According to the CBO, enacting President Obama's FY 2010 budget would yield annual budget deficits averaging 5.3 percent over the next decade, with a steadily rising trajectory after 2013 ("A Preliminary Analysis of the President's Budget, March 2009, Table 1-4, p. 10). The administration has consistently argued that the key remedy for this unsustainable path is comprehensive health care reform-specifically, the cost containment measures for which universal coverage is the precondition.
The impressive analysis of "The Economic Case for Health Care Reform" issued today by the President's Council of Economic Advisors (CEA) sheds new light on this claim. Some time ago, the administration set a goal of reducing the annual growth rate of health care costs by 1.5 percentage points, which is the maximum that most experts think would be feasible. According to today's CEA report, if health care reform measures were able to achieve these savings in full, starting in 2010, the deficit would reduced by only 1 percent of GDP by 2020 (Figure 14, p. 26), leaving the deficit at nearly 5 percent of GDP. (By the way, few experts believe that the health care cost curve could be made to bend as quickly as the CEA analysis assumes.)
The conclusion is inescapable: to accomplish over the next decade what Treasury Secretary Geithner promised yesterday in Beijing, we will need a combination of spending restraints and revenue increases going well beyond what anyone has put on the table so far. The more imponderable question is how long it will take the political system to acknowledge this uncomfortable reality.