If there’s one thing that Americans agree about, it’s that we are in the middle of an affordability crisis. The evidence is everywhere: Filling up your gas tank will probably run you more than $4 a gallon. Home prices are up over 50 percent since the pandemic. The share of Americans who say their financial situation is getting worse is at its highest point in my lifetime.
Affordability defined the 2024 presidential election, and it’s likely to define the 2026 midterms and the choice of our next president too. Roy Cooper in North Carolina is running for the Senate this November with a campaign to “make stuff cost less.” Ashley Hinson is doing the same in Iowa; she wants to help families who are being “squeezed” by high prices.
Economists have watched all this unfold with some confusion. They tend to argue, often with a raft of statistics and a lot of wonky language, that Americans are essentially mistaken. Over the past few years, yes, prices have risen — but wages have generally risen faster (or at least they did right up until the war with Iran sent gas prices soaring). Median household income reached a high last year. According to the definitions most economists use, with the exception of these past few months, America has been more affordable than at any time in its history.
I’ve spent a year talking with experts and nonexperts alike across the country, and I’ve concluded that both sides of this debate are talking past each other, and both sides are missing what’s really going on. The question is not whether our wages are outpacing inflation, but whether we have enough confidence in our economic futures to trust that we can afford the lives we expect for ourselves and our families — and that we can survive whatever comes. Americans are facing a financial crisis all right, but it’s not just affordability. We’re facing a crisis of economic security, and it’s getting worse.
For politicians, the incentive is huge to do something — anything — to fix this. President Trump promised to lower prices on Day 1. New York’s mayor, Zohran Mamdani, froze the rent. Others have suggested capping credit card interest rates or banning institutional ownership of homes.
However sincere the impulse behind these ideas, most of them would make the situation worse.
The cost of everyday goods never goes down in a day; in fact, it rarely goes down at all. If it does, it’s generally because unemployment has surged and people who don’t have jobs are forced to spend less. Unless you’re rooting for a recession, what you want is for inflation to cool, which would mean prices rise more slowly — slowly enough that wages outpace them — not that they revert to the beforetime.
Rent freezes make housing affordability worse, not better. That’s in part because the harder it is for landlords to break even, the less likely they are to put money into maintaining their properties and the more likely they are to sell them for redevelopment. And rent control often fails those families who need it most: Of the New Yorkers living in rent-stabilized apartments, almost a third earn six figures.
Capping credit card interest rates is another idea that’s made the rounds. When rates are forced down, credit card companies become warier of risk, making it harder for the poorest borrowers to get access to credit at all. That leaves them reliant on much more expensive alternatives, like payday loans or overdrafting on their bank accounts.
Congress recently banned large institutional investors such as hedge funds and private equity firms from buying up huge numbers of homes and jacking up prices. Appealing in concept, but in practice it won’t move the needle: These investors are responsible for less than 1 percent of single-family home purchases.
These types of initiatives make for good slogans, but they are sloppy economics. Worse, they risk creating an affordability doom loop in which politicians promise instant improvement in everyone’s finances that then fail to materialize, leading disappointed voters to cast out the incumbents in favor of another set of unrealistic promises.
To bring about real relief, we need to skip the one-off policy initiatives and instead build something bigger: a government that actually works. One that continues to mint millionaires and billionaires but allows everyone else to prosper too. One that addresses the underlying reasons — reasons that go way beyond grocery prices — why everything feels so precarious. We’re going to need a Newer Deal.
There’s nothing like a $20 burrito, a $6 gallon of diesel or a sky-high grocery bill to focus the mind on how expensive it is to live in the United States these days. Those are the kind of price increases that are easiest to clock, because they are things we buy again and again — same item, same time frame, ever higher price. But for all the frustration they inspire, these expenses aren’t what’s leaving Americans in a near-constant state of worry about their financial security. The real drivers of financial stress are the biggest expenses: housing, health care, education, care for our children and our aging relatives. Unlike new cellphones, TVs and dishwashers, which have become cheaper and therefore consume less of our paychecks, the price of these big things has increased far faster than wages. They now feel unsustainable for people at almost every income level.
