The results of last week’s elections made it clear that the top-of-mind issue for voters is the rising cost of living. Democrats Mikie Sherrill of New Jersey and Virginia’s Abigail Spanberger both won their gubernatorial race by double digits after focusing their campaigns on affordability. Their victories coincided with new polling showing widespread distrust in President Trump’s handling of the economy, underscoring just how politically vulnerable the White House is on cost-of-living issues.
In the days that followed, the administration responded by releasing a new “affordability agenda.” The plan includes a 50-year mortgage, $2,000 tariff rebate checks, and cash to help people with health-care expenses. Unfortunately, each of these proposals would push prices higher, not lower.
To start, the administration’s proposal to shift from 30-year to 50-year mortgages may sound like a break for homebuyers because monthly payments would likely fall by a few hundred dollars a month. But stretching loans across half a century dramatically increases total interest paid, delaying the building of equity and leaving homeowners more financially vulnerable. For a $400,000 home with a 10% down payment, a 50-year mortgage at today’s 6.25% fixed rate would reduce monthly payments by roughly $250 compared with a standard 30-year loan. But over the life of the loan, total interest payments would almost double, from $438,000 under a 30-year mortgage to $816,000.
Meanwhile, the policy does nothing to expand housing supply–the real driver of long-term affordability. We face a multi-million-unit housing shortage, driven by restrictive zoning, slow permitting, and years of underbuilding. Without addressing those barriers, cheaper financing simply fuels more bidding for the same limited number of homes, causing home prices to inflate. Real relief requires adding more housing, not just stretching mortgage plans.
The administration’s second proposal — sending Americans $2,000 checks funded by tariff revenue — is equally misguided. Tariffs are taxes paid by U.S. consumers, so any “rebate” would simply return money Americans already paid through higher prices. Moreover, the revenue might not even be collected because the administration claims tariffs as an effective tool to pressure trading partners into new trade deals. If those deals ultimately involve lifting tariffs — as the White House frequently suggests–then the revenue they are counting on will never materialize.
And even if the tariffs raise real revenue, the Trump administration has already spent it. The White House has argued that the massive tax cuts in The One Big Beautiful Bill Act (OBBBA) didn’t add to the deficit because their costs would be offset by tariff revenue. That isn’t true, but even if it was, it would mean any new checks would have to be financed with more borrowing. Americans already saw the costly consequences of deficit-financed payments in 2021 when both Presidents Trump and Biden supported an identical stimulus check. In the end, the biggest effect of this policy was to help push inflation to its highest level in four decades. Trump’s rebate checks would repeat this mistake — injecting a fresh burst of demand into an economy constrained by supply shortages. The Committee for a Responsible Federal Budget estimates these rebates would cost roughly $600 billion per year, a staggering amount of new deficit-financed stimulus.
A similar dynamic plays out in the administration’s proposed health-insurance plan. With enhanced Affordable Care Act (ACA) subsidies set to expire at the end of the year, the White House and Congressional Republicans have floated a plan to send unrestricted cash to consumers to buy any plan they want. This would hollow out the ACA marketplaces by encouraging healthier individuals to buy cheaper, less comprehensive coverage. As healthier people leave the marketplace, premiums will rise for everyone else (by definition, more sicker people), prompting insurers to exit and leaving millions with fewer options and higher costs.
Republicans frame this approach as one that prioritizes consumer choice, but that narrative ignores the structural barriers that prevent health care markets from functioning like ordinary markets. Most patients lack the information needed to shop for value when prices are unclear and providers hold the negotiating power. Simply handing people cash does nothing to change these underlying dynamics.
Even if the policy were good, it would be almost impossible to implement in the middle of an active enrollment cycle, potentially creating serious operational and regulatory risks. The health-care marketplace is built on stable rules and predictable subsidies. Abruptly moving to an entirely different model could confuse consumers and create administrative chaos for insurers precisely when millions are looking to secure coverage for the coming year.
These policies are all classic demand-side subsidies that put more government-funded purchasing power into the hands of consumers while doing nothing to improve supply. We have already seen how this movie ends. As PPI has written, the central flaw of President Biden’s economic approach four years ago was its overwhelming focus on subsidizing demand: spending trillions in stimulus while doing far too little to expand supply. That imbalance contributed to the highest inflation in 40 years, effectively negating Biden’s most significant legislative accomplishments and ultimately contributing to the political backlash that cost Democrats the White House.
Now, the Trump administration is repeating those same policy mistakes, only with more damaging consequences. Like Biden, President Trump is making his “affordability agenda” all about boosting household purchasing power without addressing the supply-side challenges that are actually responsible for higher prices. And the risks are far greater this time around following the passage of the fiscally-irresponsible OBBBA that will already stand to add trillions of dollars to the deficit over the next decade.
If the goal is to actually cut costs, policy should focus on expanding supply and lowering structural prices, not simply subsidizing demand. In health care, PPI has proposed a pragmatic reform of the ACA’s premium tax credits that would lower premiums instead of inflating them. On trade, reducing tariffs — and avoiding economically destructive trade wars — remains one of the most direct ways to cut consumer prices. And PPI has long argued for zoning and land-use reform in order to build enough homes to bring down housing costs.
Americans need lower prices, stronger competition, and policies that expand supply rather than simply encourage people to bid against one another for scarce goods and services. A serious affordability agenda would start there. Right now, the administration’s plan offers the illusion of relief — and the certainty of higher prices. It’s time for a more pragmatic strategy that tackles the real drivers of high prices.
