On the face of it, subsidies sound great. "Let's help people purchase houses, so almost everyone can become a homeowner!" "The government should assist students with college expenses. Everyone should be able to get a college education!"
Sounds good - eh?
Yet, over and over, we see the deleterious effects of government intervention in markets. As a Realtor, although I assuredly believe in the positives in owning your own home, I recognize that home ownership is not for everyone. And, during the last decade, when government stepped in to make home ownership "affordable" for more and more people - we saw the destruction and despair that resulted from such actions.
Today, I am dumbfounded at what it costs for a student to attend university. Is the solution more and more assistance from the government? No! Government intervention causes prices to rise without pause - just as it did during the housing bubble. In true market conditions, these bubbles are far less likely to occur, because markets have natural "stops" built into them.
Will the government - and we, the voting public - ever learn? "Instapundit" weighs in.
By keeping the price of loans artificially low, Congress will make the value of getting a college degree appear to be worth more than it really is, thereby encouraging more students and their families to take out more loans. That means more demand for college, resulting in higher tuition. So Congress is putting more air into the higher-ed bubble.
So why are lawmakers doing it? The simple answer is the election is six months away, college loans are, in effect, a middle-class subsidy, and neither political party wants to upset loads of middle-class voters. And with all the emphasis both sides are putting on attracting young voters, they especially don’t want to anger them by increasing the price of college.
The somewhat more complicated answer is that politicians know that they are not likely to be blamed if the bubble does eventually burst. The economist Thomas Sowell once told me, “People ask me, after something like the housing bubble, don’t members of Congress ever learn? And I reply, ‘Of course they learn. They learn they can get away with it!’”