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Federal Spending: John Taylor Misses Two Obvious and Important Things

In the Wall Street Journal, Stanford's John Taylor asks:

If government agencies and programs functioned with 19% to 20% of G.D.P. in 2007, why is it so hard for them to function with that percentage in 2021?

He does not understand the two most important and obvious features of demand for what the federal government does: the aging of America, and improving health-care technologies.

Paul Krugman is on the case with the elementary arithmetic of American long-run fiscal policy:

Seniors, Guns and Money: Americans really should fear Republican budget ideas — and not just because of that plan to dismantle Medicare. Given the realities of the federal budget, a party insisting that tax increases of any kind are off the table... is, necessarily, a party demanding savage cuts in programs that serve older Americans.... The great bulk of federal spending that isn’t either defense-related or interest on the debt goes to Social Security, Medicare and Medicaid. The first two programs specifically serve seniors. And while Medicaid is often thought of as a poverty program, these days it’s largely about providing nursing care....

[T]here will soon be a lot more seniors around because the baby boomers have started reaching retirement age.... In 2007, there were 20.9 Americans 65 and older for every 100 Americans between the ages of 20 and 64.... The Social Security Administration expects that number to rise to 27.5 by 2020, and 31.7 by 2025. That’s a lot more people relying on federal social insurance programs. Nor is demography the whole story. Over the long term, health care spending has consistently grown faster than the economy.... Cost-control measures — the very kind of measures Republicans demonized last year, with their cries of death panels — can help slow the rise, but few experts believe that we can avoid some “excess cost growth” over the next decade. Between an aging population and rising health costs, then, preserving anything like the programs for seniors we now have will require a significant increase in spending on these programs as a percentage of G.D.P. And unless we offset that rise with drastic cuts in defense spending — which Republicans, needless to say, oppose — this means a substantial rise in overall spending, which we can afford only if taxes rise...