Government
Health spending to drive record deficits higher
■ Rising health care costs and an aging population are expected to force Congress and the president to make tough financial decisions in the long term.
By Doug Trapp — Posted Sept. 9, 2009
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Washington -- Stimulus spending; aid to the automotive, financial and housing industries; and a weak economy are expected to generate the largest single-year budget deficit since World War II.
The Congressional Budget Office on Aug. 25 estimated that the federal fiscal 2009 budget deficit will reach $1.6 trillion, or about 11.2% of the nation's annual economic output.
Current policies are projected to help increase the budget deficit to $14.3 trillion by 2019, or 68% of the nation's economy. That calculation may overestimate revenues because it assumes that temporary tax reductions are allowed to expire and that certain taxpayers will not be protected from paying the alternative minimum tax.
Beyond 2019, health care costs and an increasingly older population will pose additional financial challenges, CBO Director Douglas Elmendorf, PhD, wrote Aug. 25 on his blog. "Putting the nation on a sustainable fiscal course will require some combination of lower spending and higher revenues than the amounts now projected." For example, Medicare's hospital trust fund is expected to be insolvent by 2017, according to a March 2009 Medicare trustees' report.
House Minority Leader John Boehner (R, Ohio) called out Democrats for not pursuing a more conservative budget. "Instead of putting the brakes on Washington's spending habits as they promised they'd do, Democrats have stepped on the accelerator and spent taxpayer dollars with reckless abandon all year, refusing to make tough choices and putting all the sacrifice on future generations."
The 10-year budget deficit estimate is "higher than desirable," acknowledged Peter Orszag, PhD, director of the White House Office of Management and Budget, in an Aug. 25 statement. But Orszag also noted that the administration is intent on adopting deficit-neutral health system reform and supports "pay-as-you-go" legislation requiring Congress to offset fully any new spending.
Pay-go policy -- if in effect during the Bush administration -- would have reduced the projected 2019 deficit by $5 trillion, Orszag noted.
