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Home Publications Blogs Beat the Press The Way Government Bonds Work: Lessons for Matt Bai

The Way Government Bonds Work: Lessons for Matt Bai

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Thursday, 23 September 2010 07:35

Reporters for the NYT who write on economic policy issues should know the way government bonds work. However, that is apparently not the case with Matt Bai. In defending an earlier article in which he referred to the bonds held by the trust fund as "iou's," Bai responded to a reader's question:

"The principle to which you’re referring is that the government guaranteed all of this Social Security surplus money (which it spent) with Treasury Bills. The reality is that redeeming that trillions of dollars in debt would require issuing trillions more in debt."

Bai's statement is of course true, but that is the case with all government debt. For example, suppose Mr. Bai decided to buy $100,000 of 30-year Treasury bonds. If he did this the government would turn around and spend the money that Bai had lent it. Bai seems to think there is something sinister in this story, but in fact that is usually what happens when a government or company issues bonds: it spends the money.

Thirty years from now, in 2040, Bai will go to cash in his bonds. When he does this, the government will be forced to borrow another $100,000.

This is the same story as the bonds held by Social Security. It is really very, very simple. The government will have to redeem these bonds just like any other bonds. Now, Mr. Bai apparently wants the government to default on the bonds held by Social Security. It could do this just like it could default on any of the bonds it has issued.

The people who would not get the Social Security benefits that they had paid for certainly would have good cause to be very angry if this happened, since it is a policy that is difficult to justify. Of course they may advocate that the country default on its other bonds, which might be appropriate if the country really is in such bad fiscal shape that it can't meet its obligations to its retirees.

As a practical matter, Bai is badly confused about the nature of the country's debt burden. The debt that the country is now accumulating because of the downturn need not pose any long-term fiscal burden since the Fed can just hold the bonds and repay the interest to the government.

The longer-term projections showing a serious deficit problem are all driven by projections of exploding health care costs. If we don't fix our health care system then we will face serious economic problems, one of which will be the budget deficit. However, as all economists know, the real problem is with the health care system.

Comments (42)Add Comment
your government is your home
written by frankenduf, September 23, 2010 9:30
this stuff falls within the partonizing propaganda line that the governemnt is just like your household and should be run accordingly- the irony is that this meme has trounced the old one that the government is just like a business, becuse the postmodern model of american business is to run it into the ground, but golden parachute the execs out just before
...
written by skeptonomist, September 23, 2010 9:37
Some people, even including the Chairman of the Fed, have been sounding the alarm over the danger of increasing interest rates for Treasuries. Rates apparently are supposed to increase because of the danger of default on these bonds, and the case of Greece is supposed to be example. Some of the same people apparently think that the government is or should be seriously considering defaulting on some of its bonds. They should decide whether the prospect of default is a good or a bad thing.
...
written by skeptonomist, September 23, 2010 9:50
As Dean has pointed out before, a possible eventual consequence of the increasing debt is inflation, and inflation obviously will tend to reduce the real debt. When the debt ran up to 120% of GDP during and after WW II there was considerable inflation, but it did not seem to do major harm to the economy - in fact the following period was one of the most prosperous in U.S. history. Those who think that inflation is a danger that must be avoided at all costs - including unemployment even higher than the current rate, which is what the Fed gave us previously when trying to counter inflation - should be forced to explain in detail the supposed costs of inflation - who would gain and who would lose.
oops...factual error...
written by pete, September 23, 2010 10:38
"The people who would not get the Social Security benefits that they had paid for"

Nobody has "paid" for anything. Just got my annual Social Security benefits booklet where it specifically states that payouts are arbitrarily up to congress...SS is not a defined benefit program. It changed in the 80s big time. Now, there is a wonderful flat tax which the government collects, very pro growth....this should be increased in rate and scope, lowering marginal rates. In addition there are some payments arbitrarily linked to cumulative SS taxes...different "returns" for different incomes. But to quote my booklet "Congress has made changes to the law in the past and can do so at anytime."

Regarding the SS "fund" of course, this is just an accounting gimmick. The fund is not composed of assests such as foreign currency or stocks or gold. Simply a number in a computer. The balance is arbitrarily increased by some weird hybrid interest rate each year, quite similar to the "G" fund for Fed employees. But that is not related to our taxes or payout. Indeed, congress could "cure" SS by arbitrarily increasing the funds interest rate to say, 20% per year or so (I'm sure Dean could do the math). Why not? Its just a number in a computer, but some would feel better with the illusion that the balance is growing.
Misleading issue, Low-rated comment [Show]
Bai has a point
written by David Cay Johnston, September 23, 2010 11:38
The excess FICA tax was not used to pay down debt (remember Reagan's promises), but arguably to finabce tax cuts for those at the top, though money being fungible you can make a case for buying nuclear submarines or paying FBI salaries.

