Trump Pivots to Affordability with Sweeping Economic Measures
President Donald Trump has unveiled a barrage of new proposals aimed at addressing the high cost of living in the United States. This marks a significant shift for an administration that previously dismissed Democratic focus on affordability as a hoax. The president's latest moves target housing markets, the oil industry, and personal finance, potentially bringing big changes to American households.
Surprising Phone Call and Credit-Card Rate Cap
On Monday, Trump surprised Democratic Senator Elizabeth Warren with a phone call after she criticized him during a speech about affordability. This came just days after he pitched a cap on credit-card rates that sounded remarkably similar to proposals from the Massachusetts senator's own wish list.
"I told him that Congress can pass legislation to cap credit-card rates if he will actually fight for it," Warren said in a statement following their conversation.
The president has proposed a 10% cap on credit-card rates, an idea he first floated during the 2024 presidential campaign. Recent analysis from Vanderbilt University suggests this measure could save American households roughly $100 billion annually in interest payments, providing significant relief for those carrying high levels of credit-card debt.
Housing Market Interventions
Trump's affordability agenda includes two major housing proposals. First, he wants to ban large investors from buying single-family homes, a move aimed at making housing more accessible to individual buyers. Second, he has directed government-backed mortgage-finance companies Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds.
According to Robert Barbera, a Johns Hopkins University economist, these bond purchases could lower mortgage rates by 0.20 to 0.25 percentage points. This comes as mortgage rates have already eased over the past year, though buying a home remains out of reach for many Americans.
Direct Payments and Oil Industry Plans
The president has floated using tariff revenue to fund payments of at least $2,000 to most Americans. Mark Zandi, chief economist at Moody's Analytics, believes such payments could provide a brief boost to the economy.
Meanwhile, The Wall Street Journal reported that Trump is drawing up plans to dominate the Venezuelan oil industry, efforts he believes could lower oil prices. On Monday night, he posted on social media about his concerns regarding electricity bills and data centers, stating that big tech companies building data centers "must 'pay their own way.'"
Economic Context and Political Challenges
Trump has consistently touted the American economy as strong, pointing to economic growth and low unemployment while giving himself an "A-plus-plus-plus-plus-plus" grade on economic performance. However, he has expressed frustration at Americans' extended sour mood about the economy and their fixation on high prices.
A Fox News poll in mid-December showed the president with just a 39% approval rating on the economy, consistent with other surveys. Prices remain about 25% higher than they were five years ago, with certain items like coffee rising markedly due to tariffs and other disruptions.
"Even though the rate of price increases has moderated, people are still very anxious about the higher cost of necessities," Zandi noted.
Implementation Hurdles and Expert Skepticism
Translating Trump's economic proposals into meaningful, long-term policy faces significant challenges. Most legal experts say Congress would need to approve a credit-card rate cap, and Trump has called on Congress to codify his ban on investors buying single-family homes.
Economists remain skeptical about the proposals' potential impact. "Taken together, Trump's proposals don't add up to much, and the speed with which he can deliver makes it hard to imagine it could play a big role in the midterms," Barbera said.
Michael Strain, an economist at the American Enterprise Institute, offered a mixed assessment. "Will there be a household who finds that their paycheck goes further because of these things? The answer to that is yes," he said. However, he cautioned that some policies might actually make things harder for working Americans, noting that lower-income people could turn to payday lenders if credit-card companies stop offering them cards due to rate caps.
Political Timing and Future Plans
White House officials see a fresh opportunity for Trump to show progress on the economy, even as he directs much attention overseas. Stephen Moore, who has advised Trump on economic policy in the past, observed: "It's clear that his political team is telling him: 'You've got a problem with voters: the cost of coffee and beef and healthcare and housing, etc.' So this is affordability month."
Officials have noted that many tax benefits from Trump's tax-and-spending law will reach Americans' wallets this year, and they expect record tax refunds for the filing season that starts this month. This contrasts with the 2017 tax law, where most people received tax cuts through lower paycheck withholding in ways that were less visible before midterm elections.
Trump faces an uphill battle to give Americans a reprieve from prices ahead of the November midterm elections. Officials said they expect more proposals at the World Economic Forum in Davos this month, and Trump is scheduled to visit Detroit on Tuesday, where he will give a speech on the economy and visit a Ford plant.
