Anyone who wants to understand fiscal policy in the United States for the next fifty years will need to understand health care costs. There are many important issues in tax policy – the income/consumption debate, whether and how to tax wealth (especially at death), how to deal with transfer-pricing problems, when to tax capital gains, how to handle tax protesters, and so on – but the single issue that is going to drive tax policy is health care inflation.
Scary proclamations that the U.S. faces a “long-term fiscal crisis” are actually statements that health care costs could ruin the economy. If health care costs stop increasing – either by government action or because of some “natural” maturation process in the medical-industrial complex – then there is no long-term fiscal crisis. The so-called Social Security crisis is an over-hyped non-event, as I have argued elsewhere, and as even the most serious budget hawks will admit. Nothing else in the budget (certainly not “waste, fraud, and abuse”) even comes close to justifying alarm about the long-term need to raise taxes. It is all about health care. Continue reading "Health Care Costs and Fiscal Infirmity"