ObamaCare whoops

I took the contributions to GDP from consumer spending from the latest Q4,2014 BEA update.  The Blue line in the contribution to GDP growth from health care spending, the red is the rate at which that changes, and the yellow is the rate at which the rate changes.  These are like differentials.

Note: These are Year over Year numbers.And my results are all YoY.


Here are the numbers from the BEA:
.37,0.24, 0.32, 0.20, 0.22, –0.03, 0.51, 0.70, 0.13, 0.40,
   0.13, 0.04, 0.40, 0.30, 0.48, –0.16, 0.45, 0.52, 0.88

These are the health service spending growth from the personal consumption graph, Line 17 in the second chart. They go back to  Q1 2011.

The number that stands out is the latest, Q4 2014, where health care spending comprise .88 of the GDP growth which is 2.2. So 40% of GDP growth last quarter came from increased health care spending.  Now this quarter the GDP growth is best guessed at 1.3%, and if the increase in health spending holds up, then Obamacare will drive 67% of this quarter;s growth.

Can the economy devote 2/3 of its growth rate to Obamacare?

No, the blue line tells us that health spending should be about 25% of the GDP growth rate, typically.  That red line, the first difference tells us how fast the economy can adapt to changes in health expenses, and that number hovers around zero. That red line, the adaptation rate, needs to revert to zero mean in about three quarters. The agents in the economy cannot adjust their balances any faster.

So, multiply the blue and the red line, and the result should be trending closer to zero, reverting to zero much faster. It is not. The yellow line is a proxy for that second differential, and it is widely out of the region of sustainability.

Let's try hyperbolic discounting, shall we?
Since we work with ratios, the total amounts are unitized to 1, year over year.

Now we expect one sectro of the economy to contribute 2/3 of growth, so in the short term, the total economy shrinks by 1-2/3 to support a growth of 1+2/3. That ratio comes to:
(1-23)/1+2/3) = .2, and that would be the loans to deposit ratio needed to support Obamacare growth. .  What is the loan to deposit ratio at the Fed? 1.0, and that number is holding for ten years folks.

How fast will loans to deposit change? That number, the first differential, is 1-ratio^2. So for the effect of Obamacare, we expect loans  to deposits to change by .99, in other words, the second differences need to be almost the entire ratio.  But the Fed that differential is 1-.99^2, or zero.  Loans to deposits at the Fed are not changing to accommodate Obamacare.  So these differentials are all calculated with respect to the Obamacare variable. Hyperbolic discounting tells us something is about to break because of Obamacare.

If Obamacare spending down not settle down, the economy will shrink.