THE MONEY MUST COME FROM SOMEWHERE.

Or, as we would crack wise, years ago, "When politicians promise you pie in the sky, they're going to do it with your dough."

My post title comes from a recent essay by John "Grumpy Economist" Cochrane, notionally writing about price controls, and elaborate rationalizations of their use: in reality, he's reminding all and sundry of the fundamentals of political economy and taxation.

A rent control is the same as a tax on landlords used to subsidize the rents of current tenants. You may picture a giant corporation, but many landlords are sympathetic individuals who worked hard and saved and use the apartment to fund their retirement. Corporations are owned by the 401(k) plans of sympathetic workers too. But economists should know better than to tug on your heartstrings for who should get resources forcibly taken from who else. If you ask “what’s the optimal way to tax people in general in order to lower housing costs for a politically attractive group (current tenants)” the screaming answer is not “let’s tax the people who currently own the buildings.” Sure, “tax the rich.” If you want to go down this route, it’s a lot more efficient to tax all the rich. If you ask “what’s the optimal way to help families who just got stuck with higher rents,” the screaming answers is “send them a check, but then let them move to the apartment that best fits their needs.”

A rent control only makes rental “affordable” for the lucky recipient. It does not make rental housing more “affordable” for society as a whole. It does not increase the number of people who have housing. Indeed it reduces that number. It just changes who gets it. It does not even make housing more “affordable” on average. For those who want it must now pay with time, and inconvenience, or pay by foregoing the great opportunities that moving to the city provided.

The biggest losers of rent control are the young, the mobile, the ambitious, immigrants, and people without a lot of cash. If you want to move from Fresno to take a job in San Francisco and move up, and you don’t have millions lying around to buy, you need rentals. Rent control means they are not available. Income inequality, opportunity, equity, all get worse.

There is no blob of “government” money, or “policy” that can make something affordable for one without making something else less affordable for another.

The extension to other attempts to make things "affordable" is straightforward.  "It doesn't matter what account the federal money comes from: whether you call it Medicaid or it comes out of some assigned risk pool among the insurance exchanges, where policy holders might get a premium subsidy, ultimately the money is extracted from taxpayers, borrowed on the bond market, and printed."  In that long passage, Professor Cochrane is reminding people that everything has an opportunity cost.  Without proper technique, there is no economic content.

Government, he continues, undoes a lot of good in the attempt to do good.

Nothing rings more true of our government than restrict supply, subsidize demand, and watch prices skyrocket. Universities and health care are poster children along with housing and energy. “Landlords” and “utility companies” are not, in fact, making a killing here. Land owners benefit. Energy faces rising costs like anything else. AI, not corporate apartment companies, electric utilities, and oil companies, are the hot stocks of the moment.

Contra Mahoney and Ramamurti’s assertion that price or rent controls are alternative to demand subsidies, they are exactly the same thing as a tax on suppliers used to fund demand subsidies. With a fixed supply, the number of people who have houses is fixed. The only effect of rent controls or demand subsidies is to change who gets the houses.

So, also, with the Obamacare insurance tax credits that figured in the Schumer shutdown.  Toward the end of the first Trump presidency, Congress made a few tweaks to the mandates as part of the fiscal stimulus during the opening months of the corona tyranny.

Obamacare was passed on a promise that it would be deficit-neutral or even reduce the deficit slightly. The Congressional Budget Office estimated that the law would reduce the deficit during its first decade, provided that all of its provisions were enacted as the statute called for. As The New York Times noted last summer, the Cadillac tax "was expected to be a key cost-containment provision in President Barack Obama's signature health law and one of the main ways it was supposed to pay for itself."

There are obvious lessons here about what we might expect from various plans to "pay for" Medicare for All now being touted by various Democratic presidential hopefuls. If nothing else, this episode is a reminder of how Washington works: First, Congress passes a law setting up an expensive new program along with (if we're lucky) a system to pay for it. Years later, amid a bipartisan spending binge, those taxes are repealed while the rest of the program remains on the books. The public barely notices, and the lawmakers involved shrug and move on.

The result is legislation that is fiscally ruinous, but also more popular than it would be if taxpayers were actually made to foot the bill.

That's what one would expect of a Reason contributor, Peter Suderman in the above excerpt.  But suggest, seriously, that maybe the best thing for government to do is to go away?  That, Professor Cochrane argues, is not the way of the intelligentsia.

I hate the word “policymaker.” It’s every leftwing economists’ dream, I guess, to be installed as an aristocrat and “make policy.” This is politics, not policy, redistribution in the name of electoral gain, as Mahoney and Ramamurti make clear. There is no “policy.” There is politics. This is redistribution by force. For better or worse, but don’t sugar coat what you’re doing.

He's dead right.  He's also engaging in heresy.  What's the point in getting an advanced degree from a highly regarded university and lots of disciplinary recognition if you don't get to order the groundlings around a bit?  Thus, there are institutional biases in favor of putting a Man of System in charge.  Emergence, which takes longer but might work better, is not the Men of System's preferred situation.  And, Professor Cochrane warns us, the Men of System are on the march.

We are likely to return to that theme, repeatedly, as November turns to December.