Friday, February 24, 2017

Violating the Laws of Economics

The first law of economics is the law of Supply and Demand.  It is only alive and well in a true free market economic system when consumers control the price.  If the price increases, consumers walk away and lower the demand.  If the price decreases, consumers will buy and increase the demand.  We also see that if consumers increase the demand, they increase the supply and if consumers lower the demand they lower the supply. If there is a glut of anything, prices fall.  If the price of beef goes up too high, consumers will buy chicken or some other protein based food.  If Consumers have to spend their own money for whatever they buy and they can walk away from a bad deal, consumers send a signal to producers that the product is overpriced and they won’t buy it.

There are events that have overwhelming emotional content and urgency that allow producers to cheat consumers at critical times.  Consumers need to be careful not to overspend on weddings and funerals.

Now let’s talk about the cost of government, healthcare and education.  Government subsidies raise prices on these services and prices are quadruple what they should be.  It happens because it can. Think about government moving a military base to a sleepy rural town where apartment rentals are $300 per month. These rents double to $600 per month when the base is populated. The growth that was good for the businesses was a disaster for the consumers. Voters should have the right to vote for this kind of disruption, but they often are not allowed to vote.

Our federal government has spread to controlling every part of our economy, but the US Constitution only allows it to function within its “enumerated powers”. Our federal government was designed to support a private sector economy with a free market system.  All activities outside of the “enumerated powers” are unconstitutional.  It’s no wonder that the federal government is technically bankrupt. Federal overspending was caused by ill-conceived, unconstitutional government programs.

If healthcare and education costs were paid 100% by consumers, they would cost 75% less.  I remember when I was called to participate in a “focus group” to discuss health insurance coverage.  At the time, all health insurance policies had a $1 million lifetime maximum.  The insurance companies wanted to know if they could remove the cap and offer health insurance policies with no lifetime maximum.  I objected as I said that eliminating the lifetime maximum would only encourage providers to try to figure out how to quadruple their prices. They did it anyway and prices did quadruple.

Imagine a $100,000 hospital bill costing $25,000. It could be paid off like a car loan. When we allowed government subsidies for healthcare, we were allowing a future of unsustainable healthcare cost increases.

The same thing happened to education. We saw excellent education taking place in 150 year old buildings 50 years ago. Now we see useless, harmful education taking place in vacation-venue facilities that required $billions to build to seduce naïve students.  These were the same students who grew up at the Mall and wanted $150,000 Sweet 16 Birthday parties. 

The price of government interference in the free market system is unsustainable.

Norb Leahy, Dunwoody GA Tea Party Leader

No comments: