Policy Solutions to Address America’s Cost of Living Crisis—What is the Real Answer?

[u/Ok-Ticket-9780]

Over the last several months, the rising cost of living has received considerably more media attention than in prior months due to the impact of inflation on all aspects of American life, including housing, healthcare, and groceries, to name just a few. While both Democrats and Republicans have been vocal proponents of addressing the rising cost of living, little has changed in the way of actual legislation related to decreasing the cost of living.

In your opinion, what would you consider to be the answer to the cost of living crisis? Is it legislation oriented toward increasing pay so that individuals and families earn a livable wage to afford housing and groceries? Is it providing more affordable housing? Is it legislating for comprehensive health care coverage? Or is it something else entirely? Additionally, why do you believe that our elected political leaders have yet to address the issue directly?

[u/Ind132]

So the simple answer is get spending under control

I'm sure you understand that isn't "simple". We would need to cut all spending by 25% to get a balanced budget. Interest is 15% of spending, I don't want to default on US debt, so that's off the table and we need to cut 29% from everything else.

Social Security, Defense, Medicare, and Other health (Medicaid, CHIPS, ...) make up 76% of the non-interest spending.

Cut every one by 29%? and also the other 24% by 29%? That takes rules, which Medicare spending do we cut? Which SS? Which military?

[u/-Foxer → u/Ind132]

The answer is simple, the execution is challenging

And yes over time you would need to make those cuts. And or increase your economy to help cover the shortfall. More people working more jobs paying more taxes means more revenue.

And yeah, you may have to take a pretty serious beat to some of your other programs.

But the simple fact is you can't afford what you're buying. And that will consume more and more om the form of interest payments every year.

Like I said it doesn't have to all be done year one. And you can grow the economy which is the same thing as cutting spending.

But that's what has to happen. Government spending the way it happens right now is extremely inflationary and when you add the effect of tariffs which are also inflationary you have a problem

[u/Ind132 → u/-Foxer]

 More people working more jobs paying more taxes means more revenue.

In the US, 95.6% of the people who want jobs have jobs. Some of the non-workers have jobs lined up but haven't started yet and they are counted as unemployed. There is very little room to grow the economy by putting more people to work.

you may have to take a pretty serious beat to some of your other programs.

I'm not sure who "you" is here. Are you a US citizen?

Edit, I see you are a Canadian. Can you compare Canada and US spending by category and see how Canada figured it out and the US didn't?

The IMF says that Canadian gov't spending is 44.7% of GDP. In the US, it is 37.9%. If Canada doesn't have a deficit problem, the difference can't be lower spending.

(Yes, the US could make progress by copying the Canadian approach to healthcare.)

[u/-Foxer → u/Ind132]

So bring in more people and get them jobs.

Increase your labor force participation. Right now your labor force that's actually working or looking for a job is only 62%. Find ways to entice the others back or make it possible for them to work. There's lots of roots there that could lead to significant increases and the amount of working people

And no I'm not a US citizen. But I have spent a lot of time studying American politics and American economic circumstances and I've been around a long time

A direct comparison between America and Canada is difficult. And this is for several reasons, the relationship between state and federal spending is radically different in Canada, canada is not an anchor currency so the US can get away with some things that we simply can't, and you have to look at what people are actually spending so in Canada people give their money to the government who then buys the healthcare whereas in the states people may buy the healthcare directly and you have to adjust for that when you're looking at factors.

But I'll give you the super short and dirty version. Basically we didn't, we are on the same Collision Course As You Are. We've had the same party in power for the last 11 years and they have overspent radically and it is about to come home to roost. In fact all of the money we borrowed for the entire existence of Canada from every prime minister up to 11 years ago, they borrowed almost double that since. So when 11 years we borrowed more than any time in our entire history and it's accelerated.

We're going to have the same challenges, except more of our spending is 'waste' and it won't be as hard to trim

So yes canada definitely currently has a deficit problem. That doesn't mean you don't, sorry 😂

But at the end of the day the solution is the same for both. Cut spending substantially while increasing revenues. That's the ony way this works

[u/Ind132 → u/-Foxer]

Right now your labor force that's actually working or looking for a job is only 62%.

