Health entitlements consuming more GDP
WASHINGTON -- I have been writing for some time — not years, but decades — that we are slowly turning the federal government into an old-age and health care agency. The relentless rise in the costs of Social Security, Medicare and other health programs is slowly draining funds from other areas, from defense to education. Still, it’s hard for many people to grasp what’s occurring, because the year-to-year changes seem small and inconsequential.
So let me try a different instructional tool: a table. Consider it a budget primer, good for President Trump and everyone else.
The table below shows the major categories of government spending as a share of our national income — the economy or gross domestic product (GDP). The figure for the year 2000 is an actual amount; the numbers for 2017 and 2037 are projections by the Congressional Budget Office under existing government policies and plausible economic assumptions.
What is obvious is that government spending is dominated by Social Security, Medicare and other health programs. Indeed, their share of spending has grown over time. In 2000, these programs represented roughly 7 percent of GDP (4 percent for Social Security, 3.1 percent for health care). That was nearly half of all government spending, excluding interest on the federal debt. By 2017, their share was more than half of non-interest spending at more than 10 percent of GDP (4.9 percent Social Security, 5.5 percent health care).
Looking ahead and considering the floodtide of baby-boom retirees and the high cost of health care, the CBO sees more of the same. By 2037, Social Security and federal health programs would absorb nearly 14 percent of GDP, or about oneseventh of national income.
So the message is clear. You can’t control the budget unless you’re willing to make changes in Social Security, Medicare and some other health programs. For years, I have urged that we gradually raise eligibility ages and trim some benefits of wealthier retirees. These steps would recognize longer life expectancies and the greater financial well-being of many older Americans. Introduced slowly, they would not have been disruptive.
Little or nothing has been done. You might say that by inaction, Congresses and presidents — of both parties — have created a national priority: almost all other programs should be subordinated to the needs of Social Security and health spending. From 2000 to 2037, all the increase in federal spending (as a share of GDP) will reflect these programs, the CBO projects.
Look at the table again. The category labeled “discretionary spending,” which includes defense and many other routine government functions (research, national parks, the FBI, the Coast Guard and much more), actually shows a decline in spending as a share of GDP. From 2017, so do “other entitlements,” a category covering food stamps, unemployment insurance and other “safety net” protections. The budget outlook is worse than these figures suggest, because they ignore that we’re already running annual deficits of about $500 billion, roughly 3 percent of GDP.
The larger message from this budget primer is that, under the influences of an aging society and high health costs, the government is quietly being redefined. All the other agencies and departments face continuous pressures to shrink or cut corners. Government is narrowing its focus even while it’s becoming larger. That paradox is the real lesson of the budget table.