Unintended consequences

The 18th Amendment was expected to reduce crime snd corruption, solve social problems, and improve health and hygiene.

How did that work out?

While Newton’s Third Law relates to objects, it is equally relevant, perhaps more so, to people. If only politicians understood this.

For example, making something appear free tends to increase use, health care, child care and just about anything else. Thus free becomes more costly.

Increase Social Security benefits and some people will retire earlier than planned.

Change the tax laws and people will do what is necessary to take advantage of or avoid taxes.

Raise the minimum wage and there are consequences in terms of prices and perhaps employment levels.

Tax wages for Social Security, but without added future retirement benefits and there will be creative ways to provide untaxed compensation.

All the grand promises need to be understood and consequences considered not only by those making proposals, but by the targets of the promises and rhetoric – you and me.

Here is another example from the Congressional Budget Office

The 2022 reconciliation act includes several provisions that affect prescription drug prices and coverage under Medicare. The Congressional Budget Office estimated that those provisions would reduce the federal budget deficit by $237 billion from 2022 to 2031. This slide deck focuses on three key drug-related policies that, together, are responsible for $129 billion of that reduction. To explain how the agency reached its estimate, the slide deck focuses on the effects of the three key policies in 2031:

  • First, the act requires the Secretary of Health and Human Services to negotiate prices for certain drugs covered under Medicare Part B and Part D. CBO estimated that price negotiation will lower average drug prices in Medicare and will reduce the budget deficit by $25 billion in 2031.
  • Second, certain manufacturers of brand-name drugs must pay rebates if their prices exceed an inflation-adjusted benchmark. CBO estimated that the inflation rebate policy will reduce the deficit by $8 billion in 2031.
  • Third, the law redesigns the Part D benefit. CBO projected that changes in the Part D benefit will increase the deficit by $2 billion in 2031.

What do you think? Will Medicare squeezing drug companies have any impact on pricing in the private sector? Will lowering out of pocket costs for Medicare beneficiaries have any impact on utilization?


  1. My favorite unintended consequences was in 1990 a 10% luxury tax was applied to yachts in the U.S. and the results were disastrous. Over 25,000 boating industry jobs were lost and some when overseas to never come back. The tax that was supposed to generate millions of additional government revenue actually cost the government revenue (repealed in 1993). Turns out that rich people found other things to spend their money on. It also proved that rich people’s money does trickle down and creates jobs and spreads the wealth by giving people a chance to earn a living.

    Another was from 1696 to 1851, England levied a tax on dwellings based on the number of windows. The tax led to the boarding up of windows and the construction of houses with very few windows. With the lack of fresh air, this did not help with the health of the population.

    Why would anyone believe that strong arming drug companies would not have consequences?


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