Nate Silver: What Is Driving Growth in Government Spending?

[dkf]

It’s one of the most fundamental political questions of our time: What’s driving the growth in government spending? And it has a relatively straightforward answer: first and foremost, spending on health care through Medicare and Medicaid, and other major social insurance and entitlement programs.


The usgovernmentspending.com data classifies three subcategories of entitlement programs. Spending on welfare programs like food stamps and unemployment insurance is the most cyclical – or technically the most countercyclical, since much of it kicks in automatically during an economic downturn. Spending on retirement programs, principally Social Security, is the steadiest, but it has been increasing faster than the rate of gross domestic product growth and considerably faster than inflation. And health care spending has been increasing at the fastest rate.

Specifically, overall government spending on entitlement programs increased at a 4.8 annual rate in the 40 years between 1972 and 2011, net of inflation. Health care spending increased at 5.7 percent per year (and federal government spending on health care increased at a 6.7 percent pace). In contrast, the gross domestic product grew at a rate of 2.7 percent over this period, with tax revenues increasing at about the same rate as the G.D.P.

Another way to view these data is to allocate the increase in spending-to-G.D.P. between the different categories of expenditures. Total government spending — including federal, state and local spending — rose to about 39 percent of the gross domestic product in 2011 from about 30 percent in 1972. So we have a 9 percent increase to account for, which is equal to about $1.3 trillion per year in current dollars.

Spending on entitlement programs was about $500 billion per year in 1972 in today’s dollars. If it had increased at the same rate as the gross domestic product, it would now be about $1.4 trillion. Instead, it is now about $2.9 trillion per year. What this means is that there has been about a $1.5 trillion increase in entitlement spending above and beyond gross domestic product growth. This is actually slightly larger than the overall increase in government spending relative to gross domestic product. This results from the fact that spending on the other categories has been essentially flat relative to the gross domestic product (infrastructure and services), or constitutes a negligible part of the budget for the time being (interest), or actually decreased relative to gross domestic product over the 40-year period (defense).


http://fivethirtyeight.blogs.nytimes.com/2013/01/16/what-is-driving-growth-in-government-spending/

[DCBob]

1. This is why something needs to be done.

No matter what savings we get with other spending cuts, Medicare and Medicaid costs will drawf them.

[djean111]

39. I think your idea of what needs to be done may differ from mine.

More and better (or at least as good as they used to be) jobs would solve a lot of "problems".
But all I see is the desire to cut services, not create jobs. The Thatcher insistence that there is no alternative.
We are going into full-blown austerity when the prevailing opinion is cut services to the poor and underpaid, not how can we have more jobs.
The poor are now disposable and problematic. They don't make enough at bloated Wal-Mart to afford food and health care - so hey! let's slash at their food and health care!!!! Older people need more health care? Hey - let's start giving them less money for food and living expenses and medical care - and give them a fucking PRIZE if they make it to 85!!!!!! What a country!!! And I see people saying oh, that is splendid!!!!!

[DCBob]

40. I totally agree jobs and growing the economy would do wonders..

but the rapid growth of Medicare and Medicaid costs needs be dealt with regardless.

[djean111]

41. So - how to deal with the costs?

Mostly it seems like people are advocating making health care harder, if not impossible, to get.
The ACA just cements and guarantees profits, and the premiums will grow and grow.
And we are locked in.

And some seem to advocate starting everything from scratch, and telling retirees sorry, starting over, ice floes to the left - oh, wait, they all melted, sorry! - while the 1% run away giggling, clutching that trust fund.

[DCBob]

42. The intent of the ACA was/is to control spiraling costs.

We have yet to see how that will play out. If it doesnt work then additional measures will be needed.

[Tom Rinaldo]

2. That's mostly because the private sector has failed.

If the minimum wage in America had kept up with increases in worker productivity and overall corporate profits, it would be over $20 an hour right now. If the minimum wage were over $20 an hour, the average worker would be making much more than $20 an hour. If the average worker was making well over $20 an hour, people could afford preventative medicine, private insurance, self funded retirements etc. But we can't, instead we sink toward poverty. So much for the private sector free market solution to keeping Americans alive.

