Wednesday, February 17, 2010

A Picture is Worth What it Can Hide

In a recent American article, AEI scholar Andrew Biggs tackled a politicization of the FY2010 budget regarding Social Security. If Biggs’ critique reached the White House it has not yet permeated it’s visual aids. Instead, The White House’s Economic Report of the President, released last week, continued to insist that per person health care cost growth rather than simply the exploding number of seniors poses the greatest threat to the nation’s entitlement programs. The move bolsters the White House’s push for health care reform at the expense of national solvency.
The report provides this figure, which shows the impact of ageing as almost flat.
Careful readers will see that the White House wants to stress health cost growth because “over the long-term they are by far the larger contributor to the deficit.” Before getting to that claim the White House has to admit that it agrees with Biggs about the short-term impacts of aging: Over the next 20 years, demographics—the retirement of the baby boom generation—is the larger cause of rising spending.

As Biggs explained, the short-term matters the most. Entitlements will engulf the federal budget long before we reach the “long-term” health care crisis. According to a presentation by CBO Director Douglas Elmendorf, spending on Medicare, Medicaid, Social Security Defense, and debt interest will be larger than all federal revenues by 2018. Forget twenty years, we’ve barely got 10.

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