From housing to childcare to energy, the United States is plagued by rising costs for the most needed goods and services. Part of the reason is that it’s not enough to go around.
Important reason: Economists and other experts are concerned that subsidizing these costs could make things worse. They argue that a better, fairer and richer future is one in which policies focus on increasing supply, not just socializing demand.
News promotion: President Biden’s $ 1.75 trillion Build Back Better plan ran into another obstacle Thursday as it was revealed that the bill had stalled in the Senate and would not be passed by the end of the year.
Yes, but: But for some experts, the bill symbolizes a more serious problem in policymaking, and instead of reducing the cost of important services such as childcare, as the Biden administration argues, It can actually make them worse.
- In a November column in the New York Times, Samuel Hammond, Daniel Takash, and Stephen Teres of the Niskanen Center on the left center insisted on a childcare proposal for the bill. Subsidies — “Not enough to mask the rise in prices”.
- They say that this is an example of “cost disease socialism”, where supply-constrained goods and by distributing prices to U.S. taxpayers, leaving the underlying cause of cost unresolved. Address the increased cost of service. ”
Big picture: Over the past few decades, US consumers have generally enjoyed the plunge in costs for clothing, appliances, and appliances. As a result, the cost of large-screen flat-screen TVs is much lower than it was 10 years ago.
- But the cost of key services such as health care, housing, and education has been reversed, making it more difficult than ever to eat up American income and achieve a middle-class lifestyle.
- What these industries have in common is that, unlike most consumer goods manufacturing areas, productivity growth is low and costs increase over time. This is a phenomenon that economists call “Baumol’s cost disease.”
Line spacing: The progressive response to this reality was generally to subsidize these services in an attempt to offset these rising costs by socializing them as much as possible.
- There is justice in this effort. Redistribute some wealth from the wealthy in the form of subsidies, allowing non-wealthy people to cope with rising costs of essentials.
- However, analysts and other experts at the Niskanen Center argue that a demand-focused approach rather than a supply is counterproductive and exacerbates inflation in sectors such as education and healthcare.
- Economist Noah Smith said, “If we spend more money on expensive medical, childcare and higher education issues, we will end up paying less for consumers, but society as a whole will pay more. Probably. ”
Instead, they say a better approach It will focus policymaking on increasing the supply of these expensive but important goods and services, which have come to be called “supply-side progressiveism.”
- That means working to make building the necessary housing in the desired city expensive and difficult, or to reduce many of the regulations that limit the number of doctors in the United States.
- This means not only replacing existing fossil fuels with zero-carbon energy, but also making significant investments in scientific research and development that can ensure that they exceed them, providing a cleaner and cheaper energy supply. increase.
- It means embracing the future that everything is more abundant, not just high quality television, but high quality education. The main goal of policy is more than enough for everyone, rather than discussing who deserves what.
Caution: On the part of the Build Back Better project, investment in research and infrastructure needs to be facilitated in order to reduce energy and transportation overall.
Conclusion: A prosperous future may look like utopia, but even if society is obsessed with a more expensive future, an alternative may be a shell game that shifts costs endlessly.
..
