Big Beautiful Bill Will Result In Big Debt Without the Big Beautiful Economic Growth

President Trump spent his Fourth of July signing into law the One Big Beautiful Bill Act (OBBBA), a budget reconciliation bill passed by the 119th Congress. OBBBA contains a number of policy priorities from Trump's second term, including removing the tax on overtime, funding Trump's deportations of undocumented workers, extending individual income tax provisions from the 2017 Tax Cuts and Jobs Act, and removing the tax on tips. Given its sheer size, I cannot cover everything in one entry. We will have to see if I cover various provisions in the future. 

What I can say is that on the whole, the OBBBA is not looking good for the United States. The White House's Council of Economic Advisers (CEA) is optimistic. According to the CEA's analysis, the OBBBA is expected to reduce the debt-to-GDP ratio to 94 percent, reduce the deficit by $8.5 to $11.1 trillion over the next ten years, and increase the real GDP by between 4.6 percent to 4.9 percent over the next four years. But none of the policy wonks on any side of the political aisle share the White House's optimism. 

While the Right-leaning Tax Foundation calculates that there will be modest GDP growth as a result of the OBBBA, Tax Foundation is anticipating an extra $3 trillion in debt. The Congressional Budget Office (CBO) estimates that OBBBA will increase the debt by $3.4 billion. The Wharton School, which is the premiere business school in the United States, assessed the OBBBA and found that it would increase deficits by $4.1 trillion, as well as the debt-to-GDP ratio increasing by 7.7 percent and decreasing the GDP by 0.3 percent over the next decade. The bipartisan Committee for a Responsible Federal Budget (CRFB) found that OBBBA will increase the deficit by $4.1 trillion, accelerate Medicare and Social Security insolvency to 2032, and explode interest costs to $2 trillion a year. 

For those of us who care about the deleterious effects of debt on everyday living, this "Big Beautiful Bill" is a big mess. Neither the expanded tax preferences nor the subsidies like the ones in OBBBA are going to do us any favors. We should all be concerned about deficits and economic growth, but that is not evident in the bill that the Republicans passed. Without considerable spending cuts to get the U.S. government's spending binge under control, OBBBA will be nothing but a big, bloated blunder in the United States' budgetary history. 

Grounds for Repeal: Why It's Time to Ditch Corporate Average Fuel Economy (CAFE) Standards

The One Big Beautiful Bill Act (OBBBA) is a proposed budget reconciliation bill that is making the news with such provisions as removing the tax on overtime, funding Trump's harmful deportations, increasing the SALT deduction, removing the tax on tips, or cutting Medicaid. There is another OBBBA provision that is making the news: CAFE standards. 

In the OBBBA, the fines for the automobile fuel milage standards known as Corporate Average Fuel Economy (CAFE) standards are set to $0. This makes CAFE standards compliance voluntary while indirectly nullifying the standards without explicitly repealing CAFE standards. CAFE standards were part of the Energy Policy and Conservation Act of 1975. These standards were created in response to the 1973-74 oil embargo in order to reduce U.S. dependence on foreign oil. CAFE standards are currently set at 53.4 miles for passenger cars and 38.2 miles for light-duty trucks. 

Over time, CAFE standards came to serve another purpose: reducing greenhouse gases (GHG). The idea behind CAFE standards is to incentivize cleaner and more efficient technologies, which were supposed to benefit consumers through lower fuel costs. So why am I happy CAFE standards will de facto no longer be in effect? In short, because it is an inefficient law with unintended consequences.

CAFE standards will not help save the planet. The National Highway Traffic Safety Administration (NHTSA) estimates that CAFE standards will reduce CO2 emissions by 605 million metric tons from 2026 to 2050. While that sounds like a lot of metric tons, the truth is that 605 million metric tons is the equivalent of six hours of global CO2 emissions in 2021. Given that there are 8,760 hours in a year, never mind a 25-year period, CAFE standards will do virtually nothing to reduce global carbon emissions.

