The Subsidized Healthcare and Education Disaster

by Martin Armstrong, 5/7/16

QUESTION: Mr. Armstrong; What do you think about Bernie Sanders saying education should be free? Is this socialism or doable?

ANSWER: The two areas that constantly rise in price are education and health care. Both are a total disaster because the government subsidizes them.

Bernie’s idea of free education sounds nice. However, it will fail and constitute Marxist socialism if it simply seeks to pay the educators and institutions their current price, as that would bankrupt the state completely. The idea is admirable. The only way to accomplish this is NOT to subsidize the current system. You must eliminate what the Clinton’s did to students and restore their right to file bankruptcy. Give them the right to sue a university if they cannot find employment with the degree they went to school for.

You have state-run universities. To inject competition, decree that whatever a parent or student pays for their education is tax-deductible from all taxation from Federal to local. If the educators must compete against the rest of government for their share of the taxes, costs will be kept in line.

Look at health care. In the 1980s, our company provided full health care to employees and their families. The cost was typically well under $2,000 annually. Obamacare made health care costs much higher. Whatever they name an act, the result is the opposite.

It sounds nice to provide people with free education, but that subsidizes the industry and eliminates the checks and balances needed to ensure it is in sync with the business cycle. It is insane that the only two industries that constantly rise in price against the trend are education and health care.

https://www.armstrongeconomics.com/international-news/north_america/2016-u-s-presidential-election/the-subsidized-education-health-care-disaster/

Comments

The “market” is supposed to set prices based on price and demand.  Subsidies destroy free market pricing.  True free markets require everybody to pay 100% for whatever they buy. When prices rise, demand drops and when prices drop, demand rises.

If the “market” had been allowed to set the costs for healthcare and education, these costs would still be closer to their 1980 numbers.  These costs quadrupled from 1964 to 1980.  So, if the government had refrained from subsidizing healthcare and education, these costs would not have quadrupled.  Overspending for these “entitlements” plus the unnecessary Vietnam War resulted in money printing that resulted in massive inflation in the 1970s. 

Our newest mistakes include overspending $5 trillion on the Middle East wars, Obama’s $10 trillion “stimulus” squandering and the Fed’s 400% increase in the money supply.  The only reason we don’t have 20% inflation is that the federal government needs to keep interest rates low, so they can pay the interest on their $19 trillion debt.

Norb Leahy, Dunwoody GA Tea Party Leader