Steven Pearlstein, on Government subsidies
In Wednesday’s Washington Post, Steven Pearlstein writes about how government subsidies are actually causing certain industries to increase prices much faster than the economy as a whole (article available here. Specifically, he cites three industries: housing, higher education and health care.
The problem here is two-fold. First, because the government guarantees subsidies for these industries, the industry can, in turn, set any price it desires for these services. This forces the government to increase the dollar amount of subsidies at a rate much faster than the economy is inflating. This forces a higher burden on the American taxpayer. Secondly, for those who do not receive subsidies, these people are forced to pay a higher dollar amount out-of-pocket to receive these services themselves.
In a normal economy the existing market forces would correct the problem and keep the prices in check. If college gets to expensive, people just may not go, or may think long and hard about what they want to do before they enroll. Or perhaps they’d enrolled in a community college and transfer midway through college to save money. Either way, enrollment would plummet, and colleges would be forced to lower tuition to keep themselves solvent.
Upon reading this, most of my conservative friends will problem exclaim “Exactly! Why can’t those libs understand this?” Before you get too excited, consider this. The Republican consistently pushes this point, yet look at the list of states that receive the most federal government money in relation to the amount of federal taxes they pay.
This data is available online here
Top 10: Washington DC (not a state, I know), North Dakota, New Mexico, Mississippi, Alaska, West Virginia, Montana, Alabama, South Dakota, Arkansas
Bottom 10: New Jersey, Connecticut, New Hampshire, Nevada, Illinois, Minnesota, Colorado, Massachusetts, California, New York
Here, 8 of the top 10 states went Republican in the 2000 presidential election. 7 of the bottom 10 went Democrat in that election.
Thus is seems that if we were to actually reduce the amount of the federal subsidies (an idea I still advocate), then it seems that the some of the Republicans who advocate this idea would be the ones most hurt by its implementation.
