Summary

If you think that healthcare and higher education are expensive now, wait until they are free.

When people pay for goods or services with their own money, they are price sensitive, and shop carefully, balancing their needs and wants with what those things cost. When they shop for the same goods or services with taxpayer money, price sensitivity is replaced by the simple desire to have what they want. Healthcare and college costs are soaring far faster than inflation for just these reasons.

For the next 10 minutes, we will unpack what that means for the future of our Republic.

Transcript

If you think that healthcare and higher education are expensive now, wait until they are free.

When people pay for goods or services with their own money, they are price sensitive, and shop carefully, balancing their needs and wants with what those things cost. When they shop for the same goods or services with taxpayer money, price sensitivity is replaced by the simple desire to have what they want. Healthcare and college costs are soaring far faster than inflation for just these reasons.

For the next 10 minutes, we will unpack what that means for the future of our Republic.

Let’s take a look at some very instructive examples. When a person buys something for themselves or someone very close to them, they look carefully at both price and quality. When they are using their money to buy something for a near stranger, say at the office Christmas gift exchange, price is important, but quality becomes less important. When they are able to use 3rd party money for something for themselves, quality is still important, but price becomes less important. Finally, when someone, perhaps one of us, is able to use 3rd party money to buy a gift for a stranger or near-stranger, neither price nor quality are all that critical. This last example is exactly what happens when laws are passed to use taxpayer money, 3rd party money, to supply benefits for others--voters, in this case. The politician is much less concerned with the price or even the quality of the goods or services being provided--the driving concern is votes. Buying votes. Buying our votes.

Medicare is predicted to go broke by 2026, 3 years earlier than predicted just a year ago. Yet there are more and more voices calling for Medicare For All. Social Security is predicted to go broke by 2034, driven by many factors, including the expansion of benefits far beyond what was envisioned on day one. But politicians are afraid to make even the most reasonable changes to keep Social Security solvent.

Today’s key point: with more and more taxpayer money being poured into healthcare and higher education, the lack of price sensitivity on the part of the users of those goods and services will allow the vendors, healthcare providers and colleges and universities, to continue to raise prices higher and higher, with no lessening of demand. Spending taxpayer money on what we want breaks the usual, and useful, laws of supply and demand.

In higher education, liberal access to large amounts of taxpayer-guaranteed student loans is resulting in educational institutions being awash with cash--cash from students who are far less price conscious because of the virtually unlimited supply of taxpayer-guaranteed loans. Most Americans can’t remember a time when politicians weren’t claiming to make education more affordable by funneling more money to colleges. But after the latest surge in college “affordability” policies, implemented over the last decade, the staggering costs are becoming clear.

Expanding federal grants and loans to finance higher education has predictably given colleges the ability to raise prices, which in turn requires students to take on even more debt to pay the new higher prices. It’s not a new story. In 1965,