A grocery store worker places ground beef in the meat display in Dallas, Wednesday, April 15, 2026. (AP Photo/LM Otero) Public opinion polls show that American households have been concerned about cost-of-living issues since the COVID-19 pandemic struck. The spike in inflation in 2021-2022 helped catapult Donald Trump to the presidency in the last election, as he campaigned on bringing prices down. However, inflation has increased since Trump assumed office due to the impact of tariffs and higher oil prices.
Meanwhile, Trump claims the issue of affordability is a hoax. Therefore, Democrats need to elaborate what they would do to improve affordability for Americans without increasing the budget deficit that is around 6 percent of GDP.
At the outset, Democrats should not claim they can lower prices overall. During the early 1980s, a severe recession ensued when the Federal Reserve raised interest rates to record levels to combat double-digit inflation. Fortunately, large rate increases are not necessary today, as inflation is considerably lower.
Rather, the goal should be to keep inflation near the Fed’s 2 percent target and to pursue policies that support growth of household income. During Trump’s first term, wages for low-and middle-income workers outpaced inflation by a considerable margin, but this is not the case in his second term.
One reason why lower-income families are feeling squeezed is the budget bill enacted last year included large cuts in Medicaid and food assistance. The bill also extended tax cuts that predominantly benefited high-income earners, and it widened income disparities between the rich and poor. The policies of the Trump administration — including the so-called “One, Big, Beautiful Bill Act” and reliance on tariff revenues — are highly regressive.
Federal Reserve data also show that wealth inequality in America reached its widest gap in three decades since statistics were compiled. The top 1 percent of households hold nearly one third of total U.S. wealth, matching the wealth of the bottom 90 percent combined.
Accordingly, Democrats should begin by pledging to reverse Trump’s policies that have hurt low-and middle-income families.
First, instead of boosting military spending by a massive $500 billion in the 2027 fiscal year and cutting non-defense spending by 10 percent as Trump is seeking, they should aim to restore cuts in Medicaid and food stamps and hold the line on defense spending.
Second, they should commit to eliminating Trump’s tariffs. Joe Biden was reluctant to do so in the 2020 election because he did not want to alienate union members. However, the situation is different today: Studies show that Trump’s tariffs mainly have boosted costs for American households and businesses, but they have not restored jobs in manufacturing.
Third, Democrats should not leave themselves vulnerable to attacks that they are the tax and spend party of old.
The left-leaning Center on Budget and Policy Priorities argues that affordability proposals should focus on low-moderate income groups that struggle the most to pay for basics. This makes sense considering that households below the median income level of $74,000 spend 86 percent of their income on basics compared with 36 percent for those in the top half.
But the center goes too far in arguing that U.S. taxes could be raised by eight percentage points to put the combined federal-state-local tax rate at the average for industrial countries.
An alternative approach is presented by economists Jared Bernstein and Neal Mahoney. Their guiding principle is that affordability policies should achieve the goals of making goods and services less costly without distorting price signals or economic production. For example, the authors oppose price and rent controls, because they reduce incentives to increase supply.
Finally, in deciding which areas to prioritize, polls indicate that two areas — healthcare and housing — are the top concerns of voters.
Reducing health care costs has been a long-standing priority of Democrats, as they have increased from 13 percent of GDP in 1999 to 18 percent as of 2024, according to William A. Galston of Brookings. Galston also reports that out-of-pocket expenses per person have risen by nearly one third in the past five years. That said, he acknowledges that healthcare has been a difficult problem to resolve.
In comparison, making housing more affordable for median-income households appears more attainable. According to the real-estate broker Redfin, a family needs an income of about $117,000 a year to afford a typical home, which is nearly $30,000 more than what the median U.S. household makes. Edward Pinto of the American Enterprise Institute suggests this gap could be narrowed by relaxing zoning laws in areas to allow more houses to be built.
To address this issue, both houses of Congress recently passed a bill called the 21st Century Road to Housing Act with overwhelming bipartisan support. While President Trump called the bill a “big yawn” and failed to sign it, there were sufficient votes to enact it. This suggests that affordability issues can be tackled even when Trump dismisses them.
Nicholas Sargen, Ph.D. is an economic consultant and is affiliated with the Darden School of Business. He has authored three books including “Investing in the Trump Era.”
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