{"id":330932,"date":"2025-12-23T03:50:07","date_gmt":"2025-12-23T03:50:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/330932\/"},"modified":"2025-12-23T03:50:07","modified_gmt":"2025-12-23T03:50:07","slug":"the-three-step-guide-to-fixing-affordability","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/330932\/","title":{"rendered":"The Three-Step Guide to Fixing Affordability"},"content":{"rendered":"

Earlier this month, Donald Trump took a break from his busy schedule of watching TV and overseeing the renovation of his taxpayer-financed mansion<\/a> to rally his constituents. \u201cThey always have a hoax\u2014the new word is affordability,\u201d the president told a packed crowd in the Poconos<\/a>. \u201cYou can give up pencils, because under the China policy, you know, every child can get 37 pencils. They only need one or two.\u201d In a televised address<\/a> a week later, he tried out an alternative argument: Inflation was the fault of Democrats and immigrants. Prices are \u201cfalling rapidly\u201d now, he said. \u201cNobody can believe what\u2019s going on.\u201d<\/p>\n

True enough, nobody can believe that prices are falling rapidly. Big-ticket necessities, including health care, housing, and child care, became wildly unaffordable<\/a> over the past few decades. Then COVID led to a gigantic surge in general inflation. Then borrowing costs went up sharply, making credit-card bills and auto loans more expensive. Then utilities started going bananas, in part thanks to the AI data centers popping up all over the place. Then the trade war pushed up the cost of clothing, food, and other goods. Then Congress let an important health-insurance-subsidy program expire, meaning 22 million Americans will see their premiums spike next month.<\/p>\n

Affordability is voters\u2019 No. 1 issue by far. It propelled Trump back into office last year, as it propelled Zohran Mamdani, Mikie Sherrill, and Abigail Spanberger into office this year. Trump might be callous, but his comments\u2014it\u2019s not real, so buy less; it is real, but it\u2019s getting better\u2014point to the profound dilemma all politicians face when trying to address the cost-of-living crisis.<\/p>\n

Derek Thompson: The affordability curse<\/a><\/p>\n

For one, affordability is a squidgy, subjective concept, based on what people believe they should be able to buy and the prices they believe they should have to pay. By the most straightforward, objective measures, Trump has a pretty good argument that the affordability crisis does not exist. Real disposable income<\/a> is near its highest point in history, and Americans are buying more stuff than ever<\/a>. Yet voters want prices to come down to where they were a few years ago, <\/a>a shift that would likely never occur outside the context of a devastating recession. (Deflation would in and of itself cause the economy to shrink: Why buy something today if it will cost less tomorrow?)<\/p>\n

Moreover, elected officials have a smaller toolbox to address prices than they have to address, say, rising unemployment or lackluster wages. \u201cI used to go out to the cameras on the White House North Lawn and talk about the inflation report and the jobs report,\u201d Jared Bernstein, Joe Biden\u2019s chief economic adviser, told me. \u201cI\u2019d say, You had a great jobs report, but we know that prices are still too high, and we\u2019re trying to help. And in the back of my mind, when we\u2019re talking about groceries, I was always like, Well, yeah, there\u2019s not much we can do.\u201d<\/p>\n

Many policies that would bring down prices in a durable fashion (such as a huge home-building push) would do nothing in the next few years. Many of the policies that would bring down prices in the short term (such as rent freezes) would generate shortages and lift costs over time. \u201cWe call it the affordability conundrum<\/a>,\u201d Neale Mahoney, an economist at Stanford, told me, referring to work he did with the policy adviser Bharat Ramamurti. \u201cPeople want affordability now, and the tools we have don\u2019t work on an immediate or short-term basis.\u201d Even worse, many of the policies that sound good to voters (such as stimulus checks) would spike inflation, and many of the policies that would do a lot of good (getting rid of the tax exclusion for employer-sponsored health coverage, for instance) would be challenging to pass and challenging to implement.<\/p>\n

