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GOVERNMENT SPONSORED PROGRAMS CAUSE INFLATION UPDATE NOVEMBER 2 2026

 

" WHY DO MY COSTS KEEP GOING UP?"

 

Where a national insurance program goes, so goes inflation. An adage of mine hanging in my broadcast booth.

There is another saying also plastered on the wall of the studios of Money Matters radio and that one says, “where government money goes, so goes inflation”.

Most people scratch their head at that one but it’s pretty simple to explain.

Using a fictional food insurance plan explains it quite succinctly and it’s also a fun exercise.

Imagine the calls for food insurance arises from the masses because of rising food prices due to inflation.

We will call this fictional social-safety net the National Food Insurance Plan. It would be a single payer food insurance plan, much like Medicare or any other government funded plan covering the masses.

The program’s function is to provide food to anyone that needs it, which is basically everyone.

The costs for the premiums would be calculated by including all the expense to procure, package, ship, warehouse and market all foodstuffs.

Like most government programs, almost everyone has to participate. Customers pay the premium with help from the government, and start to shop at the grocery stores with the National Food Plan Card. As the wheels are set in motion, many things start to happen.

The grocery stores, knowing customers have the card and won’t care nor ask about costs since the food is covered, start to raise prices.

This is similar to what happens now with medical insurance.

When is the last time you asked about the cost of an MRI or X Ray?

Since food is essentially “free” to the customers, they now buy whatever they want and in whatever quantity the desire. This causes an increase in the demand over what would have been bought when price was a consideration.

Demand now skyrockets. This causes what is called “demand push” inflation, where higher demand causes prices to rise. Keep in mind the prices have already been raised by the grocery store because no one looks nor cares about what the food costs due to the insurance plan.

The costs to the insuring entity then skyrocket due to the higher prices set by the grocery stores because customers no longer care about price and therefore the stores can charge whatever they want.  Adding insult to injury, the increased demand also pushes prices up even farther.

As the demand pushes prices up, the premiums are no longer sufficient to cover the program costs. The premiums then have to be raised to enable the program to continue.  As long as the program continues to function, the cycle of higher food prices followed by higher premium prices continues in a never-ending upward spiral.

I know there will be some people that dispute the mechanism of government fueled programs, but the economic machinations are functioning perfectly, although the result is the opposite of perfect.

The explanation is simple. Government spending is nuclear fueled spending.  Their funds are unlimited and the costs are massive. Price constraint on the consumer side is removed. The demand is unlimited as the food is essentially free to the consumer. The price constraint of limited funds on the consumer side is eliminated as the program pays the bill. Much like the unawareness of medical costs in the case of medical insurance, the same is true for food costs under the National Food Plan. Consumers don’t care about price as they don’t pay it. Suppliers know the customer doesn’t care nor even asks the price (much like today’s medical environment), so suppliers jack up prices.

There are multiple examples of government fueled price inflation. Medical costs are a prime example. Fueled by medical insurance from both public and private funds, the cost for medical care has become astronomical and continues higher. The housing boom was fueled by government entities like Fannie Mae and Freddie Mac. Supplemented by a variety of government backstops and monies, housing costs rocketed higher as more and more programs were initiated to help first time buyers and buyers in general.

Take a look at college costs. Once again funded by a variety of government programs, government monies funneled into colleges and university tuitions driving them through the roof where they continue to climb today.

Although inflation has rifled through the prices of many goods and services, college tuition, medical costs and housing costs continue to climb out of the reach of many Americans.

The mechanism of insurance was originally designed to transfer risk to a partnering entity in exchange for payment. On very large scales, such as at the national level, it can morph into an affordability program through a similar mechanism.

Instead of a one-off occasional occurrence, like a house fire, the problem arises when the risk is more like a necessity, or a widely used service by many.

What happens then is when it is government funded, coupled with huge demand, such as medical needs, housing or college, it can result in incredible price increases in any area where these programs exist.

“Watching the markets so you don’t have to”

 

 

This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249 His insurance agency is BAP INC. insurance.

 


 

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Insurance can protect you and your family from undue hardship. Some life insurance policies also provide tax-advantaged savings that you can draw on to achieve goals like buying a house or retiring comfortably. I have access to a variety of insurance products that can help meet your security planning needs. No matter your personal situation—if you’re single or in a family; a professional or a seasonal employee; an executive or small business owner—we will work together to design a customized plan.

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A Word about Life insurance:

In the event of death, life insurance may offer surviving family members financial security. As a tax-free lump sum payment, it can pay for final expenses and debts, as well as provide income for the deceased’s dependents.

 

The advantages of life insurance include:

An instant estate for your loved ones at a time when funds are most needed

  • Death benefits that are almost always non-taxable for named beneficiaries
  • Avoid probate costs if you name a beneficiary other than your estate
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Long-term Care, Disability and Critical Illness insurance, Lifetime income strategies and Medicare:

Help protect one of your most valuable assets – your income – from unexpected events through long-term care, disability and critical illness insurance.

Income is important for both current financial obligations (e.g. grocery bills and mortgage payments) and for future financial security (e.g. planning for your children’s education or for retirement). Just think what might happen if you suddenly lost your income stream through a long-term illness or disability.

Long-term care and disability insurance products help protect your ability to earn an income, which can be affected if you are afflicted by a disability or other condition.

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The advantages of critical illness insurance can include:

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Contact me today to determine whether critical illness insurance fits into your financial security plan.

 

There are also new “hybrid” plans available that combine the benefits of life insurance or annuities with long term care coverage and at a cost that may be more affordable than you think. Contact me today so we can assess your needs and develop the best strategies for your specific situation to give you the peace of mind you require and protect your family and loved ones.

 

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