To start things off, the CBO says the deficit this year will be $506 billion, or 2.9 percent of GDP. In 2013 it was $680 billion, so that’s a pretty steep drop. And in terms of GDP, not only is that slightly lower than the average deficit of the last 40 years (3.1 percent), it’s also a 70 percent decline from Obama’s first year in office, where because of the Great Recession, which brought both the need for more spending and a plunge in tax revenues, the deficit peaked at 9.8 percent of GDP.
We should note that a lot of people thought that the deficit was cut too fast, and that we switched prematurely from stimulus to austerity, dragging out the nation’s suffering and keeping the recovery from taking hold in a meaningful way. But whether or not you agree, you can’t say that there hasn’t been dramatic progress on reducing the deficit under this president.
The other thing to note is the CBO’s new projections on Medicare. Ask any conservative, and they’ll tell you that the real threat to our future is entitlements, and Medicare in particular. With all those Baby Boomers retiring and eating up more and more of the nation’s wealth through health care costs, Medicare will eventually devour the entire federal budget, drowning us in debt and rendering us unable to do anything except care for our elders.
But things are looking pretty good on that front as well. The New York Times’ “The Upshot” has a nice graphic showing how the CBO’s projections for future Medicare spending have gone down and down in recent years. Here’s how they describe it:
The difference between the current estimate for Medicare’s 2019 budget and the estimate for the 2019 budget four years ago is about $95 billion dollars. That sum is greater than the government is expected to spend that year on unemployment insurance, welfare and Amtrak — combined. It’s equal to about one-fifth of the expected Pentagon budget in 2019. Widely discussed policy changes, like raising the estate tax, would generate just a tiny fraction of the budget savings relative to the recent changes in Medicare’s spending estimates.In more concrete terms, the reduced estimates mean that the federal government’s long-term budget deficit is considerably less severe than commonly thought just a few years ago. The country still faces a projected deficit in future decades, thanks mostly to the retirement of the baby boomers and the high cost of medical care, but it is not likely to require the level of fiscal pain that many assumed several years ago.
Like the program itself, the reasons for the slowdown in Medicare spending are complicated. But a big part of it is — you guessed it — the Affordable Care Act. The ACA has found direct savings in Medicare with things like cuts to some provider payments. More importantly, it has tried to achieve longer-term savings through means like encouraging hospitals to reduce readmissions (where a patient gets treated and released, then winds up back in the hospital a week later) and rolling out payment systems that promote more holistic care instead of just piling on expensive tests and procedures. It also has provisions that probably haven’t reduced spending yet but likely will eventually, like spurring the shift to electronic records.
There is a transformation going on in American medicine, one that’s slow and sometimes painful. But it is happening, and that’s in no small part because of the ACA. Health care in America isn’t going to become dirt cheap, and Medicare will still make up a substantial part of the budget in coming years. But the situation isn’t nearly as bleak as people thought it would be just a few years ago. Medicare is still the biggest driver of future deficits, but the next time you hear a conservative say we have to “rein in entitlements,” you can remind them that nothing any president has done to achieve that goal has been nearly as effective as the reforms contained within the hated Obamacare.