Due to the Federal Reserve and other government policies, inflation soared both before and during World War II (WWII). As a remedy to soaring prices resulting from the Fed’s created inflation, the government passed the 1942 Stabilization Act, limiting wage (salary) increases firms could offer, but not limiting the type of employee health insurance plans they could offer.  Congress capped wages, a socialist measure, preventing firms from competing for employees through wages. Firms want the best labor (employees) and without being able to offer competitive wages, they were forced to compete through offering better health insurance plans. Congress through wage control, a socialist device, forced employers to compete by offering better health insurance to their workers by banning competitive wages.

Further, in 1943 and in 1954, the government gave preferential tax treatment for companies contributing to employee health insurance plans, providing financial encouragement and a tax advantage based form of compensation.

The health insurance market has been manipulated by government since its inception. During WWII, our government’s socialist measures of wage control and the ensuing preferential tax treatment have fostered a government involvement in the health insurance market.  The health insurance market has not been and is not a free market.  It will not be free until government strictly limits its interference.

Mises.org – The Health-Insurance Market Is Not Free – http://joeyconway.com/q7kx9w

Economic History Services – Health Insurance in the United States – http://joeyconway.com/mqyaf5

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Keynesian economic policy is to replace the lack of private sector demand during a recession with government “public” sector demand.  The underlying assumption is the original private sector demand was correct.

The response of providing tax credit to home buyers seems to make sense on the surface as it provides them assistance and encourages more people to purchase homes.  On further analysis, the tax credit really only helps the seller by allowing them to charge that much more for the price of the home.  This keeps housing prices from falling further and reaching their true market equilibrium price.

The original private sector demand in the housing market was incorrect and fueled by a artificial bubble.  The market will force a correction.  We can either allow the correction to quickly occur and move on, or we can prolong it with the risk of making it worse through intervention and market manipulation.

Cato – Republicans Just as Guilty of Flawed Keynesian Thinking – http://joeyconway.com/c76kav 

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