CAFE standards have killed people. CAFE standards create an incentive to manufacture lighter vehicles because it is easier to achieve these standards with lighter vehicles. While lighter vehicles might be good for energy efficiency, they are less safe because the risk of vehicular death increases when a lighter vehicle collides with a truck or SUV, as opposed to a heavier vehicle in the same crash. For each 0.1 mile per gallon (MPG) increase in CAFE standards, there has been an increase of 150 deaths (Jacobsen, 2011). Other studies with more lenient standards have found that CAFE standards increase vehicle deaths (see Anderson and Auffhammer, 2013; National Academy of Sciences, 2002; Crandall and Graham, 1989). It would be an a fortiori assumption that stricter CAFE standards, combined with increased traffic, kill more people. 

CAFE standards increase the price of new and used vehicles alike. As this study from the Mackinac Center shows, complying with CAFE standards entails a lighter vehicle weight, less acceleration, and technological upgrades, all of which are more expensive. A majority of those costs are passed on to the consumer, with an estimated cost of $24.1 billion of consumer costs in 2023 (Jacobsen, 2013). 

We have to remember that CAFE standards do not apply to the individual vehicle, but rather an average across the entire fleet of a given manufacturer. Even so, the standards have become so high that they incentivize greater electric vehicle (EV) manufacturing than would otherwise exist. The average EV costs about $7,000 more than a traditional gas automobile, which means that CAFE standards are both incentivizing EV manufacturing and increasing automobile prices.  

Not only that, used car owners are incentivized to hold onto their car longer, which constricts supply and drives up prices. In 2015 dollars, an increase of CAFE standards by 1 mile per gallon resulted a $164 increase in the average price of a large used car (Jacobson and van Benthem, 2015).

CAFE standards disproportionately harm the poor. 92 percent of U.S. households own a vehicle, which is to say that owning a vehicle is vital for the vast majority of Americans. This is significant since a car will cost a low-income household a higher percentage of household income than a high-income household. CAFE standards can very well make new vehicles out of reach for a low-income household, thereby driving them towards the used vehicle market and driving those prices up further. Additionally, energy efficiency standards are regressive because they require a high upfront cost. One study found that efficiency standards such as CAFE standards force low-income households to buy higher-cost vehicles, thereby being more regressive than an energy tax (Levinson, 2016). 

Postscript. To recap, CAFE standards will do nothing of statistical significance to save the planet. All the while, CAFE standards kill people while driving up new and used automobile costs, especially for low-income households. These unintended consequences make the case even stronger for consumers to have the freedom to choose how to buy, drive, fuel, and insure their vehicles. Granted, the OBBBA's provision is not quite as good as simply repealing it because Democrats can always regain power and increase the fines for violating CAFE standards. But it is nice to have at least some reprieve from a regulations that is as much of environmental feel-good policy such as plastic bag bans, the Endangered Species Act, or the act of recycling plastic.

City Hall Shouldn't Bag Your Groceries: A Case Against Government-Run Grocery Stores

Last week, New York State Representative Zohran Mamdani won the Democratic primary for the New York City mayoral election. In addition to being a Democrat, Mamdani is part of the Democratic Socialists of America (DSA), which is the U.S.' largest socialist organization and represents the Far Left in the U.S. Forget Mamdani's anti-Semitism for a moment. If you read his platform, he is a major proponent of the idea that the government should give the people things for free or should heavily subsidize them. He has advocated for many ill-conceived policies that I have previously criticized, whether it is rent control, fare-free buses, or raising the minimum wage to $30. Today, I would like to criticize another one of his ridiculous ideas: city-owned grocery stores. 

Mamdani sees food prices as being out of control due to profit. He would like to "create a network of city-owned groceries focused on keeping prices low, not making profit." He believes that he can create savings by having the government pay for capital costs while waiving property taxes for these grocery stores. In a TikTok campaign video, Mamdani said that grocery stores should not operate on profit motive, but their mission would be "lower prices, not price gouging." 

