The American ‘Affordability Crisis’

Intro LO:

I’ve decided using the Wall Street Journal article (below) because this type of crisis is unknown in Europe. Probably because Europe favours fair inequality while America favours unfair inequality (eg, my 2018 blog, a 2017 Yale study).

I agree with the author (below): the American ‘Affordability Crisis’ cannot be solved.

Neither can other American crises be solved: guns, healthcare, housing, opioids, pensions, and so on and so forth. America is sick; perhaps even terminally ill.

Actually, the cause for the American ‘Affordability Crisis’ is quite simple: wages are (very) low and the cost of living is (very) high. Having more than one job still does not solve the American ‘affordability crisis’.

Some American politicians, like Mamdani, claim that democratic socialism provides a solution. In Europe, we know for decades that it does not. Even in Russia, they know that democratic socialism is nonsense.

Some time ago, I prepared these diagrams in order to compare Europe (left) and USA (right):

In my view, Europe is (far) superior to America in (very) many aspects, despite what the American president claims:

• Politico, 5 December 2025: Trump warns Europe faces ‘civilizational erasure’ in explosive new document.
• Politico, 9 December 2025: Trump thrashes European leaders in wide-ranging interview: ‘I think they’re weak’;

The above 2 articles are examples of Trump’s habit of using reverse psychology and psychological projection. Just replace the word Europe for USA and you know what Trump actually thinks about himself and about USA:

• American leaders are weak;
• America faces ‘civilizational erasure’.

Latter (ie, America faces ‘civilizational erasure’) has been mentioned in my blogs since 2015:

• 2015: Chaos, Equilibrium, SuperPowers and the United States of Europe;
• 2025, March: Chaos, Equilibrium, SuperPowers and the United States of Europe (2);
• 2025, December: Trump and the end of American hegemony.

Recently, professor Rob de Wijk (ie, U-Leiden) supported my view (above) by claiming that the American president is afraid of a United Europe (eg, BNR, LinkedIn).

It’s wise that Europe bites its tongue:

• Politico, 9 December 2025: Show some ‘respect,’ EU chief warns Trump after blistering attack on Europe;
• Politico, 10 December 2025: Trump’s attacks force Europe to speed up post-America defense plans;
• Politico, 10 December: Pope urges Trump not to ‘break apart’ US-Europe relationship 

UPDATES:

• CNN, 16 December 2025: The No. 1 cause of America’s affordability problem just got worse
• Telegraph, 30 December 2025: Middle class households overwhelmed as US cost of living crisis spirals

Sources:

• WSJ, 23 November 2025: Everyone Is Talking About the ‘Affordability Crisis.’ It Can’t Be Solved.
• FT, 7 December 2025: America’s affordability crunch is real — and worse under Trump

WSJ: Everyone Is Talking About the ‘Affordability Crisis.’ It Can’t Be Solved.

WSJ subtitle: Trump and Mamdani both campaigned on affordability, but the issue is amorphous and poorly defined

By Greg Ip
Date: 23 November 2025

”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.

Affordability isn’t a synonym for inflation, which is the rate of change in the overall price level. Inflation reached 9% in mid-2022 but was down to 3% in September. Though it is above the Federal Reserve’s preferred 2%, that 1 percentage point difference is probably not the crisis people have in mind.

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.

When Trump returned to office, the public was obsessed with eggs, whose price had doubled in the prior year as flocks were culled to contain avian flu. The price has since fallen sharply, as Trump and his surrogates regularly point out. But the public’s attention has moved elsewhere, most notably to beef and coffee.

As a campaigner, Trump loved to talk about gasoline because its price had risen under Biden (though it fell from its peaks after Russia’s full-scale invasion of Ukraine in 2022), and more production of fossil fuels was one of his central policies. Since January, gas prices have indeed dropped. But the newly salient issue is rising electricity rates.

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.

That is slowly changing. New-home prices have slipped for the past few years, existing-home prices have stopped rising, and mortgage rates are down half a percentage point in the past year. 

Housing affordability is now slightly below its pre-2008 average, according to the National Association of Realtors, so room for improvement is limited. Trump wants to stack the Fed with loyalists who will slash interest rates, but that wouldn’t return mortgage costs to prepandemic lows absent a much-worse economy. And a politicized Fed would ultimately lead to higher inflation and rates.

Mamdani, like Trump, frames affordability in memorable terms. “We’re in the wealthiest city in the history of the world, and yet one in five can’t afford $2.90 for a MetroCard,” he declared Friday, a convenient way to justify his proposal for free buses.

But New York isn’t expensive because of public transit. When the fare rises to $3 in January, it will have climbed an average of 1.7% annually over the past decade, below the city’s inflation rate. 

In January, Mamdani memorably dove into the frigid waters off Coney Island to publicize his freeze on rents. And New York rents have gone up a lot recently, while they have stabilized or fallen in other cities thanks to a surge of supply.

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.”

Source:

• Wall Street Journal, 23 November 2025: Everyone Is Talking About the ‘Affordability Crisis.’ It Can’t Be Solved.