CBO, Entitlments, Health Care Reform and the Deficit
One more time into the breach. The CBO has issued a warning to Congress about entitlement spending. Again. Here’s a key paragraph:
Almost all of the projected growth in federal spending other than interest payments on the debt comes from growth in spending on the three largest entitlement programs–Medicare, Medicaid, and Social Security.
Most of you know that Medicare and Medicaid have an unfunded future liability of 36 trillion dollars. That’s about 3 times the annual total GDP of the US economy. And they are the very same type of “public option” program – i.e. government insurance – that the left says is so very necessary and crucial to real “health care reform”.
In other words, the left’s argument is that adding at least 47 million (presently uninsured), plus the possibility of adding 119 million who are shifted to the public option from private insurance (private insurance, btw, doesn’t have any effect on the deficit whatsoever since we, the private sector, are paying for it) will somehow make the deficit picture better?
I’m obviously missing something here.
With the public option, we’re adding a new entitlement (47 million who presently supposedly can’t afford insurance, meaning taxpayers will subsidize theirs). Assuming it is set up originally to be paid for by premiums, at some point, like Medicare and Medicaid, and every other government entitlement program I can think of, it will pay out more than it takes in. How can it not? It is a stated “non-profit” program and it will include subsidies. At some point, another revenue stream is going to be necessary as it burns through the premiums with its payouts.
Well, say the proponents of government involvement in your health care, we’re going to save money by doing preventive health care. Yes, preventive care is the key to lower costs because a healthier population is one which visits the doctor less. While that may seem to be at least partially true (you’d think a healthier population would, logically, visit the doctor less) the part that is apparently missed when touting this popular panacea is the cost of making the population healthier (and the fact that the assumption of less visits isn’t necessarily true) doesn’t cost less – it costs more:
If health care providers can prevent or delay conditions like heart disease and diabetes, the logic goes, the nation won’t have to pay for so many expensive hospital procedures.
The problem, as lawmakers are discovering to their frustration, is that the logic is wrong. Preventive care — at least the sort delivered by doctors — doesn’t save money, experts say. It costs money.
That’s old news to the analysts at the Congressional Budget Office, who have told senators on the Health, Education, Labor and Pensions Committee that it cannot score most preventive-care proposals as saving money.
So with that myth blown to hell, we’re now looking at a government plan which will add cost to the deficit by subsidizing the insurance of 47 million and (most likely) many more, plus a plan to use a more costly form of medicine as its primary means of giving care.
But, back to the entitlement report – or warning. The CBO says that unless entitlements are drastically reformed (that means Medicare, Medicaid and to a lesser extent, Social Security) we’re in deep deficit doodoo:
The most frightening findings in this report are the deficit and debt projections. In this year and next year, the yearly budget shortfall, or deficit, will be the largest post-war deficits on record–exceeding 11 percent of the economy or gross domestic product (GDP)–and by 2080 it will reach 17.8 percent of GDP.
The national debt, which is the sum of all past deficits, will escalate even faster. Since 1962, debt has averaged 36 percent of GDP, but it will reach 60 percent, nearly double the average, by next year and will exceed 100 percent of the economy by 2042. Put another way, in about 30 years, for every $1 each American citizen and business earns or produces, the government will be an equivalent $1 in debt. By 2083, debt figures will surpass an astounding 306 percent of GDP.
The report also finds high overall growth in the government as a share of the economy and of taxpayers’ wallets that provides an additional area of concern. While total government spending has hovered around 20 percent of the economy since the 1960s, it has jumped by a quarter to 25 percent in 2009 alone and will exceed 32 percent by 2083. Taxes, which have averaged at 18.3 percent of GDP, will reach unprecedented levels of 26 percent by 2083. Never in American history have spending and tax levels been that high.
Here’s the important point to be made – these projections do not include cap-and-trade or health care reform.
Got that? We’re looking at the “highest spending and tax levels” in our history without either of those huge tax and spend programs now being considered included in the numbers above. Total government spending, as a percent of GDP is now at an unprecedented 25%. And they’re trying to add more while this president, who is right in the middle of it, tells us we can’t keep this deficit spending up forever.
Fair warning.
~McQ
Conference on Health Care Reform
Cato Institute is hosting a conference on health care reform today that will be webcast live. It will feature the following speakers:
* Rep. Paul Ryan (R-WI)
* Rep. Michael C. Burgess, M.D. (R-TX)
* Rep. Jason Altmire (D-PA)
* Karen Davenport, Director of Health Policy, Center for American Progress
* Douglas Holtz-Eakin, Former Director, Congressional Budget Office, and Director of Domestic and Economic Policy for the McCain presidential campaign
* Tom G. Donlan, Barron’s
* Karen Tumulty, Time Magazine
* Susan Dentzer, Health Affairs
* John Reichard, Congressional Quarterly
This represents a wide range of views and promises to be much more interesting and informative than the White House/ABC News infomercial scheduled for next week. so if you’re interested in this topic at all, take some time to check it out.
Health Care – Speaking Of Taxes …
According to AP, there’s not much of an appetite among Democrats to raise taxes to support “health care reform”.
And, of course, given the estimates of the cost of “health care reform”, aimed at making health care “more affordable” (how do they get away with that, especially in light of our experience with Medicare and Medicaid), there’s no question that taxes must increase.
Right now the administration and Democrats are attempting to convince a skeptical public that most of that cost can be recovered in “efficiencies” government will introduce into the system. It is the oldest con game going. Anyone who has observed government operations of any scope or size knows quite well that government and its bureaucracies are not at all efficient in their operation. Medicare fraud, for instance, costs us about $60 billion a year. Somehow the same bureaucracy which has allowed this year after year will suddenly become “efficient” and stop it?
Even if that could happen, the huge expansion of the governmental piece of health care is going to require massive funding. That means raising taxes. But many Democrats are very wary of such a move, especially with the 2010 midterms looming:
Many of those newly elected Democrats are wary of voting to raise taxes, especially when they are unlikely to get any Republican support.
“If you are a first- or second-term Democrat, why on earth would you want to vote in July or August 2009 for a tax increase that the president doesn’t want to have take effect until 2011?” asked Clint Stretch, managing principal of tax policy at Deloitte Tax. “You’ve just handed your opponent an extra year to campaign that you’re a big-tax Democrat.”
There, indeed, is the nut of the opposition to such a move. That doesn’t mean that Democrats wouldn’t eventually vote to raise taxes, but they’d want to do it in 2011, not 2009. That, of course, puts them in direct opposition to Speaker Pelosi, from a safe California district, who has pledged to pass “health care reform” this year. As I’ve stated repeatedly, while Pelosi might not be the sharpest knife in the drawer (and her CIA/waterboarding debacle make the case) her political instincts are good. She realizes that there’s a very narrow window available to Democrats to pass their liberal agenda and it may close by 2010.
That shapes up into an interesting internal fight within the Democratic caucus. As I see it, “victory”, at least in the short-term, would be seeing health care put off until after the mid-terms. And, as history has told us, the longer it takes for the Congress to act on legislation like this, the less likely its passage becomes.
~McQ