Yesterday, CBO Director Peter Orszag testified before the Senate Budget Committee on the rising costs of health care. He emphasized that technological change in health care is the primary driver of health care cost, and not population aging. Furthermore, it is the rising cost of the health care that is the underlying cause of the nation's long-term fiscal challenge.

It seems things are getting worse out in the states, almost by the day. The Center on Budget and Policy Priorities has released another update of their analysis first released last week, adding one more state (Illinois) to the list of states facing a budget crunch in 2009. Now there are 20 states that are projecting budget gaps in 2009. The updated summary stats from CBPP: More than half of states anticipate budget problems, according to this updated analysis of state fiscal conditions.

• 20 states now project budget gaps for 2009. Illinois joins this list.
• The combined budget shortfall for these 20 states in 2009 is now at least $34 billion.
• 5 states now say they will have 2009 deficits, but have released no further information.
• 3 other states project budget gaps for 2010 and beyond.

CBPP: 20 STATES FACE TOTAL BUDGET SHORTFALL OF AT LEAST $34 BILLION IN 2009

The Center on Budget and Policy Priorities released an update to their analysis last week, which now shows more than half of the states are facing a budget crunch in 2009. As we've commented, this isn't good news, as state budgets are far less flexible than the federal budget and usually are legally prohibited from running a deficit. From the CBPP update: More than half of states anticipate budget problems, according to this updated analysis of state fiscal conditions.

• 19 states now project budget gaps for 2009. New Hampshire, Ohio and Wisconsin have joined this list since our last update
• The combined budget shortfall for these 19 states in 2009 is now at least $32 billion.
• 6 states now say they will have 2009 deficits, but have released no further information.
• 3 other states project budget gaps for 2010 and beyond.

CBPP: 19 STATES FACE TOTAL BUDGET SHORTFALL OF AT LEAST $32 BILLION IN 2009

Writing on the Heritage Foundation's blog, The Foundry, rbluey calls me out for my bashing (here and here) of Brian Riedl's paper Tax Rebates Will Not Stimulate The Economy and recent statements he made in a BNA article($). The following is my response. Coming back to tenth-grade economics, in which we learn that "economic growth" refers to the change in the value of all goods and services (gross domestic product, or GDP) produced over a given time period in a given set of product and service markets, we can make any number of assertions that activity X will result in an increased value of such production. Riedl's paper relies on this definition economic growth ("By definition, an economy grows when it produces more goods and services than it did the year before."), but then claims that increased consumer expenditure, prompted by an increase in consumer income enabled by government transfers (i.e. tax rebates), do not, in fact cause the economy to produce more stuff in 2008 than it would have without such rebates. This is wrong (see e.g., CBO Director Peter Orszag, Federal Reserve Board Chairman Ben Bernanke, Harvard Economics professor and former Chairman of the Council of Economic Advisers and President Reagan's chief economic adviser Martin Feldstein, and former Clinton Treasury Secretary Lawrence Summers).