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Governments are mishandling the affordability crisis

49 points andsoitis 1 hour ago 49 comments

Avicebron 1 hour ago | parent

https://archive.ph/Xr9fz

WarOnPrivacy 43 minutes ago | parent

I appreciate this. I regularly catch hostility from TE when I visit; today it was the unsatisfiable captcha.

AtlasBarfed 1 hour ago | parent

It's almost like they are run for the benefit of the ultra rich...

Let them eat cake.

cowlevel 1 hour ago | parent

The buck stops nowhere any more and I hear it's approaching the speed of light. The government is the ultimate legal power though, and whenever bad stuff is legal we all know who made it legal.

It is not "mishandling" the affordability crisis - it created it and actively maintains it. Most recently and least subtly by bombing and blockading all the places that we get oil from, in an economy that was deliberately designed so it can't do anything without oil.

taylortbb 58 minutes ago | parent

> They should lift incomes, not suppress prices

I think this misses the psychology of inflation.

If wages go up 20%, and prices go up 15%, everyone is better off and got a 5% raise, right?

Go poll people that experienced that and they won't tell you they're celebrating being 5% richer, they'll tell you they're outraged about the 15% inflation.

Psychologically they'll believe they earned that 20% raise through hard work. Putting in extra hours to get that promotion. But then the inflation robbed them of their 20% raise, and turned it into a measly 5% raise. They'll be outraged.

Politicians get this. No one will credit politicians for raising average wages, people will believe they earned their raise themselves. But there's lots of votes available for lowering prices.

manlymuppet 50 minutes ago | parent

I think this is part of the article's point. Raising incomes to combat affordability problems is far better for everyone involved than lowering prices artificially.

But like you said politicians get less credit for the the former than they do the latter, and thus we have the current situation of continued bad policy decisions.

The article isn't denying that lowering prices is politically effective--I think that's undeniable at this point--just that doing so is probably the wrong call.

taylortbb 23 minutes ago | parent

Fair, it does touch on that issue towards the end. But I think it deserves more than a couple sentences acknowledging (but proposing no solutions to) the issue in the last paragraph, given IMO it's basically the entire issue with their proposal.

Sevii 46 minutes ago | parent

There is no 'wages go up 20%'. That's not how the economy works. Wages are renegotiated on an annual basis and most people have to job hop to get anything close to a 20% raise.

Inflation affects everyone rapidly. But to get the claimed wage increase people have to do work to find new jobs.

fcarraldo 44 minutes ago | parent

Outside of tech, seeking a 20% increase would be relatively uncommon.

Loughla 37 minutes ago | parent

I don't work in tech, and hopping jobs will get you 5% at most, usually. Maybe it's because I'm in the public sector and wages are public information? Either way, it always comes across as VERY out of touch when people here talk about massive increases just by changing jobs.

alpinisme 23 minutes ago | parent

Not to mention how casually they talk about changing jobs. As though there weren’t pressures (and desires) keeping people at one workplace, and that those people form a large enough percentage of the population that their resentment of inflation has political force.

manlymuppet 44 minutes ago | parent

It was only an example though, not a claim.

I think you're being overly critical here.

pasquinelli 36 minutes ago | parent

yeah but it's not a great example, because actually wages aren't going up. maybe people would be able to psychologically handle inflation if it wasn't out-pacing wages. actually, now i think about it, that's not psychological at all, so the whole premise is kind of out the window, isn't it?

manlymuppet 26 minutes ago | parent

Though I disagree with your conclusions, that part is irrelevant to whether the example works.

An example is not bad simply because it's unrealistic. I'm sure you've heard plenty of examples which allow you to understand the main point without being perfectly representative.

The point of this example in particular was to illustrate how wages work alongside inflation. As long as you understand the point--that inflation is relative--the specific numbers don't matter.

austin-cheney 32 minutes ago | parent

That falsely turns your experience into an imagined generality.

