Wednesday, August 26, 2009

A Look At the CBOs Latest Projections

Yesterday the CBO released its long-term budget outlook. It is a lengthy document that involves an area of economics that I find highly questionable: long-term projections. I understand why we must include them and why they are done, but I still find them questionable because they are 50+ year projections. Let's look at a key point:

Basically, it's about spending on medical care. That is the primary driver for the increase government expenditures. That is also why it is imperative that we figure out a way to hold down costs.

Let's look at some charts that highlight the problem. Click on all for a larger image

Social security isn't the problem. It increases to roughly 6% of GDP and then remains stable. This is an entirely manageable situation. However,

Medical costs -- the net total spending of medicare and medicaid -- continue to increase until they reach 18% near the end of the decade. That is obviously unsustainable and again highlights why reform is mandatory.

I'm still working through the data.

The CBOs information is here.