So, the CBO today, in surveying the success of the American Recovery and Re-investment Act (ARRA,. or as we call it, “the stimulus”, makes the following claim:
Economic output and employment in the spring and summer of 2009 were lower than CBO had projected at the beginning of the year. But in CBO’s judgment, that outcome reflects greater-than-projected weakness in the underlying economy rather than lower-than-expected effects of the ARRA.
It’s kind of hard to argue with that kind of “judgment”. Your “judgment” may vary, of course.
Not that it matters, because neither you, nor the CBO, have the math to back it up.
Actually, it isn’t that hard. And the Democrats demonstrate how to do it in the House Health Care bill. James C. Capretta explains:
For starters, the gross cost of expanded Medicaid coverage and a new entitlement to subsidies for health insurance is much higher than Democrats are suggesting, according to the cost estimate released yesterday by the Congressional Budget Office (CBO). The Democrats report a lower number by netting out the taxes some individuals pay when they don’t enroll in insurance as well as the tax payments from employers who choose to “pay” rather than “play.” But that accounting confuses tax increases with spending reduction. The gross spending increase from the entitlement expansions in the revised House bill is $1.055 trillion over ten years, not $894 billion.
Remember, this is about what it will cost taxpayers. And netting out those who “pay” doesn’t lessen the cost or necessarily mean the revenue collected will go toward paying for this expanded health care.
In addition, as I noted previously, House Democrats have conveniently decided to take the so-called “doc fix” out of the larger health-care bill and pass it as a standalone measure, at a cost of $250 billion over ten years. The House health-care bill is bursting with other Medicare-related provisions. What could possibly justify separate accounting for the physician fee fix? In fact, there is no justification, other than budgetary smoke and mirrors. House leaders are splitting the costs of their scheme into two bills and pretending that this maneuver somehow brings down the overall cost to taxpayers. It doesn’t. In reality, House Democrats are still planning to spend $250 billion on Medicare physician fees, and that should be made clear in any honest accounting of what’s afoot here.
So a quarter of a trillion dollars in cost is going to be excluded from the pending health care bill and passed separately. This defines the terms “smoke and mirrors” when it comes to the real cost of this “reform”. And you can count on Democrats using every little procedural and legislative trick in the book to make this appear to be something it isn’t from a cost stand point – as demonstrated by this particular exclusion from the larger bill. This is, along with global warming, is one of the biggest con jobs ever foisted upon a people.
Finally, there’s the other spending in the health-care plan. There’s loads of it. Higher Medicaid matching funds to buy off selected governors. A new program aimed at encouraging more physicians to enter primary care. Prevention spending. And apparently just about anything else House Democrats could think of to spend taxpayers’ money on. When it’s all racked up, these programs cost $230 billion over a decade. And that’s not even including the extra spending on Medicare drug coverage, which is obscured in CBO’s accounting by provisions which allow the government to set payment rates for certain products.
The 900 billion that President Obama set as an upper limit that would not add a “dime to the deficit” isn’t even close to being met. The cost curve and the deficit curve, as demonstrated above, will definitely go up. But there’s political cover here because the CBO has scored this bill under the 900 billion “won’t add to the deficit” threshold. Of course the CBO can’t score a separate bill that hasn’t been written yet (“doc fix”) nor can it add it to the bill it just scored. And, of course, the CBO estimate for 10 years assumes the legislation will be enacted precisely as it is written and remain unchanged for those 10 years – and we know that won’t happen as well.
But that won’t stop Obama and the Dems from claiming they’ve met the goal of not adding to the deficit when this monstrosity passes. Just hide and watch.
And they’ll also claim they have the revenue to pay for all of this:
On the tax side, Democrats are planning to saddle those with incomes exceeding $500,000 per year with a new 5.4 percent surtax. That would raise $461 billion over a decade, according to the Joint Tax Committee. But there’s also the penalty tax imposed on individuals who don’t sign up for health insurance. That raises $33 billion There’s also the employer “pay or play” mandate, which brings in $135 billion. And finally, there are the taxes on medical device manufacturers and many others. These provisions raise an additional $100 billion over a decade. All in, therefore, House Democrats want to raise taxes on Americans by $725 billion over the period 2010 to 2019 to partially pay for their health-care scheme.
