“Affordability” is a big issue in policy and politics and for good reason.
According to Center of the American Experiment’s December 2025 Thinking Minnesota Poll, only six percent of Minnesotans said their income was going up faster than the cost of living, while 60 percent said it was falling behind. More Minnesotans — 33 percent — told us they were “worse off” than last year than said they were “better off” — 18 percent. Seventy-four percent of respondents said they were concerned about the cost of healthcare, 47 percent about monthly bills such as electricity and heat, 42 percent about gas or car care, and 18 percent about childcare.
What can state and local governments do to alleviate this squeeze?
One set of proposals is taxpayer-financed subsidies or tax credits for low-income households, but this is a misdiagnosis that doesn’t understand or tackle the problem. It regards the prices as the problem to be treated not as what they are: signals alerting us to underlying issues with supply of and demand for a good or service. These underlying issues must be treated to ease the squeeze on affordability.
As left-leaning writers Ezra Klein and Derek Thompson note in their recent book “Abundance,” “[I]f you subsidize demand for something that is scarce,” as with housing vouchers or childcare tax credits, for example, “you’ll raise prices or force rationing.” They note that “[t]oo much money chasing too few homes [or childcare places] means windfall profits for homeowners [or childcare providers] and an affordability crisis for buyers [or parents].”
The same principle applies across the board, with Klein and Thompson concluding that “giving people a subsidy for a good whose supply is choked is like building a ladder to try to reach an elevator that is racing ever upward.”
They capture the essential truth that affordability problems at the state level are generally supply-side problems of insufficient production, not demand-side ones of insufficient spending power. Credits and subsidies do not fix these problems. They lower no prices. They simply transfer the cost to taxpayers which, in turn, exacerbates affordability problems directly by increasing the price Minnesotans must pay for their government with higher taxes.
In many cases, state government is a source of these supply-side problems. Fortunately, this means that there are actions they can take to increase supply, lower prices, and ease affordability. In our new report “Supplying Hope and Demanding (Real) Affordability: An agenda for Minnesota’s future,” we expose some of the supply-side obstacles created by state government and offer 40 specific proposals state policymakers could act on to ease the squeeze on affordability in Minnesota.
In healthcare, for example, Minnesota’s hospital bed moratorium and related restrictions on nursing homes, imaging centers, and expansions limit competition, raise prices, and extend wait times; provider shortages worsen rural access issues; prior authorization delays care; and lingering noncompete issues can hinder physician mobility.
To relieve these pressures, legislators should ease moratoria, drawing from approaches in states like Georgia; expand “gold card” exemptions for reliable Medicaid providers; and eliminate the hospital construction moratoria, as in South Carolina. Minnesota should also increase eligibility checks on Medicaid recipients to eliminate waste and fraud in the program, preventing payments to people who do not qualify because they make too much money, live in another state, or are deceased.
In energy, the state government has mandated the transition from cheap and reliable energy sources to expensive and unreliable ones.
To bring utility bills down, state legislators should repeal the mandates for 100 percent renewable energy; repeal costly subsidy programs for energy conservation, small-scale renewable energy, electric vehicles and vehicle chargers, and similar wasteful programs; cut state-authorized taxes on electricity, natural gas, propane, gasoline and diesel fuel; repeal the ban on building new nuclear power plants; and reduce mandates and taxes on natural gas.
In childcare, the State Child Care Regulations Index recently published by the Archbridge Institute ranked Minnesota as the 10th most restrictive state for center-based care, which restricts supply and drives up prices. Changes passed in the last legislative session to loosen center staff hiring requirements and raise capacity limits for family childcare help but are only a partial fix.
To meaningfully lower costs, state policymakers should pursue more comprehensive reform and further ease college education requirements for center staff; relax staff-child ratios and group size limits; and enhance flexibility for family childcare. If our regulatory burden matched that of 27th-ranked New Hampshire, do we really think our kids would be in greater danger?
These measures tackle some of the pressures Minnesotans told us in December they were most concerned about, but there are a range of others. They are united by the belief that abundance is the solution to affordability. For a real problem, Minnesotans deserve real solutions.
John Phelan is an economist at Center of the American Experiment.
The views and opinions expressed in this commentary are those of the author and do not represent an official position of Alpha News.
John Phelan
John Phelan is an economist at Center of the American Experiment.
