This is the Cato Daily Podcast for Friday, February 5th, 2010. I'm Caleb Brown.

Last year Americans spend a larger share of their incomes on health care than ever before.

Next year, government will spend for the first time more than half of every health care dollar spent.

Michael Cannon, director of health policy studies at the Cato Institute, says the relationship between the two is more

than coincidental.

The federal government has released its latest statistics about health care spending

in the United States and what they've found is that health care spending has now risen to 17% of gross domestic product

that is the largest share of GDP that we have ever devoted to health care in the United States.

This causes concern among a lot of people

who think we're spending too much on health care because health care costs are growing so rapidly.

This concern is valid in some ways and not valid in other ways.

First, why it's not valid.

The US spends more on health care than any other nation.

The US spends more on lots of things than any other nation.

It's because we're a wealthy nation.

And as people get wealthier, they want to spend more of their income on what economists call

luxury goods. Or I should say just not even luxury goods, normal goods. As your income rises, a

normal good is something that you want to devote more of your income toward

health care is one of those normal goods. So it is normal that we would be

spending more on health care than other nations.

Now, a larger share of our GDP, yes, our greater wealth can explain that.

And it's important to remember that there's really no right amount of GDP to be spending on health care.

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