The key issue is that people paid more in taxes than was needed to pay current benefits, a form of interest-free loan. This is the exact opposite of tax planning taught to the rich, who try to collect now and pay the tax years later. The real cost of that excess FICA tax is far more than the nominal numbers.

And, again, cutting benefits to those who paid into the system since 1983 would be a subtle form of default by the government.
health care "costs"
written by pete, September 23, 2010 11:43
Indeed. Health care is cheap. We simply want more...and have the money to pay. Seems to me when basic needs are taken care of..food and shelter and safety...health becomes critical to enjoy our wealth. So it is easy to see how health care could consume even 50% of GDP at some point, when some level of wealth is achieved. That said we should not waste money. Easiest place to look for savings is to mimic the examples in the elective health care industry, like Lasix surgery, dentistry, plastic surgery, botox, spray tanning, therapeutic massage, and so forth. These have become cheaper and cheaper without a federal agency telling them to lower prices. Hell, in CA unregulated marajuana is falling so fast they are talking about monopolizing that to keep prices up! When consumers pay out of pocket, prices fall. Sigh...
Interest on excess of contributions over benefits
written by AndrewDover, September 23, 2010 12:40
Mr David Cay Johnston,

It is not an "interest-free loan", when interest is, in fact, being paid.

http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/404

...
written by liberal, September 23, 2010 12:43
Bernie wrote,
This is misleading. No one expects that the cost of an X-ray for your hurt arm will cost more, no one expects that the cost of the cast will go up either. No one expects that the antibiotics will be more expensive in the future.


You have no understanding of health care economics, or health care for that matter.

While the cost of a particular treatment likely does not increase with time, the medical sector is constantly introducing new treatments. Many of those indeed are more expensive. Compare, for example, the price of a CAT scan versus an "old fashioned" X-ray.

The "exploding health care costs" are driven by the average age of a population.


You're wrong. While the "aging" of the population does indeed contribute to increasing health care costs, it's not the main driver. You can refuse to accept that, but that's what the empirical data show.
Healthcare
written by Matt, September 23, 2010 1:21
Yes costs are increasing but we are an unhealthy lot. When I go on hikes up the Hudson valley, almost without fail fellow hikers are from other coutries. Americans eat poor, do little, drink too much, get sick and love to take pharma-drugs. An open market for healthcare will not make Americans healthier, compel them to turn off the idiot box and do something. Plus they are cowards when they face death and pursue expensive longshots instead of accepting their fate.
...
written by diesel, September 23, 2010 1:32
Odd isn't it. When boomers have the temerity to ask to be paid for the money they "invested" in SS "bonds", they are derided as selfish and spoiled. And although they paid for their parents'--the alleged "Greatest Generation's--SS benefits, they are frequently compared to them and called ingrates and wastrels who squandered their glorious political, economic and cultural "inheritance". What then to call the current generation that is balking at paying the boomers's entitlements? Scoundrels? Or are they willingly allowing themselves to be hypnotized by scoundrels and so merely complicit?
Government data (Caveat emptor)
written by Bernie, September 23, 2010 1:41
This is from the US Dept of health and human services: http://www.ahrq.gov/research/ria19/expendria.htm

"The elderly (age 65 and over) made up around 13 percent of the U.S. population in 2002, but they consumed 36 percent of total U.S. personal health care expenses. The average health care expense in 2002 was $11,089 per year for elderly people but only $3,352 per year for working-age people (ages 19-64).5 Similar differences among age groups are reflected in the data on the top 5 percent of health care spenders. People 65-79 (9 percent of the total population) represented 29 percent of the top 5 percent of spenders. Similarly, people 80 years and older (about 3 percent of the population) accounted for 14 percent of the top 5 percent of spenders (Chart 2, 40 KB).2 However, within age groups, spending is less concentrated among those age 65 and over than for the under-65 population. The top 5 percent of elderly spenders accounted for 34 percent of all expenses by the elderly in 2002, while the top 5 percent of non-elderly spenders accounted for 49 percent of expenses by the non-elderly."

As Pete and Liberal noted the reverse of what I wrote earlier is also true, the newest treatments are more expensive. However even if we stoped developing new treatments, drugs, or cures health care spending would continue to go up.

