“If something cannot go on forever it will stop.”
Economist Herbert Stein observed this some 40 years ago. At the time, many people were worked up over the US’s balance of payments. Extrapolating recent trends, they forecast that by the year 2000 the US would be importing half of the goods it consumed. Stein noted that this simply wasn’t tenable; a nation must produce the vast majority of what it consumes, especially services. Trends that can’t continue, won’t.
This also could have been applied 15 years ago during the budget discussions in Washington. At that time some folks were worried that our budget surpluses would retire all of our national debt, which would impact the financial sector. But budget surpluses cannot continue, and they stopped.
Today, discussions regarding health care appear to suffer from the same sort of hyperbole. In 50 years, it is forecast, Medicare will consume over half of the Federal budget. I would submit that it won’t. Something will intervene: technology may make health care cheaper; people may become healthier; or fiscal pressures may force us to change the way we pay for health care.
I’m not saying that analysis and planning are unnecessary. But we don’t need to obsess over it. Which reminds me of the great economist Frank Knight’s famous observation: “Never waste any time you can spend sleeping.”
Douglas R. Tengdin, CFA
Chief Investment Officer
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