Sustainability Quantified (updated 9oct13)

September 2013
S	M	T	W	T	F	S
1	2	3	4	5	6	7
8	9	10	11	12	13	14
15	16	17	18	19	20	21
22	23	24	25	26	27	28
29	30

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Sustainability Quantified (updated 9oct13)

26 September 2013

George Rebane

Sustainability, especially of government programs such as healthcare, has been a constant topic of debate on RR since its inception. Our friends on the Left have trouble understanding that a program is sustainable only to the extent that its cost doesn’t crowd out other programs and consume the country’s GDP in toto. And that is doubly true if more than one government program develops an expanding appetite for GDP.

To make this clear to those who are still numerate enough to remember their first semester algebra, consider the following. In the base year let A_H be the amount spent on a program, say, healthcare. In that year this consumes a fraction f_H = A_H/A_GDP of the country’s total output of goods and services. Assume that during the next year we witness growth rates of r_H and r_GDP in their respective sectors.

At the end of that year we will have spent (1+r_H)A_H for healthcare out of a GDP that has grown to (1+r_GDP)A_GDP. This says that our healthcare spending as a fraction of GDP is now f_H+ = [(1+r_H)A_H]/[(1+r_GDP)A_GDP].

For sustainability, this year’s healthcare fraction must be no larger than last year’s. That means that f_H+/f_H ≤ 1, or substituing from above we must have (1+r_H)/(1+r_GDP) ≤ 1. This requires that the numerator be no larger than the denominator, or that 1+r_H ≤ 1+r_GDP. Subtracting one from both sides yields the final requirement, r_GDP ≥ r_H . This simply says that the GDP’s growth rate must be at least as large as that of the sustainable program in question; in this case, healthcare.

Since the first comparison of any government program is always to its fraction of the budget, with similar argument we see that the government’s budget must also grow at least as fast as GDP. With a healthy GDP growth rate such budget increases are not a problem. However, with an anemic growth rate, taxes must be increased to grow the government’s budget sufficiently to sustain all its spending programs. Unfortunately, we then run into the Laffer Curve. (The astute reader may also offer that some other programs be cut to accomodate more desirable programs in a sputtering economy. But that may be hoping for too much.)

[9oct13 update] And now for the real budget problem (and solution).

Posted in Critical Thinking & Numeracy, General, Science Snippets, The Liberal Mind

5 responses to “Sustainability Quantified (updated 9oct13)”

Walt

26 September 2013

I guess I’m feeling the first bite of the unaffordable health tax.
There is one med. I take that no longer seems to be available.
After mining the web to see if some breakdown in the supply chain,
not much was to be found. So that left me scratching my nuts in wonder.
After calling back most of the drug stores in town the reason was clear. None of the insurance Co.’s were covering it’s cost, and I’m one of the few up here that get prescribed it. So,, why bother to even stock the shelves, even down at distribution. The cheap stuff gives me a real short fuse.
This is just one drug. How many more are in the same boat?
And things haven’t even really gotten started with this grand, “managed” care. ” Here.. Take a pill”… Sure. If only I could get it.
( Green eggs and ham tastes like crap. I took the first bite for ya’.)
NO Uncle Sam,,, I tried your green eggs and ham. You said “I’d love it”.
But No I don’t,, I say,, go shove it.

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Bill Tozer

26 September 2013

Sustainability, sustainability. Used to be a code word for shopping local, raising some chickens and dabble in the barter system. Making a solar powered blender for those parties on the redwood deck. Making your own soap and boiling sea water for your salt. No problem with the back to nature stuff. Makes one feel like Daniel Boone (without that part about carving his name into a poor defenseless tree boasting about killin a fuzzy bear).
Government uses a definition of sustainability from a galaxy far far way.
Lets take something benign and uncontroversial such as gasoline taxes. A real yawner. People are driving cars with better mileage, including hybrids and such. The economy has tanked so people are working less, driving to work less and driving less period. Don’t see the hoards of Sunday drivers going on a leisurely afternoon long cruises as much as them good old days.
The result of consuming fewer gallons of petro? Government is bringing in less revenue. The sky is falling!! Another crisis for sure. Solution? Raise gasoline taxes and figure out a way to get those who drive all electric vehicles to pay their fair share. Greedy drivers of all electric cars using the public roadways for free. Government built those bridges and roadways and it wasn’t free. Government’s answer to sustainability is to tax. Forget about the sickening poor who get hurt the hardest. Raise the gas tax and raise it yesterday if not sooner.
Lets pick on Obamacare, or The Afforable Care Act if you prefer. Another yawner. To make it sustainable, lets cut Medicare. Grand idea. Take 400 billion out of Medicare and cut some fat. Lets have that fabulous employer mandate which is the key to sustainability. Let’s front load all the goodies and back load all the costs. That be sustainable at its finest.
Problem is the Medicare cuts (savings) have been delayed, the employer mandate has been delayed, 17 other grand “savings” items have been delayed which means not only will Government have to tax the shit out of us all in 6 years to make up for all the unsustainable costs of the first 4 years, it won’t be affordable or caring. The Affordable Care Act won’t be sustainable, won’t reduce the deficit, won’t balance the budget, and won’t ever shrink in size or even pay for itself. Pay more for less.

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Michael Anderson

26 September 2013

That’s some pretty fancy math, George. Very nice. Very nice that you get to choose the variables.

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George Rebane

27 September 2013

MichaelA 1114pm – Interesting assessment on the ‘fanciness’ of the math. But more interesting is what other variables would you have chosen???

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Bill Tozer

01 October 2013

http://calwatchdog.com/2013/10/01/ca-rooftop-solar-will-cost-other-customers-1-billion-per-year/

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