It's not that the American people have truly become poorer, but rather that their money has become increasingly less effective in the face of those "inefficient yet extremely expensive" services.

The narrative of the "killing line" was something I discovered in November within the circles of X and Substack. It originated from Mike Green's "140k poverty line" theory that went viral in the U.S. I didn't expect that a month later, this narrative would spread domestically and mutate into the "killing line," which is quite interesting.

Unfortunately, my AI narrative radar wasn't ready at that time, otherwise, I would have loved to see if AI had captured the spread and changes of this narrative.

01

At the end of November, I read three articles by Mike Green on Substack:

These are three very long articles that make you feel like you've read for ages; the combined word count is about that of a small book.

I tried to summarize it in Mandarin as follows:

The gist of the articles is: If you think the current economic data is good but still find life tight, and a salary of $100,000 still feels poor, it's not your fault; it's because the measure of wealth and poverty is a self-deceptive ruler from Doraemon.

The articles present three points:

1. The "poverty line" is actually a misguided measure.

The official U.S. poverty line is an annual income of $31,200 (for a family of four); as long as your income exceeds $30,000, you are not considered poor.

But this ruler was created in 1963. The logic back then was simple: a family spends about one-third of its money on food, so by calculating the minimum food cost and multiplying it by three, you get the poverty line.

However, the situation is now vastly different. Everyone has probably seen that famous chart—the "Baumol's Cost Disease":

Food is getting cheaper, but the costs of housing, healthcare, and childcare are skyrocketing. If you recalculate based on the living standards of 1963—meaning being able to "participate" normally in society (having a place to live, a car to drive, childcare, and access to medical care)—the real poverty line today is not just over $30,000, but $140,000 (about 1 million RMB), which is just enough to live decently in this society.

2. The harder you work, the poorer you become.

The design of the welfare system in the U.S. has a huge bug: When you earn $40,000 a year, you are considered officially poor, and the government provides you with food stamps, Medicaid, and childcare subsidies. Life is tight, but there is a safety net.

However, when you work hard and your salary rises to $60,000, $80,000, or even $100,000, disaster strikes: your income increases, and your benefits disappear. Now you have to pay for expensive health insurance and rent entirely out of pocket.

The result is: A family earning $100,000 a year may have less disposable cash left each month than a family earning $40,000 (who receives benefits).

This is the source of the narrative of the "killing line" and "killing line targeting the middle class" on Chinese social networks: just like in a game, when health drops below a certain threshold, you are directly killed by a skill; the middle class, caught in the middle, is precisely at the point where benefits are withdrawn, tax burdens increase, and various rigid expenses (healthcare, rent, childcare, student loans) are piling up, losing subsidies while bearing high costs. Once faced with unemployment, illness, or rising rent, they are locked in by the killing line.

3. The assets you own are actually quite illusory.

Because:

Your house is not an asset; it's prepaid rent: If your house appreciates from $200,000 to $800,000, have you become rich? No. Because if you sell it, you still have to spend $800,000 to buy a similar house to live in. You haven't gained additional purchasing power; your living costs have just increased.

The inheritance you are waiting for is not a wealth transfer: The Baby Boomer generation's inheritance will not be passed down to you; it will go to nursing homes and the healthcare system. Currently, elderly care in the U.S. (dementia care, nursing homes) costs between $6,000 and over $10,000 a month. A parent's $800,000 house will likely end up as a series of medical bills collected by healthcare institutions and insurance companies.

Your class has become a caste: In the past, you could cross classes through hard work. Now it relies on "entry tickets"—Ivy League degrees, recommendations from core circles—these "assets" have a higher inflation rate than houses. So a salary of $150,000 may allow you to survive, but you can't afford the ticket to get your child into the upper class.

02

What exactly has caused the "inflation of the poverty line" in the U.S. (or, in our context, the "great migration of the killing line")?

Mike Green believes it is due to three turning points in American history:

Turning Point 1: The corruption and monopoly of unions in the 1960s led to decreased efficiency and increased costs.

Turning Point 2: The antitrust shift in the 1970s, where large companies engaged in rampant mergers, controlled the market, and suppressed wages.

Turning Point 3 (which everyone can probably guess): The impact of China. However, the article's viewpoint is not that China forcibly took jobs away, but rather that American capitalists engaged in capital arbitrage—moving almost all factories out of the U.S. to make profits.

But Professor Green didn't just point out the problems; he proposed a very hardcore solution called the "Rule of 65," with the core idea being something familiar to us Chinese: (1) Increase taxes on corporations (but exempt investments from taxes); (2) Large companies can no longer deduct interest on loans from taxes, firmly combating financial circular transactions; (3) Reduce burdens on ordinary people: significantly lower the payroll tax (FICA) for regular folks, allowing more cash in hand. Where will the missing money come from? Let the rich pay more, and raise the cap on the rich's social security tax.