This raises the question, what do we want for the future. Do we pay to continue getting better care for everyone? Do we let someone not get a potentially life saving treatment because they can't aford it, and accept the fact that in ten years (too late) the cost will be affordable? Do we stop here, stop developing new treatments, drugs, equipment?

There are no easy answers, but there are a lot of ignorant people who will incorectly tell you (in an insulting way) that there are.

...
written by diesel, September 23, 2010 2:57
We've known for years that the health care costs for the elderly are disproportionately high. Too large a chunk of medicare sustains people in the last two or three months of their lives. The problem is that there is no cultural mechanism for addressing the decision-making process of terminating life support when it is futile. Of course futile is a 20/20 hindsight realization. But Doctors do perform assessments that assign a probable chance to a person's surviving. They are not empowered--no one is--to act on those calculations. The Right screams "death panels", the left points out that death panels are implicit in our present system. In a way, we are (as a culture) too cowardly and immature to make decisions regarding our parents' dying. We defer the decision to God or the Doctors or Fate, but that is still a decision. So, nothing gets done and the system wastes an incredible amount of money on life support for the terminally ill. Furthermore, nothing will get done because our political system is paralyzed by the veto power of those who rigged it to function in this inefficient, yet self-aggrandizing manner. If they don't get the franchise, they would rather see entitlements destroyed than reformed.
"interest" on SS
written by pete, September 23, 2010 2:59
As I said, the interest is some bogus number, like that used for the G fund for federal employees, a really cool idea. Its like earning the long term rate of interest with no threat of capital loss if rates rise. Cool! Anyway, it is clearly not a market rate..no bank would set up a CD for me like that. Bottom line, congress sets the rate arbitrarily, they can change the law and triple the rate, it wouldn't matter. Wouldn't affect our liabilities, future payment obligations, one iota. Treasury does not pay the interest now. It's just a number in the computer. Taxpayers will fund the SS payments, whatever they be, either through the flat tax or the marginal rates, more borrowing, inflation, whatever, independent of the size of the gimmicky "fund," of which Skilling would be proud. So grow the fund to $40 T or so, if that makes you feel better...It simply has no effect on taxpayer liabilities. This emperor "lock box" has no clothes.

And please be clear that SS, unlike medicare/medicate, is not "spending." It is a transfer payment. Could be infinite, could be tiny, doesn't matter...has no direct effect on GDP..it is not "G" like government buying drones to murder Pakistanis. One thought I have had is to make SS payments be the increase in the monetary base. Just have Bernanke give each SS recipient the new money in their bank account each month. And no more open market purchases. This would be a nice rule, could use it for unemployment benefits too...Taylor might even like it. Then there would not be the problem of poorly timed monetary policy.
What Are They Smoking?
written by izzatzo, September 23, 2010 3:10
In an experiment to reduce health care and SS costs at the same time, the hospital ship Boomer Ganja has been docking at coastal ports around the US.

For a small fixed fee, boomers can get stoned and consume 48 hours worth of medical care of choice from foreign health care professionals, then receive an analysis of what it would have cost, to estimate savings to the general budget.

When asked what this had to do with SS cost and the turnover of bond lending, a boomer just coming off the ship said it depends on what you're smoking.

In this case it was Boom Baby weed, which made the Alan Simpson cow with 310 million tits shrink to the size of a cat, while the Big Health Cow with the same number of tits grew to a huge elephant in the waiting room.
...
written by skeptonomist, September 23, 2010 4:51
SS bashers deliberately try to get people arguing about irrelevancies such as the interest rate on the Trust Fund, and to confound SS with Medicare and other health issues and entitlements. The attack on SS is a class war - rich people got tax cuts starting in the 80's while payroll taxes were increased with the promise that the money in the Trust Fund would be paid back when boomer wage-earners retired. Now the rich people and their backers want to cut SS benefits so that their taxes won't raised. This is really a simple issue and has nothing to do with medical costs. If total government expenditures on health care were cut (which is actually a fairly easy thing to do, as Dean often explains), big-money interests would still be bashing SS and trying to shift the tax burden further onto the middle class.
...
written by skeptonomist, September 23, 2010 4:55
Attacks on SS are not dependent on deficits. In the late 90's when deficits were not a problem the argument was that SS must be privatized because people deserved the much higher rates of return apparently available from the stock market.
Reason for benefit cuts.
written by AndrewDover, September 23, 2010 7:08
In addition to raising the SS income cap, I would like a small reduction in SS benefits for high earners now (including current retirees).