Other proponents have argued that government-run grocery stores could increase access to healthy food, especially in areas with food deserts. Their idea is to provide grocery stores to neighborhoods that seem "economically unfeasible." This is where wishful thinking collides into reality in a rather unpleasant way. Similar to when I critiqued Kamala Harris' price controls on groceries last year, Mamdani has a profound misunderstanding of how markets work generally and specifically how the grocery store market works.

How big of a problem are food costs? Yes, food prices have increased. We have pandemic-era expansionary monetary policy and fiscal policy to thank for that price increase. More to the point, as U.S. Department of Agriculture (USDA) data shows, food at home as a percent of disposable income decreased from 12 percent in 1964 to 5 percent in 2024. In the 1940s, it was a quarter of disposable income. If food prices are not a primary strain on people's finances, this makes government-run grocery stores a less urgent policy issue. 

The nature of the grocery market. The grocery store market is a highly fragmented market. Not only that, but Mamdani's premise about grocers' motives is wrong. If grocery stores were looking to gouge customers, they would make a lot more money. In spite of most people believing the contrary, the reality is that grocery stores operate with razor-thin profit margins, ranging from 1 to 3 percent.

The joy of profit motive. Private firms have something that a public-sector one lacks: profit motive. Maximizing profit means maximizing the difference between revenue and expenses. As this article from the Foundation for Economic Education (FEE) reminds us, profit motive incentivizes lowering the cost of inputs (e.g., shopping carts, cash registers), innovation, scaling supply chains, and effectively meeting customer demands. This more often than not leads to lower prices and higher quality. 

Perverse incentives. In contrast to profit motive, city-operated grocery stores create perverse political incentives, including price manipulation, product selection, staffing decisions, and remuneration for political gain. The risk for cronyism minimizes any likelihood that Mamdani's dream would come true. 

Lack of business viability. Private grocery stores have enough trouble with profit margins. Again, city-run grocery stores do not have profit motive to optimize efficiency. They would struggle without relying on subsidies or government funding. That is not mere economic theory. The "best" success story I could find is one small government-owned store in the rural area of Erie, Kansas. This store has created a modest profit of 1.1 percent, required volunteers, and relied on donations. The supposed success story of Erie operated more like a co-op than it did an actual grocery store. However, on the whole, government-run grocery stores have not been viable, as has been the case in Baldwin, Florida and Little River, Kansas. 

That does not even count the catastrophic government ownership of food with Venezuela, the former Soviet Union, or Maoist China and the Great Leap Forward, the latter of which caused the deaths of upwards of 55 million people. I understand that the United States is not the same as communist China, government-run grocery stores come with the same centralized control and bureaucracy, price fixing, and lack of profit motive that the aforementioned Communist countries faced. All the same, it should make us pause and question how much we want the government in charge of food distribution and sales.

Case studies in proxy markets. As we question whether or not New York City (or any municipality) should operate grocery stores, it would be helpful to look at proxy markets. Some in favor of Mamdani's proposal, such as the opinion editor at Washington Post, point to liquor control states where government handles the distribution and sale of all alcohol. That is a bad argument because government ownership of liquor sales resulted in higher prices (Siegel et al., 2014), which undermines Mamdani's fantasy that he can lower grocery prices. In addition, take a look at the New York City's very own Housing Authority, which is straddled with $78 billion with unmet capital needs. I feel like I am beating a dead horse, but a lack of profit motive results in wasteful spending from the government. 

Postscript. It is amazing how socialism's loudest proponents are well-off, educated theorists who understand nothing of how the real world works. Government-run grocery stores face challenges stemming from a lack of profit motive, including inefficiencies and political manipulation. The private-sector grocery market is highly competitive with tiny profit margins. Because of those slim profit margins, government-run grocery stores would have to rely on considerable government funding, which would further drain taxpayers. Private businesses are better equipped to meet customer demands, lower prices, and innovate. Private firms have the advantage of "massive economies of scale, decades of market experience, and complex supply chains." What government-run grocery stores will do is increase prices and lower quality for the citizens that Mamdani is purporting to help. 

