The Budget Deficit Debate: Avoiding the Real Problem

Re-posted with the permission of the author Mark Thoma at Maximum Utility.

The Budget Deficit Debate: Avoiding the Real Problem

I’ve been asked several times how I feel about the president’s proposed budget, and I find it hard to answer. For me, it all comes down to the following diagram:

[Source: CBO]

The main problem, as this graph from the CBO clearly shows, is rising health care costs. However, few politicians are talking about the real problem, let alone trying to find ways to solve it. So all of the budget debate we are seeing is really just tinkering around the edges of the long-run debt problem. For example, as the graph shows Social Security has little to do with our long-run budget problem, and the imbalance in this program can be fixed relatively easily. So whatever we do here it will still leave the big problem — rising health care costs — unaddressed.

Until politicians start leveling with the public about the source of the budget imbalance instead of fooling them into thinking the measures they are talking about for Social Security and other programs will help to solve our long-run debt problem, we won’t make much progress. And the costs of this political strategy could be large. We could lose valuable programs — programs we can easily afford once the health care cost problem is resolved –as politicians attempt to make the public think they are making inroads on the long-run budget problem when in fact they are avoiding the real issue (and it doesn’t help at all that any attempts to control health care costs are derided as “death panels”).