MY VIEW: Gene Steuerle February 2013

Yesterday, Urban Institute Fellow and CRFB Board Member Gene Steuerle tied the ability of federal and state governments to control health care costs to the ability of governments to provide quality education. According to Steuerle, the growing costs of health care in budgets across the country is crowding out value spending in other sectors, and particularly in education, since it is another major spending line in state budgets. He writes:

Federal spending policies only reinforce the longer-term anti-education trend. An annual Urban Institute study on the children’s budget suggests future continual declines in total federal support for education as long as current policies and laws hold up.

Education spending will continue to decline as long as health costs keep rising rapidly and eating up so much of the additional government revenues that accompany economic growth. 

Within states, health costs show up primarily in the Medicaid budget. As the NGA numbers demonstrate, recent federal health reform did little and is expected to do little to control these state costs, despite large, mainly federally financed subsidies for expanding the number of people eligible for benefits.

With populations aging, state and federal governments now also face demographic pressures to increase their health budgets. Large shares of the Medicaid budget go for long-term and similar support for the elderly and the disabled. This budgetary threat also extends to revenues as larger shares of the population retire, earn less, and pay fewer taxes.

The next time someone tells you that we should wait another ten years to control health costs because we’ll be so much smarter and less partisan then, remind him or her that this procrastinating implicitly advocates further zeroing out state and federal spending on education—and the children’s budget more generally. Presidents and governors will never succeed with their education initiatives until they stop the health cost juggernaut in its tracks.

This is the same point that Erskine Bowles made in an interview in Forbes on the future of American innovation. Rising interest payments will likely force the federal government to cut other spending in order to keep the budget deficit from getting out of control. Some of those spending cuts will likely fall on non-defense discretionary spending, spending on areas like education and high value-added research. Controlling spending on entitlement programs will require phased-in changes that will take time, if we don't take action to address our spending on health care soon, we could be forced to make unwanted cuts to new investments in the future.

The full blog post can be found here.

"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.