a tough pill to swallow. I feel like our band's doing better. We're making more money this year than we ever have before. But at the same time, instead of that money going into savings, it's now just going to being alive and a functioning human, which is... It's frustrating that it's not a lifestyle creep that is putting that on us.

12:47Sonja Hutson: We're not changing anything about the way we eat or the way we live our lives or our energy consumption, anything like that. But the rising cost around us is putting that squeeze back into our lives. And they're living with the knowledge that the relative stability they have now could be gone tomorrow. Even the periods where we feel more comfortable and more insulated from risk, I guess, we're always still just one or two pieces of bad luck away from our financial situation changing completely, you know? I think that's most American. Yeah. Yeah.

13:34Sonja Hutson: So, Miles, the history of health insurance in America is really fascinating. You know, I remember when I was growing up in the 2000s, there were no Obamacare subsidized health insurance plans. There were huge swaths of the population that had no health insurance, which meant a lot of them were not able to access care. And it was a really huge political issue. Yeah. Yeah. So the Clinton administration back in the 90s had tried and failed to implement some sort of government funded health insurance plan. And then former President Barack Obama campaigned on the issue and was able to get the Affordable Care Act or Obamacare passed in 2010, just a little over a year since taking office.

14:16Yeah.

14:17Sonja Hutson: And then, you know, within a few years of that, the number of uninsured Americans dropped by about 20 million. And I mentioned earlier that some of these subsidies have now expired as of a few weeks ago, which means costs are skyrocketing. Get us up to speed about how exactly that happened. Yeah, so you had these enhanced subsidies under the Affordable Care Act that were brought in in the wake of the COVID-19 pandemic. As you say, in the last few weeks, these have been allowed to expire. And that means that a lot of people, about 22 million people that were relying on these stand to be hit. They stand to either lose eligibility with up to 5 million people potentially becoming uninsured, or they stand to see their premiums rise significantly.

15:07There's a lot of political back and forward going on over this at the moment. There is the potential that Congress will try to address it in some shape or form in the near term. But for people that were relying on these subsidies, there's a lot of anxiety there now.

15:22Sonja Hutson: And this was a big sticking point in the government shutdown that we saw last year, right? Yeah, absolutely. I mean, it was the kind of big thing that Democrats were holding out for in order to vote to reopen the government. And they eventually did come to an agreement that they could propose legislation that would further extend these subsidies. But they proposed that legislation and it ultimately went nowhere. Yeah, no, I think that that definitely disappointed a lot of people on the left throughout the country, but we'll get to that in a minute. How big of a squeeze is the lapsing subsidies putting on Americans across the board?

16:00Sonja Hutson: We heard Rose and Brian say they're going to have to scale back their coverage because they just can't afford the higher monthly fees. Yeah, I think you're going to have a lot of people in a similar boat to Rose and Brian. I mean, you're looking at average annual premiums more and doubling. Some of the stats I saw were jumping from less than 900 to more than 1800. So their increase is actually on the smaller end. Yeah. Some of the increases we could see could be exponential. And then on top of that, on top of people actually paying more, there's going to be people that kind of slip off altogether.

16:35And there's kind of expectations for four to five million people could become uninsured as a result of this. I've seen numbers as high as seven million. So the repercussions are going to be felt very widely.

16:48Sonja Hutson: All right, we're going to take a quick break and we'll be back in a few to talk about the thing that is most people's biggest expense each month, housing.

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17:35Sonja Hutson: Anissa Camacho feels stuck. You know, I'm 26, and I feel like I'm at that age where you are expected to kind of have your own place and be taking care of yourself. And it kind of makes you feel bad when you're not doing that. Anissa says she just can't afford to get her life going. She and her partner currently live at her grandparents' house. We feel like we've just hit this hard place, and like we can't move past it. We're sitting in a cozy cafe in downtown Bethlehem called The Joint Coffee Co. It has low ceilings, hardwood floors, and giant chalkboard menus on the wall. And it's not far from Anissa's grandparents' house.

18:15Sonja Hutson: We can't save any money. I do work two jobs. My partner works two jobs, and we still just, just feels like we are, like, scraping for crumbs here. $5.75. Anissa grew up in Bethlehem and went to college for a few years, but she couldn't afford to finish her degree. Now she works at a spa and as a florist. Her partner works at a mill and has a part-time job as a member of the National Guard. Neither of us are really making a lot of money here. Unfortunately, I'll be honest, I only make$14 an hour, which really in the grand scheme of things is$1 ,200 a month. It's not good. Rent in this area is like, for just like an apartment, one-bedroom apartment, is like$1 ,500,$1 ,600 if you want to live in a nice area.

