July 11, 2011
Ross Douthat did a little pundit sleight of hand when he told readers that:
“For decades, the tug-of-war between left and right has kept government’s share of the economy nearly constant, around 19 percent of G.D.P. But in what you might call the revenge of Lyndon Johnson, the ballooning cost of Medicare is poised to tilt the debate decisively toward liberalism.”
Douthat has to assign a very loose meaning to “around.” In fact, the Reagan military build-up caused spending to hit 23 percent in the mid 80s. It then fell back to 18 percent under President Clinton due to the peace dividend and cutbacks in various categories of domestic spending, including public investment.
The run up in the last four years is of course response to the downturn created by the collapse of the housing bubble.
The chart points out that swings in military spending have been a big factor raising spending. If spending fell from its current level (@4.6 percent of GDP) to the 3.0 percent level at the end of the Clinton years, this would free up considerable money for other purposes or lower spending.
It is also worth noting that the major factor driving up Medicare costs is the broken health care system. If people in the United States paid the same amount per person for health care as people living in other wealthy countries we would have surpluses, not deficits in the long-term. It’s not clear that giving huge excess payments to health care providers is an especially liberal position.
[Thanks to Adam Jones for catching this one.]
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