As the August 2nd deadline approaches, many Americans are mad at Congress and/or the President for this game of budget brinksmanship. A few commentators have talked about healthcare costs being an important factor in the debt, but I don’t think they emphasize it enough. Let’s spend a few moments getting our facts straight.
Here are the major expenses of the federal government in 2010, which totaled approximately $3.7 trillion.
(I’m doing my best to fairly translate data from tables from the U.S. Census Bureau. I find them a little confusing and inconsistent from one table to the next.)
The federal government took in only about $2.2 trillion in 2010.
These data mean that individuals paid about $1.8 trillion in income, social security, Medicare, and unemployment taxes; and received $2.2 trillion in social security income, Medicare benefits, Medicaid benefits, other income security benefits (unemployment, housing, food stamps, etc.), and VA benefits. Most Americans would still like other federal functions to exist such as national defense, highways, the justice system, national parks, etc.
Healthcare is the single biggest piece of the federal budget, which mostly consists of Medicare and Medicaid. If you think the situation is bad now, remember that the baby boomers are just now starting to retire and collect Social Security and Medicare benefits. The ratio of workers to retirees is about 3:1 now. That will change to 2:1 in about 30 years. But the inefficiencies of American healthcare aren’t limited to government programs
For this next exercise, I realize this trade-off would never work as cleanly as I imply. I just want you to appreciate the order of magnitude.
The U.S. spent about $2.6 trillion on healthcare in 2010, which consumed about 18% of the GDP. Most countries in Europe spend about 9% of their GDP on healthcare; some a little higher, some a little lower. Therefore, if the U.S. had a similar healthcare system as Europe, and these inefficiencies were eliminated and used to actually pay our current U.S. government obligations, $1.3 trillion would be available, which would nearly eliminate the yearly federal debt.
The next time you want to blame politicians for our mess, look in the mirror. Politicians only echo the wishes of the voters, and for decades we’ve been voting for politicians who promise something-for-nothing. It sounded good. We wanted to believe it. So they got our votes.
U.S. voters lack courage. Don’t expect politicians to make courageous and difficult decisions if the voters don’t support these decisions. Neither party is blameless, I’ll just say this. If you lean more Democrat and believe the federal government should fund lots of programs to socially engineer the country, then vote for politicians with concrete plans to raise taxes. And it can’t just be on the rich. Only about 50% of Americans pay income tax, and that isn’t right either. We all need skin in the game. If you lean more Republican and believe the federal government should be smaller, then vote for politicians with concrete plans to decrease benefits. Phrases such as “eliminate waste, fraud, and abuse” are cop-outs and don’t fix anything. Meaningful cuts mean there will be a new contract between America’s elderly/disabled/poor and the taxpayers, and these people will receive less than they do now.
A constant of the American dream has been that one generation’s children will do better than the current generation. Those days are over, because the current generation of workers and retirees has lived way beyond its means for decades, and an exorbitant healthcare system is one of the prime examples. Those debts are now coming due, and our children will be stuck with the bills. The only real question left is how bad will those bills be? I ask all of us to make sacrifices now so that our children will not be crushed by the debt of the excesses of this generation.