When Government Runs the Show, Prices Rise Faster

Earlier this week, the Center for a Free Economy pointed to economist Mark Perry’s well-known “Chart of the Century” to make a simple point. The prices that have risen fastest in America are not random. They are concentrated in sectors where government plays the biggest role.

That pattern is hard to miss. Hospital services, college tuition, child care, and medical care services have all risen far faster than overall inflation since 2000. By contrast, products and services with more competition, more consumer choice, and less government control have generally stayed closer to overall inflation, or fallen in price outright. That is not an accident. It is what happens when politics displaces markets.

Health Care Costs Keep Pulling Away

The newest health care price data tells the story plainly. Since January 2000, medical care costs have risen about 130 percent, compared to roughly 93 percent for overall inflation. Americans did not get a 130 percent improvement in value. They got a system that costs more and more every year.

Mark Perry’s broader chart shows the same trend in even starker form. Hospital services rose about 281 percent from 2000 through the end of 2025. Medical care services rose about 147 percent. Both outpaced overall inflation by a wide margin. So did other government-heavy sectors, including college tuition and child care.

These are not normal market outcomes. They are warning signs.

The Common Denominator Is Government Dominance

The sectors with the worst price growth tend to share the same feature. Government dominates them through subsidies, mandates, licensing rules, tax distortions, payment systems, and layers of regulation that protect incumbents and weaken competition.

Health care is the clearest example. Federal and state governments shape everything from insurance design to provider reimbursement to benefit mandates to hospital market behavior. That has produced a system with weak price discipline, limited transparency, and endless opportunities for cost shifting. Patients are told this is necessary to protect access. In reality, it often protects entrenched interests and drives prices higher.

Higher education shows the same pattern. Washington subsidizes demand, colleges respond by raising prices, and students and families are left with the bill. Child care faces a thicket of rules and mandates that make it harder to expand supply and harder to lower costs. In each case, the result is the same. Less flexibility, less competition, and higher prices.

Markets Work Better When Government Gets Out of the Way

Now look at the other side of Perry’s chart.

TVs fell by nearly 98 percent. Computer software fell by about 73 percent. Toys fell by roughly 74 percent. Cellphone services fell by about 44 percent. Clothing was nearly flat over a quarter century. These are not sectors known for heavy-handed government management. They are shaped far more by competition, innovation, consumer choice, and pressure to deliver better products at lower prices.

That is how markets are supposed to work.

When businesses have to compete for customers, they find ways to improve quality and cut costs. When bad ideas fail, they disappear. When new entrants see opportunity, they move in. Consumers benefit. Prices stay disciplined. Innovation moves faster.

That is not what happens in sectors where government sets the rules so tightly that competition is blunted or blocked.

Hospital Inflation Is a Symptom of a Larger Problem

Hospital inflation is not just another data point. It is a case study in what happens when a sector becomes too dependent on government payment formulas, political favoritism, and regulatory protection.

Hospitals operate in a system where third-party payment is the norm, pricing is opaque, and consumers often have little ability to shop based on value. Large incumbent systems gain leverage. Independent options disappear. Costs rise. And every new intervention is sold as the fix for the last one.

But the basic problem remains the same. Too much of American health care is insulated from the forces that hold down prices everywhere else.

That is why the cost gap keeps widening. It is also why promises of better management from Washington keep failing.

CFE Takeaway

The lesson from Mark Perry’s chart is straightforward. The sectors with the worst price growth are usually the ones where government is most involved. The sectors with the best long-run price performance are usually the ones where markets are freer to work.

Health care, and especially hospital care, proves the rule. Costs have risen much faster than overall inflation for decades. That is not a sign that America needs even more government control. It is evidence that government dominance has already done enough damage.

Real reform means more competition, more transparency, more choice, and less protection for the status quo. Until that happens, Americans should expect the same result they have seen for years: higher prices, fewer options, and a system that serves insiders better than patients.