• Health care’s huge contribution to current debt, in one, nay two, charts

    A nice, short post by Robert Dittmar makes a great point in a few charts. Here’s his chart, using Bureau of Economic Analysis data, of the total U.S. federal deficit, by year and cumulatively (aka, federal debt):

    Yow! Here’s what that chart looks like without health care’s contribution:

    Cumulative deficit (debt, the green line) would be about zero today if not for health care spending.  Dittmar explains,

    As a thought experiment, let’s suppose that medical expenditures had been self-financed since the inception of government health care in the 1960s. What would our debt and deficit look like today? To answer this question, I simply added the medical care expenditure deficit back into the total government deficit. The result is depicted in Figure 3 and is astounding (at least to me). Outside of medical expenditures and revenues, the Federal government sometimes ran a surplus and sometimes ran a deficit from 1966 until 1980. Starting in 1980, and lasting until 1994, the government consistently ran a deficit outside of medical spending, but from 1995 until 2010, it consistently ran a surplus. In 1994, the cumulative excess spending would have reached a bit over $1 trillion. But by 1999, debt due to sources other than medical spending would have been completely eliminated by surpluses! The government wouldn’t have needed to borrow again until 2011.

    @afrakt

    Share
    Comments closed
     
    • I realize Dittmar’s larger point is that the debt crisis is largely a health care financing crisis, which is correct. But, putting on my econ nerd hat, it sure seems there would be important general equilibrium effects here, and I wouldn’t hazard a guess as to their overall direction.

    • I’ll hazard a guess. Health care deficit spending is stimulative just like any other kind of spending; indeed, throughout the great downturn, health care as a sector never stopped adding jobs. Reducing the health care deficit absent other policies to redirect that spending into more productive investments and/or consumption (health care being notorious for its poor productivity and diminishing returns on population health) would contract the economy. If it was done purely through reduced spending (not higher taxes), then it would represent a huge withdrawal of economic stimulus during this sluggish period of slow growth and could well drive the underlying deficit higher. If it were done through higher taxes, it would reduce spending on other goods, which would still be contractionary.

      Health care spending is current consumption. Given the current dependence of the U.S. economy on health care expenditures, the prudent course is to ratchet down its rate of growth while adopting policies to shift the composition of public and private spending to more productive areas.

    • Of course, had we gone down the all-private road, poverty and medical debt among seniors would be a lot higher, as most would not have viable insurance options. For the disabled, states, counties and family members would have had to bear a much bigger burden. And those groups would have cut their general utilization of health care – meaning that they would have a lot of unmet needs.

      But yes, healthcare has really been the key to our deficits, and it will continue to be unless something is done.

    • Time to cut costs and increase taxes.
      The ACA makes a stab at cutting costs but our healthcare system has costs so out of control (we spend many times as much for procedures and do many times as many procedures as other developed countries) that we need to make this a major effort.
      Also, it’s time to increase Medicare taxes. Requiring rich folks to pay more (above the current cap) would be a good way to start.
      The private sector has failed miserably. It has served the needs of doctors, hospitals, and insurance companies for more profit but it has given us an unbearable system where health care costs are killing our economy (as well as patients). Time for government regulation.

    • “If my aunt had a beard….” has as much relevance as the graphs since they lack the additional premature deaths that would have arisen in the same time period from lack of access to healthcare, which I understand currently runs at 50,000 per year. Granny wouldn’t be able to afford the wheel-chair to get pushed off the cliff.

      The next song on this play-list is to remove war spending (including all DND, domestic spying, NSA, CIA, TSA, and all the other secret departments we don’t know about) to show the cumulative surplus. My guess is that health care spending is a better “investment” especially in the American lives lost computation.

    • These plots make my spidey senses tingle — someone is manipulating what they plot to try to fool me.

      Long term economic time series should never be plotted in nominal dollars! Plots like this should be plotted at least in inflation-adjusted dollars if not as percentage of GDP or potential GDP. This plot makes it look like the current stimulus package is a far far greater threat to the economic health of the US than the Great Depression or World War II.

      Also, its a bit odd that the 0 on the left axis does not match up with the 0 on the right.

      A Billion dollars just doesn’t go as far as it used to…