Skyrocketing inflation is hurting those who can least afford it: single mothers, retirees, those on the fringes of the labor market, and people working for fixed hourly wages.
A new analysis this week from the Committee to Unleash Prosperity estimated that average earners are losing the equivalent of about $50 a week as inflation significantly outpaces wage growth. That’s a tank of gas, a grocery shop, or a utility bill. President Joe Biden’s chief of staff Ron Klain couldn’t have been more wrong when he said last week that inflation is a “high class” problem.
It’s more important than ever to identify public policy solutions to help folks get ahead. Reasonable people disagree over whether government programs or free markets are better placed to facilitate people’s prosperity. This debate is playing out in real time on the national stage as congressional Democrats attempt to pass a $3.5 trillion budget bill full of social programs they claim will improve well-being. Such government policies often seem caring and helpful. They enjoy the moral high ground, boosted by a sympathetic media, because they are well intended and seek to solve a societal ill directly.
But they have unintended consequences that often exacerbate the very problems they’re trying to solve. Evaluating the true success of government programs requires a comprehensive look at their full effects, including their “unseen” impacts. Taking this broader view often reveals that free market alternatives provide the best chance at achieving personal prosperity.
Consider one of the Democrats’ major proposals: universal prekindergarten for children ages 3-4 and enormous subsidies for infant care. Affordable child care is clearly a problem facing the country. Yet it’s highly debatable whether these government proposals are the best solution. Subsidized child care would significantly worsen child care shortages by artificially boosting demand. It’s no surprise that nations with the most socialized child care systems also have the longest waitlists. In France, for instance, approximately one-quarter of families lack access. Such shortages may result in even fewer parents being able to access child care than under the market-based status quo. Subsidies also tend to reduce quality because providers don’t need to perform as highly to attract consumers. It’s also unclear whether subsidized infant child care would offer parents significant financial savings in the long run. Subsidies generally cause providers to raise their prices, reducing or eliminating the subsidy’s value. Higher education is perhaps the best example of this phenomenon.
Then there’s the cost of these government programs via the higher taxes needed to pay for them. Advocates of new spending generally ignore this side of the ledger. Deficit spending and printing money to pay for these programs in lieu of tax hikes would only fuel the inflation fire. In contrast, free market solutions can address societal problems without such negative unintended consequences.
For instance, free market reforms to relax onerous licensing requirements and strict day care regulations, including those that require small child-to-caregiver ratios, can lower child care prices. Reducing income transfers that pay some people nearly as much or more to stay home than work can alleviate the labor shortage that’s driving up child care prices.
The Steamboat Institute is bringing this robust debate over government versus free market policies to college students who may not have heard both sides. On Tuesday, we’re at the University of Texas, Austin, and on Wednesday, we’re at the University of Maryland. Charles Payne of Fox Business and CNN political commentator Bakari Sellers will take part in the debates. Our motivation?
Free market solutions that widen the path to prosperity deserve just as much consideration and moral legitimacy as government efforts.
Jennifer Schubert-Akin is the chairman and co-founder of the Steamboat Institute.