[djean111]

3. Yes!

If people had good jobs, this would not be a problem, the taxes would be rolling in, the GDP would rise - but it seems everything is now meant to make the working class smaller and more poor, and then start hacking at the safety net.
I am beginning to think that when I read "starve the beast" - the beast is now the poor, not the government.

[ancianita]

38. I've always understood that phrase to mean pretty much anything the 99% gets.

[tularetom]

5. Actually the market will eventually solve the health care problem in the US

After most of us have died because we could no longer afford the cost of medical treatment, the insurance companies, private hospitals, clinics etc. will realize they have overpriced their product and begin to lower prices. Those who can no longer compete will fall by the wayside and equilibrium will be attained.

Of course we will all be dead by then.

[alarimer]

4. What about military spending?

A lot of that is off the books. We don't truly know that black hole that is military and intelligence spending.

What needs to be done with "entitlements" (I hate that word because it makes it seem like these benefits aren't earned. They are- we pay for them with our paychecks every single month) is SINGLE PAYER HEALTH CARE.

[dkf]

6. But if we aren't considering single payer, then what are the options?

Obama has put all his eggs into the ACA and the savings there are minimal if there are savings.

Moreover we get back quite a bit more in benefits than we paid in to the system:

Medicare and Social Security: What you paid compared with what you get

The Urban Institute, a non-partisan research institute in Washington, produces statistics on this topic annually. Institute researchers figured out what people turning 65 in various years have already "paid in" to the system and what can expect to "take out" after they reach age 65. (See our charts below)

Because marital status and family income can significantly affect both the amount paid in and the amount paid out, the institute offers its calculation for various types of family units. To make the final amounts comparable to what might have been done with the tax money had it been invested privately, the institute adjusted all dollar figures at 2 percentage points above the rate of inflation. (The authors note that different assumptions for long-term returns on investment would change the results.)

According to the institute’s data, a two-earner couple receiving an average wage — $44,600 per spouse in 2012 dollars — and turning 65 in 2010 would have paid $722,000 into Social Security and Medicare and can be expected to take out $966,000 in benefits. So, this couple will be paid about one-third more in benefits than they paid in taxes.

Some types of families did much better than average. A couple with only one spouse working (and receiving the same average wage) would have paid in $361,000 if they turned 65 in 2010, but can expect to get back $854,000 — more than double what they paid in. In 1980, this same 65-year-old couple would have received five times more than what they paid in, while in 1960, such a couple would have ended up with 14 times what they put in.

http://www.politifact.com/truth-o-meter/article/2013/feb/01/medicare-and-social-security-what-you-paid-what-yo/

[Armstead]

7. My thought is that a "public Option" could help Medicare costs

I am NOT a genius with numbers. Just the opposite.

However, I have a theory about the costs of Medicare and the "public option."

If younger healthier people were able to buy into a Medicare plan with additional premiums based on their income as an alternative to private insurance, could that not help to balance off expenditures?

Private insurers covet young customers -- and don;t like older ones -- because they are paying into the system without taking out as much. In the "old days" these community ratings were designed on that basis -- healthy younger payers helped to subsidize older sicker ones.

It seems like opening up a "public option" medicare program could be a win-win by offering a more affordable alternative for basic coverage for younger "consumers" while bringing in new money onto the pot.

Maybe not, but it's certainly one alternative.

[dkf]

8. I wish they had added a public option just based on the principle that we shouldn't be forced

to buy a product from a private corporation.

But looking at all these numbers I can't help but come to the conclusion that its not feasible to leave entitlements untouched and functioning as is in perpetuity.

[Bluenorthwest]

11. Ah, blather about 'family units' which means 'Rick Warren Brand Couples Only'

You want a shock? Try running the numbers without that marriage magic. Try running them with one partner far out earning the other, which is more common than 'both making the same'.
The idea of straight folks whining about the tax code....