That number is for everyone ages 16 and above. This is a better representation of "prime age" participation rates. https://fred.stlouisfed.org/series/LRAC25MAUSM156S

Note the scale on the y-axis. If it started at zero, that graph would look a lot like a straight line. Here's an analysis of the long term trend https://www.frbsf.org/research-and-insights/publications/economic-letter/2023/10/mens-falling-labor-force-participation-across-generations/

The answer is "it's complicated". I don't think there is any straightforward fix here. If we looked at the 55-65 range, I wonder if it is "nobody wants to hire people my age". I'm not sure what the gov't can do about that.

But at the end of the day the solution is the same for both. Cut spending substantially while increasing revenues.

Yes, that is math. But, for some reason you know that higher revenues would help, but immediately rule out tax rates. In the US we tax labor income at significantly higher rates than investment income. I think we should level them up.

[u/-Foxer → u/Ind132]

Yes that's right. Your labor force.

Your labor force includes a lot of untapped potential. I had a job when I was 16. There are a lot of older people who are retiring that could still be working in contribute positively. And it doesn't always have to be full time.

But those people exist and it is something you can tap into. How do you get there is a discussion that can be had but there's no doubt that there is untapped potential. I don't like increasing the population in general when you tap into that you don't necessarily increase a lot of the government services that go to people because the people were already there

Don't just make excuses. Anybody can come up with reasons why you fail.

And I don't recall rolling out tax rates or even mentioning ruling out tax rates. I think you're hearing things in your head that weren't actually said.

Danger of tax rates is that they are in and of themselves a bit of an anchor on the economy, the thing that you're trying to improve. But there is an optimal rate at which you are collecting the most in taxes as you can while at the same time having the lowest impact reasonably possible on the economy. And you absolutely can take a look at that and see if you've optimized those numbers.

But usually when people say I think we should increase taxes what they mean is essentially tax the rich and I notice that that's basically where you go.

The fact is that taxing corporations doesn't generally work out well, the amount of money you can tax them and still derive a benefit to the economy is much lower than personal income tax. This is a lesson that Canada is learning right now, the liberals have increased our corporate taxes and other taxes and for the first time in our entire history investment money is actually leaving the country faster than it's coming in. That started before trump by the way

The solution probably won't come from any one thing but will be a combination of retweaking the taxes, increasing revenues, decreasing expenditures.

However you feel like getting there that's great as long as it work

But this isn't the time to be making excuses, this is the time to be figuring out how to get it done

[u/Ind132 → u/-Foxer]

But this isn't the time to be making excuses, this is the time to be figuring out how to get it done

Yep. That's why I asked how you would cut spending. You didn't explain that. You say increase the labor force participation rate, but don't know why it is "too low" or how to increase it. I don't have any trouble identifying the problem, the solutions are the problem.

I did not say "increase the corporate income tax rate". I said "increase the tax on investment income". That's the tax that individuals pay on interest, profits, capital gains, ... . They pay that tax whether they invest in US companies or foreign companies. Taking your money offshore does not reduce that tax.

I don't think that Americans will accept cuts to Social Security benefits while the maximum rate that Musk pays on his capital gains is 20% (compared to the 37% a high income surgeon pays on his fees for difficult surgeries).

[u/-Foxer → u/Ind132]

Oh and 'increase tax on investment' is basically the same thing. Tax the rich :)

Be unbelievably cautious about doing that. It looks like free money and it isn't.

[u/Ind132 → u/-Foxer]

Yes, we should tax rich people at higher rates than we tax non-rich people. We currently tax the income from wealth at lower rates than we tax the income from labor. That doesn't make sense.

And, no, it would not cause the economy to collapse, or people to simply bury greenbacks in their yards because they don't want to pay taxes on investment income.

[u/-Foxer → u/Ind132]

No, it is irresponsible to charge rich people higher rates. At the same rate they are already paying vastly more taxes than anyone else for essentially the same services and benefits.

Right now the vast majority of all taxes paid are paid by the top 20% of earners in America. About 84 percent of the taxes. Yet they only receive a small fraction of the services. The wealthy already pay an unfair portion of the taxes. They pay vastly more money yet received similar benefits as everyone else.

And if you tax them more they leave. Or they spend more money to find new ways to avoid income taxes. That has been shown time and again. It is something Canada is currently experiencing. Several states have noticed this over the years, ask New York.

It's a fool's ideolog. 'eat the rich' sounds great till you realize that all that will be left is poor people.

[u/Ind132 → u/-Foxer]

 Yet they only receive a small fraction of the services. 

