Insurance, Homes, and College Education

Guest Post by Mickey Ellison

Insurance, Homes, and College Education

Most people say that some things in life are just “so” expensive and the cost of those things will just continue to rise no matter what. If we want to buy a house, thank God there are banks and mortgage companies to give us a loan to make those houses a reality for us. There is also college tuition. Man, those costs are skyrocketing, and without student loans, very few would ever be able to afford college. And of course there is the cost of healthcare. If I didn’t have access to health-care insurance, I could never afford healthcare. Healthcare has gotten so expensive that it took a literal act of Congress to make it affordable for all of us.

What if I told you none of that is true, and that the very thing that you and I assume are making homes, healthcare, and college a possibility is what is making three things cost so much. Let’s take houses, healthcare, and college one at a time.

Houses:
Why has the cost of buying a home increased so much? Does it really cost more money to build a house that cost $20,000 in 1970 that now costs $200,000? Think logically about this. Has technology improved since 1970? Is it easier or harder today to chop down a tree, send it to a lumberyard, and cut it into two by fours? Did it take more time in 1970 to build a house than it does in 2014? I’ll answer those questions. Technology has improved significantly in the last 44 years. It’s easier to turn a tree into a two by four today than it was in 1970 and it definitely takes less time to build a house today than it did four decades ago. If one thinks logically, shouldn’t those three things alone make it cost less money to build the house? So why is it so expensive to buy a house today? Debt! Who benefits more from debt when buying a house, the bank or the borrower?

It’s really pretty simple to understand why a house costs so many more dollars today than it did in 1970. We deposit $1000 into the bank, and they magically loan out $10,000 that didn’t exist before you made the deposit. If today there was only $1000 available to buy the house, but tomorrow there was suddenly $10,000, do you think I could charge more for the house? That drives the cost of the houses up making need for more loans that continue to drive the cost of houses up even more, making even bigger loans necessary to buy a house. The solution is also simple. Stop borrowing money. This wouldn’t be good for the banks, but it would definitely bring down the cost of a home. We saw that exact thing happening in 2008, but the Federal Reserve and government put a stop to that by bailing out the banks for making bad loans, and the Fed has continued to make more and more money available to drive those prices back up. Would the price of a home dropped to a level where we could buy the home without a loan? We will never know since the bankers and politicians distorted the market.

College Tuition:

It appears to be a given that the cost of college is going to increase every year no matter what. Even the cost of a home dropped from 2008 to 2010, but according to USA Today, the average tuition at a 4 year public university increased by 15%. In one of the presidential debates in 2012 President Obama boasted about how he was making college educations more attainable by making Federal Student Loans easier to get and keeping the interest rates down. Has anyone stopped to think that the loans may actually be what is causing the cost to go up so much in the first place? Let’s see, if I have a product, say education, where the government is going to give out unlimited amounts of money in the form of student loans, what is my incentive to keep the price down? What a great thing if you run a college or university? What a great thing if you get to collect the interest on those loans for the next 20 years? What a great evil it is to tell our children that they must have a college education to succeed, then provide them unlimited money at age 18 to get that education, and make them slaves for much of their adult life to debt that they can’t even write off should the declare bankruptcy! Just like the houses, stop borrowing money for college and in time the price will go down!

HealthCare:

Now this is a hot topic today since we have ObamaCare! While I’m no fan of The Affordable Care Act, the law is nothing more than a symptom of the problem, and the central planners have never seen a symptom that they couldn’t fix. Except, they typically make the problem worse. I believe the problem is that most of us have no idea what medical care actually costs since we have all been told that we have to have health insurance most of our lives. Is the problem really that insurance premiums are too high or that the cost of medical services are too high. Seeking to “make” healthcare insurance more affordable does nothing to treat the problem. In fact, making insurance more available might cause the problem, the cost of healthcare, to become worse.

In healthcare there is what I call the “Unholy Trinity” of big government, big insurance, and big medical. Let’s think hypothetically here. If my focus is on the cost of my insurance, who’s focus should be on the cost of healthcare? You would think the insurance company would want to keep the costs down as much as possible right? Wrong! To keep it simple let’s say that I have an operation. On my insurance statement it shows that the surgery would have cost me $100k, but my insurance company was able to negotiate the price down to $50k which is what they pay. This is great because of the great negotiating power of my insurance company right? When in reality the surgery only really cost $10k, the hospital got paid $50k, and the hospital was able to write off the $50k that they didn’t get paid maintaining their not for profit status. The insurance company can make their money through premiums that we pay even though they paid $40k more for the surgery than it really should have cost. Visit www.surgerycenterok.com to find out what it really costs for many operations when they only take self-funded insurance plans and cash. This is a simplified version of the “Unholy Trinity”. The disease can never be cured if we only focus on the symptoms.

We have been so indoctrinated that we now believe that a little inflation is a good thing, the cost of college should always go up, and that medical care is too expensive. It doesn’t have to be this way, but fixing these lies will take people that are willing to question what they have been taught and start asking why and how! Why is it good for me, the individual, when my bread costs more this year than it did last year? How does paying $4 for a gallon of gas benefit me when 10 years ago, I could have bought gas for a $1? Why do I have to keep borrowing more and more money to buy a house or get a college education? Who does that benefit? Seek the answers to these questions and you will find that we have nothing close to a free market and we are being manipulated and because we have been indoctrinated so thoroughly that we believe this is all good for us. Stop borrowing money and THINK!

by Mickey Ellison

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8 thoughts on “Insurance, Homes, and College Education

  1. Sorry but this rant makes no sense. Debt can and should exist in a free market. If there were no such thing as borrowing, there would be no such thing as capitalism. The inflated price of these resources, like the price of most other consumer goods and services, has a great deal to do with the state, with its many mechanisms of intervention such as taxes and regulations. Whatever role the market itself plays is a moral one, by definition, because it involves VOLUNTARY interactions among free individuals (no one forces anyone else to take on debt EXCEPT THE STATE!). Asking people to stop borrowing as a solution to inflation resembles asking women to stop going out because there are rapists. The solution is to get rid of rape, not to shame victims.

      • Thank you for your response Tiffany. You are right about debt existing in a free market. There is no doubt about taxes and regulations driving costs up as well. Borrowing in and of itself doesn’t have to drive prices up, but borrowing money that didn’t exist before it was borrowed does. I will read your post.

      • Tiffany,

        You are certainly right that central banksters are the root cause of inflation just as Murray Rothbard documented so very, very well during his lifetime. On top of that though, there is the idea that the governmental incentives in education, for example, make the inflation problem even worse by creating bubbles. I think that is what Mickey was trying to communicate with his essay.

        Anyway, thanks for the comment and the excellent link to your take on the issue.

        • That’s definitely a super point, and in fact it ties in with thoughts I had expressed in my essay about federal laws that made it virtually impossible for banks to deny credit for a number of years. Of course, with the bank bail-outs, what did Congress do? Create more of the same government incentives with TARP mortgage loans which are of course backed by federal debt, which is a pretty frightening idea economically speaking.

          Perhaps you have already published on this subject, but if not then U.S. bonds would be a great topic to discuss in a future essay! 🙂

  2. Tiffany,

    Great essay and Mark is correct with what I was trying to communicate. You just did it better than I did. Central planners created the problem then created the solution to the problem. Kind of like onerous income taxes and government created retirement accounts.

    Thanks

  3. I’m not in total agreement with Insurance, Homes, and College Education | On the Mark with find house insurance being portrayed incorrectly.

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