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Kamala Harris’s $400 urban legend

No, most American households would not be devastated financially by an unanticipated $400 expense.

This is an excerpt from Arguable, a Globe Opinion newsletter from columnist Jeff Jacoby. Sign up to get Arguable in your inbox each week.
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During an appearance at Drake University in Des Moines on July 28, Vice President Kamala Harris repeated one of her favorite talking points, inadvertently undermining the administration’s recent boast that “Bidenomics” has been a great success.”

Most Americans,” Harris told her audience, “are a $400 unexpected expense away from bankruptcy.”

In Chicago four days earlier, she had said the same thing virtually word for word: “The average American is a $400 unexpected expense away from bankruptcy.”

It’s a line Harris has used a lot over the years. In 2019, as a candidate for president, then-Senator Harris told an interviewer that “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.”

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If true, that is an alarming statistic. In a nation as wealthy as the United States, it is stupefying to think that scores of millions of Americans would be thrown into “complete upheaval” or reduced to bankruptcy by a $400 expense they didn’t see coming. There could hardly be a more devastating indictment of America’s economic system or a grimmer indication of how badly inequality and social insecurity have corroded the stability of American society.

But it isn’t true.

Harris’s factoid is loosely — very loosely — drawn from the Federal Reserve’s annual survey on the economic well-being of US households. One of the questions posed to the nearly 12,000 respondents is: “Suppose that you have an emergency expense that costs $400. Based on your current financial situation, how would you pay for this expense?”Consider for a moment: How would you would pay for it?

No, most American households would not be devastated financially by an unanticipated $400 expense.Jeff Jacoby

Assuming you are like most Americans, you would cover the $400 expense with what the Fed calls “cash or its equivalent” — i.e., currency, a check, a debit card, or a credit card charge that would be paid in full when you got your next statement. According to the latest survey, that is how 63 percent of the public would handle it. Add in another 16 percent who would put the charge on a credit card and pay it off over time and the share of Americans who could readily handle the unexpected expense rises to 79 percent. A much smaller share of respondents said they would borrow the $400 from a friend or relative, sell something, or draw on other resources, like a payday loan or a line of credit. Only 13 percent of those surveyed said they would be unable to come up with the $400 “right now.”

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As even the vice president should know, 13 percent is not “most Americans” or “the average American.” And not having the wherewithal to cover a sudden $400 expense “right now” is neither bankruptcy nor “complete upheaval.” To be sure, some households truly are on the edge of insolvency, and it’s conceivable that unexpectedly having to come up with several hundred dollars could yank the rug out from under them. Their plight should not be minimized — but it also shouldn’t be exaggerated into a preposterous claim that a majority of US residents can feel the hot breath of bankruptcy breathing down their necks.

Why does Harris keep repeating an assertion that can be so easily debunked? If she hopes to convince her listeners that, as she said over the weekend, “Bidenomics is working,” it makes no sense to recycle an urban legend that “most Americans” are one small step away from financial ruin. What the Fed data really show is not only that most American households can take an unforeseen $400 expense in stride but that even more of them can do so today than could 10 years ago. The economy is not collapsing and most Americans aren’t hanging on by a thread. It’s not only foolish for Harris to pretend otherwise but bad politics to boot.

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