Again, the assumption is that all of these will remain constant revenue streams. Of course, they won’t. The rich will find a way to avoid the tax eventually as will individuals taxed for not getting insurance. And employers will certainly find a way to avoid the penalty of “pay or play”. Plus, I’d be willing to bet that medical device manufactures and other providers will eventually be exempted from their tax when a outcry is heard from those who benefit from their products that the cost is too high. While these revenue streams won’t dry up, common sense says they will be vastly reduced.
And that leave them with what? It leaves them with little choice but to do what everyone has said they’ll be forced to do:
The Democrats close the remaining gap (excluding the physician fee spending) by cutting Medicare and Medicaid spending by about $550 billion over ten years and starting up a new, budget-busting long-term care program that brings in $72 billion in excess premiums in its early years.
The plan is $550 billion in cuts over 10 years. The reality, because the other revenue streams will begin to dry up, will be much higher.
That reality will eventually mean what as costs spiral upward alarmingly?
And who stands the biggest chance of becoming the victim of that rationing?
Those who use the most health care.
And as a demographic, who are they?
“Death panels” anyone?
And the Politico presents that little nugget this way:
The public insurance option would typically charge higher premiums than private plans available in the exchange, according to the Congressional Budget Office analysis of the House bill.
That surprising conclusion raises doubts about Democratic promises that a government-run insurance plan would provide a lower-cost alternative to consumers. At the same time, it calls into question Republican charges that the plan amounts to government takeover of health insurance — because only 6 million people would enroll in the plan, according to the CBO.
Nonsense. As has been pointed out any number of times, it depends on how robust the public option is, how it is configured and whether or not it uses public money. If, for instance, it was structured as some would like – Medicare – there’s no question that what the GOP charges would be true. And, this is the House bill before the vote. What I think is may happen is this version of a “public option” may be in there as a place holder to get the bill passed out of the House with the idea that a more robust version will be added during the markup with the Senate version (assuming it gets passed). CBO has most likely scored this particular House version properly for now but don’t believe for a second that ends this.
In this fight, every trick in the book is being used, and if you believe this is the final version of the public option, I have some ocean front property in Kansas in which you may be interested.
This isn’t about a sales job, folks. It’s about a con job.
Which lies? Well in this case I’m talking about the lie that cap-and-trade will be a green job bonanza and an overall job producer and that it will stimulate the economy. Not so says the CBO:
So, instead of stimulating economic growth, it will slow it and instead of creating net jobs, it will be a job killer. Tell me again how that’s a “good thing” in a recession?
A House-passed bill that targets climate change through a cap-and-trade system of pollution credits would slow the nation’s economic growth slightly over the next few decades and would create “significant” job losses fr-om fossil fuel industries as the country shifts to renewable energy, the head of the Congressional Budget Office told a Senate energy panel Wednesday.
CBO Director Douglas W. Elmendorf emphasized that his estimates contained significant uncertainties and “do not include any benefits from averting climate change,” but his message nevertheless contrasted sharply with those of President Obama and congressional Democratic leaders, who have suggested that a cap on carbon emissions would help revive the U.S. economy.
How much will it slow the economy? Elmendorf’s estimates:
Elmendorf testified before the Senate Energy and Natural Resources Committee that the cap-and-trade provisions of the House bill — in which emitters of greenhouse gases would be able to buy and sell pollution credits — would cut the nation’s gross domestic product by 0.25 to 0.75 percent in 2020 compared with “what it would otherwise have been,” and by 1 to 3.5 percent in 2050.
That in the face of growing skepticism over the science supporting the premise that a) man is causing the climate change problem and b) that man can actually “change” nature’s direction in that regard.
