[Danzig]

An alternative policy would be to hold the growth of spending in line with the growth of the economy. That approach would require significant changes in the Medicare and Medicaid programs. Many experts believe that a substantial share of spending on health care contributes little, if anything, to the overall health of the nation, so changes in government policy have the potential to yield large reductions in federal spending without harming health. However, translating that potential into reality would require tough choices. It would ultimately depend on policymakers’ willingness to put ongoing pressure on the health sector to achieve efficiencies in the delivery of health care.

Reducing other federal spending significantly below the baseline levels would be difficult as well. Spending on Social Security has risen from almost 4 percent of GDP in the 1970s to almost 5 percent today and will increase to 6 percent in 2035 as the baby boomers retire. Other nonhealth, noninterest spending averaged almost 14 percent of GDP in the 1970s but has shrunk to about 10 percent of GDP over the past 15 years—aside from the current burst of spending in response to the recession and the financial crisis. Such spending is projected to decline further over time in CBO’s 10-year baseline.

From a purely economic perspective, slowing the growth of spending would generally impose smaller costs than boosting tax rates, although that conclusion is somewhat sensitive to the specific measures that would be adopted. From a broader social perspective, citizens and policymakers need to judge the importance of various government programs and the costs of restraining spending on health care, retirement benefits, defense, and so on. That is, lower levels of spending would help address the fiscal sustainability problem, but society would have to make difficult choices about which programs to scale back. The difficulty of the choices notwithstanding, CBO’s long-term budget projections make clear that doing nothing is not an option: Legislation must ultimately be adopted that raises revenue or reduces spending or both. Moreover, delaying action simply exacerbates the challenge, as is discussed below