« | »

CBO: Must Curb Govt Health Spending

An excerpt and some selected charts from a little reported 82 page analysis out of the Congressional Budget Office (a pdf file):

(Click to enlarge.)

The Long Term Budget Outlook

June 25, 2009


Under current law, the federal budget is on an unsustainable path—meaning that federal debt will continue to grow much faster than the economy over the long run. Although great uncertainty surrounds longterm fiscal projections, rising costs for health care and the aging of the U.S. population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits and accumulating debt. Keeping deficits and debt from reaching levels that would cause substantial harm to the economy would require increasing revenues significantly as a percentage of gross domestic product (GDP), decreasing projected spending sharply, or some combination of the two.

For decades, spending on the federal government’s major health care programs, Medicare and Medicaid, has been growing faster than the economy (as has health care spending in the private sector). The Congressional Budget Office (CBO) projects that if current laws do not change, federal spending on Medicare and Medicaid combined will grow from roughly 5 percent of GDP today to almost 10 percent by 2035 (what this report describes as the intermediate term) and to more than 17 percent by 2080 (what this report considers to be the long term). That projection means that in 2080, without changes in policy, the federal government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years.

Under current law, spending on Social Security is also projected to rise over time as a share of GDP, albeit much less dramatically. CBO projects that Social Security spending will increase from less than 5 percent of GDP today to about 6 percent in 2035 and then roughly stabilize at that level through 2080. Under the assumptions used for CBO’s long-term projections, government spending on activities other than Medicare, Medicaid, Social Security, and interest on federal debt—activities such as national defense and a wide variety of domestic programs—is projected to decline or stay roughly stable as a share of GDP in future decades.

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. By CBO’s estimates, the increase in spending for Medicare and Medicaid as a share of GDP will account for 80 percent of spending increases for the three entitlement programs between now and 2035 and 90 percent of spending growth between now and 2080. Thus, reducing overall government spending relative to what would occur under current fiscal policy would require fundamental changes in the trajectory of federal health spending. Slowing the growth rate of outlays for Medicare and Medicaid is the central long-term challenge for federal fiscal policy.

Federal spending on Medicare, Medicaid, and Social Security will grow relative to the economy both because health care spending per beneficiary is projected to increase and because the population is aging. Spending on Medicare and Medicaid will be driven by both factors, while Social Security spending will rise because of the population’s aging. Between now and 2035, aging is projected to make the larger contribution to the growth of spending for those three programs as a share of GDP. After 2035, continued increases in health care spending per beneficiary are projected to dominate the growth in spending for the three programs.

The current recession has little effect on long-term projections of noninterest spending and revenues. But CBO estimates that in fiscal years 2009 and 2010, the federal government will record its largest budget deficits as a share of GDP since shortly after World War II. As a result of those deficits, federal debt held by the public will soar from 41 percent of GDP at the end of fiscal year 2008 to 60 percent at the end of fiscal year 2010. Higher debt results in permanently higher spending to pay interest on that debt (unless the debt is later paid off ). Federal interest payments already amount to more than 1 percent of GDP; unless current law changes, that share would rise to 2.5 percent by 2020.

CBO’s long-term budget projections raise fundamental questions about economic sustainability. If outlays grew as projected and revenues did not rise at a corresponding rate, annual deficits would climb and federal debt would grow significantly. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress income growth in the United States. Over time, the accumulation of debt would seriously harm the economy. Alternatively, if spending grew as projected and taxes were raised in tandem, tax rates would have to reach levels never seen in the United States. High tax rates would slow the growth of the economy, making the spending burden harder to bear. Policymakers could mitigate the economic damage from rapidly rising debt by putting the nation on a sustainable fiscal course, which would require some combination of lower spending and higher revenues than the amounts now projected. Making such changes sooner rather than later would lessen the risks that current fiscal policy poses to the economy.

(Click to enlarge.)

Mind you, this is a report from the Democrat-controlled Congressional Budget Office. And even they say that the government simply cannot sustain its current spending.

Note, too, that the CBO sees the culprits to be Medicare and Medicaid:

By CBO’s estimates, the increase in spending for Medicare and Medicaid as a share of GDP will account for 80 percent of spending increases for the three entitlement programs between now and 2035 and 90 percent of spending growth between now and 2080. Thus, reducing overall government spending relative to what would occur under current fiscal policy would require fundamental changes in the trajectory of federal health spending. Slowing the growth rate of outlays for Medicare and Medicaid is the central long-term challenge for federal fiscal policy.

And yet what are Mr. Obama and the Democrats seeking to do?

They are seeking to expand Medicare and Medicaid to encompass everyone. For that is the essence of Obama-care.

It is simply madness.

This article was posted by Steve on Wednesday, July 1st, 2009. Comments are currently closed.

26 Responses to “CBO: Must Curb Govt Health Spending”

  1. wardmama4 says:

    Social Security is unsustainable
    Medicare is unsustainable
    Medicaid is unsustainable
    Medicare Part D (Prescription) is unsustainable

    Yet somehow adding everyone onto a new governmental program is going to be sustainable?

