Bad Economy for the Middle

 Ezra Klein looks at our problems.

“In one of the best decades the American economy has ever recorded, families were bled dry by landlords, hospital administrators, university bursars and child-care centers,” Annie Lowrey wrote. “For millions, a roaring economy felt precarious or downright terrible.” 

The numbers are startling. The median home price in 1950 was 2.2 times the average annual income; by 2020, it was six times average annual income. Child care costs grew by about 2,000 percent — yes, you read that right — between 1972 and 2007. Family premiums for employer-based health insurance jumped by 47 percent between 2011 and 2021, and deductibles and out-of-pocket costs shot up by almost 70 percent. The average price for brand-name drugs on Medicare Part D rose by 236 percent between 2009 and 2018. Between 1980 and 2018, the average cost of an undergraduate education rose by 169 percent.

We papered over the affordability crisis with low prices for consumer goods, soaring asset values that kept richer Americans happy, subsidies for some Americans at certain times and mountains of debt: housing debt and student-loan debt and medical debt that kept the working class semi-afloat. But none of this addressed the core problem. For far too long, the prices of the things we need most have been growing far faster than inflation.

And so a weird economy emerged, in which a secure, middle-class lifestyle receded for many, but the material trappings of middle-class success became affordable to most. In the 1960s, it was possible to attend a four-year college debt-free, but impossible to purchase a flat-screen television. By the 2020s, the reality was close to the reverse.

There’s a famous video where you’re told to keep your eye on a basketball being passed around and, as you do, you miss an actor in a gorilla suit ambling across the scene. But once you’ve seen the gorilla, you never miss it again. Politics works like that, too. It’s not just about the problems we have. It’s about the problems we learn to see. The prices problem has been lurking for years, but it’s never been the core of our politics. Now it is.

The political party that dominates this next era will be the one that shares the public’s fury and puts prices at the center of their agenda.

There are some early glimmers of what that might look like. The New Democrat Coalition, which is made up of 99 moderate-ish House Democrats, recently released a package of policy proposals meant to address inflation. But much of it is aimed at the affordability crisis that predates the rise in inflation. It includes legislation that would use federal transportation dollars to push cities and states to make it easier to build housing, that would ease worker shortages by raising legal immigration and that would cap insulin costs and allow Medicare to negotiate more drug prices.

If liberals look, they’ll find no end of ideas for bringing down prices across the economy. “I’ve been pulling my hair out about this stuff for years,” Dean Baker, one of the founders of the liberal Center for Economic and Policy Research, told me. “We can’t just accept markets as structured and then use tax and subsidy policy to make it less bad. A real big problem with progressives is we treat the market problems as givens rather than restructure those markets.”

For decades now, we’ve been in a politics of spending. The questions were about how much to spend and what to spend on. We’re moving into a politics that looks superficially similar but is fundamentally different: a politics of prices. How much to spend, and where to direct that spending, still matters. But it’ll be subordinate to a larger goal: bringing down prices across the economy. And that’ll be the work of years, perhaps decades.