As costs keep rising, government has options to help

The word of the moment is “affordability,” as many Americans struggle against the increasing cost of living.

Politicians, particularly Democrats, sense an opening and whether it is New York’s newly elected mayor Zohran Mamdani promising free buses and child care or New Jersey Governor-elect Mikie Sherrill promising to do something about rising electricity prices, politicians are promising to tackle prices that only seem to rise.

So, what can government do? Aren’t decisions about how much to charge for a Big Mac or an F150 pickup truck made in corporate offices and by retailers? Don’t global forces beyond the control of governments determine the price of gas at the pump or the cost of coffee because of things like instability or unfavorable weather?

Well, obviously, there are a number of things. Keeping inflation low helps everyone, but that is largely the job of the Federal Reserve, which is supposed to be independent and above politics. The other side of that is fiscal policy, which, theoretically, is the province of the Congress, which has the power of the purse.

The $1.9 trillion COVID pandemic stimulus bill passed early in the Biden administration kept the American economy afloat and allowed it to recover from the pandemic more quickly, but it was also a significant factor is igniting the inflation that, in part, doomed Kamala Harris’ bid for the White House.

Cutting taxes puts more money in people’s pockets, as the Trump administration has stressed, but it also has led — without offsetting spending reductions — to higher deficits, which push up interest rates.

Governments across the country are tinkering with regulations and other impediments to try to stimulate the building of more housing. It is a simple supply and demand equation. More housing means lower housing prices.

This falls under the term “abundance.” The book by the same name by Ezra Klein and Derek Thompson laments that regulation and legal entanglements keep America from moving forward and building everything from housing to high-speed rail to an expanded electrical grid.

Analyst Dan Wang’s recent book, “Breakneck: China’s Quest to Engineer the Future,” contrasts China — a land of engineers — with America — a land of lawyers — and how China has built itself into a manufacturing superpower that has poured more concrete during President Xi’s 11 years in office than the United States poured in the entire 20th century. Can our governments cut regulations and provide the incentives to get America building again?

What else? Government can use price controls, which distort market forces. It could cut tariffs (something the president just did for certain food items) and reduce trade barriers to increase competition (American cattlemen don’t like the idea of more beef from Argentina). It could increase the minimum wage, which might be inflationary. It can subsidize services such as health care, child care, or energy.

Government could increase benefits, such as the child tax credit that did so much to reduce poverty among the nation’s poorest children during the pandemic. It can increase immigration to provide more workers to build all those houses and staff those child care centers but also more highly skilled workers (which will inevitably provoke nativist howls). It could invest in more research and development and give more grants to bring the brightest students from around the world to American universities.

Perhaps you have noticed that a good deal of the things listed above cost taxpayer dollars. Yep, there’s no free lunch.

All these policy ideas have second- and third-order effects that are not always positive. America has an economy that is perhaps the most dynamic in the world, that nonetheless is unbalanced. In trying to achieve more balance, politicians need to take a Hippocratic oath of sorts — first, do no harm.

• Keith Peterson, of Lake Barrington, served 29 years as a press and cultural officer for the United States Information Agency and Department of State. He was chief editorial writer of the Daily Herald 1984-86. His book “American Dreams: The Story of the Cyprus Fulbright Commission” is available from Amazon.com.