Tuesday, March 12, 2013

More evidence that the Federal Budget is about Health Care spending and not much else.

How times have changed regarding the Federal Budget.  In 1960, 50% of the Federal budget was allocated to National Defense. In the 2010 budget it accounted for 19%. 

Like squeezing a balloon, virtually all of the difference has been a movement from Defense to Federal spending on Health Care programs. 

Source: Color coded pie charts copied from AEI but from a study by the Philadelphia Federal Reserve
To put this in perspective I will adjust for inflation and put 1960 spending in terms of what that means in today's dollars.  I think that will be helpful in understanding the scope of issue
Defense spending in 1960 dollars was $53 Billion dollars (source HERE). Adjusting for inflation, that would be equivalent to $390 billion in today's dollars. Actual Defense spending in 2010 was $872 Billion---a 2.25 fold increase OVER inflation.
Health care spending in 1960 was $1.5 Billion dollars (source HERE). Adjusting for inflation, that would be equivalent to $11 Billion in today's dollars. Actual Federal spending on health care in 2010 was $846 Billion----a 77 fold increase OVER inflation. YIKES!! But hold on...
 Caveat:  The Federal program Medicare did not kick in until 1965-66 time period so spending in 1960 on health care might be considered low.  Let's use 1970 for Federal health care spending and use that as the base.
Health care spending in 1970 was $12.1 Billion dollars. Adjusting for inflation, that would be equivalent to $68 billion today. Given health care spending in 2010 was $846 billion that would be a 12.5 fold increase over inflation.
Defense spending in 1970 was $95 billion. In today's dollars that is equivalent to $534 billion, Given actual Defense spending in 2010 was $872 billion, that is a 1.6 fold increase over inflation.
To be more accurate and relevant, the economist who wrote this report probably should have used a post-Medicare implementation time period to use as a base.  Given the realities of the Baby Boom generation, that would have been more helpful.


View My Stats