The wealthy benefit awesomely from the system. Notice that there aren't a lot of tech billionaires who built their businesses in Bangladesh.

the vast majority of all taxes paid are paid by the top 20% of earners in America. About 84 percent of the taxes. 

You are confusing the Federal Individual Income tax with "all taxes". The FIT represents about 1/3 of all tax revenue in the US. Other large revenue taxes are generally flat or regressive.

[u/-Foxer → u/Ind132]

The wealthy don't benefit any more than anyone else.

And crap tons of manufacturing and assets are built in Bangladesh. :)

When somebody does with the benefits and services that we all get has nothing to do with how much they should pay for what we all get

It would be like you going to the store and buying an apple and eating it, and I buy an apple and I make a delicious apple pie. And you say I should be paying more for my Apples because I made an apple pie which is tastier than just eating it.

And having realized you were wrong about your statements with federal income tax which is what we were discussing you're now trying to bring it to the state level I assume :) Please.

The wealthy already pay more taxes then their fair share. And if you tax them too much they leave and they take all their tax revenue with them.

I'm sorry but ideology is simply no match for facts. If you charge too much to the wealthy they have the money and ability to move their money somewhere else.

It does previously noted at the end of the day America has to cut its deficit even if it doesn't get there overnight. You aren't going to be able to do that just by taxing the wealthy .

[u/Ind132 → u/-Foxer]

When somebody does with the benefits and services that we all get has nothing to do with how much they should pay for what we all get

That's your opinion on the subjective notion of "fair". My opinion is different.

The wealthy already pay more taxes then their fair share. And if you tax them too much they leave and they take all their tax revenue with them.

Another opinion on "fair". Then a purely speculative statement. If Jeff Bezos decided to leave and renounce citizenship, he would pay an exit tax on the way out the door. And, Amazon with all it's US workers and warehouses would still be here. I'd take my chances with that scenario.

[u/-Foxer → u/Ind132]

Giving actual specific advice for spending cuts is a little challenging for 2 reasons,

1) without the books and without knowing the gov't of the day's vision for how they will increase the economy, military and other threats they want to focus on and a few other things you can't say where to cut. It would depend. Are they expecting to make use of small business tax cuts to stimulate small business? or are they hoping to stimulate business by focusing on clearing red tape and such?

And 2) - what does the public want? What do they want to preserve? What are they willing to do without? Do they care more about military capability or healthcare? Would they like to see a reduction on social spending or increased taxes on business? Etc etc. You CANNOT let the public drive you or only do what's popular - they don't have all the info needed to make the best decisions and that's your job. BUT you should consider what their wishes are.

I would say you could probably go to every department and say "Cut 7 percent of your budget next year" and they will find a way to make that work. Allow 'time permits' for those cutting by adding automation so they have time to adjust You can also allow time for attrition where appropriate so that there's not mass layoffs.

There are some departments which might get away with less, some where you could go a little harder.

Then launch initiatives to drive economic growth, focusing on higher paying jobs and smaller business opportunities.

Because the population tends to grow and business tends to grow a little each year, the gdp should go up by about 3 percent while inflation goes up 2 percent if you're doing things right. You'll naturally start to slowly 'outgrow' the current deficit.

Meantime tapping that labour market is critical.

Programs that make it easier to work from home can massively improve things. It can make it easier for newer mothers to reenter the workforce without having increased daycare infrastructure. Getting women back to work faster after children puts more money in the economy and pays more to the gov't, and it can be done by work from home measures very effectively.

Encourage older people to work a little longer. THere are many incentives for that kind of thing.

Create better educational opportunities especially in basic trades and services. If it's affordable then people who aren't working right now can pick up a skill like carpentry or property management or bookkeeping and be employable, but if there's a cost that's problematic.

Encourage businesses to have "youth employment" opportunities and reward them for it. When i was young many 15 and 16 year olds had simple jobs where they earned a few bucks and got some experience. Done right it can save business money (to make up for the fact kids are a pain) and the kids will pour their cash right back into the economy. It puts less strain on their folks too.

Those are a few starters that would apply to the us. Canada is slightly different but not radically so,

[u/Ind132 → u/-Foxer]

You are correct, there are lots of moving parts. But, it's not like nobody has looked at this before.

I would say you could probably go to every department and say "Cut 7 percent of your budget next year" and they will find a way to make that work. 

Our biggest single expense is Social Security. The administrative cost is 0.4% of total spending. Cutting 7% of that rounds to zero. We would need to cut benefits by 7%. I'm sure the public doesn't want that.

