Subsidies Only Increase Consumer Prices

Tesla just debuted a more affordable version of its popular Model Y SUV. The Model Y will cost about $5,000 less than the previous model which had a glass roof, leather seats, and light bars. Tesla could have been making a lower cost version all along, but they didn’t. “Why,” you may ask? The reason is simple.

Until recently, buyers of many electric vehicles could claim a $7,500 EV tax credit on their federal tax forms. Tesla, and others, knew this. Hence, instead of offering you a car at less cost, they simply decided to make a more costly vehicle, steal most of your subsidy, and leave you with higher monthly payments than necessary.

Need clarity? Tesla could have been making a $40k Model Y from the get-go, However, Tesla, in their greedy wisdom, decided to add thousands of dollars worth of fancy, needless features. Hence, instead of being able to buy their Model Y for $32,500 - which would lower monthly payments so you had more money for, say… food, Tesla designed their car so you would still have to fork out $40k, even after the subsidy.

So who did that subsidy actually go to? You guessed it. Tesla! They’re hoping the lower prices will attract more buyers after losing their gift from the taxpayers. In other words, when the government handouts end, people/businesses make wiser consumer decisions.

Sadly, the expensive subsidy circus occurs pretty much everywhere government determines assistance is a worthy goal. Education subsidies don’t make it cheaper to attend college; it makes it costlier. When subsidies are available, colleges just jack up prices so they end up with both your subsidy and the original cost of your degree.

Medical care? Same thing. The government offers medical insurance, medical payments, and more. Doctors and hospitals see the extra money being thrown around, so guess what they do? They jack up the prices of medical care. Again, they get the subsidy/insurance payments, plus the same amount of out-of-pocket payments.

The medical care issue has a second problem. Doctors claim that one-third to one-half of all medical illnesses are preventable with better diet and exercise. Subsidies – and insurance - encourage people to be less responsible with their own care since their not footing much of the bill.

Imagine how much insurance premiums could be reduced if America had one-third less medical needs. Doctors, instead of being overbooked, might actually have to compete for patients. That would alter the supply and demand equation greatly, with doctors/hospitals charging less in order to attract “customers”. That would lower insurance expenses and premiums even further.

Simple fact is this: Since government has gotten involved in education, medical care, housing, and now cars, those costs have skyrocketed way beyond overall inflation rates. Subsidies never benefit the consumer. They only benefit the entity to whom the consumer is dealing with. All subsidies need to end… unless you actually like higher prices.

Source used: CNBC