Providing tax incentives to grocers and removing zoning laws are two policy alternatives I can come up with off the top of my head. Or in the case of New York City specifically, you can lower the high sales tax and minimum wage, both of which are costs passed on to the everyday grocery shopper. We can sit around and spitball ideas to make groceries more affordable, but I will conclude by unequivocally stating that the government has no business selling groceries.

Iran Is a Legitimate Threat to Israel, But Should the U.S. Have Bombed Iran's Nuclear Facilities?

About two weeks ago on June 13, Israel initiated a surprise attack on Iran known as Operation Rising Lion targeting top military officers and scientists, much like it did when Israel targeted Hezbollah operatives in September 2024. Iran fired missiles on Israel and there have been airstrikes since. These past few days have been an escalation of the animosity that has existed between Israel and Iran since the Iranian Revolution of 1979. 

Iran has financially backed Hamas, Hezbollah, Palestinian Islamic Jihad, and the Houthis. Then there was the Iranian attacks on the Israeli embassy in Argentina in 1992 and the 1994 AMIA bombing in Argentina, the latter of which was the largest terrorist attack in Argentinean history. On top of the proxy conflicts and historical tension, Iran has called for Israel's destruction multiple times over the past few decades. 

Israel attacked Iran on June 13 because Israel reportedly wanted to prevent Iran from developing a nuclear weapon that would annihilate Israel. This would make sense because the UN nuclear watchdog International Atomic Energy Agency (IAEA) submitted a report a day before Operation Rising Lion showing that Iran was in breach of its non-proliferation obligations. President Trump initially said that he will help Israel "if needed." And help he did. 

On June 22, the United States military carried out Operation Midnight Hammer to attack three nuclear facilities: Fordow, Natanz, and Isfahan. The White House is claiming that Iranian nuclear capabilities have been obliterated. Although Trump announced a ceasefire the following day, it is neither clear whether there will be further attacks from Israel or Iran, nor is it clear whether Iran's nuclear capabilities are decimated. As of now, the ceasefire is holding, but it is too soon to tell. Similar to what I pondered three years ago with Ukraine, the question I ask now is whether the United States should have militarily gotten involved in Iran. 

The answer depends in part on how much damage was done to Iran's nuclear facilities. Damage assessments are still preliminary. An initial assessment from the Defense Intelligence Agency (DIA) said that it was only delayed by a few months. On the other hand, the CIA released a statement saying that it would take years for Iran to rebuild. If Iran's nuclear capabilities remain largely intact, it could risk greater regional tension and drag the United States in yet another war in the Middle East. If their capabilities truly were hindered, then this limited military intervention could have prevented World War III. 

Whether the United States should have carried out Operation Midnight Hammer also depends on how the United States, Israel, and Iran will respond. If the United States gets further involved in terms of actual fighting, then it makes Trump look bad since Trump promised in his last presidential campaign that he would not start any new wars. To reiterate, Israel views Iran as an existential threat. While the IDF preliminarily finds that Iran's capabilities have been set back for years, Israel might escalate if it perceives that Iran has not been adequately incapacitated.

As for Iran, the Iranian government has already passed legislation to prohibit the IAEA from entering Iran.  Iran does not have the capability to attack the United States directly. Iran tends to avoid conventional conflict and instead advances its regional operations through propaganda and proxy operations. As such, Tehran could attack the Strait of Hormuz, which could send oil prices soaring. Tehran could also attack U.S. military installations in the Middle East, much like Iran attempted on June 23 with Operation Glad Tidings of Victory when it unsuccessfully sent missiles to the Al Udeid Air Base in Qatar. Domestically, I understand that Iran is militarily weakened and economically pummeled. At the same time, that desperation could encourage the Ayatollah to tighten the screws on its citizens. 

This is a roundabout way of saying that this conflict is very much developing and much is up in the air. Even if Iran has been hobbled, Iran remains a threat. I do not want another war in the Middle East, much like most Americans. Cato Institute calculated that if the war with Iran created displacement at the same rate as Syria, that would mean 23.4 million civilians, which would increase the worldwide refugee population by 76 percent. It would be a tragedy indeed. Ultimately, I hope that further conflict and bloodshed is avoided in the Middle East. Whether that ends up being the case is something that only time will tell.