19:07Sonja Hutson: Here's the cinnamon mocha oat milk latte. Thank you. You're welcome. Even just going out to coffee like she is today feels extravagant. When you want to feel that little bit of normalcy and like go out with your friends, like grab some coffee, it almost feels like you kind of feel guilty. Like now I'm spending this couple extra bucks. I don't think we should be making people feel bad for like wanting to enjoy little things in life. when that's the only thing kind of getting them through. Because when you go home at the end of the day and you look at all those bills you're paying, it is like a slap in the face.

19:40Sonja Hutson: Anissa says the cost of housing is the biggest financial hurdle for them right now, which is why they're living with her grandparents. Bethlehem rents have been on the rise lately. Since the pandemic, they've gone up 46%, according to data from Zillow. It's become kind of a commuter town for New York and Philadelphia, which are both less than a two-hour drive away. And driving around the Lehigh Valley, it's kind of hard to miss. I saw lots of new luxury apartment buildings and even more of them under construction. So we actually live with my grandparents right now, but we miss our own space. We miss having our privacy and all that good stuff.

20:19Sonja Hutson: But we just literally cannot, like every time we look on Zillow, Facebook, anything, like we cannot find anything in our price range that we can afford. And again, that's nice. That's not like falling apart at the seams. Even without paying rent, Anissa says they're still just scraping by. We live their rent free, but we help them in other ways. So utilities and we pay for our cars, we pay for our phones. So like at the end of the month, we're like, we ain't got no extra money. She doesn't have a lot of hope for her future in Bethlehem. Our whole family is here, my family, my partner's family, and we love being near them.

21:00Sonja Hutson: However, we probably will not stay in this area just because the prices continue to rise. We actually really love the state of Maine and that's kind of where we would like to go if we have the money to do so. It is cheaper living-wise up there. It's just actually, you know, buying a house and getting up there. But no, I don't think we foresee ourselves staying here in the future, building a family here. It's just if it continues the way it is, there's just no plausible way that we could.

21:40All right.

21:41Sonja Hutson: I want to bring back Miles McCormick, our U.S. economics correspondent. Hey, Miles. Hey, Sonia. So that last sentiment we heard from Anissa, I feel like we heard that a lot from people in the Lehigh Valley. You know, life has gotten too expensive and we don't really know what to do about it other than move away to somewhere cheaper. Is there anything that can be done on a local level to bring housing prices down? I mean, I suppose that the key thing that can be done locally is just increasing housing supply, especially affordable housing supply. But that faces its own challenges, as the former county executive Lamont McClure told us.

22:19I mean, there's everything from zoning issues to getting the right amount of funding.

22:25Sonja Hutson: Yeah, and he gave us a few examples of projects that he tried to get over the line, but just couldn't. It ended up being more than$250 ,000 per unit to build these$80 ,000 homes. And at some point, CALV, the community action of the Lehigh Valley, determined that they would not be able to hold up their end of the financial bargain to build these things. So we had to scrap the project. So just the sheer cost of building these four or five affordable homes made it impossible for us, the CALV, and the Commonwealth of Pennsylvania to do this. So their ability to act is somewhat constrained on that level.

23:10I do not want to be pessimistic about local government's ability to reverse this problem. But my own experience tells me that without national solutions, we're not going to be able to do what we need to do to make life more affordable for people. If you asked me to pick, though, one thing, I would like us to have a tax structure that incentivizes people to develop affordable housing.

23:40Sonja Hutson: Miles, you know, I mentioned earlier that the rent in Bethlehem has gone up 46 percent since the pandemic. Home prices in the Lehigh Valley as a whole have gone up about 75 percent, according to data from the Federal Reserve Bank of St. Louis. What does this issue look like on a national level? Yes, I mean, it's an issue that is mirrored across the country. Supply isn't meeting demand in urban areas when it comes to rent, when it comes to buying property. I saw a stat from the Atlanta Fed that said that nationally prices are up by about a third since 2021. More than half of Americans are now considered cost burdened when it comes to renting.

24:27So affordability in housing is probably one of the leading issues when it comes to this squeeze people are feeling at the moment.

24:36Sonja Hutson: Is there anything then that the federal government can do to address this issue? Yeah. So, I mean, there's been a few things floated recently. You had President Trump suggesting that the government could launch this mass$200 billion mortgage bond buying campaign and try and drive down rates there. But yeah, again, this is one of these things that things just take a while to trickle through. There's the interest rates example, again, that we mentioned earlier, that Trump has been trying to convince the Federal Reserve to slash interest rates. And lower interest rates would make mortgages potentially more affordable because the rates would come down there.