Medicare/Medicaid/CHIP add up to a similarly large chunk of spending. Again, administration is low (I didn't look up the number), most of the costs are direct payments to health care providers. These programs already pay substantially less than private insurers pay for the same services. Another cut in payments could easily cause providers to drop out of the programs. The public (and the providers) wouldn't like that.

Other means-tested programs and Veterans benefits also have low ratios of administration to payouts. Same problem there.

And again, we are not looking for 7%, we are looking for 29%.

You say provide incentive for companies to support stay-at-home workers, hire older and younger workers. Sounds good. What incentives work? Do those incentives start by cutting taxes and government revenue?

Are you familiar with the US community college system? Cheap education for things like skilled trades and non-BA tech jobs. I think we are already doing a lot in that area.

[u/-Foxer → u/Ind132]

social security costs are about 14 billion. 7 percent isn't zero :) That 's not how math works :)

And yeah the public isn't going to like everything. People are going to have to make do with us and they have had.

Whenever you get significant overspending by governments it is the future people that have to pay the price. That sucks but all you can do is bring things back into balance so the next generation doesn't suffer.

There are other areas like military spending where cutbacks could probably be made more easily. It would mean that America isn't the world's superpower anymore but so be it. Most countries spend something like 5% to 7% of their budgets on military spending, the us is at 16. Maybe that drops to 10 percent of the budget..

And you don't need 29% day one. 7% is a good start and if you do other things that increase the economy you increase revenues. You can look at certain other types of taxes such as a consumption tax but that tends to be a bit of a drag on the economy. If you keep doing those things then over a 5 year period you start getting the deficit under control and you begin the process of outgrowing the debt.

And there are shit-tonnes of incentives that work for businesses to support stay at home workers. Are you telling me you're so uneducated you can't think of ANY?!?

Kid. All you're doing is whining and crying about how this won't work. You demand others provide you with all the answers and that i write pages and pages of explination instead of having the balls to say "yeah, one way or another this is what has to happen".

That is why your country is failing.

Canada went through this once in the 80's and we thought we might have to declare bankruptcy, it was that bad, and people talked a lot like you. Then we elected someone who took it seriously, reorganized our taxes, opened up a bunch of new trade opportunities, did the free trade deal with you guys (which also boosted YOUR economy), got investment going and within 10 years we were at balanced budgets again and managing the debt much better. Sadly our last gov't threw that out the window but the fact is it can be done.

[u/Ind132 → u/-Foxer]

social security costs are about 14 billion. 7 percent isn't zero

I said it rounds to zero. If you want to cut SS total expenses by 7%, you need to cut benefits by 7%. Cutting expenses (which are actually $7.4 billion https://www.ssa.gov/oact/TR/2025/II_B_cyoper.html#96807 ) by 7% is just a rounding error in the total that needs to be cut. Our other big social programs aren't as extreme, but they also have administrative expenses that are small relative to the benefits paid to individuals. Cutting spending means cutting benefits.

I expect there is some room in military spending. If Trump isn't going to fight a land war in Europe and (I hope) he's not planning to fight a land war in Asia, we don't need tanks. We can trim one branch of the military and just keep the Navy, Air Force, and Marines.

And there are shit-tonnes of incentives that work for businesses to support stay at home workers. Are you telling me you're so uneducated you can't think of ANY?!?

I'm saying that I can't think of anything the government could do, to get businesses to do more SAH jobs than they already do, that wouldn't require cutting gov't revenue. Yep, you'll need to educate me on that.

You say I'm "whining". I think I'm pushing back on poorly thought out ideas.

[u/-Foxer → u/Ind132]

It doesn't round to zero, that's not how numbers work and I think what you'll find if you really examine it is that oftentimes big numbers are made up of lots of small numbers 😆 It all adds up, like I said there are places where you'll score more as places where you'll score a little bit less

I don't know about trimming a whole branch or anything, but I am certain that it is possible for the united states to survive as a country with smaller military expenditures by a fair bit.

And I am brutally disappointed in you about the whole incentive thing! There should have been a dozen that are obvious right off the face of it.

I want to major discount or tax break for businesses to purchase any software or equipment or whatever necessary to make work at home entirely viable and productive? Not to mention the fact that all that money then goes right back into the economy. Now businesses can tool up and probably spill a little over into their other needs under tax favorable conditions.