U.S. v. Skrmetti: SCOTUS Protects Teens & the Law from Gender-Affirming Chaos and Harm

Last week, the justices at the United States Supreme Court (SCOTUS) made headlines with their most anticipated ruling of their 2024-25 term: United States v. Skrmetti. SCOTUS ruled 6-3 that banning puberty blockers and hormone replacement therapy (HRT) for adolescents dealing with gender dysphoria does not violate the 14th Amendment's Equal Protection clause. The Tennessee law (SB1) does not classify on sex because it bans the practice regardless of sex. This law was ruled to not have violated the 14th Amendment because it does not discriminate on such clear-cut examples as race, biological sex, religion, or sexual orientation. The only distinctions the Tennessee law makes are based on age and on medical use, neither of which are reviewed under heightened scrutiny. Tennessee is one of twenty-seven states that prevents such medical interventions for minors, which means that the bans are by and large upheld in other states, as well. 

As I brought up a couple of months ago with a UK ruling on biological sex, the concept of gender identity is incoherent. It is claimed to based on objective truth, but it can be changed on one's subjective whim. Gender identity is supposed to be a societal construct, but somehow is simultaneously biological and internal. Gender identity is identified as independent of biological sex but is also identified in reference to biological sex. It is designated based on self-expression but also as a product of socialization. Human rights and legal protections cannot be based on something as unintelligible, muddled, and disjointed as gender identity. It would also undermine protecting same-sex attraction if we cannot define the material reality of biological sex, as it would undermine women's rights. 

Coherence within the legal system is not the only reason I was happy to see the Supreme Court rule in favor of common sense. As a long-term Dutch study pointed out last year (Rawee et al., 2024), 78 percent of those dealing with gender non-contentedness overcame whatever dysphoria they were dealing with by the time they became adults without any interventions. An additional 19 percent had decreased gender non-contentedness. This means that vast majority of adolescents dealing with gender dysphoria do not need to go to the extremes of gender reassignment surgery, puberty blockers, or HRT.  

Then there is the argument of "having a living daughter is better than having a dead son." This argument assumes that without these treatments, children dealing with gender dysphoria will resort to suicide. Forgetting what we covered in the previous paragraph about most adolescents with gender dysphoria overcoming it without intervention, there has only been one main study conducted to directly assess whether sex-change hormones reduce suicide rates among trans individuals (Ruuska et al., 2024). The study concluded that no such association exists, a finding that was also detailed in the Cass Review. The Cass Review, which is the most comprehensive research on the topic to date, also shows the evidence shows that these interventions do not manage gender-related stress long-term.

Arguing that banning these procedures will increase suicide is a tactic to silence dissent and obscure another issue, which is that these treatments cause considerable harm. As I documented last year, gender affirming "care" lacks the evidence base, not to mention that puberty blockers are shown to have multiple side effects, including decreased bone density, deteriorating mental health, and lower IQ. Keep in mind that it was such European nations as the United Kingdom, Sweden, and Finland that were the trailblazers in providing these interventions a decade before it became trendy in the United States. These European countries have conducted systematic reviews and have concluded that the evidence is lacking. It is no coincidence that these nations recommend that these treatments are offered as a last resort and only offered in a clinical setting. 

It is one thing if an adult wants to undergo such a procedure with informed consent, even though the evidence base shows a lack of benefit for the vast majority of patients and shows considerable risk and harm. I personally do not agree with such activities as having children before getting married, using preferred pronouns, taking out student loans for something as useless as a gender studies degree, eating fast food every day, not exercising, smoking cigarettes, or entering in a polygamous marriage. But as long as you are not harming anyone else, you can do whatever stupid, unhealthy, or disagreeable things you want. 

