Last quarter, when we showed what was “The Reason For The “Surge” In Q3 GDP”, some were shocked to learn that in the quarter in which US GDP posted a 5% surge, it was none other than Obamacare – a mandatory tax according to the Supreme Court which has the benefit of flowing through the US income statement – which contributed the bulk of this upside.
We are happy, and we use the term loosely, that history has just repeated itself, and now that the final number is available, what we wrote a month ago in “Here Is What Americans Spent Their “Gas Savings” On” has just been confirmed, and as the chart below shows, in the final revision of Q4 GDP, while virtually every other category of household spending was largely unchanged or revised lower, it was Healthcare, of which Obamacare was the biggest contributor on the margin, which saw an unprecedented surge in total spending, from $1.858 trillion to $1.871.9 trillion just between the second and final GDP revisions: a bump of $13.9 billion, without which Q3 GDP would have grown well below 2%!
It gets better, because in the fourth quarter total spending on healthcare in chained-dollars was a whopping $35.3 billion. An all time record!
And the absolute shocker: of the $89.1 billion increase in Q4 GDP in chained-dollars, healthcare was $35.3 billion of that, or 40% of the total.
Yes, healthcare spending accounted for 40% of GDP growth in Q4!
With that we are happy to have unmasked the two great mysteries of the US economy in recent history: the first being why there is no wage growth, which as we showed previously is because all the wage growth was going to the 20% of the workforce that is supervisors and bosses. For everyone else: better luck in a next life where you too get to “supervise.”
… and now we have solved the mystery of why US households did not spend all those billions in “dropping gas price” windfalls – the answer is that they did in fact spend all this money.