Nate Silver has a much-discussed post today in The New York Times, “What Is Driving Growth in Government Spending?” Silver goes over the numbers and writes:
To clarify: all of the major categories of government spending have been increasing relative to inflation. But essentially all of the increase in spending relative to economic growth, and the potential tax base, has come from entitlement programs, and about half of that has come from health care entitlements specifically.
The growth in health care expenditures, for better or worse, is not just a government problem: private spending on health care is increasing at broadly the same rates and is eating up a larger and larger share of economic activity. It’s an immensely complicated problem, but the arithmetic is simple: if we can’t slow the rate of growth in health care expenditures, we’ll either have to raise taxes, cut other government spending or continue to run huge deficits. Or we could hope to grow our way out of the problem, but health care expenditures may be impeding private-sector growth as well.
Nate is simply looking at the numbers, and he is right: health care costs have been rising at an unsustainable rate. We as a country have to get health care costs under control. But that doesn’t necessarily mean what you might think it means.
Some people fear that Nate’s analysis, combined with his credibility, will cause people to conclude that we just have to cut medical spending in the budget. This is a mistake. In fact, we should not address this as a budget issue, because it is a symptom, not a cause. We need to fix the cause.
The problem is that if you have what I call a “manager” perspective the solutions you will come up with are wrong and will make the larger problem worse. By “manager” perspective I mean people who are trained and paid to fix problems they are pointed at to fix, but by only looking at their own department/area/region/agency/budget – and not a larger picture. In fact, they are often told that problems outside of their area are not their concern and will only distract them from doing their job. Other departments, or in the case of too many people who look at government budget problems, the larger economy, are not their problem.
So too many people who are looking at the government’s budget problem from a background of being “managers” just don’t look at the bigger picture of what happens in the whole economy. They only see the problem of the government’s budgets and only think about how to fix that problem.
So if the problem is that health care costs are going up in the federal budget, a manager of the federal budget will want to fix that by cutting costs – providing less health care to people, and other things that lower the costs in that budget. They are not looking at the underlying causes. They are not going to look at what their solution does elsewhere. That’s not the problem they are looking at.
The bigger picture, of course, is that providing less health care only means people have to go elsewhere (or nowhere), which has terrible effects on the people — and ultimately on the economy. When people are hurt by this, that’s not the manager’s problem to solve. And when the economy is hurt government revenues are hurt, and budget deficits get worse — and that’s not the manager’s problem to solve, either.
A manager perspective means you only care about the problem in this one area, so they say we have to “reduce government spending” in the budget as you see it today, without understanding that only means shifting it onto the private sector, which just makes everything worse, including the long-term budget picture because of reduced future revenues. (And, again, hurts people.)
Fortunately, it looks like this rise in medical spending might be starting to get under control. The real answer for the bigger picture is, of course, Medicare-for-All.