Small: What causes inflation? Government.

What causes inflation? Government.

By Jonathan Small

The financial pinch families feel from rising prices is undeniable. Yet too few understand that government is responsible for soaring prices.

Consider college costs. The massive government subsidies provided to colleges, through free-flowing student loans, billions in state and local tax dollars, government’s cultural overemphasis on a college degree, and the complicit “paper ceiling” at many businesses, make students much less price sensitive. Colleges have responded by hiking tuition.

According to JP Morgan, the cost of clothing has increased 35 percent since 1983 while gas increased 182 percent. But college tuition has soared 914 percent.

Has the value of a college degree increased more than 900 percent? No. But colleges are free to pretend otherwise.

We see the same thing in health care. Two government programs, Medicaid and Medicare, supposedly cover medical treatment, but they shortchange providers, leading to cost-shifting onto everyone else.

Government also gives tax breaks for employer health plans but not individual plans.

Those with private insurance cannot obtain transparent pricing prior to treatment.

A market in which third parties dominate and prices are hidden is one where rapid price increases become the norm. Obamacare supercharged the fire by setting price controls requiring health insurance premiums to allocate a set percentage of 87 percent to health expenses, thus fueling incentives for ever-increasing costs.

That’s why JP Morgan determined medical-care costs have increased 505 percent since 1983 even as technological advances lowered prices elsewhere.

Government drives up housing costs, typically through regulations that either increase the expense of construction or deter it altogether—then subsidize the demand side, making matters worse.

Government regulations deter oil-and-gas drilling in many locations while providing massive subsidies to “green” energy that is not truly viable. The end result is we all pay more for energy. Utility prices in Europe and the U.S. have been soaring because of climate alarmists controlling utility energy policy, forcing the shuttering of fossil-fuel generation, all while utility consumption for livelihoods and technology use has increased.

Automobiles prices have also been hiked by government, particularly through “environmental” regulations that force cars to include unnecessary but price-boosting technology. And things are made worse by policies that encourage the destruction of older-but-cheaper cars that many low-income people once drove.

Food-and-grocery prices have surged due to government policy prior to, during and post COVID and throughout the Biden administration. Printing more than a trillion new dollars did not make families more financially secure; it simply meant more dollars were chasing the same amount of goods, driving up prices–not to mention Federal Reserve policy that seeks inflation of 2 percent per year.

When it comes to inflation, government is the problem, not the solution.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.