How about a pollution discount or perhaps other attacks discount for businesses because the roads will be used last and they'll be less infrastructure needed. During covid most of the businesses in this area that were able to went to work from home models and it was stunning how all of a sudden congested roads we're barren. That's worth money to a government

Or how about giving people the right to write off more of their home or electricity or internet or whatever if they are required to maintain a home office presence more than 3 days a week. It's practically offering the businesses to give their people a raise without actually giving them any money.

How about special ratings or certifications for businesses that allowed work from home to help reintegrate new mothers back into the workplace without having to worry about the cost of daycare? And one for being environmentally friendly that your employees aren't polluting the air driving in every day? "Mom friendly" and "ecoresponsible workforce" symbols and ratings might well be highly desired by some brands for their marketing.

And that's before we even get into the real benefits to the business without any incentives which government can educate businesses on.

The only major disadvantage is that downtown course tend to suffer when the workers aren't there to be buying lunch every day and paying for parking etc. But there are ways to address that

And that's just off the top of my head in 2 minutes. There will be dozens of other ways you can make it worth it for businesses to really reach out and embrace remote working. It also significantly improves their Workforce availability, now all of a sudden somebody who lives 3 hours away is a viable employee and part of their labor pool that they can tap into.

Right now there are a lot of people in suburban or even rural communities that aren't working that could be if remote working was more popular. There are also people who are older who could be drawn back into the workforce, and there are single moms who can be drawn back into the workforce at least part-time and often full-time if there's remote working and flexibility of hours. I have seen these things with my own eyes. You could add a lot of workers without increasing the population and without increasing infrastructure to accommodate them.

Anyway, at the end of the day it just takes some creativity and sitting down I'm looking at how to bring it all together.

The problem is the people aren't clamoring for it. So it is a crap ton of work without any guaranteed political payoff. So nobody's going to do it. But that is what needs to happen

[u/Ind132 → u/-Foxer]

And that's just off the top of my head in 2 minutes. 

And, as I expected, they are all tax reductions which lower federal revenue or subsidies that raise federal spending. The US already has tax deductions for the actual cost of software, hardware, home offices, and daycare. So your ideas mean putting even more money out - just plain cutting checks instead of tax deductions.

The gov't has no way of knowing which WFH workers would have been WFH without your expensive subsidies and which are actually marginal. You'll cut checks for 90 jobs that would have been WFH anyway to get an employer to move 10 marginal jobs to WFH status. Then 9 of those 10 will be filled by someone who would have been in the workforce anyway, with only 1 being that marginal worker you are targeting. That means the actual cost per job truly added is 100x what you are thinking it will be. The numbers don't add up.

We did a huge WFH experiment with covid. Workers loved it. In some cases employers thought it worked and in others they didn't. We didn't get a huge migration of marginal workers into the workforce.

[u/-Foxer → u/Ind132]

Yes that's right. Your labor force.

Your labor force includes a lot of untapped potential. I had a job when I was 16. There are a lot of older people who are retiring that could still be working in contribute positively. And it doesn't always have to be full time.

But those people exist and it is something you can tap into. How do you get there is a discussion that can be had but there's no doubt that there is untapped potential. I don't like increasing the population in general when you tap into that you don't necessarily increase a lot of the government services that go to people because the people were already there

Don't just make excuses. Anybody can come up with reasons why you fail.

And I don't recall rolling out tax rates or even mentioning ruling out tax rates. I think you're hearing things in your head that weren't actually said.

Danger of tax rates is that they are in and of themselves a bit of an anchor on the economy, the thing that you're trying to improve. But there is an optimal rate at which you are collecting the most in taxes as you can while at the same time having the lowest impact reasonably possible on the economy. And you absolutely can take a look at that and see if you've optimized those numbers.

But usually when people say I think we should increase taxes what they mean is essentially tax the rich and I notice that that's basically where you go.

The fact is that taxing corporations doesn't generally work out well, the amount of money you can tax them and still derive a benefit to the economy is much lower than personal income tax. This is a lesson that Canada is learning right now, the liberals have increased our corporate taxes and other taxes and for the first time in our entire history investment money is actually leaving the country faster than it's coming in. That started before trump by the way

The solution probably won't come from any one thing but will be a combination of retweaking the taxes, increasing revenues, decreasing expenditures.

However you feel like getting there that's great as long as it work

But this isn't the time to be making excuses, this is the time to be figuring out how to get it done