Ever wonder why health care and public college tuitions have inflated more than other economic segments?
As an example, the last 25 years have seen public college tuition rates increase 500% compared to overall inflation of 115%.1 Tellingly, private colleges do not share this increase. Public college tuitions have increased 12% more than private college costs in the last 10 years.
Similar trends are seen in the health care cost data. Since Medicare and Medicaid were implemented in 1965, health care costs have increased 1550% compared to 600% for the CPI.2
A commonly proposed explanation is that recent decreases in governmental funding have caused price inflation in these areas,3 however, analysis of the data show the opposite - that INCREASED government spending correlates to increased prices, and not vice versa.
This is to be expected based on historically observed economic behavior – the more government money that is introduced into a segment of the economy, the steeper the inflation.
This is not only a consequence of the insertion of government funding. The same happens any time the actual market value of currency is altered by a non-market force. The Federal Reserve's suppression of interest rates is another example.
Wherever the government funds a segment of the economy, prices will increase faster than the average of all goods and services.
Where there is easy money, prices will increase. Economics 101. It's that simple.