Those who don’t know history are doomed to repeat it. Starting with the Higher Education Act of 1965, the government has subsidized the cost of college with the promise that more people would be able to afford higher education. Instead, college tuition and textbook costs have far outpaced inflation.
Likewise, the medical field has seen a significant increase in cost versus inflation with various subsidies, while life expectancy has actually decreased in the United States. So the cost of college has skyrocketed, and who can afford healthcare these days? Clearly, dumping government money into a problem won’t just fix it.
Demand-side economics causes inflation because subsidies increase demand and demand increases general price levels and debt. The more the government subsidizes healthcare and college education, the greater the cost to the user. That’s why healthcare and college are less affordable now than they were before government intervention.
Conservative Republicans have wisely recognized this basic economic principle throughout Joe Biden’s and the Democrats’ wild spending spree, but they’re courting a similar problem with school vouchers. And make no mistake: school vouchers will do the same for K–12 education and related services as subsidies have done for healthcare and college, by supersizing inflation.
How do I know this? As the CEO of a company that cultivates homeschool community leaders and develops homeschool curricula and educational products, my company would directly benefit from the influx of government cash. We would be able immediately to increase our prices by 100 percent or more on many of our product offerings and bring other high-priced and high-margin education products to the market.
When given money you didn’t earn, you tend to spend it. Competitors would raise their prices, too, because, hey, who wouldn’t? This has been done in every subsidized industry since the dawn of time. School vouchers are a capitalist’s dream. Yes, I would benefit from school vouchers, but school vouchers would hurt the people I want to support.
A hike in the price of education would take a couple of years to materialize, but it would materialize, believe me. Here’s why.
Take a private school that has room for 100 students. If 100 more families suddenly can afford tuition and other costs, it doesn’t mean that the school has the space for those students. It doesn’t mean it has the land to build more space—that space is expensive! Instead, the school will simply increase tuition. If 100 families who can now afford $8,000 in tuition suddenly get “free money” from the government, then the administration has every incentive to raise the tuition to $8,000 plus the amount of the “free money” given in the form of a universal voucher.
The misguided hope—and hope makes for poor policy, misguided or not—is that by creating greater demand for services, more providers will step up. Those providers, however, will have one simple goal: to make money. Like the private school in our hypothetical scenario, they will have every incentive to milk every last dollar out of the state they can.
Even if those institutions are ostensibly nonprofit, they will make money. Investors will buy land and develop it and then rent it back to the nonprofit. Normally, this sort of deal would require an arm’s length transaction; but a collusive transaction is easy to arrange, merely requiring good (or, rather, bad) legal advice and lax enforcement by the state.
Furthermore, nonprofits also pay employees who exchange time for pay and personal profit. Subsidies encourage lavish salaries and other unreasonable forms of compensation.
In short, government subsidies increase the likelihood of corruption, and corruption feeds back into inflation as the corrupt drain the public coffers and demand ever more.
Universal school vouchers have no track record of success. The one state that has implemented something similar is Arizona, and so far, it appears to have just added to the state’s educational costs, as those outside the system signed up in droves, while early numbers indicate that nearly 99 percent of those in government schools opted to remain in them. If the goal was to provide families with choices, then the school voucher program has failed since those choices aren’t dramatically changing in the wake of a new funding mechanism.
What will change are the costs of those choices: they’ll climb sky-high.