Stop the Subsidies, Uncle Sam!

Guess what two economic drivers continue to increase at speeds far above the inflation rate? If you guessed healthcare and college tuition, you are “smarter than the average bear” as Yogi used to say.

Now if you can also tell me why those two industries are so expensive – and why they outpace virtually every other sector of the economy as far as costs are concerned – you are more intelligent than the overpaid lawmakers on Capitol Hill.

(I realize that’s not saying much.)

You see, the answer is so obvious that anyone with a 6th grade education can figure it out. And yet, the numbskulls in Washington are seemingly baffled by the question, so let me dumb it down for them.

If you subsidize something, you will get more of it. And so, when you subsidize healthcare with Obamacare tax credits on steroids – and subsidize college tuition with federally guaranteed grants and student loans – the prices for both will go up… A LOT!

That’s one of the reasons why the Republicans in Congress are digging in their heels and refusing to extend the Biden-era healthcare subsidies. House Speaker Mike Johnson and Senate Majority Leader John Thune are willing to revert to the original Obamacare subsidy levels, which are unsustainable themselves. However, they are saying a resounding – and so far, unified NO – to extending the supersized subsidies that were part of the $1.9 trillion American Rescue Plan (2021) and the comically misnamed $1.2 trillion Inflation Reduction Act (2022).

By the way, according to the Bipartisan Policy Center, the actual cost of the ARP would have been closer to $3.5 trillion – including an additional $300 billion for extending the enhanced healthcare subsidies beyond their scheduled sunset date – if it were fully implemented.

Of course, this is all in addition to the government funding bill that President Biden signed into law in March 2022 that provided $885 million to assist historically Black colleges and universities (HBCUs), tribal colleges and universities, and other primarily minority serving institutions (MSIs), an increase of $96 million over FY 2021. Notably, it also allowed HBCUs and MSIs more flexibility with how they spent COVID-19 relief aid, including “for the acquisition of real property or construction directly related to preventing, preparing for and responding to coronavirus.”

The bill also included $1.5 billion for thousands of earmarks, more than 200 of which were for higher education projects. Cha-Ching!

Then there was the notorious Infrastructure Investment and Jobs Act of 2021, a $1.2 trillion Green Energy boondoggle. One of its provisions was to build a national network of 500,000 EV charging stations at a cost of $7.5 billion.

Not surprisingly, through the first three years of the Biden administration, a total of 183 chargers had come online at 44 stations across the country. In case you’re wondering, that’s .0366% of the project completed at a cost of $4,098,360 per charger.

One of the other things this massive bill did was provide EV tax credits to coax consumers to buy electric vehicles. The Congressional Budget Office estimated that these government subsidies alone would have cost taxpayers $492 billion over a 10-year period.

Thankfully, the Trump administration allowed the subsidies to expire and guess what happened? Sales of all-electric vehicles collapsed last month following the end of up to $7,500 in federal incentives for purchasing an EV.

Ford, Toyota, Kia, and Hyundai all reported major drops in electric vehicle sales last month after federal EV incentives ended. Ford reported a 25% drop in October compared to last year, and Toyota said it sold only 18 units of its bZ electric car, down from 1,401 units a year earlier.

OUCH!!!

Kia and Hyundai reported that sales of their top EV models dropped between 52% and 71% from a year earlier and some models – such as Hyundai’s Ioniq 5 and Ioniq 9 EVs – fell by 80% and 71% from September to October, respectively. It was a similar story for comparable vehicles at Kia, which is owned by Hyundai Motor but largely operates independently in the U.S.

“With the credit now off the table, the market appears to be settling into a more natural rhythm,” said Jessica Caldwell, head of insights for CarMax’s Edmunds.

In other words, if Uncle Sam would just stop meddling with the economy, the free market would take over and competition would drive prices down. That’s what happened with cars, computers, and virtually every new technology ever developed.

So, just keep your cotton-pickin’ hands off healthcare and college tuition, Uncle Sam, and watch those costs start to plummet, too.