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By Samuel Hammond, Daniel Takash and Steven Teles
Mr. Hammond, Mr. Takash and Mr. Teles write about and research policy and politics at the Niskanen Center.
The Biden administration has rebranded its Build Back Better plan as part of a strategy to fight inflation. By subsidizing essential services like child care, the argument goes, American families and the broader economy will experience relief from the rapidly rising cost of living.
Yet something doesn’t add up. Consider that the current proposal would also dramatically shift the cost structure of child care upward with regulations mandating higher salaries, greater credentials and compliance with federal “quality standards.” Having made child care more expensive, it then proposes socializing over 90 percent of the cost for a subset of middle- and lower-income households. This won’t reduce rising prices so much as mask them. And with informal child care providers, including religious organizations, at risk of being crowded-out, the true availability of low-cost child care could even contract.
This is an extreme example of what we call “Cost Disease Socialism” — addressing the increasing costs of supply-constrained goods and services by spreading the price among American taxpayers while leaving the cause of the underlying costs unaddressed.
While Democrats want to socialize the rising cost of everything from higher education to housing, neither party has a strategy for expanding the real supply of these goods and services nor a plan for the inevitable fiscal consequences when sectors with rising costs are moved onto public budgets.
Not everything Americans spend their hard-earned dollars on has experienced long-term cost inflation. Things like clothing, appliances and consumer electronics feature plunging costs even as quality improves.
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