If you thought inflation was just about rising prices, think again! The government’s approach to controlling inflation often involves price controls on essentials like rent, groceries, and gas. At first glance, it sounds like they’re helping out, but these measures can have unintended consequences that ultimately hit your wallet in unexpected ways.
In Basic Economics by Thomas Sowell, the economist explains how price caps, like rent control, were initially put in place to make housing affordable. However, they often create an economic trap that reduces landlords' and developers' incentives to invest in property upkeep. Imagine being a landlord with an apartment rented out at $1,000 that needs some costly repairs. Under rent control, there’s little motivation to spend on improvements when you can’t raise the rent to cover those costs. What was meant to make life more affordable ends up decreasing the quality of housing and stifling improvements.
Now, let’s think about the effect of price caps on other essentials—say, if the government set a price cap of $3 on a gallon of milk. Without the freedom to set prices that reflect quality, would producers still have a reason to offer premium products like organic or lactose-free milk? Probably not. Price controls can stifle innovation, reduce quality, and ultimately limit the choices available to consumers. When a producer can’t charge enough to cover the cost of making a higher-quality product, it’s a lot easier for them to just stick with the basics. So, while these interventions might sound like they’re giving consumers a break, they can actually lead to fewer choices and lower quality in the long run.
For family businesses and entrepreneurs, these policies present a real challenge. Price controls might sound like a win at first, but they often make it harder for small businesses to grow and succeed. With limited revenue options, business owners are forced to decide between maintaining quality or cutting costs just to stay afloat. It’s an economic squeeze that can turn the dream of running a profitable business into a much tougher reality.
So, what’s the real solution? Financial preparedness and strategic planning. At Calculated Moves, we empower business owners to create sustainable plans that help them thrive, even amidst unpredictable policies. With a strong strategy, you can focus on growing your business without getting tangled in these short-term “fixes.” When you hear about a new government plan to “fix” inflation, remember: true control lies in making your business work for you, not in wrestling with temporary solutions.
Ready to navigate toward smoother financial waters? Let’s discuss financial strategies that keep you on course, building success beyond fleeting policy adjustments.
Please follow us on Facebook and Instagram. Please make sure to check out our blog and our website link below. Subscribe to our YouTube channel and hit the bell to be notified when we post. Email me at donna@calculatedmoves.com.
Donna Bordeaux, CPA with Calculated Moves
Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly, and knowledgeable can be a part of your relationship with your CPA, as demonstrated by Donna and Chad Bordeaux. They have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.