A ‘Budget-Busting’ Law? Republicans and Democrats both misrepresent the fiscal effect of the health care law

Summary

The nonpartisan Congressional Budget Office states that repealing the health care law would worsen the federal deficit over the next 10 years — by $230 billion.

So how does the House Republican Leadership support its claim that the law itself is "budget-busting" and would add $701 billion to the deficit? And how does Democratic Rep. Nancy Pelosi justify claiming it will "save taxpayers $1.3 trillion"? Both sides are spinning shamelessly.

We judge that CBO’s projection, which is both official and nonpartisan, is the best available. But even that estimate is uncertain, as the agency itself concedes. For one thing, there is doubt about whether all of the Medicare savings in the law will actually materialize. Those reductions are supposed to offset part of the law’s new spending, but they could put too great a burden on hospitals.

Pelosi’s $1.3 trillion claim is deceptive. She’s projecting CBO’s estimate 20 years into the future, something the agency says is an imprecise and uncertain calculation. Furthermore the law raises taxes to pay for much of its new spending, so saying it "saves taxpayers" anything is misleading. Her figure is actually a reduction in the projected federal deficit.

As for the GOP’s claim that "the bill would add over $700 billion in red ink over the next decade," we judge it to be mostly bogus.

It rests largely on a claim that hundreds of billions of dollars in projected Medicare savings are being "double-counted." But CBO is simply not doing that.

The GOP’s $700 billion figure also includes more than $200 billion for a permanent "doctor fix" to prevent a cut in Medicare payments to doctors. But that is not even a part of the new law, and many Republicans endorse the "doctor fix" anyway.

The GOP claims the law will cost $115 billion to administer, but that isn’t true. CBO actually puts those costs at roughly $10 billion to $20 billion over the next 10 years.

Everything starts with repeal [washingtonpost.com]

By Charles Krauthammer
Friday, January 21, 2011

Of course, the very numbers that yield this $230 billion "deficit reduction" are phony to begin with. The CBO is required to accept every assumption, promise (of future spending cuts, for example) and chronological gimmick that Congress gives it. All the CBO then does is perform the calculation and spit out the result.


In fact, the whole Obamacare bill was gamed to produce a favorable CBO number. Most glaringly, the entitlement it creates - government-subsidized health insurance for 32 million Americans - doesn't kick in until 2014. That was deliberately designed so any projection for this decade would cover only six years of expenditures - while that same 10-year projection would capture 10 years of revenue. With 10 years of money inflow vs. six years of outflow, the result is a positive - i.e., deficit-reducing - number. Surprise.

If you think that's audacious, consider this: Obamacare does not create just one new entitlement (health insurance for everyone); it actually creates a second - long-term care insurance. With an aging population, and with long-term care becoming extraordinarily expensive, this promises to be the biggest budget buster in the history of the welfare state.

And yet, in the CBO calculation, this new entitlement to long-term care reduces the deficit over the next 10 years. By $70 billion, no less. How is this possible? By collecting premiums now, and paying out no benefits for the first 10 years. Presto: a (temporary) surplus. As former CBO director Douglas Holtz-Eakin and scholars Joseph Antos and James Capretta note, "Only in Washington could the creation of a reckless entitlement program be used as 'offset' to grease the way for another entitlement." I would note additionally that only in Washington could such a neat little swindle be titled the "CLASS Act" (for the Community Living Assistance Services and Supports Act).

That a health-care reform law of such enormous size and consequence, revolutionizing one-sixth of the U.S. economy, could be sold on such flimflammery is astonishing, even by Washington standards.

The problem is you are arguing about the wrong things.

What is more interesting is what the bill looks like from 10 to 20 years out. In which the bill is finally totally phased in. And it looks like the Armageddon.

But they are more accurate than the shennanigans that are being played in year 1-10.....which are about as accurate a Enron Finanacial Statement produced by Aurthur Anderson.

You seem to be unable to grasp accounting shennanigans....to work the numbers into something that makes sense (but only for years 1-10).

You get the government you deserve I guess.

With an aging population, and with long-term care becoming extraordinarily expensive, this promises to be the biggest budget buster in the history of the welfare state.

But they are more accurate than the shennanigans that are being played in year 1-10.....which are about as accurate a Enron Finanacial Statement produced by Aurthur Anderson.

Repealing one health care plan without having another better one ready to take its place is just as bad as ignoring the issue altogether. I don't think any of us here will have the "answers" but there's a lot of genuinely good ideas being thrown around. Why focus on how much it's projected to cost (when apparently we couldn't have projected health care costing as much as it does today 10 years ago) when we can be talking about ways to make it cost less?

Why are those mutually exclusive? Why can't Congress repeal a bad law on one hand, while talking about ways to keep costs down on the other?

Because if they repeal a "bad" law and don't replace it with anything else, then they've done nothing to address those costs. Talking about costs and ways to reduce them isn't mutually exclusive to taking action, but focusing simply on repealing the existing law - without having another one to take its place that's better - is just more can-kicking, provided we agree that something needs to be done about the costs to begin with.

At the moment of repeal it's true there is nothing to address the rising costs, but why should a bad law be allowed to continue to be on the books whilst the talking is taking place? Is a bad law simply that much better then 'nothing' in the absence of a good law or alternate solution?