Thursday, August 4, 2011

Health Care and the Deficit Drivers

Our first few posts were really "procedural" in nature, welcoming visitors to the blog and listing a few commentators we enjoy reading.  Now let's turn to something more substantive; what drives the deficit and our related national debt.

Let's start with a chart, courtesy of the Congressional Budget Office:

Federal Spending Graph

As shown in the chart, and as noted in a column today in the Weekly Standard ( of GDP 7.html), in 1971 government expenditures on Medicare and Medicaid amounted to about 1% of GDP.  As of last year, they amounted to about 5.6% of GDP.

More worrisome, the CBO now projects that spending on those two programs, along with new entitlements under Obamacare, will reach 10.4% of GDP by 2035 and 13% by 2050.  At the same time, spending on all other government spending (defense, Social Security, all other discretionary domestic programs other than debt service - more on that item later) will decline from a current 17% of GDP to 14.6% of GDP by 2035 and 14% by 2050.

Total health care spending (federal, state and private) is now over 16% of GDP (OECD Health Date 2009), is among the highest in the developed world and is projected to rise to 25% of GDP in 2025, 37% in 2050 and 49% in 2082.

As my eldest son has said, that which is unsustainable will not be sustained, and that is certainly true as to health care costs and related government expenditures.  At some point, not yet faced by the Congress, health care costs will have to be reined in.

Will Obamacare do that?

Well, the fair answer to that question is: We just don't know yet.

 Obamacare is a huge (multi-trillion dollar) experiment and no one can say with any certainty whether it will succeed.  At best, the claims made for its ability to limit costs (and not simply slow their rate of growth) remain unproven, and we simply don't know what the outcome will be.

What we do know is that there apparently is no Plan B, in the event Obamacare fails to control costs, a failing any good business plan would not make.

What we also know are two other things:

1.  Rising federal health care costs should be of as much concern to liberals as to conservatives, since that rising percentage of federal expenditures will have the effect of crowding out available funds for other programs, including education, environmental progress, foreign aid, etc.

2.  As with any government program, as the amount of funds disbursed, and the number of recipients, grows, a stronger and stronger constituency is built for maintaining and perhaps expanding the program, making meaningful change that much more difficult for politicians who want to keep their name on the front door of their current offices.

Your thoughts?


  1. Winning elections is easy - give the (majority of the) people what they want. Dont sleep with the intern, and be sure to graduate from college and support the troops no matter what.

    The trick is when the people want two (or more) diametrically opposed thing. Say like, I dunno, low taxes and big health care/military. What a pickle, eh?

    Answer: Claim to be doing it all! Shuffle the shells, find the ball, but not before the votes are cast. Then, a few years later, when the voters rub their chin and say, "wait...hold on a minute. what just happened there?", you change topics - quickly.

    Rinse and repeat.

  2. I'm told that Abraham Lincoln once said "You can fool some of the people all of the time, all of the people some of the time but you can't fool all of the people all of the time."

    But what Lincoln may not have realized is that you only have to fool 51% of the people every 4 years.