E (3:55)

I hope they're not trying to build up again, because if they are, we're going to have no choice but very quickly to eradicate that buildup.

B (4:03)

Israeli officials and independent analysts say Iran is reconstituting its ballistic missile program, and Netanyahu is eyeing the resumption of military operations against the country. Meanwhile, Iran's regime is facing new internal pressure. Protests have broken out in response to a worsening economic crisis that's seen the Iranian currency shed 60% of its value since June's war with Israel. That's undermined people's savings and raised costs as inflation grips the country, while water and power shortages add to the crisis. And LA is embracing rent control. Starting in February, rents on most of the city's apartments will only be able to increase by 1 to 4% a year, down from the current limit of 3 to 8% that dates back decades. Mayor Karen Bass, a Democrat, backed the changes, which come amid a deepening national debate over the effects of price controls. And let me just say that we all know that the problem facing the nation and most certainly facing our state and city, is affordability. And at the core of affordability is the price of housing. Landlords and developers opposed the tightened rent controls, saying they'd make it harder to manage rising costs and attract investments. Coming up, we'll jump from LA to DC where affordability is shaping up to be a key campaign theme heading into a midterm election year. That's after the break. What's driving the markets this week. What's on investors minds as they look ahead? Find out on the Markets podcast from Goldman Sachs. A breakdown of market moves and macro signals in 10 minutes or less. The Markets podcast from Goldman Sachs. Listen now. Midterm campaign season is practically upon us. And with polling showing that voters say they view the economy negatively, affordability could emerge as a major talking point as Republicans try to hold on to the House and Senate. So what can a president do to address high prices in the first place? And what moves could we expect to see in the months to come? To consider that, I'm joined by Wall Street Journal chief economics commentator Greg Epp, as well as White House reporter Meredith McGraw. Greg, President Trump, the mayor elect of New York, zoran Mamdani, and LA's mayor. As we just heard about there, they've all been talking about affordability lately. What are they picking up on?

E (6:58)

Affordability is a somewhat vague word. It doesn't just refer to the cost of what you buy, but also the income, the resources you have to buy those things. If you actually look at the data, there isn't a lot going on with affordability to freak out about. Inflation when Biden left office was around 3%. Today, it's still around 3%. Incomes are growing about 3.5 to 4%, depending on the measure that you use. So by that very basic measure, affordability is improving. People's incomes are growing faster than prices. The reason I think it has become a buzzword is that a lot of folks were shocked by how much prices went up in the initial aftermath of the pandemic. And they still are hoping that prices will actually go down for outright deflation, which is for prices to fall. And historically that almost never happens except when we're in a depression. And it's not going to happen now.

B (7:54)

I guess people also voted in a new president expecting change, expecting new policies in Washington to maybe break the pattern there that you talked about of inflation of around 3% carrying through from Biden to Trump.

E (8:06)

Well, yes, Trump was happy to campaign on the affordability crisis, accusing Biden of presiding over the highest inflation in history. That was not true. Saying things like the price of bacon had gone up four or five times. That was not true. I mean, there's a lot of research to suggest it was probably the number one reason that Trump was able to defeat Kamala Harris last fall. But, you know, you live by the sword, you die by the sword. People are saying, wait a minute, why are prices still going up? And they're saying, Mr. Trump, this is Your economy. Now, where's the beef?

B (8:38)

Figuratively and literally speaking, Meredith, this is a perceptions game, politics. It matters what people feel. And the polling shows this is a potential vulnerability for those in office.

C (8:49)

President Trump talks all the time about how prices are coming down or America's economy is the envy of the world. But that just doesn't line up with how a majority of Americans actually feel day to day. I recently talked to the president about this, and he acknowledged that affordability is an issue in the upcoming midterms. And he talks about the investments he's brought to the US the fact that it'll take some time for voters to feel their effect, or that he thinks prices will be in better shape in the next half of the year. But this is going to be a big problem for Republicans moving forward. It's something that Democrats are really centering their campaigns around.

B (9:30)

Greg, what could President Trump do to tackle the affordability crisis?

E (9:34)

I'll start off with one thing that he could not do, which is to raise tariffs. There's a lot of debate about how much tariffs have added to inflation, but there's not much debate that the number's positive and that if you stopped imposing tariffs, you would probably have lower inflation. And the president himself implicitly acknowledged that by rolling back some tariffs, such as on coffee and bananas. There are things you can do on the income side, and the president is indeed doing some of those. We are going to see the tax provisions of the Republicans mega bill from this past summer kick in, and that will include things like a reduction of taxes on tips on people over the age of 65, things like tax deductibility for certain automobile leases, expanded deductions for state and local taxes, and so on. So to the extent that that raises some people's tax incomes, that'll help with affordability.

B (10:23)

Meredith Gregg has previewed there a few options the president has. What are you hearing about?

C (10:28)

One of the things I did ask him is if he would lower tariffs on any additional goods, but he wouldn't say. But we have heard Treasury Secretary Besant say that there could be refunds from the tax cuts in Trump's big bill. And you know, they've tried to do things like aid packages for farmers. They've cut back certain regulations. And a big thing for Trump, too are some of these investments that he's bringing to the US And I think we're going to see more of those in the coming year. But when we'll actually see that have any notable change or impact of how voters feel about anything, I think is yet to be seen.

B (11:07)

I've been speaking to Wall Street Journal chief economics commentator Greg Ip and White House reporter Meredith McGraw. Greg, Meredith, thank you both so much.

E (11:15)

Thanks for having me.

C (11:16)

Thank you.

B (11:17)

And that's it for what's news. Today's show was produced by Pierre Bienname and Julie Chang with supervising producer Tali Arbel. And I'm Luke Vargas for the Wall Street Journal. Heads up. We'll be publishing just one show a day through Friday. We'll be back with a new show tomorrow. And as always, thanks for listening.

A (11:49)

In a world full of noise, long term thinking stands out. On the Capital Ideas podcast, Capital Group leaders explore the decisions that matter most in investing, leadership and life. It's a rare look inside a firm that's been helping people pursue their financial goals for more than 90 years. Listen to the Capital Ideas podcast from Capital Group, published by Capital Client Group, Inc.