America’s Affordability Problem Is Government

By Dan Mitchell.

"I have a series of columns (2021, 2024, 2025, and 2026). documenting that Americans are getting richer.

And here’s a chart that adds additional evidence. More and more households over time are high income (over $100k) and fewer and fewer are low income (under $35k).

And, yes, these numbers are adjusted for inflation.

The chart was included as part of an article by Max Borders for the Advocates of Self-Government.

He asked why people feel economically anxious even though incomes have increased.

The answer is that some important purchases have become relatively more expensive. And the reason, unsurprisingly, often involves bad government policy.

Here are some excerpts.

In 1967, only 16.5 percent of households earned the equivalent of $100,000 or more in today’s dollars. Today? Nearly 45 percent. The middle-income group really has shrunk—from 54 percent of households to 36 percent. …The disappearing middle class didn’t simply tumble into poverty. Millions of households graduated into higher real incomes, despite persistent inflation. And the percentage at the bottom fell, too. …We’re richer. Many of the things we buy have become dramatically better and cheaper. But some of the things we cannot easily do without have become painfully expensive. …Start with housing. Why don’t developers just build more homes where people want them? Often because it’s illegal. Zoning restrictions and building codes are costly. Minimum lot sizes consume land. Parking requirements increase costs. Permitting adds delays. NIMBY opposition prevents construction. Then we all express shock that restricting the supply of something makes it more expensive. Or consider health care. Whatever else American health care is, it is not some laissez-faire free-for-all. It’s a labyrinth of government subsidies, third-party payments, occupational licensing, insurance regulation, patent protections, insurance mandates, in-state monopolies, and restrictions on competition. …And then there’s college. For decades, our solution to expensive higher education has been to give people more money with which to buy increasingly expensive higher education. This has created a tuition spiral: Loans. Grants. Subsidies.

The article includes another chart from Mark Perry.

It shows how prices for some items have increased much faster than inflation while others have declined. In some cases by large amounts.

And notice that prices seem to go up the most in the areas where government has a big footprint.

I’ll close with a few more passages from the article.

…not every red line on this chart is caused by government. But officials can make an intrinsically expensive problem considerably worse. …If your diagnosis is that “capitalism” has made ordinary life unaffordable, your solution will probably be more subsidies, more controls, and more regulation. But what if the diagnosis is backward? What if competitive markets are actually doing remarkably well in much of the economy—and our worst affordability crises are concentrated in sectors where competition, supply, and productivity are tightly regulated and unusually constrained? …we’ve constructed bottlenecks to accessing some of the most important things in life. Housing. Health care. Education. Childcare.

Amen. To make life more affordable, we need free enterprise, not subsidies, intervention, protectionism, and third-party payer.

Government is the problem, not the solution."