Monday, March 21, 2011

Can Cuts Increase the Deficit?

Comic credit: Clay Bennett, The Christian Science Monitor

Senator Manchin (D-WV) recently sounded an alarm, stating “we cannot ignore the fiscal Titanic of our national debt and deficit.”

He’s right.

Our debt is driven by two factors – a declining revenue stream and increasing government spending. In FY 2010, the federal government spent $3.6 trillion dollars, but our revenue was only $2.2 trillion. To fill the gap, the US borrowed $1.4 trillion dollars.

Clearly, new fiscal policies are necessary if the nation is to move away from deficit spending. Policymakers have the authority to alter revenues (through tax policy) and expenditures (through appropriations).

One of the major drivers of our deficit is spending for health insurance programs; Medicare, Medicaid, and CHIP account for $753 billion of federal spending (21% of the budget in 2010). Much of these costs, in turn, are driven by the state of health in US – according to the WHO, the US ranks 37th in the world for overall health indicators.

The bottom line is that unhealthy individuals require more treatment and drive up the cost of care. The US government has historically been very supportive of the health research agencies that can lower the cost of care, foster discovery of new treatments, and seed economic development. But these vital messages have been lost in the vociferous debate over spending.

So what will happen if we cut back on health research? Failure to support health research will increase our debt burden. We need research now more than ever to find innovative solutions to the generational and interlinked challenges that we face.

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