What\u2019s a policy maker to do? Three things, I learned by speaking with campaign operatives, pollsters, economists, think-tank types, and a lot of teed-off voters from across the political spectrum. Stop making things worse. Provide immediate relief. Then do the hard work of getting the most important prices down.<\/p>\n

Today\u2019s affordability crisis isn\u2019t really one crisis. It\u2019s several crises stacked on top of one another. And recent policy actions have made a few of them worse.<\/p>\n

The cost of consumer goods soared during the coronavirus pandemic, and the White House\u2019s tariff regime effectively slapped a $140 billion<\/a>, regressive sales tax onto those same goods. The economy was growing decently and inflation was above the Federal Reserve\u2019s target when the Trump administration passed a deficit-financed, inflationary<\/a> super bill this summer. <\/a>Americans were already paying twice as much for health care as citizens of other wealthy nations when Congress failed to restore the health-care subsidies.<\/p>\n

Politicians could temper at least some of the country\u2019s affordability crisis by doing less. Getting rid of the trade measures would put roughly $1,800 a year back into consumers\u2019 pockets<\/a> while increasing job creation and lifting the pace of GDP growth. Leaving the subsidies as is would prevent 22 million Americans from paying an average of $1,000 more a year for coverage<\/a>. \u201cIt\u2019s going to be really bad,\u201d Drew Altman, the president of the Kaiser Family Foundation, told me of the looming price hike. \u201cWe\u2019re not having an honest discussion about it.\u201d Washington should also refrain from adding to the deficit, which amps up inflation and interest rates.<\/p>\n

Yet undoing the bad choices and refraining from making new ones won\u2019t be enough, for people or their bank accounts. Voters want radical policies<\/a> that deliver instant relief. They want prices to go down. In polls, they say they want bans on price gouging, freezes on rental costs and utility bills, tax cuts, stimulus checks, and price controls. <\/a><\/p>\n

The standard economic argument is that the voters shouldn\u2019t get what they want, because a lot of those proposals would raise inflation or worsen the country\u2019s affordability crisis in the long term. Take Mamdani\u2019s promise to freeze the rent on roughly 1 million New York City apartments. The residents of eligible units would benefit. But people paying market rates or looking to buy a home would not, and the policy could fuel gentrification<\/a> and dampen construction, pushing up real-estate costs in the long term. But what if the rent freeze were only temporary and lasted just long enough to give the city time to build more housing units? Maybe that\u2019s not a bad trade<\/a>.<\/p>\n

Capping prescription-drug costs\u2014perhaps the single most popular policy idea out there, embraced by voters of both parties\u2014seems to be a reasonable quick fix for the health-care-cost crisis. But it wouldn\u2019t do much, Altman said. Prescriptions account for less than 10 percent of overall health expenditures. Nevertheless, caps might still be worth implementing, helping the sickest Americans and delivering immediate relief to consumers.<\/p>\n

Rate freezes on utility bills, similarly, aren\u2019t much more than a Band-Aid. <\/a>The average monthly energy bill<\/a> has gone up 35 percent since 2022, and 12 percent in the past year alone. \u201cThere\u2019s this disconnect between the private companies that are profiting off of energy markets and people\u2019s struggles to keep the lights on,\u201d Mike Pierce, the executive director of the advocacy group Protect Borrowers, told me. Climate change, the AI buildout, and the aging of the country\u2019s utility systems threaten to hike costs in the future too. The country needs green-power plants, grid improvements, and public control over utility systems. But for now, the answer might be \u201cstopping these companies\u201d from raising rates, Julie Margetta Morgan, the president of the Century Foundation, told me.<\/p>\n

The United States isn\u2019t going to become affordable again unless Washington and the statehouses tackle three broken markets: housing, health care, and child care.<\/p>\n