[Aerows]

29. No kidding! n/t

[BeyondGeography]

9. OK, this is Robert Samuelson, but these are numbers

and this is assuming CCPI:

From 2014 to 2023, the administration projects annual spending on Social Security to rise from $860?billion to $1.4 trillion, assuming its proposal for altering the inflation adjustment of benefits is adopted. Over the same years, annual Medicare and Medicaid spending would go from $828 billion to $1.4?trillion. Meanwhile, defense spending would barely rise from $618 billion to $631 billion. Non-defense discretionary spending (a catchall covering everything from Head Start to the weather service) would increase from $624 billion to $647 billion.

http://www.dispatch.com/content/stories/editorials/2013/04/12/president-does-little-to-curb-spending-on-elderly.html

There is a serious conversation to be had. Throw out defense spending as a "concern"; the country is growing older and it needs to do something to protect investments in the future. The President is not being an evil sellout by proposing CCPI.

[Bluenorthwest]

12. Who said evil sellout? Mediocre conservative lacking in courage and imagination is much more

accurate. Did you support this policy when the Republicans pursued it, did you say 'Boehner is engaged in Serious conversation, like Serious People should do'? Somehow I think not.

[BeyondGeography]

15. Handed shit on a stick by George W. Bush is more accurate

Obama has plenty of courage and imagination; you don't get within sniffing distance of the White House without it, particularly from his starting point.

But that's neither here nor there, is it? Gore's lockbox was designed to help avoid the situation we now find ourselves in. It was real as a projection then and as reality now.

[djean111]

13. But we can't raise the cap or create good-paying jobs so that more people can pay in, right?

Also - Social Security is insurance, not an IRA. Do we refund what people paid in if they die before they get anything out? Or before they get all they have contributed out?
If we invested in jobs and fixed the cap and the tax codes this would not even be a problem.

[JaneyVee]

10. Unemployment is.

[PA Democrat]

14. Have you checked out the Time magazine piece on what is driving the high costs

of health care? The article is titled Bitter Pill: Why Medical Bills Are Killing Us and it looks like Time now requires a subscription to read the article, but I'd urge you to check out this excellent piece of journalism if you can.

Read more: http://www.time.com/time/magazine/article/0,9171,2136864,00.html#ixzz2QLmmCQAK

The author Steven Brill was interviewed on the Daily Show. Links here:

http://www.thedailyshow.com/watch/thu-february-21-2013/steven-brill

http://www.thedailyshow.com/watch/thu-february-21-2013/exclusive---steven-brill-extended-interview-pt--2

[dkf]

22. I posted that piece once upon a time...

http://www.democraticunderground.com/10022406524

That is exactly why I think single payer is the solution, but not single payer paying Medicare costs, we need a single payer system that pays Canadian costs or UK costs or any other developed nation.

[Aerows]

30. Bingo

It's the high cost and lack of regulation on medical and pharmaceutical costs that are killing us, literally. Add to that uninsured people that have no choice but to default on medical bills and hospitals rolling those costs onto those that do pay by increasing the costs, and it's a never ending cycle that is driving costs through the roof.

And lack of regulation, once again, I will add. We pay many times over for pharmaceuticals and simple procedures what those in other countries pay.

[leveymg]

16. THIS IS MISLEADING -fastest growing component of federal spending is Defense, DHS, intel, FY01-13

Shame on how Silver's piece has been slanted to downplay these essential facts about the last decade, which is the period that really counts. DEFENSE SPENDING HAS GROWN >80%, TWICE AS FAST AS MEDICARE AND OTHER DOMESTIC SOCIAL PROGRAMS DURING THE PAST DECADE:

