In life, we make assumptions all the time. I’m feeling good today, so I assume I will feel good tomorrow. If I put away money each month, I will have enough to pay for repairs for a car breaking down. Forecasting on a larger scale works the same way. If 10,000 people a day retire in the US because they turn 65, that same percentage will retire 10 years from now when people turn 65.
Well if we all are living longer, is it accurate to predict that people will retire when they could keep working? Or, that people will be able to afford to retire? We rely on a lot of long term assumptions about trends that are the basis for government policies, including budget and deficit predictions . Are they accurate?
ITR has predicted that there will be a depression at the end of the decade and they have a lot of trend data to support their assertion. The cost of social services like medicare is a big number in that calculation. An article in the NY Times this week describes an unexpected decline in the increase in Medicare costs and tries to tease apart the reasons. It has saved $3.9 in the last 10 years. This is more than 85% of the federal deficit. It is a big deal. It is also very hopeful that policy changes can make a difference without punishing the least able in our society.
Health care policy is so complex it may be too early to claim victory in controlling costs, or that Americans are behaving their way out of long term expensive health care. The letters to the editor following this article were interesting to read on this subject. If we improve health care outcomes, the cost of drugs, how many drugs we have to take, getting regular preventative health care, etc. we can change the long term assumptions about our health and the overall cost to the economy of heath care. How cool is that?
This week, look at one or two of the assumptions you base your forecasting on that may be trending differently than you expected. There may be opportunity you have missed.
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