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Saving Our Future Saving Our Future
Tough Choices in Health Tough Choices in Health Care & for the BudgetCare & for the Budget
Iowa Committee for Value in HealthcareIowa Committee for Value in HealthcareDes MoinesDes MoinesApril 2, 2009April 2, 2009Eugene Steuerle Eugene Steuerle Vice-President Vice-President
The Peter G. Peterson FoundationThe Peter G. Peterson Foundation
More Beneficiaries, Less WorkersMore Beneficiaries, Less Workers
Source: The Social Security Administration The Future of Social Security (2008) 2
Projected Real Health Care Costs Per Person Projected Real Health Care Costs Per Person 2008-20502008-2050(2008 Dollars)(2008 Dollars)
Source: Congressional Budget Office, U.S. Census and PGPF calculations.3
Sources of Growth in Projected Federal Spending Sources of Growth in Projected Federal Spending on Medicare and Medicaidon Medicare and Medicaid
Source: Congressional Budget Office 20084
Federal Social Security, Medicare, and Medicaid Outlays, FY 1940-2080
Social Security
Medicare
Medicaid
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
24.0%
26.0%
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
Perc
enta
ge o
f GD
P
Note: Authors used January 2007 CBO data for Social Security, Medicare, and Medicaid through 2017, and grew Social Security and Medicare levels with 2006 Trustees data and Medicaid with 2005 CBO data.Source: C. Eugene Steuerle, Adam Carasso, Gillian Reynolds, The Urban Institute, 2007.
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Major Fiscal ExposuresMajor Fiscal Exposures($ trillions)($ trillions)
2000 2008
Explicit liabilities $6.9 $12.2 Publicly held debt Military & civilian pensions & retiree health Other
Commitments & contingencies 0.5 1.3 E.g., PBGC, undelivered orders
Implicit exposures 13.0 42.9 Future Social Security benefits 3.8 6.6 Future Medicare Part A benefits 2.7 12.7 Future Medicare Part B benefits 6.5 15.7 Future Medicare Part D benefits -- 7.9
Total $20.4 $56.4
7Source: PGPF analysis of 2000 and 2008 Financial Report of the United States Government.Note: Estimates for Social Security and Medicare are at present value as of January 1 of each year and all other data are as of September 30.
A Budget for a Declining Nation?A Budget for a Declining Nation?
Less saving (long-run) Less work Reduced investment Increased dependence upon foreign lenders Reduced investment in our children
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Key National Indicators: Key National Indicators: Where the United States RanksWhere the United States Ranks
The United States may be the only superpower, but compared to most other OECD countries on selected key economic, social, and environmental indicators, on average, the U.S. ranks
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OECD Categories for Key Indicators(2007 OECD Factbook)
Population/Migration Energy Environment Quality of Life
Macroeconomic Trends
Labor Market Education Economic
Globalization
Prices Science & Tech. Public
Finance
17 OUT OF 2817 OUT OF 28
Source: PGPF analysis of 2007 OECD Factbook
10.0%11.0%12.0%13.0%14.0%15.0%16.0%17.0%18.0%19.0%20.0%21.0%22.0%23.0%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Perc
enta
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P
The Current Squeeze
Resources Left for Other Domestic Outlays
Source: C. Eugene Steuerle, Adam Carasso, and Gillian Reynolds, The Urban Institute, 2007. Authors' calculations based on data from CBO Budget Outlook (January 2007) and OASDI and HI-SMI Trustees Reports (2006). * Assumes extension of 2001 and 2003 tax cuts and of expiring tax provisions and a permanent fix to the alternative minimum tax.^ Assumes a m oderate drop in defense and international spending as a percent of GDP.
Receipts(if tax cuts made permanent)*
Spending on Social Security, Medicare, Medicaid, Defense,
International, and Interest
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SOON…VERY SOONSOON…VERY SOON
ANY spending on education, environment, welfare, community development and most domestic programs, as well as deficit reduction, must be paid for out of:Rescinding of tax cuts or tax increasesPared growth in health and retirement spendingA larger economy through additional work and
saving A very small international and defense presence
11
Source: Office of Management and Budget FY09 Historical Tables and Congressional Budget Office Updated Budget and Economic Outlook (March-09)
Deficits as a % of GDPDeficits as a % of GDP(1950-2019)(1950-2019)
12
Projected Composition of the President’s BudgetProjected Composition of the President’s Budget
Source: Congressional Budget Office Updated Budget and Economic Outlook (March-09)13
Tomorrow’s Problems Are Now Today’sTomorrow’s Problems Are Now Today’sLong-term budget unsustainable before crisisStimulus & financial fix necessary…but
Cause large increases in debt and interest Threaten higher interest rates as wellThreaten recovery if U.S. bonds not AAAAA
Recovery Phase (hopefully)Unwinding large increases in debtReducing ever-growing demographic and
health costs pressures
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Trends in Health Care Costs vs. WagesTrends in Health Care Costs vs. Wages
Source: Congressional Budget Office, U.S. Census and PGPF calculations15
Source: Congressional Budget Office, U.S. Census and PGPF calculations16
Source: OECD 2008
International Context for U.S. Spending LevelsInternational Context for U.S. Spending Levels
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Some of the Trade-OffsSome of the Trade-OffsHealth versus everything else
Negative cash wage growth in many firmsHealth versus other forms of social spending
Education, environment, food, jobs subsidiesHealth versus health
Acute care versus preventionChronic care versus cureInsurance versus access & public healthHealth care for old versus health care for youngSpecialization versus primary care
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The Way ForwardThe Way Forward
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