There are very few things that Americans agree on these days. After all, this is a massive country full of hundreds of millions of people in different stages of life, subscribing to many different political ideologies, religious beliefs, and cultural values—all fighting over temporary control of one powerful centralized state that allows the group in power to impose their values and preferred institutions on everyone else. It’s not exactly a setup that breeds cooperation or unity.
But there is currently one point of agreement among nearly all of these groups: that the cost of living in the United States is getting out of hand.
This “affordability crisis,” as many are calling it, wrecked Joe Biden and later Kamala Harris’ bid to stay in office in 2024 and helped usher Donald Trump back to the White House. But, ten months into Trump’s second term, the problem persists. And, as the off-year election results from earlier this month suggest, the affordability crisis is quickly turning back into a political liability for the GOP.
So now, both parties are scrambling to make addressing it a political priority—the Democrats to press their new advantage and the Republicans to minimize damage in the midterm elections next year. The problem, of course, is that if specific proposed solutions are part of the conversation at all, they tend to range from totally useless to disastrously counterproductive.
That’s not because the causes and cures of the affordability crisis are a big mystery. It’s because the current political class has little to gain and a lot to lose from targeting the actual causes of the crisis. The current setup is working wonders for them and their well-connected rich friends.
But it’s important that everyone else—that is, the bulk of Americans who are the ones being ripped off by the political class—understand the actual solutions so that the politicians claiming to address it can be judged and pressured accordingly. So let’s run through some of the primary policies needed to make a meaningful dent in the affordability crisis.
Housing
As I laid out in more detail last week, the soaring price of housing in this country all goes back to an artificial housing shortage that is caused by government barriers to the construction of new housing. Those barriers exist on federal, state, and local levels. They include everything from zoning laws to environmental regulations.
Together, these government constraints on supply prevent developers from building as much housing as people demand, which makes the price of all housing artificially higher. In the name of alleviating the economic pain caused by these high prices, governments at all levels have implemented programs designed to help people pay for housing. However, because the various policies that cause the artificial supply shortage remain in place, this spike in demand forces prices even higher, which in turn makes more people dependent on government support to afford housing.
It’s a feedback loop that accelerates price increases in the housing market. It’s led to our current situation, where housing prices are severely decoupled from the realities of supply and demand, and a return to reasonable housing markets seems impossible.
But remember, the catalyst of this affordability death spiral is the government constraints on the construction of new housing. Those constraints need to be eliminated before we’ll ever see the end of this mess.
The good news is that eliminating those constraints requires no new tax dollars or government programs. Government officials do not need to coordinate the construction of new housing; they just need to allow new housing to be built.
Energy
Energy is another area where simply allowing more production to occur would significantly improve the cost of living, especially since the cost of energy impacts nearly every other part of the economy.
As far as presidents go, Trump has been fairly good on removing barriers to energy production. But if the Republicans really want to make a lasting dent in the affordability crisis, they should pass legislation that will prevent future presidents from easily reversing any progress made under this administration.
Education
The price of a college education is another significant expense for many Americans that has accelerated to absurd levels in recent years. And, similar to housing, this is another feedback loop caused by government policy.
Specifically, when it comes to college, the culprit is government loan guarantees, which first appeared in the Higher Education Act of 1965 but were significantly expanded in the 1993 Student Loan Reform Act and certain provisions of the 2010 Affordable Care Act.
The government uses its power to help college students obtain loans, regardless of their ability to repay them. Leading young students into debt that many will never escape is bad enough, but the artificial expansion of student loans also sets off the feedback loop.
More loans mean more demand for college, which means higher prices. Higher prices mean college is less affordable than before. And so more students require loans, which the government helps them acquire—meaning more demand, higher prices, the need for even more loans, and so on.
This pattern is why college tuition prices have shot up in recent years and why Americans owe almost $2 trillion in student debt.
If politicians in either party wanted to bring the price of college back down under control to alleviate what has become a major cost for many American families, they must reverse this feedback loop. And that starts with the painful but necessary step of eliminating government-guaranteed loans.
Many students will immediately be forced to drop out or scale back their level of college participation, and numerous schools will be forced to close once their indirect government subsidies dry up. However, as artificial demand subsides, prices will fall, and college will once again become more affordable. The student debt crisis will start to fade away, and an even more painful collapse of a larger university bubble down the road will be avoided.
Healthcare
Another major source of economic pain for many Americans is how ridiculously expensive medical care has become in this country. This problem has many different facets spread across several industries, but the pattern is the same as we saw in the cases laid out above: earlier government policies raise prices, which are then used to justify government programs that drive up demand, thereby raising prices even further.
In the case of medical care itself, these initial policies emerged during the Progressive Era. A medical interest group called the AMA, which advocates for one specific symptom-focused approach to healthcare, helped usher in heavy restrictions on the formal teaching and use of competing medical approaches. These restrictions led to an artificial shortage of medical professionals, which in turn increased the price of medical care.
