Discussion: (0 comments)
There are no comments available.
View related content: Health Care
White House/Pete Souza
New York Times numbers guy Nate Silver devotes his entire column today to analyzing growth in the size of government (federal, state and local) relative to the economy 40 years ago. Although his print headline reads “Health Care Drives Increase in Government Spending,” he concludes that only about half of that increase has come from health entitlements.
I’d like to elaborate in two directions. First, while Mr. Silver focused on 1972-2011, I’ve done nearly the identical comparison for the period 1965-2007-concluding that health spending accounted for the entire increase in the size of government during that period. The point being that any conclusions about the precise importance of health care as a driver of Leviathan’s size depends very much on the time frame selected for comparison. What cannot be disputed is that the gargantuan amounts of taxpayer dollars shoveled into programs such as Medicare and Medicaid have been a critical ingredient in ballooning government to its current share of the U.S. economy.
Second, were Mr. Silver willing to put his predictive skills to use, he would discover that — going forward — health entitlements will account for the entire increase in the projected size of the federal government over the next 75 years.
Under current policy, the federal government will grow in size relative to the economy by more than 40 percent. As the accompanying chart clearly demonstrates, every penny of that increase can be attributed to health entitlements. Indeed, federal spending on everything else, which includes defense, education, criminal justice, transportation etc., will actually shrink slightly over this period. This reflects the degree to which health spending will literally begin crowding out what we can afford to spend on other vital components of government.
Of course, at the end of the day, the critical question is what can we afford to spend on taxpayer-financed health care? The 41.5 percent increase in the size of the federal government is relative to 2011, which itself is a very inflated baseline compared to historical levels of federal spending. From 1992-2007, federal spending averaged only 19.8 percent of GDP whereas by 2011 already this had mushroomed to 24.1 percent.
Federal budget mavens will know that federal revenues have averaged only 18.0 percent of GDP between 1950-2007. Which is to say, we’ve seen a growing disconnect between our willingness-to-pay for government and our willingness-to-spend for government. CBO’s projected level of spending in 2085 may be 41.5 percent higher than 2011 levels of spending, but it is 72 percent higher than the levels of spending the federal government managed to survive on during the Clinton-Bush years. More importantly, from the standpoint of getting government spending on a sustainable path for our children and grandchildren, projected spending in 2085 will be 89 percent higher than the historical level of federal taxes that Americans have been willing to bear since 1950.
Mr. Silver is far more expert in the analysis of public opinion polling data than I am. I know for certain I have no personal desire to see my federal tax bill go up 89 percent to bankroll a government that already is much larger than it need be. My gut tells me a majority of Americans share this view. If Mr. Silver can show us evidence to the contrary, I would find that quite illuminating. Until then, I will stubbornly (I’m a Taurus, after all) cling to my position: Mr. President: We Do Have a Spending Problem!
 Sticklers for the truth may note that the blog version of Mr. Silver’s piece is “What Is Driving Growth in Government Spending?” But for whatever reason, it is headlined “Health Care Drives Increases in Government Spending” in the print version.
 The chief difference between my analysis and Mr. Silver’s is that I accounted for all components of government spending related to health care, including spending on public health, military and VA health etc., whereas he focus exclusively on health entitlements, i.e., Medicare, Medicaid and Children’s Health Insurance Program. In 2011, health entitlements accounted for only 76 percent of all tax-payer financed health spending across all levels of government (calculated from figures in Table 19). Consequently, Mr. Silver’s analysis tends to underestimate the role of health spending in driving government growth.
 Regrettably, no government agency does an equivalent projection of state and local government expenditures, so there is no way to get an analysis of future spending that precisely corresponds to the analysis of the past 50-60 years that either Mr. Silver or I have already reported. Note that even the CBO projection focuses only on health entitlements rather than the broader definition of tax-financed health spending.
 Readers can check my math using data reported by the Tax Policy Center. The average turns out to 18.0 percent even if the stopping year used were 2000 rather than 2007. And lest anyone think the comparison is somehow biased by the inclusion of Reagan and Bush administrations, the average would have been only 17.7 percent were 1980 used as the stopping year.
There are no comments available.
1150 17th Street, N.W. Washington, D.C. 20036
© 2015 American Enterprise Institute for Public Policy Research