For decades, politicians have been trying to help on social issues, such as the high costs of college, healthcare and housing, so they create government programs to subsidize those products. But what they do not realize is that this governmental interference with the liberty of free markets virtually always results in an increase in the costs of those same products, which, in turn, harms the very people they want to help.
Why do the costs rise? Because when the full cost is hidden by government loans or subsidies, the customer is not as price sensitive. And when the sellers realize this they increase their prices. Wouldn’t you? That is exactly why, with student loans being guaranteed by the government, tuition costs have skyrocketed, with the resultant huge obligations for student loans. That is also why the costs have risen so greatly for healthcare services. And it is also the reason for the 2008 bank and housing crisis. Why? Since the home loans were guaranteed by the government, banks were guaranteed repayment even with unqualified buyers. So banks loaned money to people who were almost transparently unable to make their loan payments. (Thankfully the government did not decide to subsidize the purchase of cell phones and computers. Yes, the prices for those products were high at the beginning, but competition among providers soon resulted in the prices dropping substantially.) So if politicians really want to help people receive lower-priced products and services, they should repeal their social engineering subsidies, and concentrate on reducing the many unnecessary government regulations that also artificially increase prices.
(Next post: Liberty in Education)
Judge Jim Gray (Ret.)