I think the Bush tax cuts should expire next year, so I am hardly avoiding tax increases, and am not in the high tax rates anyhow. And the privatization idea was a scam; private accounts mean high income people escape the redistribution inherent in the way benefits are calculated.

My reasons are to avoid:
1) Doing 25% cuts in 2037 when I'm retired.
2) Putting the burden entirely on the young.
3) Making US unemployment worse. I'have worked for multinational companies and you bet they look at the relative costs of U.S. and Intl workers.
4) Changing the nature of SS from a self-funding program to a Government handout. The seniors deserve to be able to claim that they paid for their benefits. The problem is that defined benefit programs can get out of whack as the demographics and economic realities changes.
...
written by liberal, September 23, 2010 8:41
Bernie wrote,
This is from the US Dept of health and human services:


But none of those statistics say anything about how quickly the number of elderly is growing with time.
...
written by liberal, September 23, 2010 8:42
AndrewDover wrote,
...because people deserved the much higher rates of return apparently available from the stock market.
[emphasis added]

Heh.
...
written by liberal, September 23, 2010 8:44
pete wrote,
It's just a number in the computer.


Unlike most of the money floating around the economy. Oh, wait...
US census data
written by Bernie, September 23, 2010 9:31
http://www.census.gov/populati...tproj.html

"The U.S. population will be older than it is now.

In all of the projection series, the future age structure of the population will be older than it is now. In the middle series, the median age of the population will steadily increase from 34.0 in 1994 to 35.5 in 2000, peak at 39.1 in 2035, then decrease slightly to 39.0 by 2050. This increasing median age is driven by the aging of the population born during the Baby Boom after World War II (1946 to 1964). About 30 percent of the population in 1994 were born during the Baby Boom. As this population ages, the median age will rise. People born during the Baby Boom will be between 36 and 54 years old at the turn of the century. In 2011, the first members of the Baby Boom will reach age 65, and the Baby Boom will have decreased to 25 percent of the total population (in the middle series). The last of the Baby-Boom population will reach age 65 in the year 2029. By that time, the Baby-Boom population is projected to be only about 16 percent of the total population."
...
written by liberal, September 24, 2010 9:53
Bernie quoted,
"The U.S. population will be older than it is now.


Yes. Of course the aging of the population increases health care costs. The fact is, though, that the rate of aging doesn't even come close to explaining the rate of inflation of health care costs.
to Liberal:
written by Bernie, September 24, 2010 10:37
I thought I had no understanding of health care economics, or health care for that matter.

How about putting up some numbers to show the rate of inflation of health care costs thats not due to ageing.

Teach me something wise one.
...
written by Bob Canuck, September 24, 2010 3:56
For information about the estimated contributions of aging and rising health care costs on future health care expenditures, see the CBO report (Box 1; Chapter one; Page 11)at the following address:

http://www.cbo.gov/ftpdocs/115xx/doc11579/06-30-LTBO.pdf

The majority of the cost increase is due to rising health care costs.

With respect to the Social Security discussion, people ignore the fact that the amount of government debt is unaffected by how much of the debt is held by the Social Security Trust Fund. Assume that, in a given year, Social Security has a $100 surplus and the rest of the Budget had a $500 shortfall. Under current legislation, the government would finance its $500 deficit by using $100 from Social Security (by issuing a Special Treasury to the Social Security Trust Fund)and then raising $400 from a bond issue. However, if hypothetically Social Security had the option to decline to give the government $100 and instead invested the $100 into some other security, the government would have to raise the entire $500 from a bond issue. In either case, the government owes $500 and must service the $500. In other words, the financial burden on the government with respect to its $500 budget shortfall is the same under both examples.

To speak of defaulting on the $100 Special Treasury and not the other $400 (example 1) is like saying the government would default on $100 of the $500 (example 2). That is just silly.


...
written by liberal, September 24, 2010 4:18
Bernie wrote,
How about putting up some numbers to show the rate of inflation of health care costs thats not due to ageing.


Bob Canuck did it for me.

Another way to look at it is to compare the trend in real health care costs to the trend in the increase in the aged (e.g., 65+).