In America, houses have always been more than just places to live. They are symbols of the national ideal, with a whole system of tax credits and other preferences designed to make them accessible. Today, however, too few new homes are being built, and interest costs are rising to their highest level in years. For many, homeownership is slipping out of reach.
Over the same period that housing prices have risen, the cost of health care has gone through the roof. National health care spending now accounts for nearly 20 percent of the economy. Last year, employer-sponsored family health insurance premiums averaged $27,000 annually for a family of four. This year, with the expiration of Affordable Care Act subsidies, more than 20 million people saw their out-of-pocket costs more than double on average.
If families have children and the parents need to work, the situation gets worse. In New York, full-day child care for infants now costs an average of at least $2,000 a month. Caring for the elderly can be mercilessly expensive. Long-term care bills can easily tally more than $100,000 annually, and Medicare generally does not cover them.
The scale of those expenses tells only part of the story. The cruel paradox of American household economics — and the part that makes life feel so precarious for so many people — is that all the money we’re paying doesn’t buy us security. Show up to your kid’s nursery school one day and find it’s gone out of business, leaving you to scramble for a solution. Or pay your insurance premiums on time for years, then get a letter saying your insurer is canceling your policy. Or look for a nursing home in a rural area and find that the nearby options have closed because of staffing shortages.
And what can we say about the health system, a soul-killing maze of red tape, high co-payments and coverage gaps? When I gave birth to twins, my husband and I spent the first head-spinning months of our boys’ lives scrambling to find our way out of tens of thousands of dollars of mistaken charges. We were lucky; we had time off from work, and we had some expertise navigating the system. What’s everyone else supposed to do?
It’s hard to have confidence that our paychecks can tide us over through crises like these when leaders of the artificial intelligence industry keep telling us their products will cause mass unemployment. And I doubt anyone believes the government will catch us if we fall.
That’s what people are experiencing: high costs combined with a high degree of unpredictability. It’s why nearly 80 percent of Americans are stressed about their finances, why budgeting TikToks are going viral and why — though consumer spending is at a record high — consumer sentiment is near its record low. People at almost every income level feel as if the floor could drop out below them at any time.
In response to the Great Depression, we created the New Deal. We started Social Security to ensure that older Americans did not die in poverty, we built new infrastructure projects that employed those who needed work, and we established a minimum wage and overtime pay. These weren’t one-off initiatives; they were a holistic approach to policymaking, an entire national orientation.
Fixing the conditions that make us feel we’re walking a tightrope is going to require a similarly all-encompassing national agenda in favor of economic growth that can be widely shared. It’s going to demand more than can be crammed into a two-year Congress. This is where the Newer Deal comes in.
One-off policies for groceries and gas and rent miss the point because all those expenses are intertwined. Making housing cheaper does as much to make child care affordable as a dedicated care agenda because it frees up dollars for families to spend on day care and babysitters.
Attacking the economic system that has produced so many successful entrepreneurs and wildly profitable businesses misses the point too. The more our economy grows, the more likely a Newer Deal is to succeed, because growth means tax revenue to fund these initiatives and jobs and innovations that improve Americans’ lives.
But more money for the government to spread around isn’t enough. We need a government that actually works, that gives people what they deserve for the taxes they pay and solves problems rather than multiplying them. Americans aren’t fans of government; they made that clear in the last presidential election. That’s because the institutions they support financially often don’t deliver for them. They don’t consistently make their lives easier. And they aren’t there when things are at their worst.
