A Closer Look at ‘Affordability’

When Donald Trump first took office in January of 2017, sirloin steak ran $7.79 a pound but today costs $14.14. Over the same period, ground beef went from $3.55/pound to $6.33/pound; eggs more than doubled in price from $1.60/dozen to $3.49/dozen—and that is down from a spike to $6.23 in March; a gallon of milk went from $3.32 to $4.13; coffee (take it from a father of four, three still in diapers) has zoomed from $4.47/pound to $9.14/pound. Ground chuck (you’re making chili this time of year, right?) has nearly doubled, and so has bacon. Chicken breasts are up 28 percent. The exceptions are few and far between: Prices are bananas—except for actual bananas, which have appreciated only one thin dime per pound. 

Inflation per se is, as Milton Friedman insisted, a monetary phenomenon. But in the more colloquial sense of rising general prices, inflation can have several different causes—because that kind of price increase is the result of a change in the relationship between the amount of money available to chase goods and the amount of goods available to be chased, inflation in the common sense can be caused by both monetary and fiscal policy, by artificially low interest rates, and/or by changes in the availability of goods. Because Trump’s economic team consists of some of the smartest people in the business demeaning themselves to curry favor with the dumbest man ever to occupy the presidency—whose two terms in office were separated by an administration of off-the-leash progressives manipulating an elderly incompetent who was both dumb and mean at the height of his abilities but who was during his presidency cognitively indistinguishable from one of those reasonably priced bananas—Americans have been treated to a whole brain-damaged theme park of pro-inflation policies. The economy continues to be flooded with cheap money thanks to too much spending and too much debt (Treasury calculates that the U.S. government added about $72.7 billion in new debt in the two-week period ending on December 10) without adequate tax revenue to pay for the outlays. And the Trump administration is trying to oust the Fed chairman in order to pressure the supposedly independent monetary authority into driving interest rates down—which is exactly the opposite of what you’d want the Fed to do if you wanted prices to go down: Cheap credit is another way of saying cheap money. On the supply side, the administration has mucked up every possible thing with its idiotic (and unconstitutional) tariff policies, which have interrupted trade and broken supply chains in order to secure the administration’s goal of … destroying thousands of U.S.-based manufacturing jobs, apparently. So, lots of money dumped into the demand side, and a supply side hamstrung by the freshest economic thinking of the 15^th century. 

Don’t worry—it gets worse. 

As Sen. Mark Kelly pithily put it in another context: “You can’t put that s—t back in the donkey.”

Let’s spend a minute with our old friend the efficient-market hypothesis (EMH). EMH is one of those concepts with a name that sometimes leads people astray: EMH doesn’t hold that markets always do things in a way that is efficient in the ordinary sense of the word (low cost, low waste, etc.) or that markets will always produce the most desirable outcomes from an efficiency point of view or anything like that: Efficient here refers to information, and the efficient-market hypothesis is the idea that the current price of an asset reflects all of the available relevant information. That is not the same thing as all the possible information. EMH is most useful as a forward-looking proposition: For example, if a law is going to come into effect that hurts the prospects of a company’s core business, EMH holds that this will be reflected in share prices today rather than at some point in the future when the costs are actually incurred. EMH is not limited to documentable facts—market efficiency in that sense incorporates expectations as well, with the assumption that conflicting expectations and forecasts will interact in such a way that both are reflected in asset prices: E.g., if 92 percent of investors expect that x will happen and 8 percent expect that not-x will happen, then asset prices related to x should reflect both sets of expectations in some proportion.

