Democrats promise to lower the cost of living, but the US's high deficit and interest rate hike risks limit the policy space.

For the incoming Democratic majority in Congress, making affordability and the cost of living the centerpiece of their campaign was an obvious choice. Now comes the hard part: delivering on those campaign promises. Democrats say they will move quickly to restore health insurance subsidies under the Affordable Care Act (ACA) and reverse cuts to Medicaid and food assistance made by the Trump administration and congressional Republicans. Representative Hakeem Jeffries of New York, who is expected to become House speaker, has also said the House will vote on repealing some of the government's tariffstariffs that have driven up costs for businesses and consumers. But the party will be constrained on multiple fronts: President Trump still controls the executive branch and holds veto power, the fiscal outlook is grim, and the Federal Reserve may raise interest rates further. There is also a stubborn policy problem: cost-of-living issues such as housing and fuel simply have no easy solutions. Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, warned of the risk of "political pandering"with the U.S. deficit currently at about 6% of gross domestic product (GDP), more spending could make things worse in the short term. "Democrats' affordability agenda depends heavily on whether we are fiscally responsible. Once people understand that with deficits this high, you can't lower interest rates, you can't lower prices, and you can't raise wages," MacGuineas said in an interview. She added that both spending cuts and tax increases are needed to control rising debt. How to reward voters' trust on economic issues has already exposed divisions within the Democratic Party, including among some of those who delivered the party's most dramatic victories this month. Annie Andrews, senator-elect from South Carolina, said she would rather work with Trump to advance the party's goals on cost-of-living issues than focus her energy on a "revenge tour." "I'm willing to work with President Trump to secure the border, stop these Medicaid cuts, and find a way to end this war," Andrews said in an interview after her victory. "Fighting the administration won't lower gas prices or grocery prices, and it won't solve the problems I've heard about for the past 18 months." But that instinct is unacceptable to many in the party, who see the nationwide rejection of Republicans as a mandate for bold policy actionincluding on economic issues. "When we hold power, we have to do something with it," said Rebecca Katz, a Democratic strategist and co-founder of Fight Agency. She worked on several of the party's winning campaigns, including that of Michigan senator-elect Abdul El-Sayed and last year's New York mayoral campaign of Zohran Mamdani. Katz spoke on Tuesday at a forum organized by the progressive economic think tank Groundwork Collaborative, where party advisers and lawmakersincluding Massachusetts Senator Elizabeth Warren and Maryland Senator Chris Van Hollendiscussed how to prove to voters that they are taking action on their economic concerns. Since Trump first signaled willingness to work with Democrats, Warren has urged her party to "call his bluff" and send a series of new bills to the president, from drug pricing to the Iran war. But party strategists also say using the bully pulpit to win better prices and treatment for consumers may be just as importantperhaps even more effective than trying to reverse intractable economic forces. "This new batch of Democrats is in a delicate position: they have a mandate at the federal, state, and local levels, but at the federal level they don't control the executive branch," said Alvaro Bedoya, a former Federal Trade Commission (FTC) commissioner. He previously served as legal counsel to Minnesota Democratic Senator Al Franken. Bedoya cited the example of Instacart: within days of receiving an open letter from Democratic senators, the company abandoned a test of dynamic grocery pricing. He said in an interview that this is a strategy the party can replicate. "If you send an oversight letter to a public company, the response is often much faster, because that company has to answer to consumers and has to answer to a media uproar," Bedoya said. During the Biden administration, congressional Democrats and the administration publicly named pharmaceutical companies over patent practices, leading companies such as Boehringer Ingelheim, Astrazeneca PLC Sponsored ADR (AZN.US), and GlaxoSmithKline plc Sponsored ADR (GSK.US) to voluntarily cap inhaler prices at $35. According to Alex Jacquez, senior vice president for policy, advocacy, and research at Groundwork Collaborative, in the next Congress Democrats can apply similar pressure to utilities, health care, and rental companies over price increases or potential collusion. The organization has been working with congressional Democrats to develop economic strategy. "You can imagine looking at algorithmic rent collusion or tenant service fees in the housing market, and then on health care costs," Jacquez said, referring to pharmaceutical companies and pharmacy benefit managers (PBMs). Ben Harris, director of economic studies at the Brookings Institution and a former assistant Treasury secretary under Yellen, said Democrats can also use leverage in negotiations over the annual budget and raising the U.S. government debt limit to force rollbacks of cuts to SNAP (Supplemental Nutrition Assistance Program), Medicare, and Medicaid. The U.S. is expected to hit the congressionally authorized debt limit next year. Harris also believes the tension between moderate and progressive Democrats on affordability issues will continue to play out: voices on the left advocate "tougher measures" such as rent control, while centrist Democrats focus more on housing, health care, and education. Party organizers say the biggest risk for the new majority is not being bold enough. "We will have a hard time delivering on our promises," said Amanda Litman, founder of the nonprofit Run For Something. The organization recruits candidates for public office. "We're seeing this with Trump right now: voters notice. Don't write checks you can't cash, don't make promises you can't keep. I'm worriedthis is a real concern."