John Ransom

The country’s problems, although very serious, aren’t that tough to solve.

For anyone with a heartbeat and a healthy does of realism, our biggest problem is government intervention.

We have a credit crisis, which, like all other credit crises in the past, have been a function of too much money scattered in too few places.  

Eventually, the markets collapse when performance catches up with liquidity.

This crisis has been brought on by federal intervention in various markets that inject liquidity into too few places that give a sustainable, positive return on investment.

Let’s look at three areas where federal dollars dominate: college education; real estate and healthcare.

In college education, the federal government is the only player left. Last year, for the first time ever, student loan obligations exceeded credit card obligations. This year, according to both Heritage and USA Today student borrowing is expected to top $1 trillion. 

“Tuition and fees continue to shoot through the roof, now exceeding $17,000 per year, rising on average 8.3 percent at public universities this year,” writes Heritage. “[C]ollege costs have increased 439 percent since 1985, despite a 475 percent increase in federal subsidies such as Pell Grants. In other words, more federal funding hasn’t decreased the cost of attending college.”

In fact, the college inflation rate probably has much to do with the amount of federal aid available to colleges. Colleges, like every other business, raise prices when more money for their products is available.  

The cost of a college education is rising so fast that students can’t pay off loans, even with subsidized interest rates from the government. “A recent study by the Institute for Higher Education Policy found that for every borrower who defaults,” writes the New York Times, “at least two more fall behind in payments. The study found that only 37 percent of borrowers who started repaying their student loans in 2005 were able to pay them back fully and on time.”

The government’s solution to the problem of too much money in education is throwing more taxpayer dollars at colleges and universities.

Same is true for real estate.

John Ransom

John Ransom’s writings on politics and finance have appeared in the Los Angeles Business Journal, the Colorado Statesman, Pajamas Media and Registered Rep Magazine amongst others. Until 9/11, Ransom worked primarily in finance as an investment executive for NYSE member firm Raymond James and Associates, JW Charles and as a new business development executive at Mutual Service Corporation. He lives in San Diego. You can follow him on twitter @bamransom.

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