Friday, December 14, 2007

Inflation Watch

From a Tony Crescenzi email this morning:

There were a number of factors that drove the consumer price index to gain 0.8% overall and 0.3% minus food and energy:

Housing +0.3% (fewer people buying = higher rents)
Drugs +0.8% (BLS analyst told Market News it may have been because of new Medicare payments)
Airfares +2.6% (fuel prices)
Hospitals +0.6%
Apparel +0.8% (early holiday, mens and infants clothes, footwear)

The most worrisome of those components to me is the drugs and hospitals inflation. While energy inflation is not desired by global warming skeptics who are concerned with world hunger and disease, it should be preferred by alternative energy advocates.

But we lose twice on the health care side. First, we are taxed to subsidize Medicare and Medicaid. Then, the subsidies drive up prices, as the hospitals and drug companies respond to the subsidies opportunistically.

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