It shows price changes for various consumer goods and services compared to inflation since 1998. I have referenced this chart before and noted the "coincidence" that those items in which government is most heavily involved (health care and education) have seen the highest price increases relative to inflation.
Perhaps it is not a coincidence?
In fact, if you look at all of the red line items above, all have a significant amount of government involvement either through direct payments, tax subsidies or government regulation.
Healthcare (Medicare, Medicaid, Income tax exclusion for employer paid health care), College Education (Government grants, Government student loans, regulations (Title IX etc), Childcare (Income tax benefit), Hourly wages (Minimum hourly wage laws), Housing (Home mortgage interest tax deduction, welfare housing subsidies), Food and beverage (Food stamps).
Is it a coincidence that all of these items increased at greater than the average inflation rate?
On the other hand, all of the blue line items saw prices rise at a rate much below the rate of inflation. In fact, most are actually cheaper today than they were 20 years ago. All of these are largely tied to free market forces and subject to limited government involvement.
Is that also a coincidence?
All of this raises the question as what the next 20 years holds for healthcare and college education costs if these trends continue?
Let's look specifically at college tuition costs.
They are up approximately 180% over the last 20 years. That compares to an 80% increase in wage growth and 56% increase in overall consumer prices.
What does this mean for parents and students planning for college in the future?
Average tuition costs for private colleges are now around $35,000 per year. For state schools it is around $10,000. Both of these exclude books, room and board and fees. Let's assume an additional $20,000 in those costs for a total current cost of $55,000 for a private school and $30,000 for a state school. A student entering college this fall is probably looking at total costs of $130,000 for a state school and $230,0000 for a private school for a 4-year degree.
If college costs continue to increase at the same rate they have over the last 20 years (6.7% per year), a 4-year college education for a child born this year will cost $476,000 at a state school and $840,000 at a private school.
If the child is a first grader today that future cost will be $283,000 and $500,000.
If the child is a sixth grader today that future cost will be $205,000 and $362,000.
Let's put that in perspective. A parent of a child born this year needs to save $808 per month (invested at an 8% return) to have the funds necessary for their child to have the funds for a 4-year college education at a state school if college costs increase at the same rate in the future as they have over the last 20 years.
That is a big number to take out of the average family budget. It undoubtedly suggests that the college costs increases we have seen are unsustainable looking to the future. If 69% of college students graduate with debt today will it be 99% in 20 years?
However, why haven't these costs already moderated? Why do these costs seem to have no limit? All of the federal student loan debt available allows the colleges to keep raising costs with no adverse effects to enrollment.
Of course, many Democrats are arguing we should take this a step further. They argue that college should be free. What they don't tell you is someone still has to pay. Who will that be?
In addition, if college is made free going forward how many former graduates carrying that $1.6 trillion in student debt will also believe that their debt should also be forgiven?
There are things that only government can do. Most of those things are enumerated in the U.S. Constitution. None of the consumer goods and services listed above are mentioned.
Government is not the answer to every problem. In fact, the data above suggests that it is often the case that when government gets too involved it actually it ends up hurting more than helping to solve the problem.
Keep the chart in mind when someone tells you that government can do a better job at lower cost.
The facts suggest otherwise.
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