Our Government Is Ignoring Obvious Affordability Solutions

High prices have been the top concern among American voters for years – and for good reason. Although pandemic-era inflation has subsided, the Federal Reserve’s preferred gauge, the personal consumption expenditures index, remains stubbornly above its 2% target, and the war with Iran will ensure it goes even higher. With midterm elections approaching, Washington has raced to respond – with mostly terrible ideas.

As Bloomberg News reported this week, the Justice Department is investigating the pricing policies of US beef, egg, fertilizer, and seed producers. Last week, Treasury Secretary Scott Bessent not-so-subtly warned local gas station owners that his Department would keep them “honest” on fuel prices. The administration also wants to subsidize domestic fertilizer production, ban institutional housing investors, and regulate credit card interest rates.

Not to be outdone, congressional Democrats have introduced several bills to police “price gouging” by grocers and other retailers, and Democrat-championed rent control proposals have proliferated at the local level. Both parties also have proposed a litany of targeted, temporary cuts to gas, property, and other taxes – all to combat the “affordability crisis.”

As the Washington Post reported last month, economists – who know the long history of harm, distortion, inefficacy, and unintended consequences of these policies – have been “appalled” by almost all of it.

The reality is that there is no “affordability” silver bullet. Inflation is driven by macroeconomic (fiscal and monetary) policy. Most prices are “sticky,” meaning they rarely retreat once elevated. And producing broad-based deflation comes with harsh tradeoffs. Even at the micro level, “Baumol’s cost disease” ensures that the prices of labor-intensive services such as healthcare, education, childcare, and construction will outpace inflation because productivity in those industries lags behind the broad economy. Nothing will change these fundamentals, nor will it change various market factors – dwindling cattle herds, avian flu, etc. – that drive the prices of certain commodities.

Nevertheless, both lawmakers and policymakers have the tools to reduce the prices of essential goods and services and that most economists would support. The obvious place to start is with international trade. As Federal Reserve economists just detailed, President Donald Trump’s 2025 tariffs increased the prices of imported and domestic goods, likely elevating the PCE Index by almost one percentage point last year. Harvard Business School’s real-time tracker of the prices charged by large retailers shows similar effects.

Other import barriers, hardwired into US law, also have been shown to increase prices. Our lowaverage tariffs mask high ones on imported footwear, textiles and apparel, leather goods, housewares, pickup trucks, fresh produce, and more. We have quotas for sugar, dairy, beef, tuna, peanuts, and chocolate, as well as regulatory restrictions on food and drugs from nations with tighter regulations than our own. And we have more than 830 “trade remedy” (antidumping and countervailing duty) measures on a wide range of foods, consumer goods, and inputs in construction, agriculture, and utilities – measures that dubiously target “unfair” trade but, as just seen with tomatoes and fertilizer, always mean higher prices.

Localization mandates add to the pain. The Jones Act, which requires goods shipped between US ports to travel on American-made vessels, boosts energy prices in the Northeast and is particularly painful for Alaska, Hawaii and Puerto Rico. Domestic content rules in the Inflation Reduction Act inflate renewable energy costs. And “Buy American” restrictions on federal spending increase the price of transit, infrastructure and housing.

Even Trump officials have implicitly acknowledged this dynamic. When egg and beef prices surged, they reduced import barriers. When Zohran Mamdani won big in New York City on an “affordability” platform, the administration nixed “reciprocal” tariffs on food and fertilizer. And when the Iran war spiked gas prices, they suspended the Jones Act. These are tacit admissions that trade barriers cost Americans money.

State and local protectionism does too. Occupational licensing, which covers one in four workers, blocks competition and increases the price of legal advice, childcare, education, home repair, and other services, with little quality premium. Certificate-of-need laws prevent new healthcare facilities from competing with costlier incumbent hospitals. “Cottage food” laws, food truck restrictions, and alcohol distribution regulations cull food and drink options. Zoning strangles housing supply and keeps rents high. Auto dealer franchise laws bar direct-to-consumer sales and impose a “middleman tax” of up to $5,000 per vehicle. The list goes on.

Protectionism also isn’t the only policy making prices higher than necessary. Renewable fuel mandates force corn and soybeans into gas tanks, inflating food costs. Federal regulations make appliances more expensive and, perversely, often less efficient. Immigration restrictions block construction, agriculture, childcare, eldercare, and medical workers in high demand, pressuring prices in those industries, too.

There are dozens of these supply-side restrictions at all levels of government, and economists support reforming many of them. Individually, these changes might save households a few bucks. Collectively, they could mean thousands of dollars in annual savings. Yet few elected officials are willing to champion them. Why?

Every protectionist policy enriches a small domestic constituency – dairy farmers, shipbuilders, dentists, car dealers, labor unions, and more. The policies’ costs, meanwhile, are hidden and spread thinly across millions of consumers. With benefits concentrated and costs diffuse, protectionism’s beneficiaries lobby loudly to maintain their spoils; the rest of us lack the incentive to fight back; and politicians, eager to get reelected, give oil to the squeaky wheel. This “collective action” problem explains why, despite decades of failure, costly policies like the Jones Act are impervious to reform even when “affordability” is everyone’s top priority.

It’s not the only reason. Real reforms are piecemeal and technical, and their benefits are often disparate and invisible. There’s no press release or ribbon-cutting ceremony for reforming the Antidumping Law, relaxing zoning rules, or nixing a licensing board, and price effects appear gradually.

Real affordability fixes also often require politicians to admit that past government policy – often their policy (or their party’s) – made things worse. This is Kryptonite for officials who never admit fault and who need a glowing headline now, not when they retire. It’s far easier to attack “Corporate Greed” than admit your tariffs raised prices – especially when some firms and workers are screaming to save them.

Economists don’t run Washington. So, we’ll keep getting the “Affordability Show,” not affordability substance.