Because children do not have the maturity, understanding (mens rae), or capacity to fully make their own decisions, how society treats children's rights is different. There are a myriad of activities and decisions from which children are legally restricted that adults are not restricted, whether it is voting, owning property, entering into most contracts, purchasing alcohol or tobacco, or working in hazardous occupations. Gender reassignment surgery, hormone replacement therapy, or using puberty blockers should not be an exception, especially given everything I have highlighted above. 

Although the Supreme Court was asking a constitutional question about the 14th Amendment, the Supreme Court came with the correct ruling in terms of outcome. Gender-affirming "care" is not an evidence-based practice. There is evidence showing the harm that such practices cause, especially ones that life-altering and essentially irreversible. This lack of evidence base is also augmented by the fact that the vast majority of adolescents overcome their gender dysphoria, thereby making these treatments unnecessary for the vast majority of those dealing with gender dysphoria in the first place. Socially progressive European nations understand this reality. I hope that those in the United States who believe otherwise can actually follow the science instead of adherence to ideological compliance for its own sake. 

It Is Not a Snap Judgment to Criticize SNAP's Rising Overpayment Problem

Everyone needs to eat. If people do not eat food, they die. It is part of why the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps, is touted as playing a crucial role in fighting food insecurity across the United States. This is especially the case considering that SNAP benefits are second to unemployment insurance in terms of providing assistance during economic downturns. While it is purported as being this wonderful lifeline for struggling Americans, the reality is quite different. 

I am not referring to obesity rates exacerbated by SNAP  benefits (see my 2023 analysis here). When I was doing some research a couple of days ago on what to write about next, I came across a recently released report from the Mercatus Center entitled Reducing Waste and Fraud in SNAP. The most shocking finding of this report was that overpayment rates increased from 2 percent in 2012 to 10 percent in 2023. What this translates to is it costing U.S. taxpayers $10 billion in SNAP overpayments. It is smaller than the $31.1 billion in Medicaid improper payments I criticized last month, but it is still a jarring amount given the size of SNAP.

It is mind-blowing because in spite of the U.S. Department of Agriculture (USDA) spending more on improving retailer integrity and fighting trafficking in SNAP benefits, the overpayment rate continued to surge. Part of the reason for the surge is because USDA applied an improved methodology in 2017 and did not re-calculate the pre-2017 data. Then there are the matters of eligibility misreporting, Electronic Transfer Benefit (ETB) technical issues, and SNAP benefits trafficking, the latter of which account for about 40 percent of overpayments. 

This September 2024 report from the General Accountability Office (GAO) gives a better sense of weak oversight. For example, the GAO recommended in 2018 to increase penalties for when a retailer exchanges recipients' SNAP benefits for cash instead of food. As of September 2024, the USDA did not implement that recommendation provided in a GAO 2018 report. In that same 2018 report, the GAO criticized USDA for not applying previous recommendations from 2016. The Mercatus Center came up with a few recommendations on how to deal with these overpayment rates:

1. Create an office of program integrity within the FNS.
2. Require the disclosure of payment errors of any size, instead of just those over $57.
3. Allow states to retain more of the funds that they recover when they detect fraud.
4. Permit states to dis-enroll retailers that are taking advantage of SNAP. 
5. Encourage states to move over to SNAP EBT cards with chips.
6. Close loopholes that allow those with higher income and assets to collect SNAP benefits so that only genuinely needy households qualify.

I would also add some of the recommendations that I wrote about back in 2013, including separating SNAP benefits from agricultural subsidies, eliminating broad-based categorical eligibility, and modify the gross income limit from 130 percent to 100 percent of the poverty line, and enacting spending caps for SNAP. Sadly enough, there has been such little reform made on SNAP that these recommendations are still by and large applicable about 12 years later. The fact that so little has been done this century to improve SNAP benefits is troublesome.

