Imagine you hire a plumber. He floods your kitchen. You hire him again. He floods your basement. You hire him a third time. He floods the whole house. Then you write a five-star review and recommend him to your neighbors.

That is, roughly, the relationship between governments and economic policy for the last eighty years. Every intervention fails. Every failure is diagnosed as requiring more intervention. The plumber keeps getting rehired because he is the only plumber who also writes the building codes.

The Playbook That Never Changes

If you step back and look at the pattern of government economic policy over the past several decades, the consistency is actually impressive. Not in a good way. In the way a broken clock is consistent.

Unemployment goes up. Government creates public works programs. These programs are funded by taxes or borrowing, which pulls resources from the private sector, which causes more unemployment. Government creates more public works programs. Taxes go up again. Cycle repeats.

The 2020s made this spectacularly visible. COVID hit. Governments locked down economies. Then they panicked about the unemployment their lockdowns caused and sprayed money everywhere – stimulus checks, PPP loans, enhanced unemployment benefits that paid people more to stay home than to work. Then they were shocked – shocked! – when businesses could not find workers and inflation exploded.

The PPP loan program alone distributed over $800 billion, with estimates suggesting $100-200 billion was outright fraud. People bought Lamborghinis with PPP money. They bought crypto. They bought vacation homes. The program designed to save small businesses became the largest wealth transfer to fraudsters in American history. And when the fraud was discovered, the response was not “maybe we should not spray money from a firehose” but “we need better oversight for the next time we spray money from a firehose.”

The Tax-and-Spend Escalator

Every generation of politicians discovers the same magic trick: you can win votes by giving people things, and you can pay for those things by taxing someone else. The trick has a shelf life, but it always outlasts the election cycle, so nobody cares.

Corporate tax rates in developed economies have been on a roller coaster, but total tax burden – when you add income tax, payroll tax, sales tax, property tax, capital gains tax, estate tax, and the invisible tax of inflation – keeps climbing. The average American works until mid-April just to cover their total tax burden. That is four months of the year working for the government before you earn a dollar for yourself.

The argument is always that we need more revenue to fund essential services. But the definition of “essential” expands every year. What was unthinkable government spending in 1990 is baseline in 2025. What is “ambitious” spending in 2025 will be “inadequate” by 2030. The ratchet only turns one direction.

And here is the part that never gets discussed honestly: higher taxes do not just take money. They change behavior. When you tax profits at 40%, you do not just collect 40% of what would have happened anyway. You eliminate the projects that would have earned a 5% margin but are not worth the risk after taxes take most of the upside. The investments that do not happen, the businesses that are not started, the jobs that are not created – these are invisible. Nobody holds a press conference for the factory that was never built.

Credit Expansion: The Gift That Keeps Giving (Until It Doesn’t)

Every time the economy slows, the solution is the same: make money cheaper. Lower interest rates. Expand credit. Get people borrowing and spending. This worked like a charm in the 2010s – if you define “worked” as inflating asset prices while real wages stagnated and an entire generation could not afford houses.

The 2020-2021 money printing was the logical conclusion of this philosophy. M2 money supply increased by roughly 40% in two years. Forty percent. The Federal Reserve’s balance sheet ballooned from $4 trillion to nearly $9 trillion. All this new money needed somewhere to go. It went into housing (up 40%), stocks (all-time highs), crypto (Bitcoin to $69,000), NFTs (digital pictures of monkeys selling for millions), and meme stocks (GameStop becoming briefly worth more than many profitable Fortune 500 companies).

Then rates went up. The party ended. And the hangover hit everyone who got drunk on cheap money. Crypto crashed. Tech companies laid off hundreds of thousands. Commercial real estate entered a crisis. SVB collapsed. First Republic collapsed. Banks that had loaded up on low-yield bonds during the zero-rate era found themselves technically insolvent.

The response? Bail them out. Find a way to keep rates lower than they should be. Prepare for the next cycle of cheap money. The plumber is already scheduling his next appointment.

The Full Employment Obsession

“Full employment” sounds great. Who could be against it? Everyone should have a job. The problem is what governments do in pursuit of this goal and what they sacrifice to achieve it.

When full employment becomes the overriding objective of economic policy, everything else becomes negotiable. Stable prices? Negotiable. Sound money? Negotiable. Productive allocation of resources? Negotiable. If we can create one more job by printing a billion dollars, the temptation is always to print.

The 2020s demonstrated this perfectly. Extended unemployment benefits were designed to protect workers during lockdowns. Reasonable. But they continued long after the economy reopened, creating a labor shortage that drove wages up artificially, which drove prices up, which eroded the purchasing power of the very wages that increased. The “help” for workers made workers worse off in real terms.