There was one year I received 3 raises at Travelocity and nearly doubled my compensation. I was hired as a web designer and after 3 months was involuntarily reassigned to a developer role and told to “figure it out”. I got a negative annual review that year and then ended up in Afghanistan on a military deployment. When I came back to Travelocity I was still classified as a developer but was reassigned from marketing to product development where to wages are higher, but I was earning as a junior designer. After eagerly looking for other internal jobs they gave me a raise to catch me up. Several months later I was promoted to a senior developer position and became the company A/B test engineer, which also came with a raise. A little after that another company gave me a better offer and Travelocity countered. This was like a million years ago.

Because most of my career is in writing JavaScript if I want to continue to increase my wages I would have to do the most beginner level shit work because that is common expectation for JavaScript developers.

Supermancho 27 minutes ago | parent

> That falsely turns your experience into an imagined generality.

> There was one year I received 3 promotions at Travelocity and nearly doubled my compensation. I was hired as a web designer and after 3 months was involuntarily reassigned to a developer role and told to “figure it out”.

This is obviously an aberration where you are doing exactly what you claimed the gp did.

Moving jobs is the single best way to get a raise and has been for decades. Leveraging the experience at a company (which is relatively static) for a higher wage at another where that new and different experience has more value.

Notably, how company leadership changes are less likely to be from internal candidates than a transplant from another company.

taylortbb 25 minutes ago | parent

> There is no 'wages go up 20%'. That's not how the economy works. Wages are renegotiated on an annual basis and most people have to job hop to get anything close to a 20% raise.

The example was not meant to be a single year. Over the 2020-2024 timeframe we did see movements around that size (though the gap between average wages and inflation was smaller than my example, where I rounded the numbers).

slopinthebag 40 minutes ago | parent

i don't think this is really true. people don't complain about an abstract concept of inflation, they complain that they can no longer afford things they once could. if wages really did practically increase by 5%, they could afford more things and have more money left over at the end of the month, and that is what they would notice.

politicians can't really affect wages the same way they can temporarily and artificially lower prices. but they also understand they need inflation to get elected, since you generally win elections by what you promise, not what you don't promise.

AnimalMuppet 35 minutes ago | parent

Don't forget about taxes. Things cost 15% more, wages go up 20%, but the government takes a chunk of that 20%. Do you net even 15%? Depends on your tax bracket.

adjejmxbdjdn 11 minutes ago | parent

If wages go up 20%, your post tax income should also go up by approximately 20%.

The exceptions are if you enter a new tax bracket, but that only affects your marginal dollars, sns even then, the increase in tax brackets is just a few percent.

In the U.S., you could also cross the SS/Medicare threshold and then suddenly your post tax earnings will go up more than your wage increase.

Post-tax wage changes shouldn’t differ too much from the pre-tax wage increase.

YZF 31 minutes ago | parent

The article is behind a paywall :(

Having lived through hyper-inflation the only thing that got that under control was price controls. Wages going up can't stop inflation - they fuel inflation. Inflation psychology is that your money is going to become worthless so you don't save it, you spend it, which keeps prices going up. It wrecks havoc on loans and debt as well. If you lent money with a fixed rate hyperinflation erases your returns. If you borrowed with a fixed rate your debt is effectively erased.

Not to mention that governments in general don't control incomes. They can lower taxes (which is good IMO). They can pay government employees higher wages (which is hard to do when you lower taxes).

At the end of the day governments make things better by making smart investments (or policies that enable smart investments) and make things worse by making bad investments (or policies that lead to bad investments). Everything else is second order effect.

underlipton 22 minutes ago | parent

When wages go up 20%, they go up 50% for the top quintile and 5% average for everyone else (or whatever the math is, preserving the general proportion). When prices go up 15%, they go up 50% on mandatory expenses and 20% on discretionary spending, and the basket of goods used to index inflation for both is massaged until it looks like a 15% increase overall.