Aside from the fact that this costs millions in taxpayer dollars a year, why should we care? Misallocating resources vis-à-vis overpayments means fewer dollars actually going to those in need. Eroding public trust in the program can mean less support for SNAP, which can harm those who rely on those benefits. More to the point, if the government cannot manage a program such as SNAP with competence, it makes it more difficult to justify its existence. Yes, libertarian economist Frederich Hayek believed that there should be at least a minimal social safety net. At the same time, all the USDA's intransigence and recalcitrance show is that SNAP should be as small and minimal of a social safety net as possible.

Build Less, Pay More: Another Study Shows The Price of Housing Regulations

There was a time when buying a home with a white-picket fence was a staple of the American Dream. The home was a symbol of stability, independence, and upward mobility. At least in the middle twentieth century, one could buy a modest home with a single income. That started changing in the 1970s when the coastal cities became less affordable and Americans started gravitating more towards such Sunbelt metropolitan areas as Phoenix, Atlanta, Dallas, and Miami. 

Unfortunately, affording homes in these Sunbelt metropolitan areas is becoming more elusive with skyrocketing housing costs and housing stock decreased (see above). A new National Bureau of Economic Research (NBER) working paper from leading economists at Harvard University and the University of Pennsylvania provides an answer (Glaeser and Gyourko, 2025). From the abstract of the paper:

If the U.S. housing stock had expanded at the same rate from 2000-2020 as it did from 1980-2000, there would be 15 million more housing units...New housing growth rates have decreased and converged across these and many other metros, and prices have risen most where new supply has fallen the most. A model illustrates that structural estimation of long-term supply elasticity is difficult because variables that make places more attractive are likely to change neighborhood composition, which itself is likely other influence permitting. Our framework also suggests that as barriers to building become more important and heterogeneous across place, the positive connection between building and home prices and the negative connection between building and density will both attenuate. 

It is not a lack of land because Sunbelt metropolitan areas have plenty of land. What these economists found is that the major culprits for increasing housing costs in the Sunbelt area are zoning laws and other land-use regulations. This is basic supply and demand. When demand for housing increases, whether because of population growth, job opportunities, or migration, and supply does not grow at the same rate, prices are bound to increase. 

To give you some examples of these regulations. Zoning laws restrict what can be built and where, which constricts supply. Height restrictions and density caps further constrain supply by limiting the number of people that can live on a given parcel of land. Lengthy permitting processes and environmental reviews create delays and uncertainty for builders, which also limit the number of houses built. When all these housing regulations are combined, they create an artificial scarcity of housing. 

This both plays out in economic theory and in practice. This new NBER study is hardly the first study to come to this conclusion. Back in 2017, I illustrated how deregulating the housing market and removing these regulations would boost housing supply. Here is some other research since 2017 illustrating this point:

• In April 2025, the Bush Center estimated in its counterfactual analysis that such pro-growth housing policies as lax zoning laws, reducing minimum lot sizes, and eliminating parking requirements for apartments implemented throughout the country would have lowered housing prices by $115,000 and monthly rent by $450 per month.
• Another NBER paper shows how municipalities with stricter land-use regulations have particularly small and unproductive construction firms (D'Amico et al., 2024).
• The American Enterprise Institute (AEI) wrote a paper about light-touch density (LTD), which is a zoning strategy that incrementally allows for more diverse housing types within existing single-family zones. AEI researchers calculated that LTD could create an average of 930,000 additional housing units per annum over the next 30 to 40 years (Pinto and Peter, 2023).
• The Institute for Transportation & Development Policy reports on how minimum parking requirements contribute to increased construction costs and limit housing availability. 
• A study from the Mercatus Center shows that build-to-rent housing bans further constricts housing supply (Furth, 2022).
• The Bipartisan Policy Center released this explainer in 2022 illustrating how housing regulations impact housing supply. 

Expensive housing in the United States is no longer an outlier on the east coast or in California. Housing has become less affordable because zoning laws and land-use regulations that have constricted housing supply, thereby increasing housing prices. The housing crisis in the United States is clearly a supply-side issue caused by government regulations. Whether local jurisdictions realize the damage of these regulations and reverse them remains to be seen. What we do know as long as they remain intact, Americans will continue to pay through the nose for housing.