My brother-in-law lives in the southwestern edge of Ontario, closer to Buffalo than Toronto. Mostly it’s to take advantage of the relatively better economy in Buffalo, which is saying some. I’ve been to Buffalo.
I saw him and his family recently, in a rare visit down our way. He showed off his new vehicle, and told the story of its purchase. He mustered together about $7000, and had a modest, lightly used model in mind. His father caught wind of his plan—his father, who last year won ten million dollars in a lottery. I give him credit for straddling that line between the pure bull-headed individualism of refusing a handout when it benefits his family, and the toadiness of financial dependence. The father insisted on picking up the tab for the car, paying the full cost, and acquiesced.
So how did my brother-in-law get a new $14000 SUV? Because he’s smart.
His father’s generosity, while intended to get him to pocket his own $7000, simply gave $14000 cars the affordability of a $7000 car. His burden didn’t go up or down, but the cost of the car doubled.
He got a 100% subsidy for the car, and doubled the price.
Both father and son helped prove my point, and the point of many an economist: if you want to raise the cost of something—housing, food, tuition, healthcare—there’s no better way than to subsidize it. It works every time it’s tried.
Which of the three candidates for president understand that the best? Hillary and Obama are oblivious to this, or even its possibility. McCain is slightly less so.