Our federal deficit and debt was in bad condition before the recession. The largely useless wave of spending since then has only exacerbated the problem, and health spending is doing more than its share to contribute. The latest Congressional Budget Office update on the federal budget outlook says the problem is getting worse. (CBO Report) This is an issue that concerns us all far beyond the health care implications. In general, the nation has become inured to the monstrous size of our debt, now approaching $20 trillion, and our deficits, routinely running a half trillion dollars a year. All this is currently being financed at very low interest rates, but that can’t be expected to last. It also has negative impacts on our economy and GDP growth. Even our supposed experts have adopted a head-in-the-sand, pray for the best attitude and policymakers and politicians are just ignoring the issue. Unfortunately you can’t dodge the effects of bad policy forever (see Greece, Venezuela, Japan, et al). This year the CBO projects that the federal deficit, $590 billion or 3.2% of GDP, will be higher last year’s and that deficits will increase over the next ten years, adding to our already unsustainable federal debt. This year’s and future years’ deficits are attributable to federal revenues growing much more slowly than federal spending. For example, this year revenue will grow at 1% and spending at 5%. This trend is projected to continue over the next few years.
The primary causes of the spending growth are Medicare, Medicaid and Social Security, coupled with an anticipated tripling of federal interest expense on the debt, as interest rates and the principal amount of debt rise. The report details the depressing effect the federal budget situation has on economic growth. Health spending is doing its part and then some. In 2016 alone federal health spending on programs like Medicare and Medicaid will rise $55 billion or 6%, with Medicare accounting for half of that growth. Over the next ten years, CBO is forecasting that federal health spending will continue to increase at 6% per year, far faster than economic growth or federal revenue growth under current policies. The primary contributor to those future health spending increases is also Medicare. If you are a young person, you should be truly horrified at this fiscal mess, and you should realize that you are going to bear the brunt of the pain, in fewer benefits and higher taxes. So you should be demanding that something be done now to ameliorate the situation, before it all comes crashing down on you.