Podcast Summary: “Affordability”: Consumer Concerns and Government Proposals

Podcast: Exchanges (Goldman Sachs)
Host: Allison Nathan
Guests: David Mericle (Chief U.S. Economist), Alec Phillips (Chief U.S. Political Economist)
Date: February 10, 2026

Overview

In this episode, Allison Nathan discusses why “affordability” has become a defining concern in U.S. politics and economics, especially as elections approach. She is joined by David Mericle and Alec Phillips, who offer a nuanced look at the underlying data, consumer perceptions, and the efficacy of government proposals primarily focused on the cost of living, with a deep dive into housing. The episode addresses why high prices remain politically potent even when real incomes have recovered and explores the political and practical limits of potential policy interventions.

Key Discussion Points and Insights

1. Is There Really an "Affordability Crisis"?

[00:36–03:52]

• Current Data vs. Public Perception

  • Real incomes are “more or less back on their pre-pandemic trend,” across income groups, even after factoring in inflation.
  • International comparisons show U.S. incomes—including in poorer states—are higher than in many advanced economies.
  • Despite this, public anxiety about affordability is high, puzzling some observers:
    • “US income, in fact income even in some of the poorer US states is higher than in many other advanced economies.” – David Mericle [01:25]
  • Housing stands out as the key exception—a sector where affordability has truly eroded.

• Why Housing Matters So Much

  • Housing is special because:
    • It’s often a family’s primary way to save and build wealth.
    • Homeownership is “a gateway to social mobility”—better schools and job access often come with access to single-family homes.
    • Rental costs as a share of income are high but not drastically outside historical norms, but mortgage financing costs are at historic highs.
      • “Both the down payment as a share of income and the mortgage financing costs as a share of income are now both quite high by historical standards.” – David Mericle [02:17]

2. Political Response and Public Sentiment

[03:56–08:31]

• How Is the Administration Framing the Issue?

  • Political response has been “reactive rather than...comprehensive,” focusing on specific price flashpoints (e.g., eggs, cars) rather than income policy.
    • “There are just certain things...where it takes time for people to get used to higher prices, even if those prices aren't really increasing very much right now.” – Alec Phillips [04:46]
  • Policy emphasis has not addressed underlying income issues beyond previously legislated tax refunds.

• Disconnect Between Data and Perception

  • Real incomes have caught up, so objectively, purchasing power has recovered, yet “there’s still a lot of frustration with the high level of prices.” – David Mericle [07:30]
  • Many people see income gains as ”something I would have gotten anyway,” and the higher price levels feel unfair:
    • “There is an assumption that the income gains I would have achieved anyway even without the inflation surge. The inflation surge is someone else's fault.” – David Mericle [08:11]

3. Housing Policy: What’s Being Done and Why So Little?

[08:31–12:09]

• Recent and Proposed Measures

  • Administration has taken or floated a few actions:
    • Announced $200bn in purchases of mortgage-backed securities by Fannie Mae and Freddie Mac; expected to lower mortgage rates slightly (by 15–20 basis points). [09:32]
    • Instituted a ban on institutional purchases of single-family homes—mainly for political signaling, not real market impact.
    • Considered, but not adopted yet: Allowing 401(k) withdrawals for home purchases, offering 50-year mortgages, financing home building rather than purchase, and lowering Freddie/Fannie fees.
  • Incremental legislative action possible, such as minor incentives for localities to relax zoning laws for more housing.

• Quote:
  “This is probably not a major factor in terms of pricing or in terms of supply, but nevertheless addressed an issue that was out there politically.” – Alec Phillips on the institutional homes ban [10:43]

4. Why Is Housing So Expensive? Structural Headwinds

[12:09–16:07]

• Quantifying the Shortage

  • Housing is expensive due to both long and short-term factors.
    • Regulatory obstacles—primarily local zoning—greatly restrict building single-family homes.
      • “Because these restrictions are at the state and local level, it’s not a simple one for a new president to come in and try to solve.” – David Mericle [12:58]
    • Stagnant productivity in the construction sector; new homes are still built largely by hand, and technological innovation is limited.
    • Shortage of buildable land near cities, and a lack of skilled construction labor, exacerbated since the 2008 housing crash.

• Memorable Explanation:
  “People still want their homes to be individualistic and to have a lot of construction labor that goes into them...Technological innovation within the construction sector has actually been quite weak over the last several decades.” – David Mericle [14:29]

5. Other Affordability Initiatives: Beyond Housing

[16:27–21:04]

• Prescription Drugs

  • Recent price reductions in Medicaid program and a few broader drug markets, but limited in scope.

• Credit Cards

  • President proposed a 10% cap on interest rates and lower interchange fees; both unlikely to pass.

• Food and Gasoline

  • Food may get more focus; gasoline, traditionally a central political concern, is currently less of a flashpoint.

• Rebates, Tariffs, and Congressional Hurdles

  • President Trump has proposed a $2,000 per-person tariff rebate (little prospect of passing).
  • Potential for reduced tariffs if Supreme Court acts against current ones, but changes likely to be nominal.
  • Most big policy levers require congressional action, which is unlikely in the near term.
    • “Just about everything I mentioned requires congressional approval...Without congressional action, the President's ability to actually implement these things [is] pretty limited.” – Alec Phillips [20:09–21:04]

Notable Quotes & Memorable Moments

• David Mericle [01:25]:
  “US income, in fact income even in some of the poorer US states is higher than in many other advanced economies.”
• Alec Phillips [04:46]:
  “There are just certain things... where it takes time for people to get used to higher prices, even if those prices aren't really increasing very much right now.”
• David Mericle [07:30]:
  “There’s still a lot of frustration with the high level of prices, even though incomes have kept up at least on average.”
• David Mericle [08:11]:
  “There is an assumption that the income gains I would have achieved anyway even without the inflation surge. The inflation surge is someone else's fault.”
• Alec Phillips [10:43]:
  “This is probably not a major factor in terms of pricing or in terms of supply, but nevertheless addressed an issue that was out there politically.”
• David Mericle [14:29]:
  “Technological innovation within the construction sector has actually been quite weak over the last several decades.”
• Alec Phillips [20:09]:
  “Just about everything I mentioned requires congressional approval... Without congressional action, the President's ability to actually implement these things pretty limited.”

Timestamps for Key Segments

• 00:36: Data on affordability and why housing stands out
• 02:43: Why housing is uniquely important for social mobility and wealth
• 04:24: The administration’s framing and focus on prices over income
• 06:43: Why public perception diverges from the economic data
• 08:47: Government actions on housing; MBS purchase and institutional purchase ban
• 12:30: Explaining the housing shortage in detail: regulation, productivity, land, labor
• 16:27: Affordability policy beyond housing: drugs, credit, food
• 20:09: Legislative realities: limits on executive action

Main Takeaways

• The headline affordability crisis is largely about housing, where affordability has deteriorated due to long-standing shortages, regulatory constraints, and lackluster productivity, not just recent price hikes.
• While incomes have generally caught up to price levels post-pandemic, consumer sentiment remains sour—likely due to a focus on the visibility of price hikes and a sense of unfairness.
• Government responses are limited both by the slow-moving nature of housing reform and by the need for congressional approval for most other affordability initiatives.
• Most immediate policy actions (e.g., Fannie/Freddie moves) are incremental and may only have modest effects on the broad problem.

This summary covers all major discussion points and is structured to help you grasp both the substance and the flow of the episode, even if you haven’t listened.