Don’t Get Distracted: Its Affordability, Stupid.

Fractionally Legal v. 55 Looks at the Law of Affordability

Distraction is a classic litigation and negotiation tactic. Almost weekly, I’m forced to spend time dealing with extraneous issues and not the merits of a claim, or the actual goal of the transaction. It’s things like discovery disputes over documents that probably don’t really exist, or the work that goes into redrafting purchase and sale agreements because of “material adverse events” contingencies that probably won’t happen. Some lawyers do it to run up the bill. But most of the time, it’s actually a way to distract from what really matters in the transaction, likely because someone is trying to prevent you from realizing an unearned advantage or distract you from the weakness of their position. Just my experience; yours may differ.

Our federal government these days is all about distraction. Daily, we have a barrage of semi-sensical and nonsensical actions by a government that just seems to operate at the maniacal whims of Trump. Remember tariffs? Remember the Gulf of America? Remember shutting down the Department of Education? Remember the National Guard in Chicago? Remember when we were going to invade Greenland? Remember when we had a masked federal agent terrorizing Americans in Minneapolis (that last one is still ongoing, but it will be old news in a few weeks). And now, increasingly, there is nonsense about interfering in state election processes. Yes, these are dangerous escalations and, as I’ve written extensively in the past, they pose major challenges to our constitutional system and the U.S. place in the world. But the Trump people are morons who can’t really follow through on anything—they certainly want to remake the constitutional order (and the world) in Trump’s image, but they don’t have the brains or discipline to do it. As I’ve pointed out many times, they make a lot of mistakes. But cleaning up their messes (to the extent that is even possible) is a full-time, exhausting job.

But more and more, I think we should see all this nonsense for what it really is: a distraction. And what are they trying to distract us from? I think it’s three things.

First, the graft, theft, and fleecing of America that is the real modus operandi of the Trump administration. Trump and his sycophants are savants at stealing stuff and getting rich ($TRUMP, anyone?). The most recent example? Trump’s $10 billion lawsuit against the IRS and the U.S. Department of the Treasury over the leaked tax records. Trump’s DOJ won’t fight it—they will settle it. It’s a self-dealing payout: if it gets resolved for $5–$10 billion, that’s functionally $5–$10 billion pulled from the Treasury into Trump’s pocket. Hopefully a judge will have the guts not to approve the settlement, but who knows how that will play out.

Second is Epstein, although that’s been less successful because the Epstein revelations are so salacious. My assumption is that they pretty much gave up on that and are (sloppily) releasing the files and letting the chips fall where they may. While a sloppy production of documents might seem like the way to go since it confuses everyone and creates collateral damage, the sloppiness will always create questions around the completeness of the disclosures, which will, in turn, keep the story alive. So Epstein, to the extent he died the first time (that is questionable), will never die again. Oops.

The third thing they are covering up is the most important: the fact that costs are increasing much faster than wages, which is causing an affordability crisis that is becoming harder and harder to ignore. Yes, everything seems to be getting more expensive except the value of your labor (unless you’re in the top 5%, which you probably are if you’re reading this).

As I advise my clients, deal with the extraneous issues, but focus on the main one. And because the main issue is affordability, this newsletter is about the law of affordability—what it really means and how the government can, and cannot, make the situation better. Trump and most of his sycophants seem particularly unsuited to both understand and address affordability, so the field is wide open for the opposition to dominate. That’s natural: when you’re stealing everything you can get your hands on, you don’t really think about how much things actually cost.

The first thing to understand about the law of affordability is that the government’s power to regulate the economy to make things more “affordable” is, these days, rather uncontroversial. The original Constitution gave Congress the specific authority to regulate interstate commerce (Article I, Section 8 (the “Commerce Clause”)), which, for about 150 years, was generally used to strike down state laws that interfered with interstate commerce, rather than to support what the federal government could do to regulate the economy to, well, make life more affordable. Back in those days, the federal government did not do much, so it was natural that the Commerce Clause was not thought of as allowing the federal government to do much, but rather as a check on the states’ right to insulate themselves from the national market.

Once the federal government started regulating commerce by, for example, setting minimum amounts paid to producers of milk (thereby making life more “affordable” for milk producers even if no one was buying milk or there was too much milk) or limiting production of wheat to keep prices higher (thereby making life more “affordable” for small farmers), the Supreme Court said that was constitutional. There are some things very attenuated from interstate commerce that the federal government can’t do, but those are rare.