Wiki: The DoD baseline budget, excluding supplemental funding for the wars, has grown from $297 billion in FY2001 to a budgeted $534 billion for FY2010, an 81% increase.[37] According to the CBO, defense spending grew 9% annually on average from fiscal year 2000-2009.[38] Much of the costs for the wars in Iraq and Afghanistan have not been funded through regular appropriations bills, but through emergency supplemental appropriations bills. As such, most of these expenses were not included in the budget deficit calculation prior to FY2010. Some budget experts argue that emergency supplemental appropriations bills do not receive the same level of legislative care as regular appropriations bills.[39] During 2011, the U.S. spent more on its military budget than the next 13 countries combined.[40]

Other entitlements continue growing as well. Anti-poverty programs have surged by 49 percent in just the past decade, even after adjusting for inflation. Spending for food stamps alone has more than tripled since 2002. Health programs, including Medicaid, have increased by 38 percent, and housing assistance by 48 percent. http://www.heritage.org/research/reports/2012/10/federal-spending-by-the-numbers-2012

[djean111]

17. Oh, but that doesn't fit into the new meme - social security must go! n/t

The 1% want that trust fund, and looks like Dems are gonna help with that.

[leveymg]

18. The Blue Dog Dems are doing what the GOOP would, but didn't dare. Shame on Silver for lending his

considerable reputation and skills as a statistician to this propaganda attack on Social Security.

[BeyondGeography]

19. Obama's budget puts a stop to that

Defense spending actually falls slightly in nominal terms (much more in real terms) from 2014-2023. His projected increases alone in SS and Medicare over the same period for each program are almost as much as the annual defense budget in any given year.

[leveymg]

20. Only half true: Obama's budget slows both defense and SS/Med increases.

A real Democratic Budget would cut back Pentagon spending to a level consistent with other spending during the past decade, raise the cap on SS, and allow a public option and prescription drug imports. "Problems" solved.

[Tom Rinaldo]

21. Ever since the Cold War began, in a virtually unbroken run of decades....

Military spending was a sacred cow. All one had to do to cast the magic spell was invoke the alarmist password; "national security". It never mattered where the money would come from, it got spent. It never mattered what weapons we could afford on our budget, they got bought. The reasoning went, which was rarely challenged by anyone not on the left side of the political spectrum, that we had no other credible option to competing in an arms race with whatever it took. And when that arms race suddenly ended there was barely a pause in military spending. You see, we need a military to defend lour lives, we need a military so we can all enjoy "the American way of life".

The problem is a lot of us no longer can afford to live, and more of us are literally dieing because of that. The "American way of life" that constantly gets bragged about is being restricted to an ever smaller percentage of the American people. It's like those who say that America has the best health care in the world - just look at all the people from other nations who come here for treatment yada yada. Sure, look at all the wealthy people who come here for medical treatment. Our medical system works fine for those rich enough to afford good insurance plus the co-pays and deductibles..

You know something, I am fine with anyone who attempts to make the case that we simply can not afford to cut military spending. Granted, I am a skeptical audience, but go ahead and make the case. I know that I would have signed onto that case during World War II for example. The point is when something is essential to the well being of the public, it is the responsibility of society to find a way to provide for that. That is how Pentagon spending has always been sold. Keeping tens of millions of Americans from falling into poverty is essential to any society that I can be proud to belong to. Keeping tens of thousands of Americans from dieing due to their poverty is essential to defending the lives of the American people.

This is non-negotiable to me. Let business pay American workers enough money to provide for their ultimate retirement, or maintain an adequate safety net for the tens of millions of us who limp to the employment finish line exhausted and depleted because the wealthy in this country are addicted to skimming almost all of the profits off the top.

[dkf]

23. If we keep Medicare, social security, Medicaid and interest payments as projected...

We can't do anything else. This means we only care for the elderly and the medical costs of the very poor and the rest of the safety net for younger workers is gone as is investment and the military.

Will our government become just one big entitlement program and nothing else? How does that lead to a future where young people can generate what is needed to take care of the elderly?

The numbers don't work.

