by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Government wants you to think it helps you at every turn. Every time you make a decision, a purchase, government wants to be there, looking essential.
But it’s a trick. Most government “help” creates new problems.
Students once went to private banks to get college loans. Banks, since they had their own money on the line, tried to lend only to students who were likely to succeed and then pay them back. Politicians then said, “Banks don’t lend enough, so we’ll guarantee loans or make loans ourselves! After all, college is essential for success.”
Colleges responded by raising tuition at seven times the rate of inflation. It’s a spiral in which taxpayers are forced to give money to colleges — which then charge high tuition, so students graduate deep in debt, and then politicians demand that taxpayers forgive that debt.
President Obama said, sure, just pay back 10 percent or, after 20 years, nothing! Taxpayers will pay the rest, which goes to schools that employ professors who demand more government programs. It’s a spiral that makes government bigger.
The same thing happened with housing. People once borrowed from private banks, which applied market discipline. If they thought you wanted to borrow more than you would likely repay, banks wouldn’t lend you the money.
But now government — Fannie Mae, Freddie Mac and the Federal Housing Administration — guarantee nearly every loan. That helped create the last housing bubble. After it burst, and taxpayers were charged nearly $2 billion to bail out the FHA, the politicians assured the public they would fix this to make sure it never happened again.
But they didn’t.