The same kind of thinking about future developments applies to phenomena well beyond the areas where the formal application of EMH is appropriate. And this is where I worry even more than I usually do about Sen. Kelly’s evacuated donkey. Setting aside the nontrivial possibility that Donald Trump will attempt for a second time to stage a coup d’état as his allotted time in office comes to an end, it is reasonable to think of the post-Trump era as within sight of where we are. (Bear in mind that many unfortunate people drown within sight of the shoreline.) The news about that is not all good: It seems clear to me at this point that Trump has succeeded in remaking the debased thing we still call “the Republican Party” in his own image in accord with his own policy preferences—which, on fiscal and trade matters, means a disastrous combination of profligacy and self-injury. If equity investors, importers, exporters, supply-chain managers, bond buyers, central bankers abroad, et al. come to believe, as there is good reason to believe, that the Republican Party is today at least as committed to fiscal incontinence as the Democratic Party, then that is going to have effects on everything from the interest the U.S. government has to pay on its debt to private business decisions about how and whether to serve the U.S. market at all, where to invest (especially in physical capital) and what to invest in, etc. Much of that will keep upward pressure on U.S. prices, though some of it (higher interest rates) should put downward pressure on prices. As my friend David Bahnsen sometimes points out, U.S. government borrowing rates are not that high right now, even if they are a little bit higher than in recent history: Treasury yields were roughly twice as high in the early 1990s as they are today (and damn near four times as high in the early 1980s), which means that there is a lot of room for interest rates to rise and remain under the ceiling of historical averages. 

It is good that rates have not gone up that much—yet. It will be very, very bad if they do. In FY 2024, the U.S. government was obliged to spend just shy of $900 billion on interest payments, or about 13 percent of all federal spending and 18 percent of all federal revenue, on the debt it already was laboring under at that time—and the debt keeps growing. 

If you think we have wandered far from our original point about inflation, we haven’t. Deficits are by nature stimulative—heavy public debt is common a driver of higher consumer prices. 

With the usual caveats about the habit of thinking superstitiously about presidents and economic performance (COVID was the most important economic event of the past decade, and neither Donald Trump nor Joe Biden was responsible for it), Donald Trump would very much like for us to think of this as the Age of Trump, so, let’s do him the courtesy of pretending that it is possible to take him seriously and look at how things have changed since he was first elected to the presidency in 2016.

New car prices averaged about $35,000 on Election Day 2016; today, the average new car costs almost $50,000. Trump’s preferred economic policies—now shared by most influential Republicans—would tend to press car prices higher in two ways: by engaging in protectionism for domestic producers, insulating them to some degree from price pressure from less expensive imports, and by pressing for artificially low interest rates, which have the same effect in the car industry as they do in housing and college tuition: allowing overall sales prices to rise as consumers take on more debt in response to debt subsidies. Kelley Blue Book finds that the share of vehicles selling for prices in excess of $80,000 is at an unprecedented level. Rising car prices, to be clear, are a long-term phenomenon that precedes COVID-era disruptions. 

Likewise, housing inflation has been a real problem for a generation. (It is a real problem if you want to buy a house; it is a real boon if you already own one.) The housing index is up about 45 percent today over where it was when Trump took office in 2017. Again, it is a long-term trend—but have a gander at that price chart and see how it has grown steeper in recent years—again, a phenomenon that is not explained by COVID or some other similarly extraordinary development. Housing prices are high in part because U.S. policymakers spent decades treating rising home prices as though these were an unmixed economic benefit with no tradeoffs or downsides—no surprise, given that the richer and older people who own houses tend to vote more reliably than the poorer and younger people who are struggling to buy their first home. The federal government has worked hard to keep mortgages cheap, and local authorities have done their inflationary part by keeping new housing artificially scarce. Hence, lots of housing inflation. You know the old joke about the guy who hits himself in the head with a hammer because it feels so good when he stops? We should stop intentionally pushing housing prices higher.   

Gasoline prices are up 70 cents a gallon over where they were when Trump was sworn in in 2017 and unchanged from where they were when American voters idiotically decided that they could take Trump’s word for it when it came to lowering consumer prices. So, no big wins there, either. 

Americans’ concerns about affordability are the result of a “con job,” Trump insists. He is kinda-sorta telling the truth without meaning to. There was a con job. Trump was the con artist, and his voters—numerous enough to put him back in the White House—were the marks. In reality, Donald Trump and Joe Biden have a lot in common when it comes to basic economic policies: tariffs and special-interest protectionism, too much spending, too much debt, too much political cowardice, supine congressional enablers all too happy to let the president take the lead and catch the flak. The result is a bipartisan consonance of destructive and generally inflationary policies. 

And we all get to pay for that.