But that doesn’t matter. Reps Waxman and Markey have decided that it is necessary regardless of the science, cost or what you want. They have a planet to save you see and it’s all our fault we’re in the situation we’re in now:
“The harsh reality is that America’s global warming and energy challenges are just too important for us to keep mailing it in by not enacting a comprehensive energy and global warming bill.”
So they plan on passing this tax which will slow growth, increase joblessness and impact most those who can afford it the least. Why would they concern themselves with that when the possibility exists they might be able to save a couple of polar bears.
Congress’s approval ratings effectively reflect their priorities – and as you can tell, constituents have figured out their priorities have nothing to do with the needs of constituents or the nation.
The Washington Post’s “Capitol Briefing” breathlessly announces:
A health-care reform bill drafted by the Senate Finance Committee would expand health coverage to nearly 30 million Americans who currently lack insurance and would meet President Obama’s goal of reducing the federal budget deficit by 2019, the nonpartisan Congressional Budget Office said Wednesday.
The bill would cost $829 billion over the next decade, but would more than offset that cost by slicing hundreds of billions from government health programs such as Medicare and by imposing a 40 percent excise tax on high-cost insurance policies starting in 2013.
All told, the package would slice $81 billion from projected budget deficits over the next 10 years, the CBO said, and continue to reduce deficits well into the future.
That, of course means:
And the CBO report lends a huge political boost to the Finance Committee’s work: distinguishing it as the only one of five bills drafted by various congressional committees that meets every important test established by President Obama and key Democratic leaders.
– It would cost less than $900 billion over the next decade;
– It would vastly expand coverage; and
– It would keep Obama’s pledge that health reform will not increase budget deficits by “one dime” now or in the future.
Whooo hooo! Happy days are here again!
A couple of things to remember: In 1967, official estimates said Medicare would cost $12 billion in 1990. The actual price was $110 billion. And it and Medicaid now have about 50 trillion in unfunded future obligations. Secondly, the reason it doesn’t add to the deficit is it cuts Medicare and will force businesses to either pay an excise tax or drastically cut benefits for those who have what the elite have determined are “Cadillac” plans. Of course what that means is if you like your plan, you can keep it, but your no longer going to like your plan (because it could cost you up to 40% plus more to maintain that plan).
And then there’s this: I thought the whole stated purpose of this “reform” was to ensure the uninsured were insured. Yet the CBO report says:
By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants).
So 16 million US citizens remain uninsured. But fear not – CBO has figured that into the equation as a revenue raiser:
… penalty payments by uninsured individuals, which would amount to $4 billion;
Not to mention you could be spending a year in jail as well.
And those unfair “Cadillac plans” will add to that revenue stream as well (except, apparently, if it is a union plan):
….penalty payments by employers whose workers received subsidies via the exchanges, which would total $23 billion;
And here’s what to be really careful of when assessing this boondoggle that still leaves people uninsured (but does provide yet another law to put people in jail):
The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments. As a result, CBO estimates that of the $6 billion in federal funds that would be made available, about $3 billion would be spent over the 2010–2019 period.
As the CBO once said on its initial scoring, this bill would have to run, unchanged, for 10 years for it to unfold, cost wise, as they’re saying it will unfold. That means co-ops, not the public option.
If the public option is included, all the savings supposedly found in this bill go out the window and costs skyrocket. And Nancy Pelosi and Harry Reid say that the final bill will have a public option.
Yes those party poopers at the Congressional Budget Office are at it again. This time they’ve found the Obama claim that “seniors won’t see any of their Medicare benefits cut under the planned health care reforms” to be, well, not true.
The head of the nonpartisan Congressional Budget Office, Douglas Elmendorf, told senators Tuesday that seniors in Medicare’s managed care plans would see reduced benefits under a bill in the Finance Committee.
The bill would cut payments to the Medicare Advantage plans by more than $100 billion over 10 years.
