Worried About The Deficit? Blame Health Care

The big debate these days is when to move away from stimulus spending and toward cutting deficits.

But the debate is only about the when: Everybody agrees that some combination of higher taxes and lower spending needs to come sooner or later.

The latest long-term forecast is out today from the CBO. It's a reminder that, unless something changes, rising federal deficits in the coming years will be driven largely by government spending on health care.

(It's also a reminder that the big health-care bill didn't do much to change the basic economics of health care in this country — CBO estimates from last year look pretty much the same.)

A few graphs from the report tell the story.

First, here's government health-care spending as a share of GDP.

Health spending

Of course, an aging population is bound to drive higher health-care costs. But, as the next graph shows, it's not just aging — it's also the fact that the cost of health care is rising faster than the cost of almost everything else.

Source of health costs

Finally, here's a graph that shows the government's revenues (the dotted line) versus costs, over time. The CBO uses different models for these estimates; the estimate below is based on a model that "incorporates several changes to current law that are widely expected to occur."

Budget Estimate



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