I'm From The Government, I'm Here To Make It More Expensive

I read with crestfallen face a small article in the most recent edition of National Review. On page 13, in a yellow shaded box is a little capsule of why the government will never be our friend.

It begins with a quip from P.J. O'Rourke, (who's Eat The Rich is probably one of the best books on economics) "If you think health care is expensive now, wait until government gives it away for free".

The article details how the consumer price index, a measure of inflation, has risen since 1960 about 480% That means something in 1960 that cost $1.00 now runs $4.80. That's seems staggering, but incomes have kept pace over the same period.

Health care insurance premiums, on the other hand, have risen 1050%. That means $1.00 in premiums in 1960 now runs $10.50. It should cost $4.80. Another example of prices outstripping inflation is college tuition. $1.00 in tuition in 1960 now runs a whopping $15.20.

Health and Education are examples of services that Americans think are necessary. They are also both highly regulated and heavily subsidized by taxpayers.

Conservative economists have long warned that when you separate the person receiving a service from the person paying for it, you are asking for trouble. This is common sense. If oranges normally cost $1.00, but the gubmint gives me 75¢ with which to buy oranges, my demand for oranges is going to be higher than if I had to pay the full price.

I suspect that prices are distorted by other things too, like the availability of credit. There was a time that nobody was fool enough to lend a college student money for tuition, that is not until the Government offered to guarantee those loans. College loan interest rates do not reflect the actual risk to the people giving the loan, not by a long shot. An unsecured loan should be at least 15% but Uncle Sam's co-signing drops it to less than 5%. I'm going to college, but because I'm springing for it on my own, I shopped for the best deal. (Fisher College Online). I think if kids had to pay 15% on their college loans, they'd be a lot more uptight about tuition increases and where they went to school, reducing the amount tuition rises.

Point is, the expenses people pay out of pocket tend to track closest to normal inflation. The correlation between the cost of a service running way ahead of inflation and Government involvement should not be missed by the average citizen. Politicians who want to get, or stay, in power are always going to come up with some scheme to convince a large block of voters they are going to get something for nothing, usually at the expense a smaller block of voters. Unfortunately future generations don't get to vote. That's why it is important that we do what we can to get Government out of the business of giving away free stuff. It just makes it more expensive.

Tim McNabb