Expensive Now? Wait Until It’s Free! (EP.100)

Expensive Now?

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, DC launched a program to make college “affordable” by offering a taxpayer guarantee on student loans. By an amazing coincidence college costs have been rising much faster than inflation ever since. Today, student loans total over $1.5 T (that’s trillion); more than credit cards or car loans. Taxpayers must pay when if the student does not. And there are increasing amounts of not-well-publicized taxpayer subsidies in the form of government loan forgiveness for taking certain types of jobs–jobs that pay in addition to  reducing the borrower’s student loans. The small piece of good news here is that the economy is so robust that some employers are offering to help pay off loans in certain professions to attract and keep employees.

Additionally, there is a growing danger here from two movements, both of which promise to drastically expand the kind of taxpayer-funded programs we are talking about in this podcast: 1. The “X” is a human right” and 2. “X” makes our society better.”

Let’s take the “human right” argument first. We are being told by a growing crowd that health care and housing are human rights. “Human rights” being another way of saying “should be provided by taxpayers.” Given that in most cases people can live longer without healthcare and housing than food, the next thing we hear will be that food is a human right. And not long after that, clothing. And isn’t some sort of entertainment necessary for good mental health? When the necessities of life are all seen as human rights, and therefore taxpayer funded, who will work?

Now, for the “makes our society better” argument. For example, an educated population is good for society, therefore college should taxpayer funded. Well, there are lots of things that are good for society. A population that is well-fed, can travel to new places, is able to enjoy and learn from the arts, and more, is good for society. But does that mean that taxpayers should pay for everything that is good for our communities and our society? Of course not.

There are solutions everywhere–when the consumer, the person using the goods or services, has enough skin in the game to carefully look at price and quality before making a selection, things get dramatically better. In the healthcare world, one of the two examples at the beginning of this podcast, LASIK surgery and plastic surgery, are areas where quality has gone way up, while prices have plummeted. Why? The consumer has, pun intended, skin in the game. They were motivated to look for price and quality in these areas, and the providers responded. And where consumers are not motivated to look for price and quality, providers can pretty much do as they please. (Perhaps we will look at government price controls in another podcast.)

All of this ties to the core, driving principles at Revolution 2.0, which are:

  1. Personal Responsibility; take it, teach it and,
  2. Be Your Brother’s Keeper. The answer to the biblical question, “Am I my brother’s keeper?” is a ringing, unequivocal “Yes.” There is no other answer.

If we apply those two core principles simultaneously, never only one or the other, we will always be on the right path. Depending upon what we face, one principle or the other may appropriately be given more emphasis, but they are always acted upon together.

The Founders, Revolution 1.0,  were declared traitors by the British Crown, and their lives were forfeit if caught. We risk very little by stepping up and participating in Revolution 2.0™. . In fact, we risk our futures if we don’t. I am inviting you, recruiting you, to join Revolution 2.0™ today. Join with me in using what we know how to do–what we know we must do–to everyone’s advantage. Let’s practice thinking well of others as we seek common goals, research the facts that apply to those goals, and use non agenda-based reasoning to achieve those goals together. Practice personal responsibility and be your brother’s keeper.

Let’s continue to build on the revolutionary vision that we inherited. Read the blog, listen to the podcast, subscribe, recruit, act. Here’s what I mean my “acting.”

  • Read the blogs and/or listen to the podcasts.
  • Comment in the blogs. Let others know that you are thinking.
  • Subscribe and recommend that others subscribe as well.
  • Attach links from blogs into your social media feeds. Share your thoughts about the link.
  • From time-to-time, attach links to blogs in emails that mention related subjects. Or just send the links to family and friends.

Revolution 1.0 in 1776 was built by people talking to other people, agreeing and disagreeing, but always finding ways to stay united and going forward. Revolution 2.0 will be built the same way.

And visit the store. Fun stuff, including hats, mugs and t-shirts. Recommend other items that you’d like to see.

Join me. Let’s grow this together.

Links and References

Medicare Insolvency

Is Healthcare a Right?

Contact

As we get ready to wrap up, please do respond in the blog with comments or questions about this podcast or anything that comes to mind, or connect with me on Twitter, Facebook, and LinkedIn. And you can subscribe to the podcast on your favorite device through Apple Podcasts, Google, or Stitcher.

Now it is time for our usual parting thought. It is not enough to be informed. It is not enough to be a well informed voter. We need to act.  And if we, you and I, don’t do something, then the others who are doing something, will continue to run the show.

Remember: Knowledge by itself is like running a winning race, then stopping just before the finish line.

Will Luden, writing to you from my home office at 7,200’ in Colorado Springs.

Will Luden
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Will Luden

I am your host, Will Luden, former long-time high-tech CEO and Board Chair. I had no idea when I started this podcast that it would become the highest calling of my professional career. Lincoln famously hoped that a government, “…of the people, by the people and for the people…”, would not perish from this earth. My hope, the reason for Revolution 2.0 ”A Booster Shot”, is that a government based on common goals, achieved by applying non agenda-based reasoning to core facts, will allow us to continue to build on our mutual inheritance of a legacy of dedication to seemingly impossible ideals, a legacy that also includes a history of achieving them.
Will Luden
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4 Responses

  1. James Kuhn Reply

    Well put. The counter message must be strong and persistent to explain that when government takes ownership of an area that should be under private enterprise, quality goes down and price goes up.

  2. Charley Reply

    Exactly right… it will become astronomically more expensive when we have medicare for all and education for all. We will all be staring at tax rates exceeding 50% of our income, with no more deductions for home ownership, investments, savings, business losses, etc.

    This all points back to the dumbing-down of our educational system that refuses to teach children about 1) how our country functions, 2) how the capitalistic system works, 3) how economics work, and 4) how to properly manage your finances. Instead, they’re taking Algebra and Geometry and World History that maligns the United States’ contribution to the world.

    Not once in my life have I ever needed that Algebra class from ninth grade. But I certainly could have used some good financial principles for personal money management that would have tremendously helped in my youth.

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