As you point out, there are some reasons to think that the effect is more muted today than it was in the past. (On the other hand, maybe that’s just a temporary blip and we’ll soon be past it?)

Things like owning your house probably help a fair bit when dealing with this kind of “socio-economic inflation”. (Though everyone knows someone whose house is in a part of town that used to be nice…)

In my mind, I think this line of thinking leads in a few directions.

• It further undermines the idea of Safe Withdrawal Rates and pushes people toward realistic variable withdrawal strategies. For instance, if we find that the “new” SWR is 1.7%…what’s the point in using it for early retirees? That’s an almost impossible goal…
• The lower the SWR the more expensive things like “I want my portfolio be the same size when I die as when I retire” become. (i.e. as opposed to running it down to, or close to, $0.) Sure, it usually only takes a 0.2% reduction in spending. At a 4% withdrawal rate, that’s only a 5% cut in your expenses. That’s a trivial sacrifice in order to maintain your portfolio for your heirs. At a 1.7% withdrawal rates, it becomes a >10% cut in your expenses which starts to be the kind of thing you notice.
• Instead of a quixotic quest for “safe” people are forced to just accept that there is risk. Instead of trying to make a spending plan with 0% chance of failure, or even 5% chance of failure, accept that dropping out of the workforce with half a century ahead of you might mean a 10% or 20% chance of failure.
• Accept that “maintain my standard of living forever” is not a useful default. We already generally admit that having the same spending at age 96 as you did at 47 is…implausible. Maybe gradually sliding down the socio-economic gradient isn’t actually so bad and when you’re 94 you can live without weekly trips to the Moon like everyone else does.
• It does probably undermine the concept of leanFIRE, though. If you’re already low on the socio-economic spectrum and your FIRE strategy doesn’t have much fat…then over 50 years it seems like there is a pretty good chance you’ll run into difficulties.

Overall, I still think that a portfolio that is 25–35x your current annual expenses is probably a perfectly fine place to start. I am reminded of William Bernstein’s claim that in Deep Risk that over long periods of time (such as early retirees are subject to) any “chance of success” better than 80% is fooling yourself because of the chance of war, government collapse, hyperinflation, etc.

We just can’t fool ourselves that we can build a perfect plan.