Progressive affordability policy keeps chasing its own tail
by Kevin Villani · The Washington TimesOPINION:
Few images capture futility better than a dog chasing its tail. That is the perfect metaphor for the American progressive movement. Presidents Hoover and Franklin D. Roosevelt built the arena, but Lyndon B. Johnson trained the dog.
For a century, progressives have tried to solve affordability problems by using the very tools that mathematically guarantee scarcity, and then demanded even more intervention to fix the damage they caused.
Today’s affordability crisis in food, energy, housing, healthcare and higher education has one thing in common: all are sectors where government simultaneously restricts supply and subsidizes demand. The sectors with the worst affordability problems are precisely those where progressive policy has done both.
Food: Subsidized demand, distorted supply
Federal food policy is a century-long experiment in subsidizing demand while cartelizing supply. Agriculture Department crop subsidies insulate large producers from market discipline, while the Supplemental Nutrition Assistance Program injects hundreds of billions of dollars into demand. When supply is distorted and demand is subsidized, prices must rise. Grocery inflation punishes working families, and progressives respond by demanding more subsidies, further inflating demand and pushing prices higher.
Energy: Restrict supply, then subsidize demand
Energy inflation is not caused by market failure but by political hostility to supply. Regulatory barriers, drilling restrictions, pipeline cancellations, shipping constraints and forced transitions to intermittent energy sources have throttled production. When supply is artificially constrained, prices rise. Progressives then demand subsidies for “affordable energy,” which increases demand without increasing supply. The cycle repeats.
Housing: The most predictable crisis in America
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Housing is the purest example of the creation of progressive scarcity. Local land use restrictions limit supply through density caps, minimum lot sizes, affordable housing mandates, rent controls and construction requirements. Meanwhile, federal policy subsidizes demand through mortgage guarantees, artificially low interest rates and tax preferences. When supply is capped and demand is subsidized, prices must rise.
The modern American is forced to take on a lifetime of institutional debt just to secure basic shelter. Progressives respond by demanding more subsidies, which inflate demand further and push prices even higher.
Healthcare: Mandates, subsidies and the price spiral
Healthcare inflation is the product of tax distortions, regulatory mandates and demand subsidies. Tying insurance to employment through the tax code insulated insurers from competition. Mandates such as the Affordable Care Act subsidized demand while restricting supply through coverage requirements and administrative burdens. Prices rose. Progressives responded with additional subsidies, which further raised demand.
Higher education: Subsidize demand, inflate tuition
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Federal student loans and grant programs severed the link between tuition and value. When the government guarantees demand, universities raise prices. Administrative bloat expands. Amenities proliferate. Tuition has risen faster than inflation for decades. Progressives respond by demanding more subsidies, which inflate demand further and push tuition even higher.
Progressive policies worsen the “affordability crisis.” The Soviet Union maintained low prices on these necessities, coupled with severe rationing. Progressive command-and-control policies are no different in effect: minimum-wage laws reduce supply by pricing out marginal labor and raising production costs; price controls reduce supply by making production unprofitable. Subsidies to increase demand contribute to the deficit.
Taxing the wealthy reduces saving and investment, making goods scarcer and more expensive. Subsidies increase demand, raising prices when supply is constrained.
Every lever progressives pull to “help” affordability worsens it.
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The inflation illusion
Eventually, voters would figure this out. The progressive solution has been to print more money. The century before progressive President Wilson created the Federal Reserve yielded only 7% cumulative inflation. This included the period immediately before — labeled the age of Robber Barons by socialist writers — which brought rapid growth in real wages. The progressive century afterward delivered more than 3,000%; all the while, politicians blamed business for “price gouging.” The less affordable the “affordability initiatives” become, the greater the reliance on deficits financed with money printing.
Inflation is a tax on consumption and on nominal savings — especially the savings of lower-income households that rely on fixed-value instruments.
The Social Security system illustrates the illusion perfectly. Workers pay a wage tax into a “trust fund” supposedly invested in government securities. In reality, the money is spent immediately on the debt-financed social agenda.
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After 100 years of progressive affordability policy, the results are unmistakable: Prices rise fastest in the sectors progressives regulate most, scarcity is worst where they restrict supply and subsidize demand, and the subsequent inflation punishes the very households they claim to protect. The dog runs faster and faster, but is no closer to catching his tail.
• Kevin Villani is a California-based economist specializing in incentive‐driven policy analysis and institutional economics.