China vs US – 2

While US leaders fiddle, Chinese leaders build a global powerhouse. Two very differing reports from each side of the Pacific Ocean were unveiled recently.

US Health Care Spending Continues Unabated

First CMS, which issues the annual US report on health care spending and projections, issued its annual report:

“U.S. health care spending by 2016 will almost double to $4.1 trillion and account for 20% of every dollar spent, according to a report released on Wednesday by the National Health Statistics Group at CMS, the Los Angeles Times reports. According to the report, published on the Health Affairs Web site, public and private health care spending will increase to about $12,782 per capita by 2016 from about $7,498 per capita in 2006 (Alonso-Zaldivar, Los Angeles Times, 2/21).”

American leaders took note and issued warnings:

Secretary Mike Leavitt said, “America’s per capita health spending is the highest in the world. There is simply no place on the economic leader board for a nation that spends a fifth of its domestic product on health care” (Freking, AP/Houston Chronicle, 2/21).

Robert Bixby, executive director of the Concord Coalition, said that the cost of health care “is really the key issue for the fiscal future of the nation,” adding, “If health care costs continue to drift up — unless you dramatically raise taxes — you will have health care pushing out everything else government does. Nobody can say exactly when you reach a point that it’s unsustainable, but you can look at something and say it’s unlikely.”

Chinese Military Spending Increases Dramatically

On the other side of the Pacific the Chinese government announced another in a long series of increased military spending:

China will raise its annual defense spending by almost 18 percent, the Chinese government announced Sunday, as the country continues a rapid military buildup that has drawn criticism from the United States.

Chinese defense outlays would increase by 17.8 percent to 350.92 billion yuan, or $45 billion, this year. The budget represents the largest increase in military spending in five years. The sharp rise in military outlays follows a 14.7 percent budget increase in 2006 as the People’s Liberation Army tries to streamline its massive ground forces and deploys new warships, missiles and aircraft.

Military analysts said that the Chinese military was reaping the benefit of sustained spending increases.

They noted the successful test of the anti-satellite missile, which destroyed a defunct Chinese weather satellite, as evidence that the Chinese military was able to field increasingly advanced weaponry. The Chinese military revealed in December that it had begun to deploy a state-of-the-art jet fighter, the J-10, which Chinese and foreign experts have described as a breakthrough for the Chinese defense industry.

Who will win the Arms Race – China or the US?

A year ago I wrote about the contrasting trends of US health care spending and the forecast for China to supersede the US economy in size by 2020(Feb. 14, 2006 post). These forecasts were all based on forecast by the US Government and respected conservative sources such as the Economist.

A year has passed and it appears the trends continue but the arms race appears to be accelerating with China upping the ante on their military spending.

The question remains. Who will win the next arms race – China or the US?

As US health care spending relentlessly increases other spending choices are and will continue to be reduced. Already state governments are reducing spending on education as they fight the losing battle of paying for increased health care costs.

Currently the federal government is coping by deficit spending. This new federal budget proposes to reduce health care spending, but this would merely shift health care costs to the states and private sector. No measures are proposed that would control overall health care expenditures nationally.

Uncontrolled health care spending is the Achilles heel of the US economy and world power status.

It is time for our leaders to lead.