Topic: Monetary Policy
Stop the Insanity!

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Doing the same thing over again and again while expecting different results is one definition of insanity. Obviously, our government hasn't figured that out yet.

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by Chuck Angier
(libertarian)
Sunday, August 24, 2008

There is much news today about the housing mess as well as soaring health care and education, fuel and food costs. With very few exceptions, most politicians have plans to fix all this with greater government oversight and funding. But wait a minute. Isn't government oversight and funding why these issues are out of control in the first place? Won't more of the same certainly make it worse?

Housing - We all know what's happening in the housing and financial markets but do we know why?

1. We already know that "public" funds are at work. The government has created trillions of dollars of indiscriminate funding via Freddie Mac and Fannie Mae. This funding has driven the cost of housing out of reach of most folks without the help of Freddie and Fannie.
2. Government has removed personal responsibility from the equation. Can we say "Foreclosure Prevention Act of 2008"?
3. Government has taught that housing is an entitlement. Hmm. Show me how.
4. Government has "tax-incentivized" housing through any number of instruments but the most obvious is the mortgage interest deduction, a huge incentive to borrow money to buy a house. By the way, why can one taxpayer deduct thousands in mortgage interest from his income, while a neighbor in similar circumstances, but renting, cannot?

The taxpayer is on the verge of taking over something like $5 trillion in debt from Freddie and Fannie. Never mind the $300 billion created out of thin air for the foreclosure prevention act. Never mind the rescue of failed institutions like IndyMac, Bear Stearns and others. Most homeowners if they still have a house, have little, no, or negative equity in their largest and most emotional investment...their home! Have we learned our lesson yet?

Health Care - Our health care expenditures currently represent about 17% of our GDP (around $2 trillion, or about $7,026 per person), and are on track to consume 20% of our GDP in 2017, doubling to around $4 trillion. Prior to 1960, health care consumed less than 5% of our personal expenditures while food consumed more than 20%. Now food has been halved to about 10% while health care has quadrupled to our largest single personal expenditure coming in at around 20%! Certainly health care has benefitted from technological advances, just like every other sector, including food, but technology should drive the cost down, not up. That's what technology does. Take as an example, calculators. When I started college in the mid 70's, a simple electronic calculator cost more than a well equipped personal computer costs today. So why are health care costs so out of control?

1. We already know that "public" funds pick up half of our National health care tab. These indiscriminate funds have certainly driven up the cost of health care, just like they did the housing bubble, duh!
2. Government has removed personal responsibility from the equation. "Somebody else" is paying for it.
3. Government has taught that health care is an entitlement. Hmm. Show me how.
4. Many say that health care is the responsibility of the employer. Why?
5. Government tells us that we need universal insurance to pay for health care. Insurance is a big part of the problem and none of the solution. If medical insurance is such a great idea, then why is it that employers can deduct it as an expense while an individual that purchases his own cannot?
6. Government has tax-incentivized health care through various "medical IRA" instruments, creating even more funds to be spent on health care or not at all. Some even have a "use it or lose it" provision FORCING one to purchase unnecessary health care! Is "inflationary" the right word? By the way, if "medical IRA's" or health savings accounts (HSA's) are such a great idea, then why can't everybody have one? Why must we purchase a high deductible insurance policy to be able to take advantage of an HSA. It is obvious that the real beneficiary of the HSA is the insurance companies.

And all for what? Are we healthier? Absolutely not. Are we living longer? Yes, but at what cost and quality of life? Let's see, if electronic calculators had gone the way of health care? Hmm. I wonder.

Education - In 1977 the average cost of college tuition was $924. By 2006, it was up to $7,601, rising at twice the rate of inflation. Graduates are entering the workplace with debts that they may never be able to repay, never mind purchase a house or pay for health care. Why?

1. We already know that "public" funds are at work here. Like about $20 billion in Pell grants as just one example. Almost half of the college tuition and fees is paid by grants or government backed loans. Let's see, we have government grants and loans to pay for tuition at government institutions. Is there something wrong with this picture? Am I missing something? These indiscriminate funds have certainly driven up the cost of higher education, just like they did health care and housing, duh!
2. Government has removed personal responsibility from the equation. "Somebody else" is paying for it. Government is scrambling to find new and creative ways to forgive educational debt including government service. This can be interpreted 3 ways. Conscription. Slavery. Socialism. No Thanks!
3. Government has taught that education is an entitlement. Hmm. Show me how.
4. Government has tax-incentivized education through various "educational IRA" instruments, creating even more funds to be spent on education or not at all.

By creating money out of thin air (grants, loans, and tax-incentivized savings plans) the cost of higher education has been driven to an unfortunate end where many graduates are entering the workplace in mediocre professions with mediocre skills and a debt that they may never be able to repay.

Y'know, miracle of miracles, I believe I see a pattern developing! Three huge sectors of our society thoroughly corrupted and adulterated by similar government policies. Can we stop this insanity?

Food and fuel is a little different story.

Fuel - Oil has doubled in price in the last year. Yeah, yeah, yeah, we can blame big oil and George Bush, but the real culprits are:

1. A fiscal policy of economic growth through deficit spending, (see Housing, Health Care and Education above) resulting in a weak, diluted currency. The cost of everything we import (like oil) rises.
2. Increased demand for energy from developing countries.
3. Restrictions on domestic production.

Food - Agriculture is very energy intensive so a doubling in the cost of energy will certainly pressure food prices (and everything else for that matter) to rise accordingly. Furthermore, our weakened currency makes what few exports we still have (like food and fertilizer) to be in higher demand overseas placing even more upward pressure on food costs. Many blame ethanol for increased food costs, but I'm afraid it is just not so...at least not now.

Food and fuel have not yet been as corrupted as housing, education and health care, but this year's political wannabes plan to fix all of these problems with more of the very policies that created them in the first place! Insane!  Most if not all of our problems can be laid squarely at the feet of government policy.

Many wish to tax the "rich" to pay for more failed policy and give the working man a break. Here's an interesting thought. If we take from the "rich" and give to the "poor" won't the funds be spent such that the "rich" become richer?

Angier is self employed in agri-business. He can be contacted at chuckangier@gmail.com.

©2008 Chuck Angier, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Sunday, August 24, 2008
Last modified: Sunday, August 24, 2008

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