Elmendorf said the changes would reduce the extra benefits that would be made available to beneficiaries.
My guess is Doug Elmendorf will probably not make the White House Christmas list this year.
There are a number of people dancing in the street because there’s finally a bill in existence that the CBO says will reduce the deficit. Not by much, but that’s really irrelevant – it does the job that meets one of President Obama’s primary goals.
Of course the plan, authored by Sen. Max Baucus, has also come under fire from both the right and left for various aspects each doesn’t like. But that CBO endorsement, well, they’re pretty happy about that.
However, a close examination of that endorsement should warn everyone with an understanding of politicians and Congressional history off of the plan.
Let me explain. While the CBO does indeed say this plan will reduce the deficit, it makes it very clear that such a reduction is contingent upon some very unlikely happenstance.
[T]he Chairman’s proposal would reduce the federal deficit by $16 billion in 2019, CBO and JCT estimate. After that, the added revenues and cost savings are projected to grow more rapidly than the cost of the coverage expansion. Consequently, CBO expects that the proposal, if enacted, would reduce federal budget deficits over the ensuing decade relative to those projected under current law, with a total effect during that decade that is in a broad range around one-half percent of GDP….
Now that which is very, very unlikely:
These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments. The projected savings for the Chairman’s proposal reflect the cumulative impact of a number of specifications that would constrain payment rates for providers of Medicare services. The long-term budgetary impact could be quite different if those provisions were ultimately changed or not fully implemented.
The Baucus plan, just like the House plan, derives the majority of its “savings” in cuts in Medicare spending. However, as Peter Suderman at Reason’s Hit & Run explains, the likelyhood of those cuts ever being made, at least to the point necessary to reduce the deficit, is poor at best. Why?
Because of the mechanism the bill uses to make them:
It’s true that the Baucus plan, which creates a commission to figure out how to cut Medicare costs, sets up a slightly more robust framework for cost-cutting than currently exists. But that commission still only gets to make recommendations, and Congress still has the power to block them.
To review – in order to meet the CBO numbers, the bill must be enacted and remain unmodified for two decades. And, Congress must enact the Medicare cuts to the level required of the bill to achieve those reductions.
I ask you – what would you bet on either of those things actually ever coming to pass?
With all the “new” figures out there concerning deficit and debt numbers, plus the old, it’s rather confusing as to which can be believed. Greg Mankiw cites the Concord Coalition who makes the case that perhaps neither the CBO or the White House have their finger on the real deficit numbers:
The Concord Baseline makes some key assumption changes to the CBO baseline. CBO is required to assume that congressional appropriations continue increasing only at the rate of inflation for the 10 year baseline. They also extend emergency supplemental at their “current” level plus inflation over the duration of the baseline. For tax legislation, they assume current law will govern–so if there are tax cuts that have sunsets (as the 2001 and 2003 tax cuts have), CBO is required to project revenues assuming the tax cuts expire as written in the legislation. They also project economic growth in a very conservative fashion–they do not try to anticipate major changes in the economy, either recessions or accelerations.
The Concord Coalition takes the CBO baseline and adjusts it to assume appropriations increase at the same rate as the economy (GDP growth). This increase is closer to the historical average rate of increase. We also assume that supplemental appropriations do not continue indefinitely. For recent appropriations for the wars in Iraq and Afghanistan, we include realistic estimates from CBO about how much will be spent under a scenario where troop levels slowly decrease to about one-third of their level at the time of the estimate. For taxes, we assume that all of the major tax cuts will be extended beyond 2010. We also assume the one-year patches to the Alternative Minimum Tax will continue to be enacted, holding the level of taxpayers hit by the tax roughly constant throughout the baseline period. Finally, we include a calculation for the increased debt service (interest payments) that these policies would cause by their increasing the deficit. We do not make any changes to CBO’s economic assumptions.
