Donald Gainsborough stands at the epicenter of the American policy landscape as the leader of Government Curated, where he deciphers the complex machinery of legislation and its real-world impact on the citizenry. With a career spent navigating the volatile intersection of political strategy and economic reality, he has become a leading voice for those trying to understand why the nation feels so fractured despite a plethora of positive macroeconomic indicators. In an era where the stock market is robust and unemployment remains at historic lows, Gainsborough provides a vital perspective on the “affordability crisis” that continues to haunt the halls of power in Washington. Our conversation explores the persistent friction between the data points celebrated by economists and the lived experiences of voters who feel they are losing control over their financial destinies. We delve into the psychological toll of inflation, the structural imbalances of wealth, and why the political quest for a “silver bullet” solution remains one of the most elusive challenges in modern governance.
Consumer spending has remained remarkably resilient even as sentiment hits historic lows and households report feeling worse than they did during the 2008 financial crisis. How do you explain this disconnect between what people say about their finances and how they actually use their wallets?
It is a fascinating and somewhat confounding paradox that defines our current moment. Even as sentiment is more depressed than when Wall Street melted down and joblessness soared over a decade ago, the American consumer simply has not stopped spending. We saw this during the height of the inflation surge and even as the Iran war pushed gas prices above the $4 per gallon mark; people kept their wallets open and their credit cards active. Federal Reserve researchers have actually pointed out that while many people claim they are pulling back, they are often buying more in terms of both volume and quality than they were previously. This resilience is fueled by the fact that American paychecks are objectively larger now than before the pandemic, even after accounting for five years of elevated inflation. While nearly three-quarters of Americans tell Gallup they believe economic conditions are worsening, they aren’t budgeting as if financial ruin is at their doorstep, creating a situation where the fury we see in political polling doesn’t match the activity we see at the checkout counter.
If affordability is, as some experts suggest, a “nonsensical” word in pure economic terms, why has it become the central pillar of our political discourse and voter anger?
The tension lies in the fact that economists view the world through the lens of finite resources and trade-offs, whereas voters view it through the lens of their expectations. When you hear experts say you can afford anything—it’s just a question of what you have to give up to get it—it sounds dismissive to a family struggling with a grocery bill that has doubled. For a long time, Americans enjoyed a period where they felt they didn’t have to give up much to get a lot of everything, but that era has shifted. Affordability has become a political crisis because it represents a perceived loss of status and ease, even if the “misery amidst splendor” theory suggests we are buying better health outcomes and bigger houses than in the past. Politicians focus on it because it is the most direct way to speak to the anxiety of a voter who feels the “American Dream” is becoming a high-priced subscription service they can no longer maintain.
We have seen data indicating that inflation-adjusted family income is 70 percent higher than it was in 1970, yet the “K-shaped economy” narrative and feelings of inequality are stronger than ever. Why aren’t these long-term gains translating into a sense of financial peace?
The reality is that while the averages look spectacular—with the S&P 500 delivering annualized returns of more than 12 percent over the last five years—the distribution of that success is incredibly skewed. We are currently looking at a situation where the bottom 90 percent of households hold less than a third of the country’s wealth, a figure that hasn’t significantly improved since 2011 when unemployment was twice as high as it is today. People are also facing very real cracks in their personal safety nets; for instance, the percentage of Americans who have had to dip into their 401(k)s for tuition, medical bills, or home payments has tripled since the start of the decade. Even if your income is higher in a historical context, you are constantly comparing yourself to the top 10 percent of households who are responsible for roughly half of all spending in the U.S. This relative deprivation makes a 70 percent increase in income feel like standing still when the cost of entry for a stable, middle-class life—like housing and healthcare—is escalating at a pace that feels predatory.
Recent policy attempts, such as the omnibus tax and spending law with its jumbo refunds, were intended to provide a “silver bullet” for the cost of living. Why hasn’t the political benefit for these moves materialized for the administration?
There is a certain “mirage” quality to quick-fix policies like direct payments or temporary tax breaks because they rarely address the deep, structural issues that voters are actually worried about. When those refund checks hit bank accounts recently, the political needle barely moved because voters viewed them as a temporary patch rather than a permanent solution to their declining purchasing power. Furthermore, there was a legitimate concern that such massive influxes of cash could prove inflationary, effectively taking back with one hand what was given with the other. The administration has tried to point to the acceleration in wage growth for lower-income workers as proof that their industrial and trade policies are working, but these long-term gains are often overshadowed by short-term pain. When gas is $4 a gallon and the trade war with Canada creates micro-shocks in local economies, a one-time refund check feels like a very small umbrella in a very large storm.
Inflation has a psychological toll that seems to outlast the actual price spikes, with people often attributing their raises to merit while blaming the government for high prices. How does this “loss of control” narrative complicate the path to a durable economic recovery?
This is one of the most difficult hurdles for any policymaker to overcome because it’s rooted in human nature. According to studies on the effects of inflation, individuals tend to believe that their pay raises are a direct result of their own hard work or career progression, whereas they see rising prices as an external, unfair imposition by the government or “the system.” This robs people of their “progress narrative”—the feeling that they are the masters of their own destiny and can build a better life through their own efforts. When inflation is high, it feels like an invisible thief is stealing the rewards of your labor, leading to a profound sense of anger that can’t be soothed by a chart showing that wages are technically outpacing prices. If a voter feels that the government has robbed them of the control they once had over their family’s future, they are going to remain furious regardless of what the latest GDP or unemployment figures say.
With the unresolved war with Iran impacting energy markets and the rapid rise of AI technology hoovering up capital and energy, how much control does Washington actually have over the “sticker shock” defining this era?
The truth is that many of the forces driving today’s affordability crisis are global and technological in nature, making them incredibly difficult to manage through traditional domestic policy. The Iran war has made global energy markets fragile, and while the White House argues this will eventually lead to more resilience, the immediate effect is $4 gas that acts as a daily tax on every commuting worker. At the same time, the artificial intelligence boom is consuming vast amounts of capital and energy, which keeps interest rates and electricity costs much higher than we saw in the previous decade. We also have to consider the “onshoring” of manufacturing, which is intended to make supply chains less susceptible to shocks but inevitably raises costs for consumers in the short term. Politicians struggle to admit to the public that there is no “silver bullet” and that building a more resilient, domestic-focused economy might actually require us to pay a little more today for a lot more security tomorrow.
What is your forecast for the affordability crisis?
My forecast is that we are entering a prolonged period of “misleading averages” where the headline economic data will continue to look strong while the underlying sense of strain remains high for the majority of households. We have maintained a record of unemployment at or below 4.5 percent for nearly five years, yet we are seeing auto loan and credit card delinquency rates climb back to levels not seen since the 2008 recession. This suggests that the “K-shaped” divide is not over; it is simply evolving, with the top tier of spenders keeping the economy humming while the bottom 90 percent feel like they are running a race they cannot win. Until we see fundamental reforms that address the structural wealth gap and the triple-threat of energy costs, housing shortages, and interest rates, the public’s fury will likely remain a permanent fixture of our political landscape. We must stop looking for a single policy that goes into effect tomorrow and start focusing on the slow, difficult work of unlocking labor, capital, and energy to create a more balanced and predictable economy for the next generation.
