President Donald Trump has dismissed the matter of “affordability” as a hoax, but voters consistently name the cost of living as the matter most likely to affect their votes next year, even as inflation has slowed since Trump took office. Unfortunately for those voters, the Democratic Party contrasts itself to Trump only with policies that subsidize demand without expanding supply, a formula that has made life more expensive and will continue to do so.
Democrats have had the most success attacking Trump over the Obamacare subsidies that expire at the end of this month. It is true that once the subsidies expire, many older, wealthier consumers will have to pay higher premiums for health insurance. But these subsidies do not lower costs in any real sense. By capping premiums and expanding eligibility, they weaken price discipline and inflate exchange spending. Just as importantly, they undercut employer coverage, especially for small firms and local governments, by making subsidized exchange plans cheaper than job-based insurance, encouraging employers to drop coverage and offload workers and retirees onto federally funded exchanges.
The Democrats’ proposed “clean” extension of bonus subsidies would cost $350 billion over the next 10 years, encourage more fraud and abuse, and do nothing to bring down the cost of healthcare.
Trump’s mass deportations have lowered rents in most markets across the country, but home ownership remains out of reach for far too many people. Sens. Tim Scott (R-SC) and Elizabeth Warren (D-MA) passed modest legislation through the Senate to increase housing supply by coaxing local governments to relax regulations that make new home construction more expensive, but their legislation died in the House.
More partisan Democratic efforts to lower housing costs include outright cash grants for first-time home buyers that could be used for down payments and closing costs. Like healthcare subsidies, this sounds nice but would raise prices as sellers factor in the extra money sloshing through the market. Without creating more supply, Democrats will have done nothing to lower prices.
On energy, while 11 House Democrats crossed the aisle to vote for the Standardizing Permitting and Expediting Economic Development Act, on legislation making it easier to drill for natural gas, install solar panels, and build pipelines, all of which would increase energy supply and lower prices, 195 House Democrats voted no. The legislation now faces an uncertain future in the Senate,
At the state level, Gov.-elect Abigail Spanberger (D-VA) has said she plans to make affordability one of her top issues. But on energy, she wants to subsidize demand by expanding spending on low-income energy assistance while restricting supply by joining the Regional Greenhouse Gas Initiative. The RGGI, a multistate carbon cap and tax program, forces old power plants out of business to lower emissions. Unfortunately for Democrats and consumers, reducing supply raises prices. Outgoing Gov. Glenn Youngkin (R-VA) estimated his administration saved Virginia rate payers almost $1 billion by exiting the RGGI in 2022. Spanberger wants to shift those costs right back onto Virginia consumers.
NEWSOM’S UNPAID BILLS ARE COSTING CALIFORNIA JOBS
Tuesday’s Bureau of Economic Analysis report showing the economy growing at a robust 4.3% in the third quarter, and last week’s Bureau of Labor Statistics report finding inflation down to 2.7%, are both welcome news for the Trump administration. But strong top-line numbers do not erase the economic pressures consumers still feel, especially from electricity prices that continue to rise even as other costs fall, and from homeownership that remains out of reach for far too many Americans.
Trump’s greatest political advantage may be a Democratic Party that continues to treat subsidizing demand as its only affordability strategy. Voters need look no further than California, Illinois, New York, and New Jersey to see that the blue-state model of higher taxes, tighter regulations, and bigger subsidies has failed to make life more affordable.