The two parties in St. Paul have very different priorities this session. For Republicans, the focus is “affordability;” for the DFL, it is gun control and immigration. But, as we found in our Thinking Minnesota poll in the Winter 2026 issue of our magazine, Thinking Minnesota, “affordability” remains a top concern for Minnesotans. So, even the DFL feels moved to at least pay lip service to the issue.
So, what would a genuine “affordability” agenda look like?
To figure this out we need to, first, define the problem; second, figure out what is causing it; and third, identify policies which will remedy these problems.
What is “affordability”?
“Affordability” is simply a rise in the cost of living relative to people’s ability to meet that cost.
It is a general phenomenon. In even a healthy economy, at any time, some prices will be rising to reflect changes in supply and demand. But, in the first instance, other prices will be falling so that the squeeze on people’s budgets in one area is relieved in others. Second, high prices are their own cure; they incentivize suppliers to produce more of whatever good or service it is whose price is rising and that increase in supply brings the price down.
But, while concerns about affordability might manifest in particular concerns about eggs, or housing, or childcare, as an issue it is not any one of these but a clustering of several of them at once, a general phenomenon.
What causes unaffordability?
As a general phenomenon, problems with affordability must have a general cause. A disease might cause the price of chickens to rise, or a war might cause the price of gasoline to rise, but if a bunch of prices are rising together the cause is probably something more fundamentally wrong in the economy.
If the federal government, acting through the Federal Reserve, produces money at a rate faster than the rate of production of goods and services it can be spent on, then, all else being equal, the price of those goods and services will rise. If the price level, generally measured by the Consumer Price Index, increases faster than people’s incomes, then their incomes are squeezed in real terms and issues with affordability arise.
That is the demand side, but there is the supply side, too. To get price increases under control and ease affordability concerns, it is important not only to slow the rate of increase in the production of money but also to increase the rate of production of goods and services for that money to be spent on.
There is little that policymakers in St. Paul of any party can do about the Federal Reserve, but there are actions they can and have taken on the supply side of the economy which restrict supply and hinder affordability in Minnesota.
What can we do to fix it?
To tackle the affordability crisis at the state level, we need to identify those supply side actions which state policymakers have taken that restrict supply and hinder affordability in Minnesota.
We will do that for a range of costs – housing, utilities, healthcare, and childcare. We will also look at how the state government can improve affordability for Minnesotans in the most direct way possible; by reducing the amount of money it forces them to pay in taxes.
Before we do that, it is worth noting what policies will not help improve affordability. Remember, that prices are not the problem but a signal of an underlying problem; demand high relative to supply. The solution we will propose is to fix this underlying problem with a range of supply side measures.
There are other proposals which seek to treat the problem – prices – rather than the underlying supply side problem, such as with housing credits, childcare tax credits, or tax credits more generally. But, as Ezra Klein and Derek Thompson note in the book Abundance, “[I]f you subsidize demand for something that is scarce,” as with housing vouchers, “you’ll raise prices or force rationing.” They go to note that “[t]oo much money chasing too few homes means windfall profits for homeowners and an affordability crisis for buyers.”
These are supply side problems of insufficient production, not demand side ones of insufficient spending power. Credits do not fix these problems, they lower no prices, all they do is transfer the cost to taxpayers which, in turn, exacerbates affordability problems in the most direct way possible by increasing the price Minnesotans must pay for their government.
For a real problem, Minnesotans deserve real solutions.
