Saturday, August 2, 2008

Government's Reaction to Inflation

One of the big dangers of inflation, once it starts working it's way through the financial system, is everyone starts coming up a little short in their budgets. Everyone, especially the Government. So what do people do, seek alternative revenue sources, right? Of course, but is that really the goal of government? Should they be seeking to maximize revenue? That's what's happening all over the place.

There were two articles in the Chronicle today on the subject. The first is how parking tickets are now $60! $60!!! One of the people interviewed makes a great point,

Scott Simpson of SF: "Look, I understand San Francisco is in a jam financially," he said. "But you can't make it so painful that people don't want to do impulse shopping in the city. Eventually, that's going to hurt the merchants."

So government reaches for more money, cause they need it, but what is the result? In the short-term the government makes more money, but the retailers lose some business and consumers have less money to spend.

The city is also increasing the fee on newspaper racks. Of course, this is a front page issue for the Chronicle, but it's just another example of the city reaching, effectively increasing tax rates, because of inflationary pressures.