One is to create systems that encourage innovation and efficiency.
The other is to run government subsidy programs that discourage efficiency.
We now have proposals to put price controls on groceries, and price controls or subsidies (not specified) on childcare services. Kamala Harris Calls For Cap On Family Child Care Expenses
Contrary to popular media belief, subsidized childcare will not increase the fertility rate. The fertility rate began collapsing 50+ years ago. More than 20 years ago, other countries began trying to address the decline with subsidized childcare and direct payments to parents to have children, and up to one year long paid or partially paid maternity/paternity leaves. None of those programs produced long term sustainable changes in their fertility rates.
Related: Why fewer Americans are having kids (msn.com) (Hint – it’s not costs)
U.S. Fertility rate decline began long ago and is unrelated to contemporary political or economic issues.
Meanwhile, Trump proposes tariffs on all imported goods, falsely claiming this will not increase costs to American consumers.
Harris proposes that taxpayers assume all education loan debts and all medical debts. Why not all small business debts too? And auto loans? Eventually no individual is responsible for anything – except spending money.
Politically popular measures like tax deductions for mortgage interest payments act as subsidies to banks, not consumers. These measures effectively increase the market clearing price for homes – leading to higher prices and larger loans, which benefits banks who make their money by writing loans.
Similar to Harris/Walz proposal to give $25,000 to all first-time home buyers – that would lead directly to a higher market clearing price for many homes.
Even things we take for granted, like health insurance, can perversely increase prices. A well insured consumer has no incentive to consider health care pricing – in fact, is probably unable to even get a price quote. Consequently, business does not go to more efficient, less costly providers – because price mostly doesn’t matter. This leads to upward pressure on prices. The only limit is what the insurer has negotiated – but since nearly everyone has insurance, usually mostly paid by someone else, there isn’t as much pressure on insurers either. It’s all a mess.
We are now willing to throw out 200 years of economics theory to subsidize everything in sight and think this will make things better.
