Affordability Crisis: The Real Reason Republicans Should Panic
Trump’s economic approval collapses as Americans face the worst affordability crisis in decades.
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To borrow a phrase from James Carville, when it comes to politics, “It’s the economy, stupid.” It was true when Carville said it in 1992, and it has been true ever since. So it’s no surprise that the recent off-year elections were about the economy and who the public trusts to improve it.
At the start of the year, the American people — still smarting from the inflation of the Biden years — believed Donald Trump would fix things. When he beat Kamala Harris in the election, voters favored him on the economy by 9 points. But now that he’s actually in charge again, he’s 26 points underwater on his handling of the economy.
Although inflation is officially lower than it was at Biden’s worst, it doesn’t feel that way. (This explains an NBC poll showing more than half the country believes Trump has already made the economy worse.) Prices for symbolic necessities keep rising. People are paying more for everything: food, electricity, transportation, insurance, and — most painfully — housing.
Back in the day, the general rule was that no one, renter or homeowner, should spend more than one-third of their income on housing. A few weeks ago, Forbes reported that the average renter now spends 42 percent of their pre-tax income on housing. Thinking you might as well buy? Well, the median home price in America is more than $419,000.
Is $419,000 affordable? To understand that, you need to compare income to cost. Forty years ago, people typically bought homes worth 3.5 times their income — someone making $30,000 a year bought a home for about $105,000. Today, people are paying five times their income for a house. Prices keep rising, and no wonder the average first-time homebuyer is now 40 years old — a record.
The monthly stress of making rent or a mortgage payment is real, and so is the pain of buying groceries or paying insurance. Auto insurance is up 20 percent in the past year. Depending on where you live, homeowners insurance is up ten percent or more. But the biggest hit is health insurance purchased on the open market. Thanks to Trump and the GOP Congress, individuals and families are set to pay an average of 26 percent more in the coming year.
Today’s numbers are bad, but they don’t capture the deeper trends boxing people in. Consider wealth: over the last 25 years, the top fifth of Americans have gotten substantially richer. The very rich — the top 1 percent — have seen their wealth grow even faster. Meanwhile, median wages have barely kept up with inflation. And billionaires continue to use the tax code to pay lower rates than the middle class.
(I want to take a point of personal privilege here for a quick aside, probably worthy of an article and video of itself. The economic theory of both the right and left, I believe, are correct, but not all the time. I now believe that each has a place depending on circumstances. In the late 70s, the economy was stagnant, the country needed an injection of lower taxes and energy. However after decades and growing wealth inequality, it’s been long past time for some higher taxes on wealth and spending for the middle and working classes. More to come on this)
Whether it’s the unfairness of the tax system or the sense that hard work just doesn’t get you ahead, people are feeling sour. Mix into that people like Elon Musk now guaranteed to be the first trillionaire in history despite giggling with a chainsaw as he cut things people needed. That message was loud in the recent off-year elections, where a self-avowed democratic socialist won a historic New York mayoral race on the theme of “affordability.” Democrats also won gubernatorial races in Virginia and New Jersey with the same message.
Beyond politics, the squeeze is being felt by would-be parents delaying having children because of the cost of living, and by retailers desperately trying to appeal to cautious consumers. McDonald’s has brought back its “extra value meal” to lure back low-income customers who have scaled back their business, and discounters like Walmart and Family Dollar are seeing more affluent shoppers. Consumer confidence, according to the University of Michigan, has dropped to a near-record low.
Although Trump says he doesn’t want to “hear about affordability,” his administration clearly recognizes the danger. In the past week, officials floated rolling back tariffs on foods like coffee and fruit, and even floated the absurd idea that Americans should buy homes with 50-year mortgages.
Meanwhile, the American people are getting restless. A recent YouGov/Economist poll found that 86 percent of Americans believe the rich have too much power. Sixty-four percent say billionaires don’t pay enough taxes. Fifty-seven percent think the government should help close the gap between rich and poor.
The last time the public was this angry about the economy was in 2010. It produced the anti-Obama Tea Party movement, brought massive crowds to congressional town halls, and turned the midterms into a bloodbath for Democrats — the worst midterm for an in-power party in 62 years.
Republicans should take heed. It’s still the economy, stupid. If we’re lucky, they won’t.
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