No Long Term Budget Problem?

Sarah KliffLate last week, Sarah Kliff brought attention to the new Economic Report of the President. In the article, she notes that healthcare costs over the past few years have only grown at the rate of inflation. If this is not just a recession fluke, there are huge policy implications.

As anyone who reads this site knows, the only budget problem we have is the long term growth of healthcare spending. In fact, healthcare spending has been rising so fast the last few decades that if nothing is done, it will bankrupt our whole economy, much less the government. But if healthcare costs stabilize, we have no budget problem.

So the question is whether the slowdown is a long term trend. There is reason to believe that it is. One issue that Kliff does not mention is that we already pay far too much for our healthcare. Thus, it may be that the healthcare market has hit a ceiling. Remember: prices are set by what the customer will pay, not what the companies must pay to provide the good or service. But this doesn’t mean that we’ve necessarily reached a new normal in healthcare costs.

But let’s suppose we have. If that’s the case then all of the deficit hysteria is for nothing. And that is one of the biggest problems with all of this Chicken Little nonsense regarding Social Security and Medicare. We are being asked to cut these programs because in the future there may be a funding problem. This is just madness.

Now we have much of the Democratic Party—including President Obama—pushing for a Grand Bargain to cut Social Security and Medicare. And for what? So we can get the rich to pay a tiny bit more in taxes at a time when their taxes are extremely low by historical standards? And note: the Grand Bargain that Obama is pushing (any real deal would be worse) is 2/3 entitlement cuts to 1/3 loophole closing.

All liberals need to pay close attention to this issue. As Kliff points out, “It’s taken as an article of faith inside the beltway: Policy makers need to do something to tamp down on out-of-control health-care costs.” We need to counter this idea at every opportunity. Because we do not know that something must be done. And until we do, there is no reason to cut these programs. Unlike global warming (which we aren’t doing anything about), we can deal with any budget problems once they actually become budget problems.


Most of the push for cutting entitlement programs is a cover for cutting taxes on the rich. Note that all the big conservative and moderate budget plans start with a big tax cut. In any normal world, this would make these plans Very Unserious indeed. But because they also do great harm to the poor, they are considered Very Serious.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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