Monday, August 10, 2009

A sure way to create inflation? Subsidies!

The federal government, through subsidization, has made everything from education to healthcare to corn and sugar more expensive by throwing money at those industries.

Now it's happening with cars.

So our taxes are going up, while our buying power goes down. Thanks, Dear Leaders.

Most people realize that taxes make some things more expensive (e.g. sales and gasoline taxes), which, I theorize, makes the inflation effects of subsidization counterintuitive. Of course, taxes can make thing cheaper--income taxes and property taxes can really drive down the value of real estate. No one said economics was easy. But that's no excuse to deny the realities.

A logical followup question: how can we make things more affordable? (Hint: Airline tickets and telecom services used be really expensive decades ago).

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