Nostalgia has a way of distorting reality. Many Americans look back fondly on an era when small-town main streets thrived, and business owners knew customers by name. In today’s economy, where families struggle with rising rents, childcare costs, and the challenge of maintaining work-life balance, it’s understandable to yearn for simpler times. But the truth is more complex. While some costs have risen sharply, others have declined. The lesson for policymakers is clear: addressing the cost-of-living crisis requires targeted, fact-based solutions—not sweeping industrial or foreign policy interventions that could make matters worse.
For years, headlines have warned that millennials will be the first generation to fare worse than their parents. While some data support this claim, the full picture is more nuanced. Despite concerns over stagnant wages, the Federal Reserve reports that real median household income has increased by more than a third between 1984 and 2023. Research out of Cambridge suggests that the real issue is growing inequality within the millennial generation—while some have prospered, others have fallen further behind. This disparity requires precise policy interventions, not a broad-brush approach that ignores economic realities.
Unfortunately, the current administration has leaned into protectionist policies—namely tariffs—as a response to economic anxiety. Yet research from the New York Federal Reserve, shows that tariffs raise prices across the board, making everyday goods less affordable. Higher import costs allow domestic producers to increase prices without fear of losing customers, and the added cost of manufacturing inputs further drives up prices. Rather than using trade policy as a blunt instrument, lawmakers should focus on the sectors where costs are rising most dramatically.
While the cost of some goods has declined over time, housing has become increasingly unaffordable. This is not just a problem for urban centers; it is a nationwide crisis. In 2022, the ratio of the median home price to median household income reached a record high since the 1970s. The National Association of Home Builders (NAHB) found that low-income households would need to spend a staggering 76 percent of their income to afford a median-priced home.
Housing is the single largest expenditure for most Americans, taking up about a third of household income in 2023, according to the Consumer Expenditure Survey. Transportation, the second-largest category, accounts for just 17 percent. When housing costs rise disproportionately, they drive the broader cost-of-living crisis—even if other expenses remain stable or decline. Addressing this issue requires targeted housing policies not mandates of protectionism.
A blunt approach focused on bringing back the good ole days misses the reality that, certain sectors have seen meaningful affordability improvements. Food, for example, has become significantly cheaper over time. In 1947, roughly 25 percent of household income was spent on store-bought food; by 2022, that figure had dropped to just over 7 percent. Household furnishings and other consumer goods have also become more affordable, demonstrating that market-driven efficiencies can deliver real benefits to consumers.
Rather than undoing these gains with protectionist policies, lawmakers should focus on policies that sustain affordability and expand consumer access. Two areas where federal policy could make a meaningful impact are corporate tax rates and import exemptions.
Lowering the corporate tax rate—from 21 percent to a proposed 15 percent—has been framed by critics as a giveaway to big business. But research shows that corporate tax hikes often translate into higher retail prices, as businesses pass increased costs onto consumers. A targeted tax reduction could help keep prices low while spurring economic growth.
Similarly, maintaining the de minimis import exemption—allowing goods valued under $800 to enter the U.S. duty-free—is critical for consumer affordability. This exemption enables Americans to access inexpensive goods from abroad, reducing overall costs. Earlier this year, even a temporary suspension of de minimis exemptions led to massive shipping backlogs and higher logistical burdens. Some lawmakers argue that eliminating this exemption would curb China’s economic influence, but the real impact would be felt by American consumers, who would face higher prices and reduced product availability.
The cost-of-living crisis is real, but it is not universal. While some sectors have seen steep cost increases, others have become more affordable. Lawmakers must resist the temptation to use this crisis as a justification for sweeping industrial or foreign policy changes. Instead, they should take a data-driven approach—targeting the true cost drivers, such as housing, while preserving and expanding affordability gains in other areas. A scalpel, not a hammer, is what’s needed to address the challenges Americans face today.
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