We may have gone from conceiving of government as an entity that builds roads, dams and airports, provides shared services like schooling, policing and national parks, and wages wars, into the world’s largest insurance broker.
Some brilliant research here that leads to one unfortunate conclusion: the only thing driving the deficit is entitlement spending, and mainly health care costs. All other forms of spending (military and discretionary) have basically grown with GDP over the last 100 years, but entitlement spending has averaged nearly double GDP growth over the last few years.
The problem is, no politician will touch entitlement spending because it affects individual voters much worse than other forms of spending:
On a political level, cuts to entitlement programs are liable to be more noticeable to individual voters than cuts to things like infrastructure spending. A 10 percent cut to Social Security or Medicare benefits will surely draw the ire of voters. A 10 percent reduction in the amount allocated to bridge repair, or in the amount of government-sponsored energy research, will affect individual citizens less directly.
Unless we call come together to find a way to curb health care costs1 and care for our old and needy, the government will become the world’s largest insurance company:
And soon, we may cross an important symbolic threshold: when the overall majority of government expenditures are spent on, essentially, insurance programs. (Another way to conceive of the major categories of entitlement programs are as health insurance, retirement insurance, unemployment insurance and so forth).
- No, price controls are not an answer. All price controls manage to do is decrease the supply of health care (less doctors), and take it to a point where the only people who can get access are the wealthy [↩]