Trump and Affordability

They're just not that into each other.

As folks up here know, I think and write a lot about the economics and politics of affordability. Watching Trump try to deal with the issue in his inimical way thereby warrants a comment. As you’ll see, I’m skeptical that he’ll be able to pull much off in this space.

Let’s start with a summary of the affordability issue from my perspective.

—It’s real, though it’s not so much about inflation as it is about the level of prices, which means slower inflation doesn’t really assuage the many feeling this pinch. Trump keeps making up facts about how there’s no inflation, which, even if it were true—inflation was last seen at 2.7% in Dec—wouldn’t be much comfort from folks upset of price levels. (He also falsely claims prices are down.)

—That said, past inflation is far from irrelevant. The current emphasis on affordability stems from the pandemic-induced price shock back in 2021. But it’s not like families weren’t struggling with certain costs before that.

—Those costs—and this is key—mostly center on childcare, healthcare, housing, groceries, utilities (specifically electricity). Obviously, that’s not an exhaustive list. EG, insurance costs outside of healthcare are increasing showing up these days. But these are the ones that meet the affordability criteria I recently set out in this NYT oped.

—These criteria are twofold: for policy to effectively help make life more affordable, two conditions should be met. One, we should be talking about big-ticket items that play a meaningful role in family budgets, and two, the markets that provide this good or service should be at least flawed, if not broken.

—Healthcare, housing, childcare, electricity are all naturals in this regard. I go through why in the oped. Marketwise, healthcare and housing are quite flawed. Childcare largely suffers from the mismatch between the incomes of people who need it most and what it costs to provide at a decent quality-level. Groceries are a tougher sell. Margins are usually low in the sector and there’s decent access across most markets, but there’s still may be some ways to help consumers. More to come in later posts on that.

Now, here’s why all the above is inherently challenging for Trump:

He’s impatient: A key part of the solution for many affordability items is increased supply, with housing as the most obvious e.g. That takes time. Even if you cut through the regulatory sludge, which also, ftr, takes patience and focus, it can still take at least a few years to push out supply curves. I’m sympathetic to Trump on this one. People want affordability relief now, not in two years. The answer, as I and others have written, is to combine near-term relief, say temporary rental assistance or a cap on a price, accompanied by longer-term supply expansions.

His falsehoods don’t fly in this space: Trump has made a rich living off of convincing his followers of an alternate reality where everyone is taking what’s theirs, he is their retribution, blah, blah, etc. But when it comes to costs, they know which way is up. So, when he says everything is cheaper, even his followers don’t believe him.

He’s overly focused on oil and gas: Trump sees his actions against Venezuela in part through an affordability lens. Acquiring more oil will lower the price at the pump. This is true, though there’s a patience problem here too: the big oil companies are balking at making investments into such a politically unstable environment, and even if they did, it would take time to rebuild the necessary infrastructure. But the gas price is already relatively low and has been for awhile. I grant that it will likely help him if it falls further—presidents do get credit and blame for the pump price. But it’s not a prominent entry on the affordability list.

He’s overly focused on interest rates: His jihad against Powell, his $200bn MBS (mortgage-backed security) buy, his credit-card rate cap are all born of frustration that he can’t set interest rates, like all the other authoritarian leaders can! (At tremendous cost to their peoples, ftr.) But he’s playing with fire here. His MBS play did, in fact, lower the 30-year mortgage rate by about 20 basis points, which ain’t nothing. But in the near-term, that’s a demand-side play. It will lead to more people chasing a near-term fixed supply of housing, thereby pushing up prices. Meanwhile, his tariff and deportation policies are worsening the problem by raising construction costs (tariffs alone are estimated to raise the cost of building a new home by $11,000).

Capping credit cards rates could help, though cap them too low and the banks won’t extend credit to lower-income, riskier borrowers. It’s also pretty rich given the fact that Trump spent 2025 cozying up to the credit card industry, including withdrawing support for a Biden-era rule that would have capped credit card late fees at $8, waiving through a Capital One-Discover merger that some experts warned would increase credit card interest rates, and gutting the industry watchdog Consumer Financial Protection Bureau.

Finally, as noted above, and as I’ve been repeating ad infinitum in recent days in the wake of his latest attack on Fed chair Powell, politicizing monetary policy—i.e., giving the president control of interest rates—is a great way to not just set off inflation but, by dint of undermining Fed credibility, remove the inflationary expectations anchor such that the higher inflation is far more lasting.

He doesn’t legislate: Capping credit cards requires Congressional action, as do the policy solutions to healthcare, housing, childcare, etc. Trump has pushed the executive order and rule change approach further than any of his predecessors, but these challenges cannot be met through these administrative means alone.

His party’s not there: Which leads to perhaps the deepest challenge he’ll face in this space, which is the antipathy of his party for the interventions of the necessary scale to lower costs. An effective childcare program scores at $350bn over 10 years. This is a great investment, but the Rs won’t go there, especially if it is paid for, as it should be, by progressive taxation. On healthcare, he and his party are all “premium support” and health-savings accounts, which reduces to dialing back Mcare, Mcaid, Obamacare, giving folks checks and saying “good luck shopping for health coverage,” a recipe for adverse selection and reduced coverage for those who need it most.

He’s overly messing with markets: Policymakers in this space cannot forget criteria two from my outline above: the markets that provide this good or service should be at least flawed, if not broken. Trump, like all populists, has evinced total disregard for markets, intervening far beyond anything we’ve seen from Democrats. As I and others have written, he’s quite comfortable with U.S. Capitalism with Chinese Characteristics. This is a recipe for overreach and devaluing the power of market-based competition in most areas outside of those on the affordability formulary.

So, no. I don’t expect much from Trump on affordability. That’s a tough conclusion for those who believed his campaign pledges to “lower prices on day one.” But it’s the reality of his limitations and if the Ds get their act together, it’s a massive political vulnerability for him and opportunity for them.