[Tom Rinaldo]

28. At the risk of seeming overly dramatic

Once or twice a century, sometime three, business as usual breaks down. The Great Depression was one of those times for America last century, the Civil War the century before. I would call the era of the Civil Rights movement to be another - it brought about profound changes in the way Americans live and significantly upset the status quo . World War Two would have been another one had the Allies lost. As it turned out however it opened up bright new opportunities for America that could not have been assumed would open. We witness this in other nations also. Germany re-unified, French Republics fell and were replaced by new ones. Great Britain lost its empire.

I don't know how exactly it will all shake out, but the United States is on a collision course with its own destiny. The current plutocracy will not continue on its course undisturbed. We are discussing some of the reasons why that is so on this thread. The massive shift of wealth toward the Super wealthy in this country away from virtually everyone else is leaving too many people virtually or literally impoverished. I guarantee you that the descendents of the Robber Barons did not see the New Deal coming back in 1926.

[dkf]

32. When systems collapse it is not the elderly who benefit.

We need a highly organized system to acquire the means to pay for the elderly. In chaos, people who can be productive are at an advantage. People who are dependent on the Government will be the ones in desperate straits.

If we start from scratch there is no obligation to payout what previous governments and systems have promised.

[Tom Rinaldo]

34. It is natural, it is right, for people to protect their essential interests

Failure to do so is simple surrender, and that only further emboldens the greedy etc. I am not campaigning for a collapse to the system, but I do acknowledge history - sometimes there is turmoil. Sometimes that turmoil is great. Social Security came out of the Great Depression to begin with. Yet many thousands of people died or had their deaths significantly hastened by what transpired during the Great Depression. Some fights can not be avoided, even when they risk great suffering in the course of them. Once one enters permanent retreat the outcome is inevitable and not very pretty.

John Kerry campaigned in 2004 for the total repeal of the Bush Tax cuts. He had it right. They still should be repealed in total. We are reaching the point where average people are not simply being asked to tighten their belts by a notch, they are being asked to cut off circulation to their lower extremities. Not all of us yet, that's true - but it is heading in that direction and gathering steam. People today need Social Security now more than did elders in the 70's. The baseline benefits one receives are based on ones earnings track record. In the 70's most workers were able to continue in their careers before retiring at 65. Their best earning years, as a result, were often those between 55 and 65, AND many retired with a pension. All of that is ancient history now. Millions are being forced to take early retirement on Social Security, meaning their monthly benefits start out much lower as a result even with a lower baseline. They don't do so because they don't need those bigger checks that waiting to 66 would bring them, they do so because they can no longer find any gainful employment and they are desperate for any income.

[dkf]

35. Do the sick and elderly ever benefit from a revolution?

[Tom Rinaldo]

36. You mentioned Revolution, not me

Was the New Deal a revolution? Opinions probably differ on that. But just to go down your road for a moment, sometimes people would rather go down fighting for a cause than be ground into the dirt.

Honestly, I am not talking about Revolution, I am talking about a shift in paradigm though. Some people did die in the Civil Rights struggle, there were some riots also where people burned down their own neighborhoods. But segregation was ultimately defeated, and the proponents of that had resisted that change for almost a century.

The Right in this country consolidated around a message which was; Government is too big, taxes are too high, and the private sector always does a better job than the private sector. During my lifetime there has been a major shift. It once was assumed that core government functions - including the safety net, had to be maintained. There were never cuts to those programs without first trying to raise enough money to keep them solvent, and the central ones were never cut, period. But tax rates began to plunge "to stimulate business", and then that became a religion onto itself. Still though, in a real downturn it was understood that revenues sometimes needed to be increased. Ronald Reagan raised taxes. George H.W. Bush raised taxes, and then Bill Clinton raised taxes and we began to generate budget surpluses. Now though Republican candidates for President will stand on a stage and say they would refuse a budget deal that had $10 cut in spending for every $1 in new revenue.

