The electorate complained about the economy and inflation, but the real source of discontent was – and continues to be – affordability.

In the aftermath of the election, I’ve seen and heard plenty of breast beating and Monday morning quarterbacking about why the Democrats did so poorly. Most of what I’ve seen acknowledges that the Democrats failed to effectively address the concerns and apprehensions of those who feel left behind, economically; but thus far, I’ve yet to see any concrete suggestions as to how Democrats should re-define themselves or their messaging.

Here's my take: In my opinion, the centerpiece of the Democratic agenda should be allowing working families to keep more of what they earn, thereby enhancing their capacity to build wealth.  I see this widespread lack of savings as being the heart of the problem. According to a recent survey by Nerdwallet, 57 percent of Americans identify as living paycheck-to-paycheck. Even if this self-reporting is somewhat exaggerated, it certainly justifies the conclusion that affordability is a paramount concern for a large segment of those who have become disaffected with the Democratic party. 

To my mind, when the media report about discontent on the part of voters with the pace of inflation and the direction of the economy, they get it wrong. The true source of discontent is affordability.  Democrats can point to a host of objective data that reflect improvements in the general economy and inflation; but the real progress that has been made in those areas over the last several years hasn’t translated into improvements in affordability – nor should we expect that. We can see improvements in inflation without seeing improvements in affordability – which is exactly what has happened. To be clear, inflation certainly exacerbates the affordability problem, but lowering the rate of inflation does nothing to bring down the cost of bread or gas or housing; and these high prices are the reason for the discontent.

Affordability should be the Democrats’ focus to the exclusion of virtually anything else. Just as Trump brought every question back to the issue of immigration and border security, Democrats should bring every discussion back to affordability. Congress, under the prodding of the Democrats, could attack the problem of affordability directly by calling for workers to keep more of what they earn.  I’m advocating for a structural change in our tax law that does just that by exempting a substantially higher amount of income from federal income taxes than is currently allowed. 

In an earlier posting, I proposed exempting the first $100,000 of income for each adult from federal income taxes.  The idea would be to tax incomes above that exemption threshold at marginal rates sufficient to make up for the shortfall.  My two primary conclusions under the design of the example that I had constructed for that post were the following:  First, the break-even level of income for jointly-filing taxpayers would be roughly $500,000, where families earning this amount would be paying about the same amount of taxes that they currently do.  Lower income families would get a tax break; higher income families would pay more.  And second, the tax saving for the lower income families would initially rise as income rises, but it would peak at roughly $35,000 for joint filers having incomes around the $200,000 level. Thereafter, as incomes rise further the size of the tax break would converge toward zero as incomes rise to around $500,000.

Do I expect anything like this to be enacted while Republicans control the executive branch and both houses in Congress? Clearly not. But for as long as the Democrats are out of power, they should bring every conversation back to the issue of affordability, highlighting the fact that they have a plan, while the Republicans are doing nothing to ameliorate this problem.  Rather, with Trump’s tariff plans and his pledge to deport millions who earn low wages, the prospect of a resurgence of inflation is substantially elevated, exacerbating the problem of affordability.  The Democrats have the opportunity to win back their historical supporters and then some, but they need to coalesce on a program that speaks to this population – not with platitudes and aspirations but with concrete plans for the future. 

Derivatives Litigation Services assists legal teams with litigation when derivative contracts play a role in disputed transactions. The firm offers advice and counsel on a best efforts basis but bears no responsibility for outcomes dictated by mediation or court judgments.

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