Cost Disease Socialism: How Subsidizing Costs While Restricting Supply Drives America’s Fiscal Imbalance
"The traditional socialist call to 'seize the means of production' has thus been updated to something closer to 'subsidize my cost of living'."
What It’s About
Teles, Hammond, & Takash analyze “cost disease socialism,” a phenomenon where rising costs in key sectors like healthcare, housing, education, and childcare lead to calls for government subsidies to help people afford those services. While helping some, these subsidies ironically further increase costs overall by increasing demand.
Upshot
Teles, Hammond, & Takash argue:
- Subsidization Without Reform Worsens Inflation: Government funding that doesn't address underlying supply restrictions tends to increase prices
- Cutting Spending Won’t Work Either: A focus on austerity and budget controls fails unless it addresses the regulatory roots of cost disease
- Regulatory Barriers Inflate Costs: Restrictive zoning, excessive licensing requirements, and compliance burdens limit the supply of goods and services and drive up prices. This points to deregulatory solutions
Did you know? Nearly 30% of all US jobs now require a government-issued license.
Why It Matters
As important services become increasingly unaffordable, the push for government intervention naturally grows louder. This report helps explain why such well-intentioned subsidies can deepen the very problems they aim to solve.
Who Wrote It
Steven Teles is a Professor of Political Science at Johns Hopkins University and a Senior Fellow at the Niskanen Center.
Samuel Hammond is Senior Economist at the Foundation for American Innovation.
Daniel Takash is a legal fellow at the Public Interest Patent Law Institute.