    Only in Do As I Say, Not As I Do Liberal minds.

    • proreason says:

      Social Security is trivial to fix. The retirement age should be adjusted to match the country’s age demographics, but people within 10 to 15 years of retirement should not be impacted.

      Medicare could be instantly fixed if the payouts this year were based on the income for the prior year. This, of course, would likely mean that the deductables would increase regularly, but as you say, the current program is unsustainable. The age to qualify should also be adjusted as for Social Security.

      Medicaid is a relatively minor problem.

      Part D should follow the Medicare pattern.

      But to say this is to laugh…….these are common sense solutions……and common sense won’t get anybody elected to office in this country when the politicians have spent lifetimes as con artists. Particularly since the Moron has demonstrated that the only thing he is really good at is lying.

    • Rusty Shackleford says:

      This is like the average household trying to use its Visa to pay off their Mastercard. Or, even, refinancing their house to get out of debt…which is what barry has actually done, rescued before going under financially by a lucrative book deal which returned them to solvency. I often wonder what would’ve happened had the book deal failed and he and his lavishly spending consort were forced to sell their ASSets.

      See, the Obamas were knee-deep in debt. In fact, deeper than knee-deep. They had a very expensive townhouse in Hyde Park, IL and they refinanced it to get mo’ money. Meanwhile, paying the minimum towards their student loans..with loan officers calling them at home.


      So, you see, to Blammo, debt is a silly thing…mostly to be ignored. “It’ll go away”, I’m sure he figures.

      Their combined income was quite high…if you wonder where that mysterious 250,000 dollar number comes from.

      Yet, rather than pay down their incredible student loans, they lived the lives of Riley and spent, spent and spent…then refie’d the townhouse and spent some more.

      So….now we get to see his “high-finance” skills in action. I guess he figures the people will all come up with book deals to cover the new debt that he’s laid on us.


  2. bronzeprofessor says:

    Whenever I bring this up to my Democrat friends, they always say Bush drove up deficits. Then I point out that Sarah Palin’ Alaska is running at a budget surplus and John Mccain’s one main virtue was cutting wasteful spending — and the Democrats just bring up the Katie Couric interview and repeat rumors that someone screamed “kill him” at a rally, then talk about how there were no weapons of mass destruction in Iraq.

    I am not surprised the Democrat-controlled CBO has issued this report — the Democrats who are undistracted enough to realize what a time bomb the debt is, want to save the party from their Kool-Aid addicts before the Republicans can make good on the problems of the debt.

  3. Rusty Shackleford says:

    Hm, the charts look suspiciously like the projected global warming charts from the EPA.

  4. GetBackJack says:

    Medicare is the worst healthcare on the planet outside Nigeria
    Medicaid is managed like something you’d expect in a broken Russia
    VA hospitals are perpetually underfunded and understaffed

    And the Dims think this qualifies them to take over everything else.

    I have got to get me some that shiat they’re smoking.

  5. U NO HOO says:

    Wait a minute…

    If only women can make decisons about abortion…

    Then maybe only doctors should make medical decisions…

    And only insurance agents and insurance buyers should make decisions about insurance…

    I’m just saying Obama isn’t a doctor nor an insurance agent.

    • jobeth says:

      Yes…but he plays one in his mind!

    • neocon mom says:

      Apparently the duties of someone of his “pay-grade” include referring older patients to government sponsored palliatives in lieu of treatment.

    • jobeth says:

      neocon mom…

      Off topic one moment please….Are you planning on attending a local tea party this weekend? I understand you are from Gainsville. We are going to one in Ocala on the 4th

      Steve…If neocon mom would like my email address, I would be apprecitive if you could give it to her. Thanks :)

  6. Colonel1961 says:

    Not to worry. Ya’ll are forgetting how much more efficient it will be when government has total control of all health care! I can hear the savings from here!! Whee…

    • jobeth says:

      Yep…that “ching ching” you hear is from the funeral industry…due to all the oldsters that don’t get the treatment, but instead a pat on the head and a “toot a lou to you oldie”

  7. MinnesotaRush says:

    “CBO: Must Curb Govt Health Spending”


    I’m thinkin’ that’s what they wanted to say!

  8. bill says:

    I have an aged aunt on medicare … it sucks. We send money.

  9. Gila Monster says:

    Mark Levin referenced this thread on his broadcast tonight, kudos Steve.

  10. Rusty Shackleford says:

    In light of California’s inability to pass a budget as of midnight last night, it bears saying again…actually YELLING again that the problem isn’t spending on things that are necessary; The problem is wasteful spending on things that everyone knows is wasteful and unnecessary! Free healthcare for illegals, welfare, free housing, and on and on.

    It’s, once again, the elephant in the room and when people in Calli-fahwn-ya aske “where’d the money go?”, like a father confronting a teenager who has no gas money because he spent it on a new amplifier for his car, I will say…”YOU SPENT IT, DUMBASS!”

