Senate Majority Leader Reid illustrates the deeply embedded economic fallacies that underpin so much government policy. Unfortunately, he does so by propping up fallacies, rather than dismantling bad policy:
Like the cash for clunkers program, the home buyer credit program is classic example of government injecting artificial influence in the market. By using taxpayer funds to encourage first time home buyers to buy now, the government created an artificially high demand for homes. All this did was borrow from the future of home sales. What about the housing market "later on"?
Such influence is "artificial" because it introduces pressures in the market that the market itself would neither create nor tolerate. Supply and demand, the cornerstone of basic market operations, gets skewed, prices misaligned, and markets made unnecessarily volatile. Whenever prices do not reflect the natural pressures of the market, government-induced consumption leads to shortages.
In the end the taxpayer pays twice, once in the form of the taxes that fund these schemes and twice as the consumer faced with artificially high prices to pay for products.
Politicians are fond of borrowing from the future for short sighted gains today. If they can hold up numbers and statistics for electoral success now, why worry about the aftereffects of their policies? On a larger scale, for decades they've been borrowing from the future with domestic entitlement programs, taxation, deficit spending, and inflationary policy.
The supply of meddling interventionist freedom-killing policy needs to go way down. That will happen when our demand for its enabling politicians goes way down, too.
