Tuesday, August 4, 2015

Wal-Mart's Low Cost, Low Price Strategy Compared to Government 'Subsidies' for College Attendees ...The Productive Private Sector Waltons in Contrast to the Government 'Subsidized' Clintons ... Two Wealthy Families from Arkansas

Wal-Mart charges every day low prices for the goods and services it offers for sale. Otherwise customers would shop elsewhere. Competition reigns in the free market.

Government charges low prices for those attending college (and ObamaCare users too) by subsidizing the colleges, then offering affordable pricing to attendees (and ObamaCare users), and finally by sticking it to taxpayers in order to recover fully its costs. The taxpayers have no choice, and government has no real incentive or need to control costs or maximize the value of the offerings provided to 'customers.' Government providers don't have to concern themselves with such things as customer satisfaction, productivity, value for money, or controlling costs.

The competitive private sector concentrates on satisfying customers and controlling costs, and in the process of so doing, shareholders benefit. Otherwise shareholders exit and the company folds. Meanwhile, the monopolistic public sector neither concentrates on satisfying customers nor on controlling costs. In the process, taxpayers don't benefit. They just pay. 

The Way of the Waltons --- Wal-Mart founder Sam Walton attributed much of his business success to a very simple formula for pricing and cost control. It can be summarized as follows: If the company's profit margin ever exceeded 4%, it was time to cut prices; but if the company's profit margin fell below 3%, it was time to cut costs. Wal-Mart grew and the Waltons became wealthy by offering very competitive low prices to their customers and earning big profits for shareholders

The Way of the Clintons ---The Clintons have made their millions by being 'public servants.' They are masters of working government levers to grant both access and favors to 'valued' clients seeking to soak the taxpayers.

Thus, one financially successful family from Arkansas served customers on the road to its riches, while the other got wealthy by 'serving' government favor seekers and soaking taxpayers.

In short, while Wal-Mart focused on serving customers and maintaining a low cost operation, the Clintons opened government doors and granted subsidies to the family's favored supporters. And this government emphasis on subsidies instead of productivity is the key to understanding why we have perhaps the very best government that money can buy. 

Productivity and cost control aren't part of the formula for 'good' government as practiced in today's America. Instead taxpayer subsidies are used to pay for unaffordable government. The bills are eventually paid by the entire U.S. citizenry. Everybody pays at least a little, including the direct users, so that the government workers can be paid a lot.

And that's why such government goodies as 'free' education, 'subsidized' health care and even the U.S. postal service are so ridiculously expensive. It's really that simple.

Today we'll look at the current state of subsidized and unaffordable higher education in America.

Federal Aid's Role in Driving Up Tuitions Gains Credence has the story:

"Imagine a scenario in which the federal government helps households pursue the American dream with ultra-loose credit, only to see prices skyrocket and families take on loads of debt they can’t repay.

Yes, it sounds like the housing market of a decade ago, but some say it is also the challenge of today’s higher-education system.

The federal government has boosted aid to families in recent decades to make college more affordable. A new study from the New York Federal Reserve faults these policies for enabling college institutions to aggressively raise tuitions.

The implication is the federal government is fueling a vicious cycle of higher prices and government aid that ultimately could cost taxpayers and price some Americans out of higher education, similar to what some economists contend happened with the housing bubble.

Conservatives have long held that generous federal-aid policies inflate higher-education costs, a viewpoint famously articulated by then-Education Secretary William Bennett in a 1987 column that came to be dubbed the Bennett Hypothesis.

Now, more mainstream economists and academics are adopting that view, or at least some variation. And while college institutions reject the notion that they game the federal student-aid system to jack up prices, many higher-education officials concede there is a pricing problem, and changes are needed.

“There’s widespread concern among policy makers and college officials that it has become too easy for students to borrow large amounts of money without necessarily appreciating what they are getting into,” said Terry Hartle of the American Council on Education, a trade group representing college and university presidents.

The government’s student-credit spigot burst open in recent decades as Americans sought a leg up in an increasingly sophisticated economy, and accelerated during the last recession. Annual student-loan disbursements—which include some private loans but come mostly from the federal government—more than doubled between 2001 and 2012 to $120 billion . . . .

And it’s not just that more people went to college; the amounts borrowed also grew sharply. During that time, the average loan per recipient rose 58%, after inflation, to $5,777 a year.

Federal student loans allow Americans to borrow at below-market rates with scant scrutiny of their credit and no assessment of their ability to repay. Meanwhile, federal Pell grants, which help low-income college students and don’t need to be repaid, more than tripled to more than $30 billion a year between 2001 and 2012. Education tax credits roughly quadrupled to about $20 billion a year.
The cost of getting a degree similarly exploded. From 2000 to 2014, consumers’ out-of-pocket costs for college and graduate-school tuition rose 6% a year, on average, according to the Labor Department’s consumer-price index. By comparison, medical-care inflation looks meek at an average 3.8%. Overall consumer prices climbed 2.4% a year. . . .

The study found that, on average, for a $1 increase in the subsidized-loan cap, tuitions rose by as much as 65 cents. For Pell grants, it translated to 55 cents on the dollar. The study pinpoints private schools—both nonprofit and for-profit—as bigger offenders than public ones. . . .

One thing the latest research doesn’t address is the effect of student aid on graduate-school tuitions, which have disproportionately driven the surge in student borrowing. And grad school is perhaps where the market is most distorted by federal policies.

The federal government limits how much undergrads can borrow—up to $57,500 total—but doesn’t for grad students, who can borrow to cover any amount their schools charges through a decade-old program known as Grad PLUS. Economists say that has given institutions unprecedented pricing power. . . . In the seven years before Grad PLUS, college tuitions were rising faster than grad-school costs. In the seven years after, the reverse occurred."

Summing Up

Wal-Mart offers 'unsubsidized' low prices and competitive values for customers.

Government offers 'subsidized' low prices and great financial harm for both taxpayers and the 'sooner or later' paying customers.

Government's lack of focus on productivity and cost management is creating an increasingly out-of-control and unaffordable situation.

We the People need to recognize that the real Arkansas threats to our nation's well being and prosperity are people like the Clintons, and not the Waltons.

Both are rich, but only one got that way by competing fairly, taking care of customers and not by taking advantage of We the People.

Yet somehow the Waltons are deemed to be the greedy ones, and the Clintons are billed as the noble public servants.

Wake up, America.

That's my take.

Thanks. Bob.

No comments:

Post a Comment