George Rebane

The coming explosion of entitlements is one of the publicized drivers of socialized medicine and its current embodiment as Obamacare.  The nearby chart from the Heritage Foundation plotting CBO data tells part of the story.  Historical tax revenues for the feds have been close to the underside of 20% of GDP.  If you project such average tax revenues and increase each of the three big entitlements as shown (presumably by the available national demographical data), then there is a point somewhere in mid-century where the entitlement payouts will equal all of the federal tax revenues.

We have to be careful here because there are some other factors not shown in this slightly dated but still highly evocative chart (last year’s stimulus antics have made things go from bad to worse).  First, since the expenditures are shown as a percentage of GDP over time, there is an implicit GDP growth rate assumed that is not shown, and changing that up/down will greatly affect when the tax revenue (red) line crosses the sum of the entitlements.  Second, the feds collect monies for Social Security and Medicare out of our paychecks which are in addition to the federal taxes we pay into the General Fund.  Those collections are going to be proportional to paychecks which in turn will follow GDP to some degree.  These factors serve to raise the effective red line and push out the crossover date.

Nevertheless, the graphic makes the point that the entitlements business-as-usual will be a train wreck a lot sooner than later, since the government must spend money on other things like defense and dams and foreign aid and interest on the national debt and … .  All this serves to lower the red line thereby making the train wreck come sooner.

Finally, we come to the real train wreck of colliding ideologies that the chart can also help us understand.  The socialists promoting Obamacare are proposing to solve the problem by raising taxes (no matter what lies come out of Washington) and reducing Medicare and Medicaid payments while forcing most people to eventually buy government health insurance.  The cost side will be controlled by draconian rationing measures that will be eased into place over the next decade.  Recall that Obamacare kicks in after three years of tax increases are collected, and then the socialists in Congress promise to “fix” the bill that the President will sign a few weeks from now.

It’s the inevitable rationing that gives rise to the debate about what to call the rationing boards.  You can call them what you wish, but they will tell us all what medical care we will get and when we will get it.  If you die in the interval, so much the better because that will lower the cost curve on the chart.

The other (libertarian/free-market) ideology calls for the government to roll back the obvious medical care cost contributors – e.g. insane law suits and stifled competition within the insurance, care provider, and pharma industries.  The free-marketers also want government revenues to increase through tax reforms and legislative measures which will boost GDP growth thereby raising tax revenues.  For example, defeat bills such as the Waxman-Markey energy tax and ‘green jobs’ job killing measures now being celebrated by the left and corporations eyeing the new federal tit.

All this is of a piece with RR’s report ‘Planning on a Miracle’.

(Hat tip to Russ Steele for pointing out the graphic.  His NC Media Watch regularly covers climate change developments and their impact on the economy. )