25:17Exactly. Exactly. But then over the medium term, there's the potential for that to drive up inflation in other ways. So it all kind of comes full circle. So it's just a bit of a headache all round. It's becoming a serious political challenge.

25:31Sonja Hutson: Yeah, let's talk a little bit more about the politics of this issue. How critical is the issue of affordability to voters? And how much trouble are Republicans in because prices are still so high? Big trouble, I think. This was one of the key issues that got Donald Trump elected. Yeah, he had a very clear message like, your costs went up when Biden was president, I'm going to bring them down. Totally, totally. And a little over a year into his presidency now, a lot of the folks that backed him on this promise of bringing prices down are now becoming frustrated at him because prices are still going up.

26:12And now that frustration that was an asset to Donald Trump on the campaign trail is now a liability for him because people are blaming him. I mean, you only have to look at some of the recent off-year elections that we had, be it the mayoral race in New York, governor races in New Jersey and Virginia, mayoral race in Miami. All of these examples of Democrats winning or outperforming because of the frustration that voters have over affordability that is being kind of pinned on Republicans.

26:46Sonja Hutson: I think the thing that complicates this narrative a little bit, though, is that most of the people that we spoke to really blamed both of the parties for this crisis. Yeah, 100 percent, 100 percent. And that, I think, is one of the most kind of important elements of all this, that the trust or faith in politicians and political institutions is just plunging because people were frustrated with the Democrats that prices were out of control. Now they're frustrated with the Republicans that stuff's out of control. So a lot of people just kind of feel abandoned by the system. They feel that life's becoming harder and harder.

27:21And as far as they're concerned, politicians aren't interested, don't care.

27:25Sonja Hutson: Yeah, Anissa definitely told us a few things that kind of stick out to me of just like this lack of optimism or hope that this issue is going to get any better. I would love to have a little bit of optimism. Like there is that small part of me, but it feels like it's being stomped out because every day I see just worse things happening. And she feels really, yeah, abandoned by politicians on both sides of the aisle. Those people that we're voting for that are saying we are going to make this our number one issue and help you guys and then see them be voted into office and switch. It just makes you feel like what the hell.

28:08Sonja Hutson: And it makes you lose trust also in like politics as a whole. And like, what's the point of even voting? And even Tiffany, the woman we met at the food bank, who, you know, blamed the Democrats for the government shutdown. I do feel it's a Democratic thing. I personally do. I think they should be standing here with the rest of us and see what they've done. Because they don't care. I honestly think they don't care. She also then went on to say, you know, Trump has no empathy for what we're going through. You know, he pretty much don't care. You know, as long as he has his, doesn't matter about us.

28:42Sonja Hutson: and the fact that I see some kids going to school needing more food, which is even more devastating, that should not even be legal. Totally. There's just this increasing sense that the political class is out of touch. And I think that that is kind of fueled in part by the fact that while you've got this affordability crisis on one hand, that lower income Americans are struggling more and more each week, richer Americans are getting richer because we've had this stock market boom over the last year. So people with money in stocks are just seeing their wealth rise and rise. So you've got this widening gap between rich and poor in a country that already had a pretty high level of inequality.

29:23Sonja Hutson: Yeah. In some ways, it kind of seems like because both parties have kind of failed to address this issue, they can both use it as an issue to their advantage politically. Yeah, absolutely. And that's kind of what we see. It's just this kind of political football that's kind of been kicked back and forward. Donald Trump is still kind of bringing up at every rally or every speech he does what he sees as the failures of the Biden administration. When Biden and congressional Democrats had power, they blew up our economy, sent prices soaring. While Democrats are saying that Donald Trump is out of touch and kind of citing some of the things he's doing for more wealthy Americans or the, I don't know, the redesigns of the White House, the installation of a ballroom or a golden toilet or whatever it might be.

30:11But yeah, as you say, it's just going back and forth and probably just kind of exacerbating that lack of faith in the system that we were talking about earlier.

30:21Sonja Hutson: Miles McCormick, the FT's U.S. economics correspondent. Thanks so much. Thanks very much, Sonia.

30:54Sonja Hutson: Bethlehem with me.

31:22Thank you. And to think, that's just a small taste of what Schwab offers. Because Schwab knows that when it comes to your finances, choice matters. No matter your goals, investing style, life stage, or experience, Schwab has everything you need all in one place. So you can invest your way. Visit schwab.com to learn more.