Trump’s affordability crisis

OPINION:

Last month, Democrats won races for governor in Virginia and New Jersey and mayor in New York City by hammering “affordability.”

Voters are giving President Trump poor grades on inflation, and that poses an existential threat to Republican majorities in Congress.

Yet Republicans may be getting a bum rap. Affordability isn’t just inflation; wages count too. It’s your ability to pay for the things you need and want.

Over the past year and since 2019, wages have outrun inflation and real incomes are up, but not a lot.

Unfortunately, salient items — things Americans must buy or hate to forgo, such as a good cup of coffee and thick hamburgers — are much pricier, and the president’s fingerprints are all over those.

Holiday dinners may be a bit less expensive this year. Turkey is cheaper because Americans are eating fewer of the big birds the rest of the year, but beef, pork and chicken prices are up.

Housing is too expensive. New York City Mayor-elect Zohran Mamdani ran hard on promises to freeze rents on city-regulated apartments.

Nationally, prices for existing and new homes have moderated in recent months, but the ratio of the median-priced home to the median household income is 5, and that’s 25% more than the average for the past 50 years.

The average household income is about $85,000, and that income could afford only about one-third of the homes for sale last summer. Rents continue to rise and take about one-third of household income. Much of this is beyond the president’s control, but his policies haven’t helped.

Beef prices are hitting record highs because Americans continue to eat about 47 pounds per capita each year. Meanwhile, droughts have dried up grazing land and forced ranchers to cull herds to 75-year lows. The United States exports fattier, premium cuts such as steaks and short ribs and imports lean trimmings to achieve the optimal blend for our vast appetite for hamburger.

Mr. Trump’s tariffs disrupt those logistics and can’t boost the number of cattle our grasslands will support, but they help raise beef prices.

Coffee plants require warm, wet climates and rich volcanic soils in places such as Brazil and Vietnam, where poor harvests are driving up prices. The U.S. has limited coffee-suitable soil, mostly in Hawaii. Mr. Trump’s tariffs can’t appreciably boost U.S. production, but they do raise coffee roasters’ costs.

The president harps about interest rates, and in some measure, the Federal Reserve has complied — 30-year mortgage rates have come down. That’s hardly enough, though, because homebuyers focus on monthly payments.

With housing in short supply — especially near big cities, where the most attractive employment opportunities tend to bunch — lower interest costs enable homebuyers to bid up prices. Escrow items such as homeowner insurance and property taxes are up 41% since 2019.

Climate change is a factor too. Higher atmospheric and ocean temperatures are increasing the frequency and intensity of storms, floods and wildfires and forcing insurers to raise rates.

States and cities limit housing supplies with tough zoning and land use regulations, but tariffs on building materials don’t help.

With immigrants accounting for 31% of construction workers, the president’s deportations and limits on immigration exacerbate labor shortages and run opposite to lowering housing costs.

Mr. Trump likes to boast about low gasoline prices, but those haven’t changed much from a year ago.

New data centers to support artificial intelligence are driving up electric utility rates, and Mr. Trump’s opposition to wind and solar power will limit new grid capacity.

Against all this, consumer confidence, as tracked by the Conference Board, is down dramatically since the president was reelected last year. It’s nearly as low as at the depth of the COVID-19-induced recession. The margin between those surveyed who say jobs are plentiful and those who say they are scarce is similarly depressed.

Respondents to the University of Michigan Survey of Consumer Sentiment believe economic conditions are terrible. That’s not true, but Americans got used to living beyond their means as the economy came out of the last recession. They coped with the inflation by running down relief payments and expanding child care tax credits that were saved during the shutdown. Many also benefited from enhanced Obamacare insurance subsidies, set to expire Dec. 31.

Worse for the president, most Americans think he is giving too little priority to lowering prices and too much attention to other issues. His claim that a Thanksgiving dinner costs 25% less than it did a year ago, when it isn’t true, doesn’t help.

A CBS News/YouGov poll found that 60% of voters say Mr. Trump describes economic conditions as better than they really are. Only 36% approve of his handling of the economy. Most menacing, 65% say his policies are making grocery prices go up.

Now he is rolling back tariffs on many food items.

In politics, as in retailing, a reputation for high prices is easily won but tough to shake.

• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.