Other parts of the Constitution—namely the Fifth Amendment’s Due Process Clause and the Fourteenth Amendment’s application of due process to the states—are also no longer used to strike down government interference in economic affairs. The law used to be that due process prohibited the government from interfering in the freedom to contract and so, for example, any law that regulated wages was likely unconstitutional. The New Deal changed that—but only because Roosevelt threatened to pack the Supreme Court to pass his New Deal legislation, and had the votes in Congress to do it.

These days, due process protects against certain government overreach, but it does not protect “freedom of contract,” so laws that regulate the economy to make life more affordable—whether minimum wage laws or price controls—are perfectly constitutional. In some instances, the laws are vague or ambiguous, or the executive branch exceeds its congressional authority. However, if the federal government (or state government) wants to regulate the economy, and does it right, it can. Additionally, state constitutions often give states even more power to regulate economic affairs. For example, New York State’s Constitution guarantees education and housing (unlike the federal Constitution).

The Constitution is not a barrier to the government making life more affordable. Rather, another law stands in the way: the law of economics. For example, the government could, if it wanted to, give everyone a bunch of money. That would be perfectly legal. The problem would be that it would drive prices up by (1) creating more demand for goods and (2) making those goods more scarce as some people choose to work less. We saw that happen with the COVID bailouts, and we’re dealing with the fallout even six years later.

It’s also why proposals for “free buses” make such little sense. You would increase demand for the service while decreasing the funds available to provide the service. These are policy decisions, not legal ones. The law is settled. The policy is dumb.

The other thing the government could do (and does) is regulate prices by putting caps on the price that can be charged for goods and services. Again, this is totally legal. But price caps also don’t work as intended because they decrease supply. No one wants to make an investment where their return is capped. We see that in New York City: it’s why tens of thousands of price-controlled units are currently off the market—many of the units are old and need to be renovated, but current state law says that the price will be capped when those units return to the market. Landlords won’t spend the money to renovate when their return is capped. And where there is a mixed market, with some units being price-controlled and others being free market, capping the costs of some units will raise the cost of others.

It’s why the current proposal for a “rent freeze” is counterproductive. It’s probably going to lead to higher rents, not lower rents—at least for the millions of people not in price-controlled housing. The solution is to add supply. Whether the government uses its power to add supply is, again, a policy question, not a legal question.

Here, there is some law around affordability—but it’s still being made. Because price controls on housing basically require private landlords to take less money and house tenants they otherwise would not, there is an argument that price controls in housing are a “taking” in violation of the Fifth Amendment (“nor shall private property be taken for public use, without just compensation”). I’ve written extensively about that. (It’s behind a paywall, but I can give it to you if you’re interested).

So far, two members of the Supreme Court (Thomas and Gorsuch) have indicated that they would consider whether price controls on private housing are a taking—and there is another case for the Court to consider the question. It’s possible this would be the first attempt for the Supreme Court to weigh in on the government’s efforts to deal with the affordability crisis. IMHO, once we get rid of price caps, the only solution to housing affordability is the obvious one: build more housing. And that would be a good thing.

In the end, despite being very willing to use imagined powers to advance their agenda (tariffs? shutting down federal agencies? deploying the National Guard to U.S. cities), they completely ignore the powers they actually have to make life better for working Americans. The opposition has to stay focused on preserving democracy and resisting the slide toward autocracy—because if elections become less meaningful, Trump’s inability to address affordability won’t matter; voters won’t have a real way to make their voices heard. That’s exactly the outcome Trump would prefer. But as long as we can connect the dots—showing that life is getting less affordable as democratic norms erode—more Americans will recognize what’s happening. And hopefully that shifts enough minds to course-correct before it’s too late.

Keep thinking, keep building,

Jesse

Hi, and welcome to my newsletter! I’m Jesse Strauss, Your Fractional General Counsel. I’m a lawyer with a private practice based in New York City, helping clients in the United States and globally with their U.S. legal needs. My expertise spans various areas, including raising funding rounds, employment issues, negotiating master service agreements, intellectual property, compliance, legal process management, and dispute resolution. My focus is on founding and nurturing great companies from seed to exit. Discover more at Your Fractional GC and book a complimentary 30-minute consultation. You can also follow me on Threads @lawyerjesse1977, on BlueSky @lawyerjesse.bsky.social, subscribe to my Substack here (follow me on notes), and follow me on LinkedIn here.