Biden: Government Subsidies Raise Prices (and Create Dependency and Social Disorder)

One of the universal laws of economics is “Whatever you subsidize, you get more of it.” Joe Biden was asked if government subsidies have had an impact on tuition cost hikes. Here’s what the Vice President said:

[G]overnment subsidies have impacted upon rising tuition costs. It’s a conundrum here. But if we went the rate your view of the free market route what we would have done is we would have not of done that. We would not have increased Pell grants, for example. And there would be 9 million fewer students in college today.

Like any commodity, when prices go up and there aren’t enough buyers, costs come down. It’s called a sale. Since colleges know that students are having their tuition costs subsidized by cheap loans, they can raise prices. With cheap money available, demand for a college education goes up. This causes prices to increase. When prices go up, politicians plead for more funding which, you guessed it, drive prices up even higher. Now we’re finding out that students have massive after-college debts that will take years to pay off. The Obama Administration is offering a solution this “conundrum.” It’s the same solution – more government intervention and subsidies. It’s called “We Can’t Wait: Obama Administration to Lower Student Loan Payments for Millions of Borrowers.”

What’s true of college tuition is also true of other government-subsidized programs.

In his 1935 State of the Union address, President Franklin D. Roosevelt advocated for social security, unemployment insurance, and aid to dependent children. In the mid-1930s, most families – black and white – were intact. Divorce was very low, and babies born out of wedlock made up a relatively small percentage of overall births. While pushing his social engineering legislation, Roosevelt offered this warning:

The lessons of history, confirmed by evidence immediately before me, show conclusively that continued dependence on relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit. It is inimical to the dictates of sound policy. It is a violation of the traditions of America.

This forewarning didn’t stop Roosevelt and his social engineers from monkeying with morality. The results have been disastrous. Consider out-of-wedlock births. William A. Niskanen wrote the following in “Welfare and the Culture of Poverty” in the 1996 issue of the Cato Journal:

“Since 1960, the illegitimacy rate has increased from 2.3 percent to 22 percent for whites and from 21.4 percent to 68 percent for blacks. A substantial part of the current generation of inner city young people has grown up without a father, a contributor to the increase in violent crime and the decline in school performance as well as to some of the pathologies addressed in this study.”

Subsidizing illegitimate births through government payouts made it profitable for women to have children and for men not to marry just like college costs went up when government began subsidizing college educations.  Walter Williams writes:

Some argue that the state of the black family is the result of the legacy of slavery, discrimination and poverty. That has to be nonsense. A study of 1880 family structure in Philadelphia shows that three-quarters of black families were nuclear families, comprised of two parents and children. In New York City in 1925, 85 percent of kin-related black households had two parents.

It’s more lucrative to have babies out of wedlock because government aid programs only pay off when the children are “dependent,” as in ADC – Aid to Dependent Children. If the father marries the mother, the children are no longer dependent and the checks stop coming.