Where Is The Inflation?

For those unaware prior to the price rise in energy, food and other basic essentials there have been price rise of other goods and services even before the current price run up. They were mainly school tuition, hospital expenses, and child care. Housing to date has also been on the rise but not as much as the former list.

Hospital expenses has risen over 200% for the past 22 years while college tuition is nearly 160%. Where is worth noting is that both these expenses are due in part with what the US government has done to raise the cost.

Student Loans

When government provided assistance in college loans it allowed colleges to raise prices. This due in part that the government made investing in college loans safe and provided low borrowing interest rates for students to pay off.

A 2017 study from the Federal Reserve Bank of New York found that the average tuition increase associated with expansion of student loans is as much as 60 cents per dollar.

“Between 1995 and 2017, the balance of outstanding federal student loan debt increased more than sevenfold, from $187 billion to $1.4 trillion (in 2017 dollars).”

The massive increase loans are held by the federal government. Essentially US tax payers are putting up the bill for the loan and although it has somewhat slowed in its increase rate it is now at an all time high of close to $1.46 trillion lend out to students.

There have been some loan forgiveness provided by the government to help stem the overall higher education costs. Yet there is no way $1.4 trillion can be erased. Instead the US tax payer will likely never see this paid out in full. Why you ask?

The trend of around 5 million people expanding the U.S. working age population every five years since 1950 has shifted, starting in the period between 2016 and 2020 when growth slowed to 2 million.

From president of Microsoft Brad Smith, recently from an interview with Reuters. Article Here

Labor force participation rates have been trending down for over two decades so less people will be able to pay off their debts as they no longer are working. This is not a good sign for the long run as there will likely be more people who graduate from college but are not participating in the work force.

Hospital Expenses

USA government spending for fiscal year 2020 shows that health care makes up more than 1/5 of the total expenses. This is more than pensions and social security. It is even twice as much as defense costs.

Again similar to college loans supported by government the cost of health care supported by government has allowed costs to inflate.

Public health insurance run up in cost has essentially gave way to private cost to exceed in by 2020 based on Health Systems Tracker. This means that private purchases of health insurance become more expensive than what the government was paying for.

Conclusions

All this inflation comes back to one source and that is government. Over the past decades the government has provided financial support to have prices to continue to rise in both college tuition and health care. Moving forward it will be difficult to expect lower costs in these goods and services as inflation continues to heat up.

Next time you hear about inflation being recent you just look back to the cost of higher education and health care and it won't be long before you know that inflation has always been here, just disguised as something else besides essential goods and services.

None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!

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