Yes, rents are part of the price of the ticket to work in SV, and as such does not constitute discretionary income. The extra cash you spend to drive a BMW instead of a five year old Nissan definitely most certainly does.
Yes, but even how much you pay for rent can be controlled, if you choose to.
You can easily find a room in an apartment for less than 1000 $/mo anywhere in the bay. It won't be a nice room if you choose to live in, say SoMa, but it's housing. So you could argue anything over that is "discretionary".
Obviously, many people would consider such a living situation unacceptable. But in the most general sense, it is still a choice.
That's true -- according to Trulia, the median rent right now in Palo Alto is $6100 vs. $3495 in San Jose. But I think it's kind of easy, living here, to lose sight of just how out of whack those costs are with the rest of the country. In Tampa, Florida (which is actually pretty close to the US average), it's $1495; even in Sacramento, about two hours from here, it's $1600. If you could stand the time sink, it's quite likely it would be cheaper to live in Sacramento and commute to the Bay Area.
None of this means that there aren't valid reasons for staying here; even giving up a fairly significant portion of my income as rent leaves me with more money than I'd likely have after rent if I had a comparable job in Tampa, assuming I could even find one. But I don't think this is a sustainable situation for the region. The nanny in the "This is your life in SV" satire, and other people in her salary range (or under it), are on the cusp of being pushed out of the area entirely.
