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Strategies & Market Trends : ahhaha's ahs
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To: GraceZ who wrote (3178)10/18/2001 12:26:16 PM
From: Don LloydRead Replies (2) of 24758
 
Grace -

...Aside from that argument, recently I've noticed that two things that continually run well ahead of inflation are higher education and medical costs which is bringing them further and further out of reach for many more people. One could argue that a great deal of that running ahead of inflation has to do with the fact that they are subsidized by the government. So these programs that are designed to do what is essentially a "good" thing (ie. providing education and medical care for the needy) also sets up a situation where the cost continually rises and makes them less affordable for people further up the ladder.

This is exactly right, but may not go far enough.

The government can create money, but it cannot create wealth. Whenever the government tries to give a benefit to one group, it must steal it from someone else. Even worse is its effect on the providers of the goods and services to be subsidized. When the government is paying the bill, there is little or no pressure to compete on price and quality, nor to address the specific desires of consumers. The only pressure is to fill out all the government forms in a manner that the government accepts. This results in very high prices for goods and services whose characteristics are far inferior to those which would have resulted from an undistorted competition for the consumer's dollar. But you only have to look at all the hospitals that go bankrupt to realize that the government subsidies are poisonous to the providers as well, as the government mandates both what the services are and what it will pay for them. The strings attached to government subsidies are really steel cables wrapped in razor wire.

Regards, Don
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