The current debate over the budget deficit has primarily focused issues such as tax reform, but there’s an underlying, fast-growing problem no one wants to address.
Societe Generale’s Rudy Narvas points out that while we may be talking about cutting non-interest expenses and Social Security, it’s health care we should be watching.
From Rudy Narvas:
While we debate about short-term spending cuts and tax reform, the pink elephant in the room remains healthcare spending. The only action we see on this issue is the chatter on how members of Congress are seeking spending cuts targeted at defunding Obama’s healthcare law. Healthcare spending will break the back of the government’s finances in the long term. As shown in the chart below, over the next 25 years healthcare will become the largest part of spending, at over 10% of GDP.
Note that, with revenues projected to flat line, this health care problem becomes more and more worrying each year.