America’s social safety net has huge holes. If you can’t work six months because of a surgery, you’re disabled, but not enough for disability benefits. If you’re a Lyft driver in Massachusetts and you lose your job, you’re unemployed, but not eligible for unemployment insurance. If you’re 23 and working full time for very low wages, you’re poor enough to qualify for the earned-income tax credit, but you’re not old enough; the program doesn’t kick in until you’re 25. And if you’re 66 and in the same circumstance, again, you’re poor enough, but now you’re too old. When someone ages out of foster care at 18, she can get housing vouchers to help get a roof over her head, but it’s hard to find a landlord who accepts them.
Those holes are getting bigger. Millions of parents breathed a sigh of relief in 2021 when an expanded child tax credit allowed them to put food on the table — only to find themselves back in poverty the next year when Congress failed to extend the credit. Nearly 5 million Americans are expected to lose their health insurance because it’s too expensive now that expanded subsidies have expired. Over 14 million Americans caring for older relatives struggle to make ends meet. Last year, Congress added new work requirements for Medicaid and food assistance, which means the Americans who need help most are in many cases not getting it. And as for the aid that’s still offered, no one can get it without filling out form after form after form.
Distributing more dollars is only part of the challenge, though. The government has to make sure that the dollars are spent as intended. Those goals can be in tension. One path forward is to make our programs simpler and our government agencies less reliant on long-outdated technology. Elon Musk’s burn-it-down approach to federal agencies accomplished nothing (certainly not shrinking the budget), but it’s true that the government can be a bureaucratic nightmare of inefficiency, slowing change to a crawl or preventing it all together. Government has to meet people’s needs. We’re far from that today.
The obvious problem is that getting there costs money, and the government’s already spending way too much. The nation’s huge budget shortfall directly hurts affordability. Higher national deficits mean higher interest rates on your mortgage or your car loan.
The path forward requires higher taxes for those who can afford it. Corporations that profit from any A.I. boom should pay higher rates; so, too, their billionaire founders (and multimillionaire dentists and car dealers as well). It is hard to have faith in the government when it offers one set of rules for ordinary Americans and another for those at the top who are powerful enough to lobby for loopholes or to evade their tax obligations altogether.
Policymakers will vary on exactly which strategies to pursue, but the broad goals should be clear: increase the supply of housing and of capable caregivers, make sure Social Security doesn’t go bankrupt and make our health care system more efficient. In the most prosperous country in the world, home to almost 600 billionaires who aren’t even rich enough to make the Forbes 400, a Newer Deal could make life more affordable — and less precarious.
This Newer Deal may strike some as plucked from a liberal wish list, but the resonance of the affordability crisis offers a chance to rethink partisan assumptions. Economic populism is reshaping the Democratic and Republican parties alike. At its core is the conviction that working people deserve better. I disagree with plenty of populist initiatives, but there’s nothing partisan about a belief that working people should be able to afford the necessities, that there should be enough housing to go around, that Americans should be able to weather a health care crisis without going deep into debt or that we shouldn’t have to live in fear for the aging relative who lacks adequate care.
Candidates on the ballot next month have oh so many affordability plans: getting rid of tariffs to help grocery bills, suspending the gas tax or eliminating electrification mandates to make energy less expensive, even more rent caps and calls to expand Medicaid eligibility.
If you look closely, you’ll find some good ideas — and some consensus at a time when our two major political parties are otherwise not on speaking terms. Just last month, a bipartisan group of senators proposed overhauling the byzantine rules that make it so hard to build much-needed infrastructure, starting with additional energy plants that could lower everyone’s monthly bills. Candidates on both sides of the aisle have proposals to increase access to affordable child care and negotiate better terms with pharmaceutical companies.
Many observers are skeptical the affordability crisis will lead to better policy outcomes. I’m more hopeful. We can’t agree on terminology, but we are all coalescing around a set of principles about what economic security requires and the ways in which our government is falling short. Recognizing that we’re in a crisis, even an ill-defined one, is the first step. The next step is doing something about it.
Natasha Sarin, a contributing Opinion writer, is a professor at Yale Law School and the president of the Budget Lab at Yale. She served in the Treasury Department during the Biden administration.
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