Obamacare costs more than advertised, double-counting edition
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
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313 comments Add your comment
MarkV
May 2nd, 2012
11:16 pm
md @11:05 pm
“You yourself have mixed up the concepts…..one sentence it’s “should have healthcare”, and the next it’s “access to healthcare”…….they are not the same.”
I have not mixed up concepts. In the first instance “should have health care” is my opinion of the general moral imperative in any civilized society. The second, “access to health care,” is my the interpretation of the fundamental values of this country regarding the rights as expressed in the Declaration, and of the opinion of the authors and signatories that the government is instituted to secure such a right.
Love me some Reagan
May 2nd, 2012
11:18 pm
“why else could he have banned from another column?”
Stupidity for starters
Get Real
May 2nd, 2012
11:28 pm
Banned from Bookman’s blog should be considered a badge of honor…
fair and balanced
May 3rd, 2012
12:29 am
According to Mr. M ichael Smith when a Republican president forces the insured and hospitals to cover the costs of the uninsured , they are being “humanitarian” but if a Democrat forces people to buy insurance and pay for their emergency medical care the Democrats are being socialists. something is half a–ed backwards about that view point.
captguitarman
May 3rd, 2012
1:14 am
Yes, Obamacare will turn out to be the Mother of All Entitlements. The cost estimates are no where near accurate, and purposefully so, and the creative accounting just exacerbates the problem. The Dems passed this hugely unpopular bill by a gnat’s hair in the depths of the Great Recession — and for one reason — because they could, knowing that this chance would never come again. With Social Security and Medicare already heading directly toward insolvency, they passed it — and they passed it so quickly, using so many back room deals, bribes, hand shakes, etc. they don’t even know what is in it. But even so, they knew it was one of the worst pieces of legislation ever concieved by Congress, so they carefully backloaded the “difficult” provisions so that they would not kick in until after the 2012 election. Once those provisions kick in, and as Nancy Pelosi prophesied, we all find out what is really in this bill, it could have a long-reaching negative effect on the Dems, much like the Great Depression did when Hoover was president – which created a Dem majority in Congress for forty years. The SCOTUS would acutally be doing Obama and the Dems a favor, along with all the rest of us, by de-railing this bill. As you may have noted, Obama and the Dems never talk about it, brag about it, point to it. They know that its contents could be their undoing for many years to come.
greg
May 3rd, 2012
7:16 am
Can’t wait for my health care run like the Post Office and tag depts. ASPIRIN ??
seabeau
May 3rd, 2012
8:08 am
I say “A Plague ON BOTH OF THEIR HOUSES”. Support a State Called National Constitutional Convention, to curb the excesses of the Federal Government.
sircharles
May 3rd, 2012
8:22 am
All comments are important here. Democrates or Republicians don’t matter because they both work behind doors to make us all responsible for bills they write and approve on the House Floor. We think because we have name ourselves a democrate or republician we are doing something. No matter which side you take, you are merely making it easy for them to help you spend your tax dollars to make them more rich and make it appear that they are doing something for us….they are not! We all need some type of health care insurance; it may save your life. All of these congressmen get health care and retirement pay for the rest of their lives, including their families and what do we get? Its time we show that we too, have a stake in this world we live in and we should get the same treatments they do. We all should push this issue if nothing else!
GT
May 3rd, 2012
8:32 am
Clean it all up. The accounting distracts from the real problems. In the Reagan administration the Republicans rode the S&L crisis in ,off book accounting, till it was a tsunami that was too big to ignore. They were preaching austerity and instead of fixing an embarrassing problem early and saving the country huge money, they left bad S&Ls in operation and the cancer got terminal. In the private sector they call this cooking the books, and like MCI people, go to jail for “claiming all is well”, when bombs are going off. Wall Street did the same head turn in the Bush administration. Very much like the S&L crisis they had investors and money managers over there heads, selling and managing stuff that the government and the private sector were clueless on, more less the investors, ignoring it until one day you are a mile under water looking at fish. The guy next door is beating his wife but we don’t call the police and he eventually kills the woman.
Now they want the health problem to go away the same way. We are paying for this right now, unless we start having dead bodies, not allowed treatment, lined up in front of Grady Hospital and we are paying for it at the premium price of today’s out of control medical industry. Only when it reached the Supreme Court where a more factual conversation was triggered, did the right even acknowledge they need to have something done about the problem. The sad thing is this is about the only area that honest conversation is held any more, in a court of law under oath. If the Wall Street Journal were to discover the cure of cancer and it would have to give the left credit, a lot of people in this country would die, because it would never go to press. The owner of this once fine paper, may very well find himself in jail the next year or so, but your are spellbound by his work, because it justifies your selfishness and lack of initiative.
killerj
May 3rd, 2012
8:33 am
We the people can be like Greece,give me some tar & feathers I want to have some fun!
GT
May 3rd, 2012
8:54 am
Wall Street helped Greece along the way selling them derivatives that were worthless. They were going to lower their interest rate by 90%, didn’t work. Jefferson County took the same ride. Both times huge bonuses were paid for nothing except stealing, to investment bankers who then complained about having to pay taxes off their stolen money. This is the stuff the Wall Street Journal use to write about before it was bought by Murdock and turned into the National Enquirer feeding red meat to mobsters.
fair and balanced
May 3rd, 2012
9:19 pm
All I got out of Kyle’s article is that he was reporting an article in Rupert Mordoch’s rag sheet as being fact with no investigation . Then he gets his anti-Obama dig in in the last sentence based on unsupported facts from two biased sources as reported by someone else- fair and balanced reporting or just political rhetoric?????
Joe Biden
May 3rd, 2012
9:48 pm
Perhaps if the readers want the truth about Mr. blahaus’ unsubstaiated hack job, they should read the following article:
http://www.washingtonpost.com/blogs/ezra-klein/post/the-weird-baseline-obamacares-opponents-are-using/2012/04/10/gIQAu3de8S_blog.html
It seems Mr. Blahaus assumes that currently their is no deficit in medicare and uses that as an incorrect baseline.
“”"”But to get that answer, you have to abandon the idea that the right way to score a bill is to see if more money is coming in then going out. That’s what Blahous has done here. But no one is interested in actually moving to that kind of a baseline. That baseline would mean neither Medicare nor Social Security’s looming fiscal challenges actually add to the deficit. That baseline would mean the “Obama deficits” are quite small. That baseline would mean Paul Ryan’s budget is “double counting.Lots of the Affordable Care Act’s skeptics are trumpeting the Blahous study. But none of them actually use that baseline. Nor do they plan to switch over to it. And that means they don’t really believe the study.”"”"
“The Bizarre Baseline Games You Need to Play to make Obamacare Increase the Deficit”"
Posted by Ezra Kleinat 03:01 PM ET, 04/10/2012