I don't have time to look up the stats, but my impression is that real health care costs grow quite fast, easily faster than the increase in the aged population.
...
written by AndrewDover, September 24, 2010 5:08
"Of the two factors, aging is the more important over the next 25 years. With the interaction allocated between the two, aging accounts for 63 percent of the total projected growth in spending on Social Security and the major mandatory health care programs by 2035, and excess cost growth accounts for 37 percent
(see the table above and the figure at right)."

same reference:
http://www.cbo.gov/ftpdocs/115xx/doc11579/06-30-LTBO.pdf
Bob Canuck and Liberal are ILLITERATE!
written by Bernie, September 24, 2010 5:29
If you can read, read the dry, boring, and repetitive report you used to justify your response. It very clearly in multiple places that you are wrong. Next time do you homework and read what you are linking to.

Here is what the report actually says!

"Box 1-2 How the Aging of the Population and Rising Costs for Health Care
Affect Federal Spending on Major Mandatory Programs"


"Of the two factors, aging is the more important over
the next 25 years. With the interaction allocated
between the two, aging accounts for 63 percent of the
total projected growth in spending on Social Security
and the major mandatory health care programs by
2035, and excess cost growth accounts for 37 percent
(see the table above and the figure at right). That
result is not surprising given that the aging of the
baby-boom generation will significantly expand the
number of people participating in many of those
programs."

This is what the report says about costs withou the effect of ageing (from chapter 2)

Thus,
even in the absence of changes in federal law, growth in
spending on Medicaid and on health care in the private
sector will gradually slow. The rate of growth of spending
on Medicare is also expected to slow, but to a lesser
extent, reflecting changes in medical practices common
to all patients, regulatory changes allowed under the law and the increasing pressure of premiums and cost-sharing
requirements on enrollees’ finances."

oh and in case you didn't notice I despise dishonest people who will imagine the content of a report, not expecting someone to read it.
...
written by Bob Canuck, September 24, 2010 5:30
The excerpt cited by Andrew Dover pertains to Social Security combined with major mandatory health care programs. If you read a little further on the same page, you will see the impact of the excess cost growth in health care on projected federal spending on the major health care programs: by 2035 - 55%; by 2080 - 71%.
...
written by Bernie, September 24, 2010 7:11
Your right Bob, except the people who care 70 years from now aren't even born yet. Its depressing to think that they actually tried their best to estimate that far in the future. Two important points: 1. "Under that combination of policy assumptions, federal
debt would grow much more rapidly than under the
extended-baseline scenario. With significantly lower revenues
and higher outlays, debt would reach 87 percent of
GDP by 2020, CBO projects. After that, the growing
imbalance between revenues and noninterest spending,combined with spiraling interest payments, would swiftly
push debt to unsustainable levels. Debt as a share of GDP
would exceed its historical peak of 109 percent by 2025
and would reach 185 percent in 2035."

basically if things don't change by 2035 its game over. We never get to 2080.

2) "Future tax revenues, program spending, and economic
performance will all be affected by the size and structure
of the U.S. population. For its long-term budget projections,
CBO adopted the intermediate (midrange) values
in the 2009 report of the Social Security trustees for such
demographic variables as the total fertility rate, the rate of
decline in mortality, levels of immigration and emigration,
and disability rates (specifically, the rates at which
people enter and leave Social Security’s Disability Insurance
program)."

This is the best they could do. The only accurate thing you could say about any of those variables 50 years from now is that they will not be the same as today. However using the current variables keeps you from guessing in the opposite direction they they will actually move. This makes the most accurate prediction the only one you know is wrong. In fifty years what will the life expectancy be?

Point one is the important one, something has to change by the boomer peak. This makes any predictions beyond that worthless.
...
written by Bob Canuck, September 24, 2010 7:20
Bernie,

I have some comments in response to your post that called me an illiterate and dishonest.

1.At the point I joined the conversation, you and Liberal were discussing the impact of aging and the rise in health care costs on health care expenditures: not the impact of those factors on health care costs and Social Security.

2.The citation I gave dealt solely with the impact of aging and the rise in health care costs on government spending on major health care programs.

3.You cited the CBO’s analysis for government spending on major health care programs and Social Security. Please read the page I referenced in its entirety and you will see the distinction the CBO makes.

4.You have misinterpreted the meaning of your second excerpt. That paragraph does not say that the effects of aging have been excluded. It is saying that the rate of growth in spending, which is a function of the expenditures at the start of the period, and the impact of aging and the excess cost growth of health care costs, will slow. That is, the spending will continue to grow, but at a slower rate.

Bob
I typed foolishly.
written by Bernie, September 24, 2010 7:41
I apologize, I misunderstood your post based on liberals response. I typed quickly and emotionally (some of that was due to having to read that awful report). I was wrong.
...
written by Bob Canuck, September 24, 2010 8:00
Bernie,

Apology accepted. Have a good night.


