Monthly Archives: February 2018

Mitch Daniels on why cost costs so much

Mitch Daniels:

Just for fun, let’s design an economic sector guaranteed to cost too much. Then you guess what it is. For openers, we will sell a product deemed a necessity, with little or no option for the customer to avoid us altogether. Next, we will arrange to get paid for inputs, not outputs — how much we do, not how well we do it. We will make certain that actual results are difficult or impossible to measure with confidence. And we’ll layer on a pile of complex federal regulations to run up administrative costs.

Then, and here’s the clincher, we will persuade the marketplace to flood our economic Eden with payments not from the user but from some third party. This will assure that the customer, insulated from true costs, will behave irrationally, often overconsuming and abandoning the consumerist judgment he practices at the grocery store or while Internet shopping.

Presto! Guaranteed excessive spending, much of it staying in the pockets of the lucky producers…

It worked so well in health care, we decided to repeat the formula with higher education…

The government is losing, rather than making money on student loans

Josh Mitchell reports that

U.S. officials have long maintained the federal government would make a profit on its $1.4 trillion student loan portfolio or at least break even, but two recent reports suggest just the opposite will be the case. Government lending to college and graduate students could soon become an immense drain on federal coffers, worsening an already deteriorating U.S. budget picture…

projected that money coming in for government student loan and guarantee programs will be $36 billion short of what’s needed to cover outstanding debt and accrued interest.

A year earlier, the department projected the shortfall would be $8.4 billion, while in prior years it projected the program would generate billions of dollars in taxpayer surpluses…

the risk of a flood of red ink highlights what analysts across the political spectrum agree has become an inefficient system that for years directed funds to universities as they raised prices, with little regard for the creditworthiness of borrowers…