Hey there. “Affordability” is the hot political topic this winter, and the President is telling a very different story from the economic data — and his White House’s own actions. We’ll break it down below, and meet one of many families making hard decisions because their life has become, well, unaffordable. 

But first, let’s talk about artificial intelligence. Wall Street hit another all-time high this week, in a year of growth fueled largely by AI hype. At the same time, Oracle shares lost double digits Thursday as investors blanched at the company’s massive data center spending and fretted about a bubble. If there is a bubble, and it pops, we have a roundup of terms you’ll want to watch out for.   — Tony Wagner, newsletter editor

PS: Read to the end of this email for some great deals on public media merch for everyone on your list! 

Before the great financial crisis, did you know what a mortgage-backed security was? A credit default swap? Had you ever heard of Lehman Brothers?

Every economic bubble has its own vernacular. The esoteric jargon and financial terms of art and even names of companies that, when the bubble is inflating, become the lingua franca of Wall Street.

But when bubbles pop, this language forces its way into common vocabulary.

The artificial intelligence bubble has not yet popped. In fact, there is plenty of debate about whether we’re even in a bubble. But many experts will confess to some trepidation about how much our economy is tied to AI, and the potentially disastrous consequences if this latest tech revolution were to go south.

Here are a few AI bubble terms you may want to familiarize yourself with now. You know, just in case.

First up, Special Purpose Vehicle — the cool kids call them SPVs.

Even very rich tech companies sometimes need to borrow money to build an AI data center. So when Meta announced earlier this year it was building a nearly $30 billion data center in Louisiana, it wasn’t surprising there was lots of debt involved.

“Now this isn't Meta borrowing the money,” said Gil Luria, who heads up technology research at investment firm D.A. Davidson.

Technically, it’s a special purpose vehicle borrowing the money. A separate legal entity Meta co-created with a private investment firm. Meta is agreeing to rent the data center.

“So that would be like you buying a house, but not taking the mortgage yourself, but having somebody else take the mortgage, which, from your perspective, is great,” Luria said.

But from a broader economic perspective, maybe not so great. The fraudulent energy company Enron was a big fan of special purpose vehicles. Now, there’s nothing inherently illegal about SPVs. But if demand to use that Louisiana data center falls short of expectations?

“It's Meta borrowing money without borrowing money, and at the end of the day, somebody's going to be left holding the bag,” said Luria.

Life at Julie Yang and Daniel Thao’s house in St. Paul Park, Minnesota, is a little chaotic these days. Asher, who’s in the third grade, has become a bit of a class clown. 

“We just had conferences, and I heard really bad reviews,” said Yang. “So I was pretty upset with that, so now he’s grounded.”

Meanwhile, five-year-old Isla had a falling out with a friend, she added. “Something had happened at school, and she was like, ‘Yeah, well, she yelled at me and told me she wasn’t my friend anymore. And then she told all the other girls not to like me.’“

Typical drama, really — especially for a family with six kids. What’s not so typical is what’s happening with their newborn. Sachi was born preterm with a congenital heart defect and had to have a major surgery. He requires a lot of care.

“We just left a three-hour genetic appointment yesterday,” Yang said. “I feel like I’ve been at the doctor’s every week.”

Yang recently made the difficult decision to cut way back on her hours at her job as a nurse. It means the family lost their state child care assistance and her part-time nursing pay, which was about $30,000 a year. The two have been dipping into savings; they’ve told the kids to expect one gift each this Christmas. 

Raising kids in the U.S. has always required families to improvise, especially when it comes to juggling schedules and finances.

“You know, to have young children in general is somewhat of a leap of faith and an economically scary prospect, right?” said Taryn Morrissey, a professor of public administration and policy at American University. 

But there’s something about this moment that feels different, with the rising cost of everything from health care to groceries — it feels like it’s coming to a head. Between 2020 and 2024, the average price of child care rose nearly 30%, according to Child Care Aware of America.

“It’s an intense, economically uncertain moment,” said Morrissey. “And families are facing a lot of pressures.”

Those pressures may be pushing some parents to restructure their lives. The number of households paying for child care is down more than 1.5% from a year ago, according to recent data from Bank of America. Meanwhile, the number of households receiving multiple paychecks is also down. The trend is more common among lower-income families. 

“People are making these complicated calculations,” said Morrissey. “It’s just that many families don’t seem to have real options.” 

Imagine a world where both major presidential candidates agree that climate change is a serious problem, and they want to use the same policy to address it.

This was a real thing in 2008.

Democrat Barack Obama and Republican John McCain, who were both U.S. senators at the time, disagreed on some details, but they agreed that a national cap-and-trade system could push power plants and other industries to lower their carbon emissions.

Spoiler alert: Their proposals never made it through Congress.

But, shortly after the 2008 election, ten states on the East Coast booted up a cap-and-trade system of their own, called the Regional Greenhouse Gas Initiative (RGGI). It’s a voluntary program; states can join or leave as they choose. And though it’s been running for sixteen years, RGGI made some headlines this fall.

Pennsylvania Gov. Josh Shapiro signed a budget bill last month that will keep the Keystone State out of RGGI. Meanwhile, Virginia Governor-elect Abigail Spanberger has said she intends to rejoin it, after the current governor pulled the state out.

So, how does cap-and-trade work again? Unless you’re very steeped in energy policy, you’re forgiven for not remembering.

To explain, Peter Shattuck at the energy consulting firm Power Advisory has an analogy: “Let's say, for whatever reason, we wanted to reduce the amount of dining out. You'd set an overall cap on the number of meals out.”

Then, you’d sell passes to people who want to eat at restaurants. But, you’d reduce the total number of passes available over time. So want-to-be diners would bid up the price for them — supply and demand.

“It would create an incentive to do other things, like eat at home,” Shattuck said. “And if you reuse the revenue raised by selling the passes in stocking people's kitchens, then it would be all the more appealing to eat at home, and we'd reduce the amount of dining out.”

This, but for carbon dioxide emissions from power plants. That’s what RGGI does. So 16 years in, how’s it working?

The Federal Reserve lowered its key interest rate by a quarter of a percentage point this week. It’s the third cut this year, and possibly the last for a while.

Three officials voted against the move, a first in six years, and even the dissenters were split on which way to go. With the central bank so divided and the economy so uncertain, Fed Chair Jerome Powell signaled a “wait and see” approach going into next year.

That was unwelcome news to President Donald Trump, who has railed against Powell all year for his caution around monetary policy. The President called his appointee a “dead head” this week. It’s actually one of the nicer names Trump has come up with for Powell, considering the Fed chair is on record as a big fan of Grateful Dead.