Democrats won nearly all of last November’s off-year elections by successfully weaponizing the term “affordability.” Inflation is down from Biden-era levels, but it is still too high. The middle class has been hit especially hard by the price of necessities such as utilities and groceries, and leftists, including avowed Marxist New York Mayor Zohran Mamdani, have outmaneuvered the Republican Party on the economy as the White House defended its tariff regime and downplayed the economic woes of working-class Americans.
The White House ought to take November’s losses as an opportunity to ditch failed interventionist economic policies and counter the Left’s pie-in-the-sky socialist rhetoric with free-market solutions that lower the cost of essentials and put money back in voters’ pockets. Instead, it has chosen to embrace the Left’s debunked premise that prosperity can be achieved through 20th-century-style big government action. According to White House press secretary Karoline Leavitt, President Donald Trump reached out to Sen. Elizabeth Warren (D-MA) to discuss affordability.
“I told him that Congress can pass legislation to cap credit card rates if he will actually fight for it,” Warren said. “I also urged him to get House Republicans to pass the bipartisan ROAD to Housing Act, which passed the Senate with unanimous support and would build more housing and lower costs.”
The Trump-Warren plan to cap credit card interest rates at 10% would be an unmitigated disaster. Like all other forms of price controls, capping credit card rates would backfire, harming the lower- and middle-class citizens whom Trump and Warren are targeting with such a proposal.
The Austrian economist Friedrich Hayek described the price system as a “mechanism for conveying information.” Interest rates are a part of that price system, and without the ability to mitigate risk, credit card companies will be forced to refuse credit to subprime borrowers. Instead of the working class receiving cheaper credit, millions of Americans would have no access to credit, forcing them toward far worse options, such as predatory payday loans.
The effects would be felt downstream as well. If millions of families no longer have access to credit or have drastically reduced credit limits, the economy at large will take a massive hit from manufacturing to retail, invariably leading to layoffs across multiple sectors.
Other recent populist proposals are less dangerous, but would be every bit as ineffectual. Trump recently declared that corporations such as Blackstone will be banned from buying single-family homes.
“People live in homes, not corporations,” he said.
This populist rhetoric may sound good at face value, but only around 1% of single-family homes are owned by large corporations. If the populist Right and the anti-capitalist Left were serious about making home ownership more affordable, they would slash red tape to make building more realistic and eliminate tariffs on building materials. Forcing Blackstone and other corporations out of the housing market will be a drop in the bucket.
LIST: UNUSUAL GOVERNMENT INTERVENTIONS INTO THE PRIVATE SECTOR UNDER TRUMP
Trump’s prosecution of Federal Reserve Chairman Jerome Powell is another ill-advised development. The investigation is supposedly related to testimony about renovations at the Fed, but everyone with two brain cells to rub together understands that Trump is frustrated that the Fed has not reduced interest rates to the White House’s target of 1% or lower. Ironically, while the president views Powell as his political opponent (he should take that up with the man who appointed him), the Fed chairman may be saving Trump from himself. If the Fed drastically reduced the funds rate at the president’s request, it would risk a massive inflationary spike in an election year.
The party in power always faces an uphill battle in the midterm elections, and this year is no different. But there is still time to strengthen the economy before voters make up their minds. Unemployment is relatively low, gross domestic product growth is encouraging, and it is likely, if you believe the betting markets, that the Supreme Court will give the White House an off-ramp on its global trade war as early as next week. If the president can ditch the populist slop and if an aide can delete Warren’s number from Trump’s phone, there is a chance that sound economic policy can prevail in time to save the GOP’s electoral chances this November.
Brady Leonard (@bradyleonard) is a musician, political strategist, and host of The No Gimmicks Podcast.