If "Deregulate and Wait" Doesn't Work, "Deregulate and Wait" Definitely Will!
I was watching this video by Peter Schiff in which he argues that the reason for the modern rise in college tuition is government-backed loans. If only college students could only get private sector loans on somewhat worse terms, then students would be significantly more price conscious and that would force schools to lower tuitions.
There are two key errors in the above:
First, he assumes that students with government loans are the ones who are pushing the bid price up, as opposed to the students wealthy enough to not need loans. Loans allow for more equality of opportunity, but it's not at all clear that even in the total absence of loans, MIT, Harvard, and the like would be unable to fill their halls with students able to pay $40k a year out of pocket.
Second, he assumes that the change from "most jobs didn't require a college degree" is due to all those high school grads going to college on a lark, on account of the government loans. He seems to have it reversed. Rather, an increasingly competitive job market* has made college an increasingly lucrative investment. So while tuition has become much more expensive, I'd look askance at libertarians arguing that it's too expensive. Why would they find it odd that a market pushes the price of something towards its value?
(Government aid has decreased due to the recession and tuition has gone up. Would Schiff argue that this is because of the psychology of dependence caused by government intervention? If less intervention makes things worse, wait (and maybe deregulate more)! Actually, I think the article is missing something, it's not just "reduced state spending on higher education and diminished campus endowments", it's also that college is a better investment (relative to not going to college) because the job market is even worse.)
He is, of course, right that government's can drive the price up by providing unlimited amounts of funding with no control over cost. His concern about healthcare reform is also justified, since mandates without regulation will have the effect of raising costs. There are countries that have universal healthcare with low cost per capita and high quality outcomes, but they didn't achieve that by just forcing people to give money to private insurers. However, I assume he'd go with the Republican solution on that issue (back to the status quo but with more deregulation, you're over-insured anyways**).
Finally, when it comes to government driving up costs by being willing to spend unlimited amounts of money on stuff, Schiff really should focus on extracting the metaphorical beam from his party's eye.
* Arguably, our real economy has been weakening for decades. Since the financial sector was expanding, people were kept riding high on a wave of consumer credit, even as the solid economic ground eroded away.
** I've seen suggestions that insurance should be replaced by high-deductible plans and health savings accounts. However, that has significant drawbacks: The high-deductible plans are as riddled with fraud and high costs as the rest of the market; health savings accounts don't help those who are too poor to save or provide a safety net for those in exceptional emergences; and people get more preventative care, saving a ton of costs in the long run, when it's just covered by their insurance.
There are two key errors in the above:
First, he assumes that students with government loans are the ones who are pushing the bid price up, as opposed to the students wealthy enough to not need loans. Loans allow for more equality of opportunity, but it's not at all clear that even in the total absence of loans, MIT, Harvard, and the like would be unable to fill their halls with students able to pay $40k a year out of pocket.
Second, he assumes that the change from "most jobs didn't require a college degree" is due to all those high school grads going to college on a lark, on account of the government loans. He seems to have it reversed. Rather, an increasingly competitive job market* has made college an increasingly lucrative investment. So while tuition has become much more expensive, I'd look askance at libertarians arguing that it's too expensive. Why would they find it odd that a market pushes the price of something towards its value?
(Government aid has decreased due to the recession and tuition has gone up. Would Schiff argue that this is because of the psychology of dependence caused by government intervention? If less intervention makes things worse, wait (and maybe deregulate more)! Actually, I think the article is missing something, it's not just "reduced state spending on higher education and diminished campus endowments", it's also that college is a better investment (relative to not going to college) because the job market is even worse.)
He is, of course, right that government's can drive the price up by providing unlimited amounts of funding with no control over cost. His concern about healthcare reform is also justified, since mandates without regulation will have the effect of raising costs. There are countries that have universal healthcare with low cost per capita and high quality outcomes, but they didn't achieve that by just forcing people to give money to private insurers. However, I assume he'd go with the Republican solution on that issue (back to the status quo but with more deregulation, you're over-insured anyways**).
Finally, when it comes to government driving up costs by being willing to spend unlimited amounts of money on stuff, Schiff really should focus on extracting the metaphorical beam from his party's eye.
* Arguably, our real economy has been weakening for decades. Since the financial sector was expanding, people were kept riding high on a wave of consumer credit, even as the solid economic ground eroded away.
** I've seen suggestions that insurance should be replaced by high-deductible plans and health savings accounts. However, that has significant drawbacks: The high-deductible plans are as riddled with fraud and high costs as the rest of the market; health savings accounts don't help those who are too poor to save or provide a safety net for those in exceptional emergences; and people get more preventative care, saving a ton of costs in the long run, when it's just covered by their insurance.