That said, your assessment of the psychology of inflation is correct. It's just inapplicable here. The issue isn't people not understanding how much richer they are, because they're not. It's the intelligentsia and "elite" refusing to acknowledge the reality, because they'd then have to actually make material changes, which would reverse the siphoning of wealth from the middle class that they've been engaging in for at least the last 30 years.

komali2 22 minutes ago | parent

> Psychologically they'll believe they earned that 20% raise through hard work.

Well, it's not just that. They've been telling us for decades that wages are alternatively a direct reflection of the value of our labor to the company, or, a price set by the market, depending on which is cheaper for the corporations.

Kind of like when people say that UBI would simply instantly raise the price of all rent to match. Oh, really? The supply of rentable units will suddenly have decreased? The demand will suddenly have gone up? No? Odd that the "market set price" responded then.

slopinthebag 58 minutes ago | parent

the affordability crisis is downstream of inflation. governments should stop inflating the money supply, but of course they won't ever do this because they would then need to generate revenue another way, which would be to raise taxes. inflation is really just a hidden tax and it's easier for them to "tax" without pissing off citizens.

and so really the solution is to reduce spending. which, to some extent, is so obvious it kind of hurts.

sdf4j 46 minutes ago | parent

The consequences of reducing spending are also obvious, I won’t call it a ‘solution’ given how bad they hurts.

1270018080 41 minutes ago | parent

This is the most impactful economic discovery of the century. You can raise taxes as much as you want if you add a layer of seperation to it and print currency.

manlymuppet 36 minutes ago | parent

Well, a little bit of inflation is actually good for the economy long term, and we have to balance that with the opportunity of cost of not spending.

Yes, the amount of government spending currently is likely too much, but by not spending the opportunity cost is sometimes greater. As the article contends, the solution to the affordability problem is to raise wages. If you can use the levers of government to induce growth that naturally raises wages, more deficit spending might be worth it.

t0mpr1c3 36 minutes ago | parent

Nobody wants to go back to the gold standard.

Inflation is useful. So is deficit spending in a growing economy.

> Inflation is really just a hidden tax

No it isn't. The idea that the government should fix the value of money -- and that if it does otherwise it is stealing out of your pockets -- is goldbug crank territory.

If inflation was a tax, then deflation would make people richer. It doesn't. Deflation is very damaging to the economy, and avoiding it is more or less the number one goal of economic policy.

missedthecue 19 minutes ago | parent

Deficit spending is not universally able to create wealth. It can when invested in durable infrastructure at reasonable prices that increases productivity of the economy. But when countries borrow to pay pensions and other transfers, it destroys wealth and makes society poorer.

t0mpr1c3 15 minutes ago | parent

I agree that inflation and deficit spending can be bad. But neither is always bad.

joshuahaglund 33 minutes ago | parent

What's wrong with taxing the rich to maintain current spending?

denkmoon 29 minutes ago | parent

That the rich don't want to be taxed, obviously. and manage to convince a voting plurality that they shouldn't.

IG_Semmelweiss 26 minutes ago | parent

Confiscating the wealth of all U.S. billionaires (~$8 trillion) would fund federal operations for roughly 9 months...1-time only.

After that, the money is gone.

The underlying problem of high, persistent government spending remains. This isn’t primarily a “tax the rich” problem.

missedthecue 24 minutes ago | parent

Laffer Curve. Depends on the country but France for example already takes 44% of their GDP as tax, runs heavy deficits, and attempts to make up the difference by increasing taxes on the wealthy causes them to leave.

At some point they'll need to do austerity.

underlipton 11 minutes ago | parent

It's well-established that Americans are much earlier on the curve than wealthy people would like to believe. Mamdani Doctrine: ignore the part of your brain screaming rich people double consciousness and just do what's right for and fair for most people. At this point in history, that's taxing wealthy people - including paid-off-6k-sq-ft-house-with-2-people-in-it pensioners and $200k-a-year-living-paycheck-to-paycheck-in-a-coastal-metro yuppies. Yes, there'll have to be some tough decisions; austerity, indeed.

