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How Are Those Government Subsidies for HealthCare and Education Working Out?
When President Obama announced changes to rules on repaying college student loans, he said his goal was to ease the financial burden of getting a degree."We've made it a priority to make college more affordable, reduce your student loan debt," he told students in Denver, unveiling his plans to make it easier for college graduates to get out from under their debt obligations. But if the history of college financial aid (and other government attempts to protect consumers from costs) is any guide, Obama's plan will likely backfire. Over the past three decades, financial aid has rocketed up 438% after inflation, says the College Board. That's largely due to huge hikes in more than a dozen federal grant and loan programs. "By providing aid and subsidized loans, the government is trying to protect students, but the effect is perverse," said Jane Shaw, president of the John W. Pope Center for Higher Education Policy in Raleigh, N.C. "They increase demand and enable colleges to hike tuitions virtually without restraint." An increase in the average student loan of $1 was associated with net tuition that's 93 cents higher at public schools and 55 cents higher at private schools, according to Andrew Gillen of the Center for College Affordability and Productivity. A 2007 study by University of Oregon economists concluded that colleges "tend to absorb most federal student aid by increasing their tuition revenue," according to the Chronicle of Higher Education. That doesnt necessarily mean students are getting a better education. From 1993 to 2007, per-student spending on administration climbed twice as fast as spending on instruction, a Goldwater Institute study found. The same phenomenon has occurred in health care, where government for decades has worked to shield consumers from direct costs, fueling health care cost inflation by encouraging demand and giving doctors and hospitals greater license to raise prices. Today, the government pays directly for over 44% of care, according to data compiled by the Centers for Medicare and Medicaid Services. And federal tax policy encourages generous employer-provided insurance by deducting premium costs from taxable income, a $100 billion-plus annual subsidy, according to the Joint Committee on Taxation. The 2,156 state benefit mandates further insulate consumers from the direct costs. Consumers now pay just 12% of the nation's health care tab out of pocket vs. nearly half in 1960, fueling much of the nation's health care inflationary spiral. "Providers aren't competing for business based on price," said John Goodman, president of the Dallas-based National Center for Policy Analysis. "And if they're not competing on price, they have no reason to lower cost." And education and health care fixes almost always add to these existing subsidies, providing still more inflationary fuel. ObamaCare will further cut out-of-pocket spending by expanding insurance coverage and requiring more generous benefits. When it comes to college education, the last three presidents all passed huge increases in aid,with each boasting that theirs was the biggest investment in college "since the G.I. Bill." Shaw said, "Government will keep doing what it's doing until there's a broad understanding by the public of the adverse effects produced by these attempts to shield consumers from costs." Posted by: Beavis 2011-11-02 |
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