tax rates would have to be raised by substantial amounts to finance the level of spending projected for 2082 under CBO’s alternative fiscal scenario. Before any economic feedbacks are taken into account, and assuming that raising marginal tax rates was the only mechanism used to balance the budget, tax rates would have to more than double. Such tax rates would significantly reduce economic activity and would create serious problems with tax avoidance and tax evasion.
Orszag points out that containing health care spending is the key to avoiding dire scenarios. But elsewhere he puts more faith than I do in improving health care efficiency. A one-time increase in efficiency, no matter how large, does not take us off the path of ever-increasing health spending. It only postpones the day of reckoning.
It seems to me that fee-for-service reimbursement, paid for by third parties, without rationing, is inherently not sustainable. As I say in my book, we cannot have open access to health care services, consumer insulation from expenses, and sustainable health care spending. Pick two.