Saturday, June 27, 2015

Fwd: budget

'What encourages the deception is the glacial speed of change. Over long stretches, government is being remade, but in any one year, the shift is tiny and virtually invisible. Look at what has happened since 1990 - and what lies ahead.

In 1990, federal spending equaled about 21% of gross domestic product. Social Security and major health programs (mainly Medicare and Medicaid) represented a little less than one-third of all spending.

The rest was defense, domestic "discretionary" programs (homeland security, environment regulation, law enforcement and the like) and non-elderly "entitlements" (unemployment insurance, welfare).

In 2015, the federal government is still spending 21% of GDP, but now Social Security and major health programs consume about half the budget, according to the CBO report. Most health spending goes to the elderly.

As the CBO makes clear, an aging population and high health costs will perpetuate this trend for years. Under current law, Social Security and health programs will account for two-thirds of today's budget levels (measured by GDP) by 2040, estimates the CBO. What's left for the rest? Not much.

The remaining amounts are "the lowest ... relative to the size of the economy since the 1930s," says the CBO. Either the rest of government will shrink dramatically - or Congress will expand government spending sharply. That, of course, would require higher taxes or bigger deficits.

But budget deficits are not the problem. They are simply the consequences of the problem, which is that the combination of an aging society and expensive health care threatens many vital government functions.'

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