Around the same time, industry interest groups also ushered in similar government restrictions in the drug market and used the government to gain control over the food processing and agricultural sectors.
Importantly, many of these supply restrictions were sold as being necessary to keep Americans safe. But at the same time, the government has gone to great lengths to immunize medical providers and drug manufacturers from the legal consequences of harming their customers.
The crony government constraints on the supply of medical care and drugs created a real affordability problem for many Americans. But it didn’t really become a crisis until the 1960s when Congress passed Medicare and Medicaid.
These programs were sold as ways to help elderly and poverty-stricken Americans afford healthcare. But, just as with housing, the government ramping up demand by pouring tax dollars into the healthcare sector while continuing to restrict supply led to an easily predictable explosion in healthcare and drug prices.
On the agricultural side, farming and meatpacking groups had successfully lobbied for the creation of what would become the recurring five-year farm bill. This law contains a multitude of handouts and privileges for agricultural giants, such as supply restrictions that artificially raise the prices of certain types of produce and subsidies that oversaturate the market with other crops and products.
In addition to decoupling food production from market forces—which itself is contributing to the affordability crisis—the government’s crony agricultural policy has helped push a highly processed diet on the American people.
Big agricultural companies flood the market with highly subsidized crops that have alternative uses, like corn syrup and seed oils, which crowd out healthier options that consumers actually prefer. Food companies can then use these artificially cheap ingredients to produce highly addictive ultra-processed foods that their friends in the government and government-backed university nutrition programs then say are part of a healthy diet.
Americans—who are taught from a young age to trust government authorities and university-trained, state-licensed medical professionals—are easily hooked on these highly addictive ultra-processed foods, which is, perhaps, the main reason for America’s massive chronic disease epidemic. An epidemic that creates even more demand, and thus higher prices, for artificially restricted healthcare services and drugs.
Accelerating those horrible feedback loops are the government’s crony “public health” departments that further warp federal policy to financially benefit well-connected Big Pharma companies and decades of federal policies designed to favor health insurance providers, which have destroyed the mechanisms that make insurance work for consumers and supercharged the rate of price increases in the healthcare sector.
Together, all these government programs have been built up and combined to create the utter fiscal monstrosity that is the American healthcare system. To begin to repair this broken system, the crony restrictions and subsidies on the supply of healthcare, drugs, and food need to be abolished and replaced by an actual market, backed with legal consequences for harming customers.
Money Itself
The last area I’ll touch on is also the most important. Anyone who wants to address the affordability crisis needs to focus on the monetary system.
The government seized control over the institution of money with the founding of the Federal Reserve and later the suspension of the dollar’s tie to gold. This politicization of money helped supercharge all the rackets I laid out above by freeing the government of its traditional constraints of needing to first tax or borrow anything it wants to spend.
But on top of that, in recent decades especially, the government has settled on a monetary policy that seeks to bring about permanent price inflation—the opposite of the deflationary conditions every growing economy had found itself in for thousands of years. The federal government aims to reduce the value of the dollar by two percent every single year, forever.
Because of the compounding effect a two percent annual reduction has over time, and because money itself accounts for half of every transaction that happens anywhere in the economy and 100 percent of any money saved, it’s hard to overstate just how harmful this inflationist monetary policy has been for a population already struggling with the cost of living.
And, on top of that, in recent years, the Fed has been inflating the value of the dollar away at even higher rates. That is why the affordability crisis has become the issue of the day.
We need to move away from this and return to what’s worked best for everyday people for thousands of years—money determined by supply and demand rather than the whims of government officials.
Conclusion
Again, the good news is that the steps needed to solve the affordability crisis do not require more government spending. All that’s needed are cuts.
Governments on all levels just need to step back and allow more housing to be built, more energy to be produced, and healthcare services to be offered. Then the crony, expensive government programs guaranteeing student loans, subsidizing big agriculture, and protecting big pharma need to be cut.
And then, once the policies that caused the affordability problems in the first place are eliminated, all the welfare spending programs introduced later can be abolished or, at the very least, significantly reduced. With all those cuts, the government could start to make a significant dent in the national debt and cut taxes.
And, since taxes are the largest single expense for most households, a sizable tax cut would go further and make life even more affordable for most Americans. The affordability crisis would be a relic of the past.
The bad news is that the policies causing and exacerbating the crisis are very lucrative for the political establishment. These aren’t policy mistakes that got out of hand; they are deliberate government rackets designed to rip us all off to enrich and empower the political class. And so those in power have and will continue to fight tooth-and-nail to prevent any politician or political movement from meaningfully addressing the true causes of this crisis.
Truly solving the affordability crisis will not be politically easy. But it is necessary. Anyone or any movement, in or out of government, that is genuinely interested in pursuing these solutions must first understand what actually needs to happen. Then they need to pursue any policy changes that move us in the right direction on any of these fronts. And finally, perhaps most importantly, any politician who claims to want to address the affordability crisis but who remains uninterested, unwilling, or unable to identify and target the actual causes needs to be dismissed as unserious and replaced.