The country is short an estimated 5 million housing units, thanks to excessive zoning regulations, excessive community input, rising financing costs, and rising input costs. Washington doesn\u2019t have a ready way to fill the gulf. State and local governments have control over nearly all of the relevant land-use rules, with the federal government working almost exclusively through mortgage and rental subsidies. The good news is that states are getting their act together: Governor Gavin Newsom signed more than 60 housing bills<\/a> in California last year; Montana passed a massive package of land-use reforms<\/a> in 2023. And Congress is finally starting to figure out policies to push towns and cities to build<\/a>.<\/p>\n

Will houses really be cheaper in the future? Austin, Texas, shows that they could be: Asking rents dropped 16 percent from the end of 2023 to the end of 2024, thanks to \u201can influx of new supply,\u201d as Redfin explained<\/a>.<\/p>\n

As for health costs, well, \u201cthere has never been a meaningful, national effort\u201d to hold them down, Altman said. (The Affordable Care Act expanded coverage but didn\u2019t do much on prices.) As a result, health care pushes half a million Americans into bankruptcy<\/a> a year, and excess spending acts as a miserable tax on every family\u2019s budget.<\/p>\n

The problem is structural. \u201cMost people get health benefits through their employer\u2014they\u2019re exempt from payroll taxes, they\u2019re exempt from income taxes, and employers can deduct them as a cost of doing business,\u201d Meredith Rosenthal of the Harvard T.H. Chan School of Public Health explained. The situation \u201cdrives unaffordability,\u201d she told me. Employers have a reduced incentive and little leverage to demand low-cost plans. Employees can\u2019t effectively shop around<\/a>. She and Altman also pointed to hospital consolidation and a lack of price controls as core issues.<\/p>\n

Read: Trump\u2019s affordability weave<\/a><\/p>\n

Neither Democrats nor Republicans have shown much interest in wringing money out of the system. Legislation to do so would be challenging to put together, unpopular among the hospital systems that are many regions\u2019 largest employers, and potentially disruptive to Americans\u2019 coverage. Yet it would boost wages, reduce inequality, and improve family finances in a way that nothing other than reducing housing costs would.<\/p>\n

Trump, for his part, seems to want to somehow get rid of insurance at a conceptual level. \u201cI want to give billions of dollars directly to the people,\u201d he said. \u201cI want to give all of that money we give to the big, fat, rich insurance companies, and I want to give them nothing.\u201d But without insurance, only the very richest Americans would be able to afford cancer treatment or a C-section. Hospitals would shut down. The broken market would fall apart.<\/p>\n

Last, there\u2019s child care, a ruinous, if temporary, expense. Parents pay the equivalent of a second mortgage. Day-care centers offer poverty wages to workers. Far too few families get affordable, high-quality care, pushing millions of women out of the labor market. Connecticut and New Mexico are setting up publicly financed universal-child-care systems, and the federal government should consider doing the same on a national level. \u201cThese things would be expensive,\u201d Lena Bilik of the Roosevelt Institute told me. \u201cBut think of all the foregone wages and the lost economic security when people have to step back from work for any kind of unpaid caregiving.\u201d<\/p>\n

The affordability crisis is the problem, one that has been with us for decades and will be with us for decades unless politicians get their act together. It is sapping wages and imperiling families\u2019 financial security. It\u2019s driving political instability and voter frustration. It\u2019s stopping people from having kids, starting businesses, going to college, living where they want, and retiring when they need to.<\/p>\n

Prices \u201care all coming down and coming down fast,\u201d Trump promised. That isn\u2019t true. But hopefully someday it will be.<\/p>\n","protected":false},"excerpt":{"rendered":"Earlier this month, Donald Trump took a break from his busy schedule of watching TV and overseeing the…\n","protected":false},"author":2,"featured_media":330933,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,56,54,55],"class_list":{"0":"post-330932","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-uk","11":"tag-united-kingdom","12":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/330932","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=330932"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/330932\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/330933"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=330932"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=330932"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=330932"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}