Follow such analysis and you will find a range of bad actors, cutting across partisan and professional lines. In densely populated cities, it is so difficult to build housing, largely because governments have made it difficult to build. Those governments are disproportionately run by Democrats. “Blue places have chosen to make their housing supply inelastic — to use econ speak — and red places have generally allowed the housing market to function and supply to respond when demand increases,” Jenny Schuetz, the author of “Fixer -Upper: How to fix America’s broken housing systems,” told me.
But drug prices are high because Republicans support expanded patent protection but won’t let the government use its purchasing power to lower prices, which is how virtually every other wealthy nation is cutting costs. On the one hand, we allow monopolies and on the other, we refuse to use purchasing power. The Warp Speed Vaccine Development Program was an example of how things could be done differently: the government made itself the buyer of vaccines and then distributed them freely. And what about public competition for non-patent products? California Governor Gavin Newsom has just… announced the state has set aside $100 million to start making its own low-cost insulin. If it works, it could become a national model.
Elsewhere, it is professional lobbies that are the culprit. America has too few doctors, especially primary care physicians, leading to higher prices and longer waiting times. Much of the reason is that trade groups representing physicians have lobbied to limit supply, limit the number we train, create barriers to allowing nurse practitioners to take over more primary care duties, and block efforts to block physicians who are trained in high-performing systems abroad to be able to practice here.
This too has been a Baker bugaboo for a long time. We could quickly reduce the shortage of doctors by releasing doctors from Europe here and allowing them to practice easily. In the longer term, we could open more medical schools, make telehealth easier and increase nurses’ freedom to practice autonomously.
There is also a range of tariffs that the Biden administration could lift if it wanted to cut at least some prices quickly. Some of these tariffs — such as those on Canadian timber — are designed to protect U.S. industries. Others, such as the tariffs Donald Trump has slapped on China, which President Biden has done nothing to reverse, are foreign policy tools. But if high prices are the problem, then new priorities may need to be set. An analysis by the Peterson Institute for International Economics found that a large but plausible trade liberalization package could cut costs by $797 per household per year.
Inflation crises in the United States are usually caused, or severely exacerbated, by our exposure to petrostates. That goes for the OPEC embargo of the 1970s and what the Biden administration likes to call “Putin’s price hike” of 2022. As Mark Zandi, the chief economist at Moody’s Analytics, noted, the spike in fuel prices was responsible for more than half of inflation in June. That will probably ease. But a world where most of America’s power was generated by wind and solar, nuclear and geothermal, is a world where we would be much less dependent on the fluctuations of the global energy market. (And while it seems almost ridiculous to say this, a world of uncontrolled climate crisis won’t be good for prices either; there are no end to good reasons to decarbonise.)