With those seemingly more complete assumptions and numbers, the Coalition finds that we’re most likely looking at much higher deficits over the next 10 years than either CBO or OMB are projecting:
As you can see, the Concord Coalition believes their projections to come from a more “plausible” set of baseline assumptions than either CBO and OMB. If so, and reading the description above, I see nothing that is implausible in their assumptions, we’re seeing the deficits understated by almost half.
Another in a long line of reasons not to be enacting any new and huge entitlement or cap-and-trade. In fact, the business of Congress right now should be a long and detailed look at how it can cut entitlement spending and scale back government.
But they’re not. Instead they’re busily engaged in expanding multi-generational taxation without representation. Didn’t we once fight a revolution over that?
Back in March of this year, when both the White House and the CBO put out their budget deficit numbers, we were told that the CBO simply had it wrong and were much too pessimistic about the 10 year budget that the Obama administration was touting.
The head of the White House’s Office of Management and Budget, Peter Orszag, had this to say at the time:
White House budget chief Peter Orszag said that CBO’s long-range economic projections are more pessimistic than those of the White House, private economists and the Federal Reserve and that he remained confident that Obama’s budget, if enacted, would produce smaller deficits.
Even so, Orszag acknowledged that if the CBO projections prove accurate, Obama’s budget would produce deficits that could not be sustained.
“Deficits in the, let’s say, 5 percent of GDP range would lead to rising debt-to-GDP ratios that would ultimately not be sustainable,” Orszag told reporters.
Deficits so big put upward pressure on interest rates as the government offers more attractive interest rates to attract borrowers.
“I think deficits of 5 percent (of GDP) are unsupportable,” said economist Mark Zandi, chief economist at Moody’s Economy.com. “It will lead to higher interest rates to the point where it will force policymakers to make changes.”
Of course, today the White House’s OMB acknowledged that, in fact, the CBO’s estimates in March were indeed correct. OMB has adjusted its deficit estimate up 2 trillion dollars to over 9 trillion. That means that in 2019, the deficit will be 6% of GDP – or to quote Peter Orszag, “unsustainable“.
What does “unsustainable” mean to you, and how does one address such a problem?
Well, it certainly isn’t addressed with increased spending, new entitlements and more debt, is it?
Is there any wonder a sizable majority thinks the country is still on the wrong track despite a change of administrations?
In case the politicians still don’t get it (and after this morning’s awesomely dumb move by Republicans, they need to be reminded as well) — It’s the spending, stupid!
Right about what? Well, in this case, the 10 year budget estimate. Remember this chart first seen in March?
This was the difference between the Obama administration and the CBO estimate based on the Obama administration’s 10 year budget. At the time the CBO said that the budget estimate would raise the debt by 9.1 trillion dollars. The Obama administration said, at the time, that the CBO was wrong.
Quietly, at 7pm this last Friday night, the Obama administration raised its estimate of what their budget would add to the debt by the 2 trillion the CBO had said was always there. What that means for the chart is you can ignore the pastel red bars – the Obama estimate – in favor of the dark red bars.
The administration claims that its change in the estimate is due to things which have apparently changed since March, but of which they were just unaware might happen:
Obama administration officials have concluded the economy was much worse last year — and tax revenues much lower — than they had initially assumed, which means that the estimated budget deficit will increase from $7 trillion to about $9 trillion over the coming decade.
This has to give you all sorts of confidence in other White House cost estimates not to mention their denials of the CBO’s accuracy on things like cap-and-trade and health care in favor of their own.
They didn’t know enough to make an accurate estimate. But the CBO did.
So when the administration says that health care reform will save money and the CBO says it will “bend the cost curve upward”, what should this example lead us to believe?
The cost curve is going to bend upward.
UPDATE: James Pethokoukis thinks this is a prelude to CBO kicking their estimate up a notch:
Expect the CBO to also crank up its forecast, which will be higher than the administration’s. Also, this is further evidence that the common wisdom that people don’t care about budget deficits (no matter what the polls say) is wrong. C’mon, leaking such news on a late Friday afternoon?