Meanwhile, the “labor shortage” coexisted with millions of people who had simply left the workforce. Not unemployed – they had stopped looking. The official unemployment rate looked great. The labor force participation rate told a different story. But nobody campaigns on labor force participation rates.

Price Controls: Still Not Working After All These Years

Europe’s response to the 2022 energy crisis was a masterclass in repeating old mistakes. Natural gas prices spiked after the Russia-Ukraine conflict disrupted supply. The economically obvious response: let high prices encourage conservation and new supply. What actually happened: governments imposed price caps.

Price caps on energy meant that consumers had no incentive to conserve. Why reduce consumption when the government guarantees cheap prices? Simultaneously, producers had no incentive to invest in new supply. Why drill new wells or build new infrastructure when the government caps your revenue? The caps made the shortage worse. Countries that needed energy independence most urgently got policies that guaranteed continued dependence.

Rent control continues its decades-long tradition of destroying housing in every city that implements it. Stockholm has a 20-year waiting list for rent-controlled apartments. San Francisco lost 15% of its rental housing stock to condo conversions and withdrawals from the market after rent control tightened. Berlin reintroduced rent caps in 2020, watched investment in new housing collapse, and had the law struck down by courts in 2021. New York’s rent-stabilized apartments deteriorate because landlords cannot afford maintenance at controlled rents.

The pattern is always the same. Prices are signals. When you suppress the signal, you do not fix the problem. You blind yourself to it.

Minimum Wage: Good Intentions, Measured in Lost Jobs

The minimum wage debate is one of the most emotionally charged in economics, and emotion is exactly why it keeps being decided badly.

Every minimum wage increase has a visible beneficiary: the worker who keeps their job and now earns more. Every increase also has an invisible victim: the worker whose job no longer exists because it is not worth $15 or $20 an hour to the employer.

The rise of self-checkout kiosks, ordering tablets at restaurants, and automated customer service is not coincidental. It accelerated precisely as minimum wages climbed. When you make human labor more expensive, you make automation more attractive. The teenager who would have gotten a first job at a fast food restaurant now competes with a touchscreen that costs $3,000 once and works 24/7 without breaks.

The gig economy – Uber, DoorDash, TaskRabbit – is partly a market workaround for minimum wage laws. These platforms classify workers as contractors, avoiding minimum wage requirements, because the economics of many gig jobs simply do not work at mandated wage floors. The political response has been to try to force gig workers into employee classification, which would eliminate many of the jobs entirely. The workers themselves often prefer the flexibility of gig work, but their preferences are secondary to the political goal of making the numbers look right.

Profits: The Villain That Makes Everything Work

Politicians love denouncing corporate profits. “Record profits!” is practically a campaign slogan. The implication is always that profits are money stolen from workers or consumers.

This framing ignores what profits actually do. Profits are the signal that tells capital where to go. When a sector is profitable, investment flows in, capacity increases, competition rises, and prices fall. When a sector is unprofitable, capital flows out, capacity shrinks, and resources move to more valuable uses. Profits are the economy’s navigation system.

When you tax profits heavily, cap them, or vilify them, you are not redistributing from the rich to the poor. You are breaking the navigation system. Capital stops flowing to where it is needed. It flows to where it is protected – offshore accounts, tax shelters, politically connected industries. The result is not less inequality. It is less production, fewer jobs, and slower growth for everyone.

The tech sector’s massive investment in AI through 2023-2025 – hundreds of billions of dollars – happened because companies expected profits. If those expected profits were taxed or regulated into nonexistence, the investment would not have happened. The AI tools that are already making every industry more productive would not exist. The jobs those tools create would not exist. The price reductions they enable would not exist.

The Takeaway

The pattern has not changed in eighty years. Government intervenes. The intervention causes problems. Government intervenes more to fix the problems. The new intervention causes new problems. At no point does anyone suggest that the original intervention was the issue.

The 2020s compressed this cycle into fast-forward. Lock down the economy. Print money to fix the lockdown damage. Raise rates to fix the money-printing damage. Bail out banks hurt by the rate increases. Consider lowering rates again to fix the bailout damage. The plumber keeps flooding the house. The reviews keep coming back five stars.

Understanding this cycle does not mean you can stop it. Politicians will always find it easier to intervene than to explain why they should not. But understanding it means you can plan around it. You can hedge your savings against inflation. You can build skills that are valuable regardless of what the government does to the labor market. You can make decisions based on economic reality rather than political promises.

The interventions will continue. The question is whether you see them for what they are or whether you keep waiting for the plumber to fix the leak.