Slate, arguably the worst-edited publication in these United States, suggests that the moon “may be the literal key to human destiny.” A literal key is a literal object that you stick in a literal lock to literally unlock it. “Key” used in the way Slate is using it is never literal, always metaphorical. 

“What Happens if Obamacare Subsidies Expire?” asks the New York Times. Happy to help out here: What happens is that some financial obligations will be transferred from the people who are not receiving those insurance benefits to the people who are receiving those insurance benefits. That’s how subsidies work. 

If a New York Times correspondent wrote as credulously about, say, biblical literalism as New York Times writers do about superstitious nonsense such as feng shui or modish dietary and fitness pseudoscience, he’d be laughed out of the room. He’d probably be fired. But bring on the silly Eastern pop-mysticism. The Times writes that feng shui “focuses on energetic flow through a space,” heedless of the fact that the energy in question does not flow through space because the energy in question does not exist. It is like the “innate intelligence” or “vital force” of chiropractic–it is a made-up thing. 

So do get a load of this “neuroaesthetics” business, which should, the Times tells us, “gear the compass of design towards this idea of empathetic, responsive environments that make us feel like our best selves.” I suppose I shouldn’t bother pointing out that an environment, not being a sentient being, cannot be empathetic. It is interesting to me that a newspaper that is so profoundly editorially hostile toward the religion upon which the civilization that produced the New York Times is based remains so gullible when it comes to New Age goo. 

From the New York Times: 

As the Times tells the story, the Navy requested some 4,000 specific changes, spent about $3.5 billion, and produced a grand total of 0.00 ships. 

I thought about the famous Ship of Theseus thought experiment: How many design changes can you request before the design isn’t the design? 

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The actor Peter Greene has passed away at the relatively young age of 60. It may border on speaking ill of the dead, but Greene had a particular gift: He was naturally skeezy-looking, skeezy-seeming, just generally skeezy. He made an impression in a relatively minor role as the fence Redfoot in The Usual Suspects, when, according to legend, he improvised by flicking a lit cigarette into Stephen Baldwin’s face. He lent his skeezy presence to the opening scene of Justified, in my view the finest Western in television history, as drug trafficker eating crab cakes in a Miami rooftop restaurant while simultaneously engaged in a classic high-noon standoff with a U.S. marshal. But he surely will be best remembered as the sadistic Zed in Pulp Fiction—“mister hillbilly rapist” in the words of one vengeful victim. Something about the guy’s face just made him fit those roles. And it takes all kinds of faces: Steve Buscemi (who also had a tiny but memorable role in Pulp Fiction) isn’t competing for parts with Brad Pitt. I don’t know anything about his personality or his life, but I knew his face, and I knew what to expect from it. A life in Hollywood isn’t necessarily glamorous—some guys just have to work for a living, and Peter Greene seems to have been one of those. But the work was good—and that is not the worst eulogy a working actor can receive. 

The architect Frank Gehry also has passed away, at the age of 96. I am not an architecture critic, but I did live in a Gehry-designed building in Manhattan for some years, so I am intimately familiar with at least one piece of his work. It was a real pleasure to see my building from afar and to come home to it after a trip, or even after a long day. Pulling into the porte-cochère in a taxi made you feel like you were living in a movie. It was a special place, and I’m sure it still is. Naturally, the ceilings in the hallway leaked from the first years it was open, presumably from plumbing problems or condensation, it being unlikely that we were seeing rain coming through on the 27th floor of a 76-floor building. 

Beautiful but high-maintenance–a familiar story if not quite a universal one. 

Funny story about that neighborhood: There was a Denny’s nearby, on the ground floor of a different fancy building, whose residents had fought like hell to keep the restaurant from opening and insisting that a Denny’s was out of character for the neighborhood. (It wasn’t—Pace University was nearby.) Denny’s finally opened and cheekily responded by adding a special plate to its menu, the “Grand Cru Slam,” which was the same thing as a regular Denny’s “Grand Slam” except that it cost $300 and came with a bottle of Dom Pérignon. And, yes, people did order it. The Denny’s didn’t survive, though.

I’d say that New York isn’t what it used to be, but people have been saying that since there were working farms just north of 42nd Street. New York is what it used to be—that is part of its charm, and part of its problem.