Morning all. Rather than my typical morning post today you will be getting two new interviews we’ve conducted in recent days. The first is with our friend, economist Dr. Rob Shapiro (this one). The second, slated to come this afternoon, is with a terrific candidate for the US House, Mayor Paige Cognetti, running in PA-10.
I asked Rob to come by yesterday discuss a new essay he’s written for the Washington Monthly called "Affordability: How Trump Has Made It Worse.” It’s a very thoughtful deep dive into the topic of the moment - affordability - and how Trump’s policies, contrary to what he promised, have made it worse. A video recording is above and a transcript can be found here.
In our conversation here’s how Rob sums up what Trump has done:
Most of the discussion about affordability focuses on prices, but prices are only half the issue. Affordability is the intersection between increases in prices and increases in income. If your income goes up 10% and prices go up 5%, you don’t have much of an affordability problem. But if prices go up 10% and your income only goes up 5%, you do.
Another important point is that people have a kind of “muscle memory” about inflation — their perception is not about the last month but about the last several years. In this case, it’s really about the last five years. From right before the pandemic to today, prices overall have risen about 25%. Some categories have risen far more: housing, rent, and food are up 31%; electricity is up 37%; beef is up 55%.
A few things rose less than average — prescription drugs only went up about 6%, gasoline about 15%. But the categories people rely on most — food, electricity, and housing — are all outpacing overall inflation. That helps explain why people feel there’s an affordability crisis.
The other half of affordability is income. Over this five-year period, the median income of American households after inflation is flat. It’s almost exactly where it was in December 2019. Earnings have barely increased — less than 1% after inflation — and that’s true across every education level. The worst hit are professionals and people with graduate degrees, whose real earnings actually declined slightly.
Yet during this time, productivity in the overall economy increased more than 10%. Normally when productivity rises, workers’ earnings rise as well. That didn’t happen. So where did the gains go? Into capital income — interest, dividends, capital gains.
And capital income is extraordinarily concentrated: 88% of it is captured by the top 10%, 52% by the top 1%. Capital income grew 30% over this period. That’s where the productivity gains went.
The government also subsidizes many of the areas people associate with affordability: food (through SNAP), health care (through the ACA and Medicaid), and energy (through support for renewables and tax breaks for oil companies).
What has the Trump administration done? It cut food subsidies, slashed health care subsidies, cut energy support, and raised prices directly through tariffs. Everything they’ve done has made the country less affordable. I say we live not in a MAGA country, but a “MALA” country — Make America Less Affordable.
On top of that, the administration used the money it “saved” by cutting SNAP, Medicaid, and energy programs to fund tax cuts for the people who receive that capital income that surged 30% while everyone else’s earnings stagnated. That is the American affordability crisis.
As a follow on to my post yesterday about Trump’s malevolent and traiterous “Russia First” agenda, we do a deep dive into the central role his tariffs are playing in that strategy. An excerpt:
SIMON:
I’ll add one more piece. This abandonment of working people and the middle class in favor of an oligarchical class is reinforced by how Trump is trying to move the tax burden away from wealthy people and onto working people. He talks openly about wanting to go back to a world before the income tax because he and his friends don’t want to pay capital gains or income taxes.
Tariffs are essentially taxation without representation. They raise prices, but they’re also a tax — a tax borne disproportionately by working people. Wealthy people can absorb a 5–6% increase in grocery prices more easily. So tariffs shift the tax burden downward. It’s a structural reordering of who pays for government. It’s an audacious and obvious betrayal of working people.
ROB:
I would call it counter-revolutionary. It reflects a different vision of society and who matters. It’s radical for a nation founded on the self-evident truth that all people are created equal. To reverse that principle is very radical. And he is backed by a movement — which is the only way to undertake radical change. The only way to counter a movement is with a counter-movement. And I know that’s part of your mission, Simon.
SIMON:
Let’s drill down on tariffs. Republicans understand how bad the political environment is for them next year. If Trump wanted to soften the politics, reversing the tariffs would be the obvious move. But he won’t. The tariffs weren’t passed by Congress. Courts have found them illegal. The Supreme Court might agree. But he’s wedded to them despite the political pain and economic harm.
Why? Because tariffs are central to everything he’s doing. They help unravel the entire post-WWII economic system, which spent 80 years lowering tariffs. Tariffs were treated almost like economic weapons — they were harmful, destabilizing, and contributed to past global conflicts.
His wildly aggressive tariffs violated trade agreements, including Senate-ratified treaties with our closest allies. Let’s talk about the broader harm to our national interests.
ROB:
To understand the damage, look at the history of tariffs. Starting in the 1950s under the General Agreement on Tariffs and Trade (GATT), the U.S. unilaterally cut tariffs as part of the post-war world order. These cuts supported U.S. Cold War strategy — they tied allies to us economically.
The unraveling of that regime — imposing global tariffs at the highest levels since the 1930s — undermines not just prices but the character of our global alliances.
We do not trade with our enemies — Russia, Iran, North Korea. Tariffs affect our allies, creating fissures in relationships that have maintained world peace. This aligns with his attacks on NATO and even the new national strategy saying the U.S. will support far-right anti-immigration parties across Europe. That’s another breach in alliances — another crack in global stability.
SIMON:
Exactly. The tariffs are part of a central project: dismantling the American-led global order that won the Cold War and kept America prosperous. Instead of making America great, he’s unraveling the system that made us powerful, wealthy, and free.
This is why he holds onto the tariffs even though they hurt him politically: they accelerate the collapse of the global system America built.
This is a very comprehensive discussion with one of our leading Democratic economists of this era. Check out Rob’s article and our conversation when you can. Promise they will be worth your time.
Other Hopium fare for your weekend reading and viewing pleasure:
Remember you can find all of our interviews and podcasts on the Hopium site under the Podcast tab and on YouTube, Apple Podcasts, and Spotify too.
Keep working hard all, and remember Hopium is hope with a plan. We don’t just hope tomorrow will be a better day. We do the work to make it so - Simon
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