The U.S. government devoted 24.3 percent of its expenditure to health care last year. And the total health care expenditure was 18 percent of GDP and had been rising 50 percent faster than GDP. If the trend is unchecked, the U.S. government and the country as a whole are heading towards bankruptcy.
The Trend Is the Problem
The U.S. national debt has been rising at 9.3 percent per year since 2000 and, excluding the debt held by government accounts like social security trust fund, 10.8 percent per annum. In the past decade, the federal government’s debt has increased by 156 percent. The U.S. government forecast is for gross debt to rise at 5.7 percent over the next four years. Considering what has occurred in the past and accelerating expenditure associated with aging, it is hard to see how the debt will slow down so much. Of course, one could always assume better revenue collection in the future, which isn’t likely. The U.S. economy may be stuck around 2 percent growth rate for the next decade. If so, government revenue would be less than expected and the debt may continue its past trend.
The odds are that U.S. government debt will rise five percentage points above nominal GDP. In a decade, total government debt would surpass 200 percent of GDP, similar to Japan today. While Japan’s high level of government debt is entirely funded by domestic savings, the same cannot be said about the United States. The United States imports 4 percent of GDP in capital per year. When its government debt reaches 200 percent of GDP, foreign capital is likely to panic. A currency-cum-debt crisis is likely to follow. Basically, the United States’ current trend is not sustainable.
Text Source: english.caixin.com/
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