Despite deep partisanship in the United States, one issue appears to unite Americans: the rising cost of everyday life. As affordability becomes a defining issue heading into the midterms, a question is taking on new urgency: What can government do to make life more affordable?
In this episode of You Might Be Right, former Tennessee Governors Phil Bredesen and Bill Haslam explore that question with Michael Strain and Jason Furman.
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Strain, director of economic policy studies and a senior fellow at the American Enterprise Institute, argues that Americans’ concerns about affordability go beyond inflation. Prices are significantly higher than they were five years ago, inflation continues to affect household budgets, and the costs of things many Americans consider essential to middle-class life, including housing, higher education and childcare, have been rising for decades.
Strain points to both fiscal and monetary policy decisions that contributed to recent inflation, including the size of the 2021 American Rescue Plan and the Federal Reserve’s response. Looking ahead, he argues for greater fiscal restraint, reforms aimed at lowering costs in areas such as housing and higher education, and avoiding policies, including tariffs, that he believes put additional upward pressure on prices.
Furman, Aetna Professor of the Practice of Economic Policy at Harvard, offers a different perspective on the affordability debate. While Americans remain deeply frustrated by higher prices, he notes that wages have outpaced inflation in recent years and argues that economic data presents a more complicated picture than public sentiment alone might suggest.
Like Strain, Furman points to the size of the 2021 stimulus and the Federal Reserve’s initial response as contributors to inflation. He also argues that tariffs have made it difficult for inflation to return to lower levels. When it comes to making housing, healthcare and other necessities more affordable, Furman emphasizes increasing supply rather than policies that simply give consumers more money to spend.
Despite differences in how they assess the affordability crisis, the two economists find common ground on several of the forces shaping it and on the limits of government action. Their conversation with the governors examines what policymakers can realistically do to bring costs down, where government intervention can help and how efforts to make life more affordable can create economic consequences of their own.
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