Milton Friedman famously said, “There’s no such thing as a free lunch.” Friedman wasn’t just making a point about going out to eat. Rather, he was trying to convey a fundamental economic principle: we live in a world of scarcity, which forces us to economize on goods. After all, if we lived in the Garden of Eden with infinite abundance and didn’t have to make trade-offs, then what use would economics be to us? This is the most basic premise of the economic discipline and must never be forgotten or ignored…especially by legislators.
Unfortunately politicians like to conveniently forget this fact. They like to boast about Utopian schemes that will provide free healthcare for all or free food for every starving child. President Obama’s latest plot is to provide two years of free community college to everyone. I, too, would love if every student could have free education (trust me, I would especially appreciate this). But the notion of enacting this as a serious policy proposal in the real world sounds like something a well-meaning first grader would dream up. The fact that this proposal has any traction at all makes me worry that our ignoramus in chief and the rest of his bumbling, corporate shill minions in Congress and the Senate never passed economics 101.
Our economically unenlightened leader explains his plan, “Put simply, what I’d like to do is to see the first two years of community college free for everybody who is willing to work for it.” As usual, the politician who touts such wonderful, helpful programs is lauded as a champion of the poor and crusader of justice, without anyone ever actually looking at their plan to bring about such glorious results. But there is more to economics than just good intentions.
Milton Friedman pointed out this fallacy as well, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” Wanting the best for people is a wonderful sentiment and I share the President’s ends of affordable, accessible education for everyone. But from what I remember of that economics 101 class I took in high school, his means are not only not going to get him his desired ends but have an actively bad result.
The program is reportedly expected to cost the federal government $60 billion over 10 years. Where does Obama plan to get this money? As a politician, he only has two sources to fund his grandiose ideas: taxation or inflation.
He can either extort Americans into supporting his project (whether they like it or not), which leaves less money in the private (i.e. real) economy to be spent and saved according to consumer and investor preferences. And who is Obama really kidding if he thinks that him and his cronies can spend money and direct resources more efficiently than free, self-interested actors who have not only an incentive (the profit-loss system that allows enterprises to determine if they are successful – catering to consumer demand – or a failure – not responding to consumer demand), but also a mechanism (the complex price system that serves to coordinate millions and billions of people’s actions and goals, and allows for the rational allocation of scarce resource) that promotes efficiency.
His second option is to print money out of thin air using the Federal Reserve. To see why this idea is absurd on its face, we again turn to Friedman, “Inflation is taxation without legislation.” Inflation means more dollars chasing the same amount of goods and services, which means there is no actual increase in wealth or standard of living, just the pieces of paper in your wallet and the prices of those goods and services (functioning as a kind of tax on consumers). Treating inflation as a legitimate economic policy conflates real wealth, which includes things that actually increase the standard of living like goods and services, with money, which is just something used to facilitate trade. Money itself won’t feed you. It won’t educate you. It won’t make you better off. The real engine of economic progress is production, innovation, and trade. Not more green pieces of paper with pictures of dead tyrants on them.
While the government has attempted to make college more affordable, the actual policies have done the exact opposite. The endless trough of financial aid artificially increases the demand for college without increasing the supply. Did the notion that more demand without more supply leads to higher prices ever occur to Obama? Or did he just sleep through his economics classes? His plan to provide even more subsidies to the already over subsidized college industry is like…well it’s like the government stubbornly throwing money at a sector of the economy and expecting it to help consumers. There is no other comparison because it is the stupidest, most widespread economic policy that plagued America for 150 years.
Obama’s college scam and the support that it is garnering runs afoul of an economic fallacy that Frederic Bastiat pointed out over 150 years ago termed “The Seen and Unseen.” Obama is only focusing on the seen effects of his proposal, which is more money for potential college attendees — and who could be against that? Obama is ignoring the unseen, however, which could include things like higher taxes, less spending and saving, higher inflation, higher prices, and more debt, which leads one to ask who could be for this?
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