NCPA - National Center for Policy Analysis

The Burden of Federal Health Spending

June 24, 2002

Federal health programs are out of control, and some method of reducing their cost will have to be found. This means reducing the size of their planned growth -- what liberals play politics by calling "cutting their budgets." But it must be done.

A new report from the nonpartisan Congressional Budget Office examining 125 years of federal spending from 1950 to 2075 paints a chilling picture.

  • In 1960, the federal government spent virtually nothing on health, while Social Security retirement benefits consumed 13 percent of federal spending and debt interest 8 percent -- leaving almost 80 percent for national defense, public works, agriculture and everything else.
  • By 2000 Social Security had roughly doubled as a share of Gross Domestic Product and consumed 23 percent of the budget, while interest had gone up 50 percent and absorbed 12 percent of the budget.
  • But health spending had gone from nothing to 3.4 percent of GDP and 18 percent of the federal budget in a generation, and Medicare alone cost the economy as much as Social Security did in 1960.

The future, however, is far worse.

  • By the year 2075, under current law, Medicare will rise to 9.9 percent of GDP and Medicaid will increase to 5.3 percent -- while Social Security's long-term spending is flat after 2030.
  • In other words, these two programs alone, neither of which existed in 1960, will just about equal the total size of the federal government that year.
  • Total federal spending will hit 42 percent of the nation's economy -- something some European economies already match, but a figure that will create an America far different from this one.

There are only two options: double taxes or "cut" spending.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, June 24, 2002

 

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