BLKNSLVR 56 minutes ago | parent

A group of people unaffected by a problem will rarely correctly handle the problem. And the further they are away from it, the further from 'correctly handle' will be their handling.

Most of the people responsible for Government decisions are fairly well insulated from most crises, hence the crises will continue and grow.

georgemcbay 45 minutes ago | parent

> Most of the people responsible for Government decisions are fairly well separated from most crises

A lot of the time it is actually even worse than this in that they are often in a position to benefit from the crises.

The real major economic problem of our day is the extent to which labor's share of productivity gains have plummeted and continue to plummet.

If your wealth comes from capital everything is going gangbusters and nothing needs to be fixed. Just listen to Trump talk about the economy and how blind he is to how normal people experience it.

And AI is just going to supercharge this problem.

BLKNSLVR 24 minutes ago | parent

Going way off topic here but, how can we expect AI 'alignment' when even country leadership doesn't align with the people any more?

On a relate-able scale, look at the 'alignment' difference between a worker and their manager; between an SWE and someone in mangement a couple of levels above. They're a different species, in terms of 'alignment', generally. They don't even speak the same language.

(I'm being hyperbolic, but hopefully the core of what I mean comes across).

expedition32 40 minutes ago | parent

The Dutch government doesn't have the power to make America, Russia, Israel behave civilised. They would if they could.

As it is we have to live with it. Enduring the barbarians.

BLKNSLVR 31 minutes ago | parent

The difference being that the Dutch Government isn't meant to be responsible for the civilised behaviour of other countries.

Governments, however, are responsible for responding to crises occurring in the areas they are elected and paid to govern. But increasingly they behave like lords over subjects rather than representatives of the group.

komali2 16 minutes ago | parent

The Dutch government could protect its sovereign interests apart from the USA - for example by legalizing decompilation and antagonistic interrop with American software, or reverse engineering of American hardware, or suspension of copyright and trademark protections for American businesses. Dutch Mickey mouse cartoons for everyone!

There'd be short term economic repercussions when America throws a tantrum, but whose fault is it that this could significantly harm the Dutch economy? Better to rip off the band-aid.

oatmeal1 53 minutes ago | parent

The majority of the affordability crisis stems from car dependency and excessive need for infrastructure due to bad zoning policy.

cheonic4040 45 minutes ago | parent

> The majority of the affordability crisis stems from car dependency and excessive need for infrastructure due to bad zoning policy.

New York City is one of the most expensive places in the world. Housing is more expensive than SF.

No cars needed in NYC, yet expensive as hell.

1270018080 38 minutes ago | parent

NYC, and a handful of neighborhoods from the other top 5 cities, are the only places in the entire country that have semi-functioning urban design. The entire population of America who wants human centered urban design only have a few square miles to pick from. So of course the cost of living will be high.

supertrope 21 minutes ago | parent

oatmeal1 is right. The largest components of most people's budgets are housing and transportation. Restricting new construction constricts new supply which results in rent/mortgage payments being higher than they need to be. Zoning which makes driving easy and anything else very hard makes buying and maintaining an automobile a de facto necessity. It also exposes you to oil shocks.

Herring 27 minutes ago | parent

> They should lift incomes, not suppress prices

Redistribution is a left-wing policy. A lot of elected governments went right-wing recently. It's as simple as that.

The issue is not "governments". This is what the voting public wants.

newCrotchSmell 23 minutes ago | parent

They should outlaw financial engineering of human agency and build decision models development and deployed within full public view that bubble up for vote national, regional, or local initiatives

But since government is a euphemism for the more verbose "humans whose biology drives them to select self" they will continue to mishandle the "affordability crisis" by propping up its roots, doing nothing to stave off future gilded ages

verteu 15 minutes ago | parent

The article is light on concrete policy suggestions.

One possibility is "adjust the minimum wage for inflation," but they seem to be against this: https://www.google.com/search?client=firefox-b-1-d&q=the+eco...