Chuck Blahous uses a clever pop-culture film reference to make his point about the myth that containing health-care costs will reform entitlement spending.  In an article for the Hudson Institute, the former member of the National Economic Council cites a new CBO report that clearly shows aging as the prime driver of the entitlement collapse, in both Social Security and Medicare.  While containing costs will help later, it won’t make a bit of difference until we solve the demographic issues:

My onetime colleague Andrew Biggs points out that this story resembles that movie scene in which Butch Cassidy and the Sundance Kid are debating whether to jump off a high cliff into roaring rapids. The Sundance Kid protests, “I can’t swim!” — to which Butch Cassidy reassuringly says not to worry, for “The fall will probably kill you!”

And that’s the reality here. Granted, excess health care cost inflation will probably eventually be our biggest problem. That’s only true, though, if we enable the federal budget to survive the challenges of population over the next few decades. In other words, we need to survive the fall before learning to swim even becomes relevant.

The sooner that this reality sets in across the political spectrum, the sooner we can have an informed discussion of the fiscal choices facing our federal government.

I wrote about the new CBO report yesterday, in which I pointed out that the previous CBO director is now, not coincidentally, Obama’s budget director Peter Orszag.  Blahous rips Orszag’s work in this article, especially for its perpetuation of several myths about the Medicare entitlement disaster:

  • We don’t really have a spending problem (other than on health care).
  • We don’t really have an “entitlement” problem.
  • We don’t really have a large fiscal problem arising from population aging.
  • We don’t really have a large Social Security problem.
  • Virtually our entire federal fiscal problem derives from Medicare/Medicaid, the largest health care entitlements.
  • The only reason that the Medicare/Medicaid programs exhibit large fiscal problems is that they are symptoms of a larger national health care problem.
  • Hence, national health care reform is the key to fixing the government’s dire fiscal outlook.

We can thank the Democrats for blocking meaningful reform in 2005, when George Bush used up what political capital he had to push for the easier of the two reforms, Social Security.  Democrats insisted that no problem existed despite their own statements from the late 1990s when they demanded reform.  The new CBO report shows what everyone already knows: the aging of America’s population has made Medicare into a Ponzi scheme, and Social Security almost as much so.

Should we worry about health-care costs?  Certainly, but as Medicare shows, government restrictions on price are not the same thing as reducing costs.  Besides, we need to see if the fall kills us before we bother to start swimming.