I’ve written many times about the budgeting/accounting/scoring gimmicks that allowed Democrats to claim Obamacare would reduce federal deficits when the opposite is true. The latest piece of evidence came from Charles Blahous, an economist and trustee of the Social Security and Medicare programs who recently reported Obamacare’s “double counting” of spending cuts and tax increases means the law will actually increase deficits by $340 billion over 10 years (or about seven Buffett Rules).
Blahous, writing with former federal budget official James Capretta in today’s Wall Street Journal, explains double counting by making an analogy to Social Security:
If we generate $1 in savings within that program, then that’s $1 that Social Security can spend later. If we also claimed this same $1 to finance a new spending program, we would clearly be adding to the total federal deficit. There has long been bipartisan understanding of this aspect of Social Security, which is why Congress’s paygo rules prohibit using Social Security savings as an offset to pay for unrelated federal spending.
No such prohibition exists in the budget process against committing Medicare savings simultaneously to Medicare and to pay for a new federal program. It’s this budget loophole, unique to Medicare, that gives the health law’s spending constraints and payroll tax hikes the appearance of reducing federal deficits. But it is appearance, not reality. If you have only $1 of income and are obliged to pay a dollar each to two different recipients, then you will have to borrow another $1. This is effectively what the health law does. It authorizes far more in spending than it creates in savings.
So, perversely, the “pay-as-you-go” rules that President Obama and congressional Democrats touted as a measure of their fiscal responsibility back in 2009 are precisely what allowed them to engage in this duplicity. Blahous and Capretta explain further:
When Congress considers legislation that alters taxes or spending related to Medicare’s Hospital Insurance Trust Fund, the changes are recorded not just on the Hospital Insurance Trust Fund’s books, but also on Congress’s “pay-as-you-go” scorecard.
The “paygo” requirement is supposed to force lawmakers to find “offsets” for new tax cuts or entitlement spending, and thus protect against adding to future federal budget deficits. Putting the Medicare payroll tax hikes and spending constraints on the “pay-as-you-go” ledger was instrumental in getting the health law through Congress, because doing so fostered a widespread misperception that the law would reduce future deficits.
But the same provisions add to the Hospital Insurance Trust Fund’s reserves, which expands Medicare’s spending authority. Medicare can only pay full benefits so long as its trust fund has sufficient reserves to meet these obligations. If the trust fund has insufficient resources, then spending must be cut automatically to ensure the fund does not go into deficit. The health law’s Medicare provisions prevent these spending cuts from taking place for several more years.
It’s another reason why “paygo” rules (or lack thereof) don’t necessarily make Congress fiscally responsible (or irresponsible). What makes Congress responsible, or not, is its willingness to spend no more than it takes in.
And when Obama and Congress pass a law to take in $1, count that $1 twice, and then claim the ability to spend $2, there’s no way to spin it as fiscally responsible.
– By Kyle Wingfield