Why 1989 shouldn’t define 2025 

This week’s headlines shine a spotlight on significant economic indicators, revealing a stark contrast between the data-driven narrative and the lived experiences of millions of Americans. The S&P CoreLogic Housing Price Index shows continued increases in home prices, while the real GDP climbed at an annual rate of 2.45% in the fourth quarter of 2024. Furthermore, the Personal Consumption Expenditures index increased by 0.4% in February, leading to a 12-month inflation rate of 2.8%, a figure that is higher than expected. These statistics serve as benchmarks to assess the overall health of our economy.

However, for countless individuals striving to purchase a home, secure stable employment, or achieve financial security, these figures seem disconnected from reality. This disconnect is not a mere coincidence; it’s rooted in outdated economic systems that continue to influence our financial landscape in ways that do not reflect the modern economy.

Take, for instance, the credit scoring model utilized by giants such as Fannie Mae and Freddie Mac, which is still based on the FICO formula established in 1989—the same year that marked the fall of the Berlin Wall and the launch of the Game Boy. Though the world has evolved dramatically since that year, the criteria governing mortgage approvals have not adapted accordingly.

In 1989, the financial landscape was characterized by traditional employment and conventional means of credit accumulation. Many borrowers were integrated into a system where payroll checks were the norm, and credit cards were a primary method for managing expenses. Fast forward to 2025, and we find ourselves in a vastly different reality. Today, many Americans rely on gig jobs, freelancing, and non-traditional income streams. They may handle their finances with debit cards or cash rather than relying solely on credit. Despite consistently meeting their financial obligations, these individuals often find themselves unjustly categorized as credit risks due to the rigidity of the 1980s credit model. This misalignment does not reflect their ability to repay but instead exposes the model’s limitations.

The inadequacies of the credit system extend beyond mere scoring; they also permeate the way we value labor. In 1989, the median household income stood at approximately $28,910. Fast forward to today, and that figure has escalated to around $80,000, yet the cost of living has more than doubled in that time. While GDP per capita has tripled, the compensation systems in place continue to undervalue the contributions of various sectors, particularly for women, caregivers, and nontraditional workers who form the backbone of the modern workforce.

The childcare sector epitomizes this struggle. Between 1990 and April 2024, the cost of daycare and preschool skyrocketed by 263%, a figure that far exceeds general inflation. As a result, many parents, often women, are faced with unrealistic choices regarding their careers. When families are forced to make decisions based on childcare costs, many women exit the workforce, further perpetuating economic inequalities. If women were able to participate in the workforce at rates equal to their male counterparts, the U.S. economy could gain an astounding $4.3 trillion boost by 2025.

What’s troubling is that while certain inflation metrics indicate moments of improvement, essential aspects like housing, childcare, and healthcare continue to climb at a pace that outstrips wage growth. Consequently, homeownership eludes many, making the prospect of owning a home feel more distant now than it did during the Great Recession.

The reality of 2025 finds us still lumbering along under economic rules that hark back to 1989. This is not merely an outdated approach; it is an unsustainable one.

The good news? We possess the tools, data, and technology needed to develop a modern economic framework that accurately mirrors contemporary lifestyles and work patterns. We have the capability to overhaul credit scoring systems to incorporate real-world behaviors, and we can reevaluate how we measure and value income, labor, and care work. If we can align these frameworks with the true costs and challenges facing families today, we can create an environment where financial stability is accessible to all.

Until such reforms are made, the economic narrative may look appealing on paper, but it will remain disconnected from the everyday realities faced by those who are still striving to secure their place in the economy.

In essence, moving forward requires a commitment to building a system that is reflective of our current circumstances and inclusive of all workers. By doing so, we can transform an economy that feels like a party for a select few into one that genuinely invites everyone to join. The road to economic reform is long, but the potential rewards—a more robust, equitable economy—are truly worth the effort.

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