Widening Deficit Raises Stakes On Health Care

WASHINGTON (MarketWatch) -- Both sides in the debate over health-care reform just got reinforcements from new forecasts released Tuesday showing big government budget deficits continuing even after the economy recovers.

The White House and the Congressional Budget Office each released their summer budget outlooks on Tuesday. With a few minor differences, the two forecasts are in agreement.

This year's deficit doesn't look as bad as it did six months ago, primarily because the worst-case scenario for the bank bailouts didn't materialize. However, the deficits for the rest of the coming decade look a little worse.

The annual deficit is likely to remain above 3% of gross domestic product indefinitely, with the total debt held by the public rising to $14.3 trillion, or about 68% of the GDP estimate of $21.1 trillion in 2019, the CBO says. That's a huge amount of debt, but it's probably manageable, for now.

The big concern about the deficit comes later on, as health-care costs consume a larger and larger piece of the government's budget as the population ages.

Republicans reacted to the new forecasts just as you'd expect, arguing that the big deficit shows that health-care reform is impossible. Rep. John Boehner of Ohio, the top Republican in the House, said health-care was one of a "long line of expensive Democratic experiments that will add to the deficit."

Democrats, of course, said the deficit projections showed that health-care reform is absolutely necessary. If health-care costs aren't brought under control, the debt will mount beyond belief. This country can't afford an inefficient and wasteful health-care industry.

Democrats are right to finger health-care costs as THE issue for the government's long-term fiscal health. And Republicans are right in warning against any reform that doesn't credibly lower costs in the long run. This country can't afford to add to its health-care bill.

As the lawmakers return to Washington after the holiday, they should remember that controlling costs and improving outcomes should be the goal of any health-care reform.