Bob
...
written by Bernie, September 24, 2010 8:06
Alright, I'm not intentionally misrepresenting anything, but maybe I don't understand. The preceding part of the report I omitted is:

"Instead, over
time, people will try to limit their spending for health
care in order to maintain their consumption of other
goods and services. In addition, state governments—
which pay a large share of Medicaid’s costs and have considerable
influence on those costs—will need to reduce
spending growth in order to balance their budgets."

I inferred that this portion of the report is discussing only spending. The ageing effect has no bearing on an individuals budget, and Medicaid deals with poor, not old.

What am I missing?
...
written by liberal, September 24, 2010 8:25
AndrewDover quoted,
Of the two factors, aging is the more important over the next 25 years.


Not sure if that's in reference to the conversation we're having with Bernie, but that includes Social Security, where obviously the contribution of increasing health care costs is 0% and aging is 100%.
...
written by liberal, September 24, 2010 8:30
Bernie wrote,
In fifty years what will the life expectancy be?


Actually, my impression is that life expectancy might be one of the things that's easier to predict. Or maybe I'm thinking of world population.

Point one is the important one, something has to change by the boomer peak. This makes any predictions beyond that worthless.


Not sure if this is what you're getting at, but yes, at current rates of health care cost inflation, the country will go bankrupt. I can't remember the exact date, but if you extrapolate, in the not way too distant future, health care becomes 75% of the economy.

That's clearly impossible, of course.

The question is, rather, what kind of health care system do we want?
...
written by liberal, September 24, 2010 8:32
Bernie wrote,
What am I missing?


Not sure; I don't have enough time to read the report in detail.

Sounds like they're saying that because we need other economic activity than health care, both private and public health care spending will have to slow down.
Liberal, you hit the nail on the head.
written by Bernie, September 24, 2010 8:52
"what kind of health care system do we want?"

Exactly! thats the first question, then we can figure out how to get there.

...
written by Bob Canuck, September 24, 2010 8:59
Bernie,

That section is focusing on the amount of money that the Federal government will be spending on Medicaid and Medicare. The aging population is one of the factors that influence the amount that the Federal government will spend. The other factor is the price of health care.

A very crude illustration would be as follows:

1. People consume units of health care.

2. A health care unit is comprised of doctor visits, tests, drugs, etc. That is, everything that is considered to be a health care expense is included in a health care unit.

3. As people age, they consume more health care units.

4. The price of a health care unit will rise every year.

5. The amount of money spent on health care is the number of units consumed multiplied by the price of a health care unit.

The CBO is saying that the rise in the price of a health care unit will rise faster than the rate of increase in the number of health care units consumed.

The CBO is also saying that the rate of growth in government spending on health care will slow over time(it will still be rising but a lower rate) due to many reasons. For example, states will use their influence to put downward pressure on health care prices.

Ok
written by Bernie, September 24, 2010 9:22
Bob, I think we agree about that.


"The CBO is saying that the rise in the price of a health care unit will rise faster than the rate of increase in the number of health care units consumed. "

I would add the same "(it will still be rising but a lower rate)" qualifier, because they are talking about both the government and individuals limiting the rate of spending increase.

I'll concede the point though, I'm sick of reading that report.

Can we agree that if you fix the ageing problem that the rest is manageable?
...
written by Bob Canuck, September 24, 2010 9:43
Bernie,

Given that the only way to fix the aging problem is to either find a way for people to reduce their use of health care as they age (an impossibility) or kill people before they start to increase their use of the health care system, the solution is to, using my illustration, address the price of a health care unit.

This is why reform of the health care system is so critical. As Dean Baker has noted many times, if the U.S. had the per capita health care cost of other industrialized countries (with better health outcomes), there would not be a budget deficit. It is the high cost of U.S. health care and the rising health care prices that is causing so many financial problems for both the government (Medicare and Medicaid) and the private sector (lack of access, personal bankruptcies, etc.).
Goodnight.
written by Bernie, September 24, 2010 9:47
I want to apologize to Liberal, Bob, and everyone else again for acting immature earlier.

My opinion, Social Security and Medicare have been fine until now, what changed?

Its based on demographics, the average population age is going up. Too many retirees for the number of workers.

How do you fix that?

Either Spend more and provide less, or….. change the number of workers.

“Give me your tired, your poor, your huddled masses yearning to breathe free”

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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