There is no reason to believe that with the right education and agitation efforts that pendulum can't be reversed again. And if the minimum wage were significantly raised, for one example, workers wouldn't need an earned income tax credit from the government, they would begin paying trillions more in new taxes instead. The business elites use wars to plunder, Halliburton made 35 billion alone in profits from the Iraq war, but taxpayers dropped a trillion on it. We are building an F-35 fighter plane that we do not need that will cost a trillion over the full life span of that military project

The Chained CPI will only bring in 122 Billion over ten years. If we are going to cut our way out of this fiscal mess by cutting at the bottom, instead of re-ordering all of our priorities as a nation, what types of cuts do you think the American people will need to suffer through to make any substantial difference? Social Security cuts ten times what the Chained CPI will save the treasury, maybe? Is that what we will be looking at? The attempt to squeeze Seniors for 100+ billion is just a smokescreen to distract us from looking at where revenues have really been lost - to off shore accounts for one thing. Wall Street just cost the American taxpayer another trillion or so in 2008-2009 trying to re-stabilize the system that they crashed. We had to fork it over to them PLUS suffer the loss of federal revenues that happens during a recession when the economy slows, unemployment goes up and revenues go down because they played fast and loose with our economy. Yet Wall Street is fiercely resisting new financial transaction fees of pennies a trade that would raise over a trillion in ten years.

Those who have a vested interest in the status quo are the ones defining what changes are and are not possible. THAT has to change.

[dkf]

37. I don't think this country is interested in being more socialist though.

Moreover people who are upset don't seem to be giving themselves any chance of an electoral success by being so upset with the Democratic Party.

[kentuck]

24. People have to live.

The SSI program has grown dramatically. It has become almost like a guaranteed income in some parts of the country. The costs of Medicare and Medicaid have gotten out of hand.

But why? And who benefits from the rising costs of these programs? Healthcare is taking 17% of our GNP. That is unbelievable! That should never be.

Many of the costs of government are due to the failure of our economic system to provide meaningful wages and the ability to survive from working. For example, people that work at Walmart qualify for food stamps. Yet, the family that owns Walmart are the richest people in the world. Something is out of balance there folks.

People have to eat to survive and they need shelter and the bare basics. Much of government spending is going for these purposes because of the massive transfer of wealth to the very top and the shrinking of our middle class.

It is not just the "government" that is at fault.

[dkf]

25. But these are costs just for the elderly.

It probably shows that spending on the poor of working age will have to be cut to almost non existence as elder costs rise as will all other types of government spending.

Moreover we can't grow faster than expected medical costs. Those types of growth rates are only seen in developing countries.

[kentuck]

26. Medicaid is for all ages but Medicare has been growing out of control...

It is not the program that is at fault necessarily, it is the pricing system. Every retiree pays $100 a month out of their SS check plus many have other insurance plans.

We should not only look at the program without looking at the charges by providers.

[dkf]

27. Obama is doing that and is getting smashed for it.

I hope we support him in his effort. These are only baby steps too.

[kentuck]

33. We need more doctors and more competition in the medical field...

I would support a program, which the AMA would strongly oppose, to give government assistance to educate more doctors and let them pay back their costs for education by caring for Medicare patients over a certain time period, maybe 5 years? I think this would cause a dramatic drop in the costs doctors are now charging.

[Aerows]

31. We need to reduce the cost

of health care in this country by introducing some stiff legislation, then ENFORCING it that prohibits the price-gouging pharmaceutical companies and hospitals are engaging in. If you can buy a drug in another country that is identical to the one in the US at a fraction of the price, then the problem is that we don't have anything that prevents pharmaceutical companies from bleeding US citizens dry. If you can get a procedure done that is identical to the one in the US with reasonably identical care, then it is the hospitals that are bleeding us dry.

Both of these things are the problem, and until the strangle hold is broken that the health care industry has on us, nothing is going to change. Single payer would automatically wreck that strangle hold.

[99Forever]

43. With certain "Democrats" doing their dirty work,...

... carrying their water, and posting their lying talking points for them on a Democratic site, who needs Republicans, eh dkf?