    It’s the SAME THING…..you spent it on stuff you shouldn’t have so that now you don’t have money for the things you should. Schools have no money…care centers for the aged have no money, because Swarzenegger’s government felt so happy to GIVE it away to the needy masses…

    How do you get your car registered at the DMV now? And….with all the money spent….giving out IOU’s???? So when I get a ticket in Calli-fawhn-ya…I’ll just send them an IOU to pay the ticket, right?

    Give me a break. And Blammo looks upon that state as a MODEL for how to run the nation’s finances?

    Tell me this is just a bad dream or that it’s somebody’s idea of a joke.

    California as a MODEL? For what? Fiscal dysfunction? My god…..you wanna just slap somebody.

    There were some lines from an old Frank Sinatra song…”Use your mentality…..Wake up to reality”

    I am just livid with rage. Billions of dollars California takes in in taxes and they cannot manage what they get…..so….they will raise taxes for MORE money because they’ve so badly mismanaged what they get already. No wonder there are protests in the streets of California because they SPENT IT ALL.

    WAKE UP PEOPLE!!!! This is how The Rookie wants to use federal tax dollars. As for healthcare, California has one of the most liberal policies of doling out cash to hospitals that take care of illegal aliens and people who do not have health insurance. That is the Obama healthcare plan…get it?

    THAT, is the same as socialized medicine because they get the money from those who pay taxes and by charging more from those who DO have healthcare insurance.

    DO THE MATH…..with The Rookie at the helm….watch GovCo start handing out IOU’s for tax refunds next year. Good at all Sonic and McDonald’s for one giant shake.

    The mind boggles———

    • proreason says:

      “I am just livid with rage.”

      Is there a color more extreme than livid?

      YOU will end up paying for California politicians’ irresponsibility. It may be hidden, and unpublicized, but the debt of that state will come out of your pocket, Rusty.

    • Rusty Shackleford says:


      You’re correct, I’m sure. Next up: Bailout money for CA.

      And, the “Berkeley class” seems curiously quiet on this issue of being broke and how they got there.

  11. Trialdog says:

    So the CBO issues a report about fiscal irresponsibility and you assume it is some type of warning? The CBO report is only a warning if you want to maintain a vibrant free market capitalist economy.
    You seem stuck using the old way of doing things when analyzing our economy. That’s what got us into this mess. Just ask the President and our objective press.
    The President was given a mandate to “fundamentally change” the way we do things. He’s doing what he promised he’d do if elected. There may be other ways of doing things, and you can mention them, but as he’ll tell you, he won.
    The CBO report is simply a report on how things sit now so we can measure how well the President’s plans work when the spending goes up higher. And make no mistake, the President’s plans will work exactly as he promised.
    The CBO states the government simply cannot sustain its current level of spending. The President says: “Yes we can.” Not only that, we can and will do more. The President is assuring us that the more the government spends, the more jobs will be created and the more the governement taxes, the closer science will come to perfecting free, clean, and abundant energy.
    I’m tired of stories premised on the idea the economy or our standard of living was meant to grow under Obama’s plans. They weren’t, they aren’t, and they won’t.
    You don’t seem to be embracing the change too well.
    I mean, like, I look at your graph thingy and I see that in WWII, we spendt more. And, like, wasn’t that a time when the old geezers came together and stuff? If Obama can do that again, we can all like come together and stuff to make sure people get free health care and stuff. The government can just pay for it with money from really rich people who don’t need it anyway because like George Bush just gave it to them anyway and like we can’t just destroy the planet so greedy people can drive SUVs and start wars for oil. I mean like we should be more like Europe and stuff. They don’t start wars or do colonialism and they don’t have big obnoxious churches everywhere and everything is subsidized and people get free health care, day care, and they have hash houses and cool brew pubs.

    • proreason says:

      there ya go Trialdog.

      You have described the mentality perfectly.


    • Rusty Shackleford says:

      Like, shaa, dude

    • jobeth says:

      Trialdog…You have missed your calling…You could have been a great lib!
      You have the mindset down pat!…or should I say the mindlesset. LOL

      I can identify with the comment… “…from really rich people who don’t need it anyway.

      I had to listen to a raging diatribe (seriously!) from a rabid lefty Obamabot a few months ago who was spitting angry that someone (me) would dare call Obalmy on his policies etc. She went off on some family member of hers who had the selfishness and audacity to own three houses! Imagine that…!

      He owned three houses that “he shouldn’t be ALLOWED to have because he doesn’t NEED three houses.” And that she saw nothing wrong with him having to sell them to have more money to spread the wealth via Obalmy’s new tax system. Because in her eyes he was rich.

      BTW…she lives in less than optimal housing. Can’t wait to see what would happen if she decides to ever sell her place if this Cap & Trade bill with its little secret clause of having to spend thousands of $$ to greenly retrofit her house for resale should it get in. Bet she won’t like that little gem. LOL

  12. nuthingbettertodo says:

    I know this is a little off topic but I had to stick this in here. I found this while linking fom a totally unrelated story (about Gwyneth Paltrow opening her big mouth again). The story is from ’07 in the UK but current related stories on the side bar…


« Front Page | To Top
« | »