Talk of an affordability crisis is political campaign talk, nothing more.
Americans are enjoying unprecedented income growth and wealth. Over the past 35 years, real incomes are up almost 40%. Real personal income rose 2.3% in the year through August. Real hourly wages continue to climb. Both incomes and wages are rising in line with the 19-year average. Inflation is slightly above target, but it is not out of control.
President Donald Trump and his senior advisers should shift the political focus from affordability to abundance. A faster-growing economy will produce more of the goods and services consumers want. There are concrete signs that the economy is already strengthening. Productivity growth is improving, likely because of the artificial intelligence revolution. The potential growth rate for the economy is increasing.
But an economy that delivers abundance requires a renewed commitment to free market capitalism. People thrive when they are free to invest and experiment, to take risks and accept the consequences. This is the bottom-up path to abundance. To reach it, the maze of regulations, permitting rules, reporting requirements, environmental reviews, lawsuits, and procurement systems that favor selected groups must be dismantled.
Still, three sectors of the economy remain increasingly unaffordable for many households: healthcare, housing, and electricity.
Healthcare. The only durable way to make healthcare more affordable is to increase its supply. More subsidies are a dead end because they raise demand without raising supply. Medical training in the United States takes too long. The time required to educate doctors can be reduced without sacrificing quality. Nurses, nurse practitioners, physician assistants, and other trained healthcare professionals should be empowered. With AI tools, this underutilized workforce could take on many of the tasks that currently clog the system.
The Department of Justice should scrutinize consolidation in the healthcare sector. Prices for healthcare services at both hospitals and physicians’ practices rise fastest in markets where merger activity is highest. The signs of market power abuse are clear. Tax reform is another required step. The tax exclusion for employer-provided health insurance subsidizes demand without expanding supply, contributing to the federal deficit. Employer-provided health insurance is income. It should be taxed as income. This would level the playing field and reduce the deficit at the margin.
Housing. Housing costs continue to rise, and many Americans now doubt they will ever be able to buy a home. The U.S. is not building enough houses. The federal government should use its financial leverage to push state and local governments to modernize zoning laws, update building codes, and remove barriers that limit new construction.
Electricity. Electricity costs are also rising sharply. In New Jersey, a deep blue state, electricity bills are up 19% over the past year. The left blames data centers, but they are not the problem. The main pressure comes from the rising costs of upgrading and protecting the electric grid, including poles, wires, equipment, and safeguards against storms and fires. The federal government should work with states and utilities to strengthen the grid. To benefit fully from the AI revolution, the U.S. needs more energy and a far more resilient electrical system.
MIKE JOHNSON WARNS DELIVERING ON TRUMP’S AFFORDABILITY AGENDA WILL TAKE ‘A WHILE’: ‘VERY COMPLEX’
The bottom line? Producing an abundant supply of goods and services requires a full commitment to free market capitalism and a full-throated rejection of socialism.
However, if they embark on that course, Americans will greatly benefit from reaching their destination.
James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He publishes a daily Substack on financial markets, politics, and society. He can be followed on X and reached at [email protected].
