Students Get Lesson in Socialism

Welcome to the socialist welfare state:

New Mexico Democratic Gov. Michelle Lujan Grisham’s plan for free college tuition has been put on hold due to a decrease in oil profits. The New Mexico Opportunity Scholarship, announced in 2019 by Grisham, would “provide for 100 percent of undergraduate tuition and fees at New Mexico institutions of higher education for eligible in-state resident students.” The scholarship was set to launch for the fall 2020 semester and impact as many as 55,000 students in the state.

So first you create an entitlement with lavish benefits promises. Then, when economic reality sets in, you walk back on your promises. Campus Reform again:

Plans to use oil profits to pay for the Opportunity Scholarship are now on hold, however, due to the decrease in oil prices. The pandemic, which resulted in record low oil prices, is now forcing New Mexico to reanalyze its state budget. The oil industry in New Mexico makes up almost 40 percent of the state’s revenue and was already affecting the budget in spring 2020. 

Just like Medicaid Expansion, which has been a disaster for New Mexico. In 2018, a majority of all New Mexico kids, 56 percent, were on Medicaid. More than 28 percent of all working-age adults were also on Medicaid. Compare these numbers to the U.S. averages: 38.5 and 15 percent, respectively. Medicaid is also a bigger cost to the state, claiming close to a third of the state’s outlays.

None of this was planned when the state passed Medicaid Expansion, yet now they are stuck with the entitlement.

Or will they walk back Medicaid Expansion just like they do with free college? Campus Reform again:

Plans to use oil profits to pay for the Opportunity Scholarship are now on hold, however, due to the decrease in oil prices. The pandemic, which resulted in record low oil prices, is now forcing New Mexico to reanalyze its state budget. The oil industry in New Mexico makes up almost 40 percent of the state’s revenue and was already affecting the budget in spring 2020. “I’ve just never seen anything like it. And quite frankly, I don’t know what it means,” State Senate Finance Committee Chairman John Arthur Smith said, according to the New Mexico Political Report.

The spending-happy politicians down there in the Enchantment State have no reason to blame this on this year’s artificial economic shutdown. The problem they have paying for their entitlements is structural, inherent to the welfare state. I explain this problem in detail in my soon-to-be-released ebook Tax Cuts Don’t Work; for now, let us listen to a Venezuelan refugee, interviewed by Campus Reform:

Activist and attorney Jorge Galicia, a Venezuelan who fled his home country due to the economic collapse from socialism, discussed New Mexico’s situation with Campus Reform. “The first thing we have to note about this whole plan is that it wasn’t even necessary for it to take into effect to notice why this is such a bad idea. Financing huge social programs with taxpayers’ money (or in this case, oil revenue money) might work for some time, but inevitably the state will run out of money at some point making it impossible to maintain the funding for these ambitious programs,” he said. 

Galicia also issued a dire warning:

Galicia explains that this exact situation happened in Venezuela, forcing him and millions of others to flee to America. “Unfortunately this is what happened in Venezuela. After the oil industry was nationalized our government decided to put in place ambitious social programs…thanks to the new huge income the government was receiving.” “It took less than a decade for the massive financial problems to appear thanks to a drop of the oil prices. Inflation, inability to pay foreign debt, and loss of trust from investors was part of the horrible economic consequences we suffered in the 80s and beyond,” Galicia said. Galicia also emphasized the need for America to decrease public spending. He stated that the U.S. needs to take these issues more seriously before America suffers an economic collapse like Venezuela.

I can relate to this warning. I lived through a milder version of a socialist meltdown back in Sweden in the early 1990s. I shared that experience in detail in my book Industrial Poverty.

The debacle with the Opportunity Scholarship program in New Mexico is a small-scale example, almost a laboratory experiment with socialism. Hopefully, enough Americans will listen to it to prevent a system-wide experiment of the same kind. We are already precipitously close to doing just that.

Bluntly: before the Covid-19 stimulus bills we still had to actively cause a Venezuelan situation here in America. Today, the default is reversed: if we do nothing, a Venezuelan situation will unfold before our very eyes. We have to take active measures to prevent it. We still can, but with the default setting of our economy now putting us on track for unhinged spending and hyperinflation, Congress needs to overcome its inherent inertia and resistance toward any kind of spending reform.