Trump and NYC mayor Zohran Mamdani will fail. Here’s why.
Talk Is Cheap
Greg Ip has an interesting article on the Wall Street Journal. He says Everyone Is Talking About the ‘Affordability Crisis.’ It Can’t Be Solved.
I agree with much of what Ip says, but he misses the two key reasons. Do you know what they are? First here are some snips.
President Trump has been looking for someone to blame for all the “affordability crisis” chatter that is dragging on his presidency.
On Friday, he came face to face with him in the Oval Office.
While the affordability crisis might not be a Democratic “con job,” as Trump once claimed, it certainly dominates the vibes, and no one embodies the vibes better than Zohran Mamdani, who was elected mayor of New York City this month.
Mamdani, like the Democratic candidates for governor in New Jersey and Virginia, campaigned single-mindedly on affordability. He was still at it Friday. Asked, with Trump at his side, about the Middle East or whether Trump is a fascist, Mamdani kept returning to the “affordability agenda” and the “cost of living crisis.”
But getting elected on vibes is one thing; solving them is another. And that’s the problem with the affordability crisis. What started as a serious but short-lived spike in inflation from 2021 to 2023 has evolved into something broader and more amorphous. Like the climate crisis or the crisis of democratic legitimacy, the affordability crisis has become an umbrella term for countless loosely connected phenomena.
Like those other crises, this one defies definition and thus resolution.
Strictly speaking, affordability means having the resources to pay for goods and services at current prices. By that standard, the simplest metric is real (i.e., after-inflation) incomes. Real incomes fell behind when inflation shot up, then recovered as inflation receded and wages caught up. Real personal income was up 2.3% in the year through August, and real hourly wages climbed 0.8% in the year through September, both in line with the 19-year average.
Clearly, the affordability crisis can’t be captured by such macroeconomic measures. It is an amalgam of microeconomic irritants that vary by individual, time and place.
Because there is always something going up in price or someone whose incomes are suffering, affordability is an especially potent issue for political challengers such as Trump and Mamdani, who have a gift for zeroing in on whatever is most salient to voters.
Trump relentlessly bashed President Joe Biden and Vice President Kamala Harris, the Democratic nominee last year, over the price of groceries and gasoline. That some of it wasn’t true (“Bacon is up five times!”) didn’t matter. The attacks resonated.
There is nothing any elected official can do to “solve” the affordability crisis reliably. As Biden learned, people don’t want lower inflation (i.e., prices to rise more slowly); they want prices to fall. Trump promised they would. Overall prices haven’t fallen and almost certainly won’t. For prices merely to stop rising for a year (i.e., an inflation rate of zero), would probably require a deep recession. Overall prices haven’t fallen materially since the Great Depression.
Individual actions such as reduced regulation on energy production and infrastructure and capping certain drug prices will help at the margin, but tariffs do the opposite (as Trump seems to have acknowledged by rolling some back).
Housing is especially hard to solve. It has become much more expensive since the pandemic. From 2008 through 2021, mortgage rates were abnormally low, a product of very low inflation and aggressive Federal Reserve policies, which boosted home prices. Mortgage rates have since returned to pre-2008 norms, but housing prices haven’t yet adjusted downward, so monthly payments remain high, especially for first-time buyers.
New York has long been an expensive and difficult place to build housing, and while Mamdani has ideas to boost supply, some, such as a rent freeze, will likely discourage supply and vacancies.
Like Trump, Mamdani will find it easier to campaign on affordability than to solve it.
No Political Will
No one will fix the problem for two reasons.
- Politician don’t understand inflation.
- No politician would have the political will, even if they did understand.
Trump’s tariffs make matters worse and so will Mamdani’s rent controls. Both pander to extreme ends of populist nonsense.
If you want to fix inflation, you first have to understand it and measure it properly.
Then you have to get elected and get Congress to go along.
Fixing inflation requires a concerted effort to stop cheapening the dollar. This needs to start with doing something about massive deficit spending. Who has the political will?
Real Incomes
Ip discusses real (inflation-adjusted) incomes. He says “Real personal income was up 2.3% in the year through August, and real hourly wages climbed 0.8% in the year through September, both in line with the 19-year average”
Quite frankly, that’s nonsense. Ip does not properly understand real inflation.
As reported by the BLS and BEA, real income is up.
However, BLS measures of real income do not include home owners’ insurance, or property taxes. And the BLS weights for food are wrong. For good measure, the BLS ignores tips on dining out.
Properly weighted and measured, real incomes are still in the midst of a big dive.
I agree with Ip that “Affordability is an amalgam of microeconomic irritants that vary by individual, time and place.” Everyone has their own personal measure of inflation.
But in aggregate, people are very upset that real incomes are falling, not that prices are up 3 percent as measured. If real incomes were up 6 percent, complaints would largely go away.
Understand Inflation
Inflation stems from cheapening the purchasing power of money. Yet, the Fed defines “price stability” as 2 percent annual inflation.
No one in their right mind would define stability that way. But it is the widely-accepted central bank definition.
As noted, the Fed does not measure inflation properly. If and when the Fed gets its ridiculous measure down to two percent, the Fed will declare success.
However, consumers won’t feel success until two things happen: Real incomes really increase for the median person (properly factoring in food and shelter), and the median person can actually afford to buy the median-priced home on a median income.
So, good luck with that. Meanwhile, the Fed, Trump, and Zohran Mamdani all pander to their constituencies with platitudes and promises.
Key Related Posts
August 11, 2025: Is Homeowners Insurance Understated in the CPI? Shop Around!
Our Insurance went up by $2,000. Then another $2,000. Here’s our story.
Neither homeowners’ insurance, nor property taxes are in the CPI.
August 12, 2025: Where Do You Spend Money on Food? How Screwed Up Are the BLS Weights?
Does the BLS match your budget?
Real income is not up. Those two posts explain why. In addition, real incomes are dropping for anyone who buys their own health insurance.
But if you are looking for political pandering at its finest, please see Trump Has Great Meeting With “Rational” New York City Mayor
