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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Capping Spending As the Population Ages

One of the reasons the GOP’s drive to cap (either via statute or a constitutional amendment) federal spending at 18% of GDP is even more radical than it sounds is that it’s a mite strange to insist the federal government dramatically shrink on the very brink of the retirement of the baby boom generation, which will represent a momentous if temporary boost in government’s obligations under current policies.
At National Journal, Ron Brownstein notes that the last time federal spending was at 18% of GDP was in 1966, which also happens to be the year Medicare was inaugurated. Now federal expenditures targeted to retirees are guaranteed to swell without an abrupt abandonment of the entire New Deal/Great Society safety net:

Two factors above all are swelling those programs. One is the unbroken rise in per capita health care spending as medical technology advances. The other is the growing elderly population. When Medicare began in 1966, it served about 19 million seniors. Today, the program serves nearly 48 million. Its trustees project that by 2035 that number will approach 86 million.
Against that overwhelming demographic pressure, mandating that federal spending return to its 1966 level is like ordering the tide to reverse its course. Although many Republicans want to cap federal spending at 18 percent of the economy, the nonpartisan Congressional Budget Office projects that Social Security, Medicare, and Medicaid alone will consume about 15 percent of the nation’s total economic output by 2035. And under other scenarios that CBO has explored, even that figure might be optimistic.
That prospect points toward two large conclusions. One is that it’s unrealistic to limit federal spending to levels last seen when the elderly represented only about half as large a share of the population as they will in the decades ahead. Given the demographic demands, future federal spending will almost certainly require more than 21 percent of the economy–although likely less than the swollen 25 percent level reached after 2009’s stimulus program. A corollary is that sooner or later, the demands of providing for an aging society without gutting everything else that government does will require Washington to raise more revenue.

To hear Republicans tell it, Democrats in Washington are on some sort of ideological bender aimed at massively expanding the federal government; all GOPers are doing is putting on the brakes. (Actually, the more honest conservatives admit they are trying to return to the size and role of government as it existed long, long ago, perhaps as long ago as the 1920s, but they are the exception).
The reality is that (a) current policies produce higher federal spending in the short term because bad economic times automatically propel millions of people into eligibility for federal benefits; and (b) they produce higher federal spending over the long run because health care costs (private as well as public) remain out of control, and because the population is both growing and aging. You can make the argument that we just can’t afford the kind of society we enjoyed in past decades, but it’s long past time that conservatives stop pretending they are just bravely defending the status quo against crazy liberal efforts to turn America into Sweden.

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