The Chinese experience is definitely practical.

03

Professor Mike Green's views have gone viral among the American middle class. However, they have sparked a collective backlash from the elite class and various economists.

His articles do indeed have many data flaws. For example, using data from wealthy areas (Essex County, one of the top 6% of wealthy areas in the U.S.) as a national average; assuming all children go to expensive childcare centers (over $30,000 a year), while in reality, most American families still take care of their children themselves; some concepts are also a bit confused, such as treating "average spending" as "minimum survival needs."

Later, Green appeared on many podcasts to clarify: the $140,000 refers not to the traditional sense of "not being able to afford food" poverty, but to a "decent living threshold" for an ordinary family that does not rely on government subsidies and can still save some money.

Although Professor Green's math seems to have indeed been incorrect, the critics did not win, because regardless of what the poverty line actually is, everyone's "sense of poverty" is very real. Moreover, the "killing sensation" is becoming increasingly real—whether for Americans or Chinese.

Why? I believe the real reason is still "Baumol's Disease."

"Baumol's Cost Disease" was proposed by economist William Baumol in 1965, attempting to describe an economic phenomenon:

Some industries (like manufacturing) rely on machines and technology, becoming increasingly efficient, with unit costs decreasing; but some industries (like education and healthcare) primarily rely on people, making it difficult to significantly improve efficiency—one class still takes an hour, and a doctor still needs time to see a patient; it’s impossible to speed up like factories.

So the question arises: overall wages in society will rise along with those efficient industries. To prevent teachers and doctors from moving to higher-paying industries, schools and hospitals must also raise wages. However, their efficiency hasn't improved much, yet wages rise, resulting in increasingly high costs and prices.

In other words: Industries that can be sped up by machines raise overall wages, while those that cannot must also raise salaries to retain workers, but efficiency remains unchanged, so costs rise. This is "Baumol's Cost Disease."

This is why, in the chart at the beginning of the article, the lines representing industrial goods like TVs, phones, and toys trend downward, becoming cheaper, while the lines representing education, healthcare, and childcare costs soar.

The logic behind this is very realistic:

In any field that can be replaced by machines and automation, efficiency will only continue to rise. For example, smartphones, although their prices seem not to have dropped much, have performance that is worlds apart from a few years ago, with computing power and storage increasing several times; this is essentially a form of "invisible price reduction" brought about by technology. Not to mention Chinese manufacturing, such as photovoltaics, EVs, and lithium batteries, which are becoming increasingly automated, driving costs down to rock-bottom prices.

But the problem lies in those areas where "machines cannot replace people." When I was young, my nanny could take care of four kids at once; today, she can still only take care of four, and due to higher demands from parents, she may even be able to care for fewer children. This means that the productivity of the service industry has not changed for decades, and may even have regressed.

However, in the service industry (specifically in the U.S.), to prevent nannies and nurses from leaving for delivery jobs or factories, they must raise wages to keep up with the overall income level in society. The coffee in a café may not be expensive, but the exorbitant prices you pay largely cover the staff's wages, rent, and utilities. Efficiency hasn't increased, but wages must rise, so the costs can only be passed on to consumers. (Note that this specifically refers to the U.S.)

Therefore, the American middle-class families facing the "killing line" are not so poor that they can't afford food; they have cars, iPhones, and various streaming subscriptions, but when it comes to expenses like buying a house, healthcare, and childcare, their wallets are instantly emptied. So, it's not that the American people have truly become poorer, but rather that their money has become increasingly less effective in the face of those "inefficient yet extremely expensive" services.

As I write this, I know everyone is eager to ask: Does China have a killing line? Does China's killing line target the middle class? Has China's poverty line also risen?

The answer is most likely no.

So, we may not have a "killing line." This matter was discussed in the podcast episode "What Remains of Trade When China Becomes an Industrial Cthulhu? Higher Productivity, Why Lower Wages?" that I recorded with Director Liu in "Qianglie Tan."

As we Chinese should know, the situation in China is that society is more sensitive to service prices. For "non-productive" items, people are generally unwilling to spend money, especially on services. In the expenditure structure of labor reproduction, certain service expenditures in China have been kept very low for a long time, to the point where "this wage can be unpaid." When services are undervalued and welfare stages differ, the wage system will naturally present a completely different structural form compared to the West.

This creates a peculiar phenomenon: one can still "survive" no matter what. Because the cost of living can be driven down to an extremely low level.

Therefore, while China may not have a "killing line," it doesn't mean there won't be an invisible threshold, such as how low the dignity of service providers can be pressed down? How high can the intensity go?

So, as the saying goes: everything comes at a cost.

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