Health Spending Crushing a Stalled Economy

March’s estimate of last year’s fourth quarter Gross Domestic Product (GDP) showed that health spending was chewing through a weak economy. Today’s release of the advanced estimate of this year’s first quarter GDP might best be described as health spending crushing a stalled economy.

GDP barely budged, increasing by a trivial 0.2 percent annualized. Although personal consumption expenditures increased at a much higher rate, the largest component of that increase was health services, which contributed 0.62 percent to the change in GDP. (Housing and utilities, at 0.59 percent, was second.) Investment spending and exports were in the tank.

Seasonally adjusted at annual rates, GDP increased by only $6.3 billion from the fourth quarter. Health services consumption, on the other hand, increased by $23 billion. This is a dramatic increase in a segment of GDP committed to a government-controlled and relatively unproductive sector of our economy.

John R. Graham is a Senior Fellow at the Independent Institute.
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