The Three-Step Guide to Fixing Affordability

E arlier this month, Donald Trump took a break from his busy schedule of watching TV and overseeing the renovation of his taxpayer-financed mansion to rally his constituents. “They always have a hoax—the new word is affordability ,” the president told a packed crowd in the Poconos . “You can give up pencils, because under the China policy, you know, every child can get 37 pencils. They only need one or two.” In a televised address a week later, he tried out an alternative argument: Inflation was the fault of Democrats and immigrants. Prices are “falling rapidly” now, he said. “Nobody can believe what’s going on.” True enough, nobody can believe that prices are falling rapidly. Big-ticket necessities, including health care, housing, and child care, became wildly unaffordable 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. Affordability is voters’ 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— it’s not real, so buy less; it is real, but it’s getting better —point to the profound dilemma all politicians face when trying to address the cost-of-living crisis. Derek Thompson: The affordability curse 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 is near its highest point in history, and Americans are buying more stuff than ever . Yet voters want prices to come down to where they were a few years ago, 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?) Moreover, elected officials have a smaller toolbox to address prices than they have to address, say, rising unemployment or lackluster wages. “I used to go out to the cameras on the White House North Lawn and talk about the inflation report and the jobs report,” Jared Bernstein, Joe Biden’s chief economic adviser, told me. “I’d say, You had a great jobs report, but we know that prices are still too high, and we’re trying to help . And in the back of my mind, when we’re talking about groceries, I was always like, Well, yeah, there’s not much we can do .” Many policies...

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