As RomneyCare Moves Toward Probable Final Passage, Douglas Holtz-Eakin Says 463+123+114 = 562
Yep. It's twue! It's twue! BUT, DOUG, 463+123+114 DOES NOT EQUAL 562!!!! Has the New York Times no arithmeticians? Has the American Action Forum no calculators? Oh, the problems with writing your op-eds too quickly...
Douglas Holtz-Eakin:
Op-Ed Contributor - The Real Arithmetic of Health Care Reform: ON Thursday, the Congressional Budget Office reported that, if enacted, the latest health care reform legislation would, over the next 10 years... lower federal deficits by $138 billion. In other words, a bill that would set up two new entitlement spending programs.... Could this really be true?... The answer, unfortunately, is that the budget office is required to take written legislation at face value and not second-guess the plausibility of what it is handed. So fantasy in, fantasy out. In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges: The health care reform legislation would raise, not lower, federal deficits, by $562 billion....
Removing the unrealistic annual Medicare savings ($463 billion) and the stolen annual revenues from Social Security and long-term care insurance ($123 billion), and adding in the annual spending that so far is not accounted for ($114 billion) quickly generates additional deficits of $562 billion in the first 10 years...
Peter Orszag has two replies: http://www.whitehouse.gov/omb/blog/10/03/18/Responsible-and-Paid-For/ and: http://www.whitehouse.gov/omb/blog/10/03/21/Fiscal-Realities/. I think Peter is less wrong than Doug.
What do I think? I think the Medicare cuts dominate. Over the first ten years the net effects of the bill on the deficit are not a big deal. Thereafter, the swings in Medicare spending overwhelm the net impact of everything else. If any appreciable fraction of the Medicare spending growth rate reductions written into the bill come to pass, it is a huge present-value deficit reducer. I think that they will. So I view this bill as a severe long-run reduction in Medicare spending growth--through cutbacks to provider incomes, administrative changes that will hopefully get more care for the money, and increased cost-sharing--made palatable to a Democratic majority by the insurance reforms and the exchanges.
Doug is eager to carry water for his political masters, and so he soft-pedals his argument on that point--spending almost all of it on irrelevancies:
Gimmick No. 1... (i) the first 10 years of revenue would be used to pay for only 6 years of spending.... (ii)nTo operate the new programs over the first 10 years, future Congresses would need to vote for $114 billion in additional annual... discretionary spending.... (iii) $70 billion in premiums expected to be raised in the first 10 years for the legislation’s new long-term health care insurance program. This money is counted as deficit reduction, but the benefits it is intended to finance are assumed not to materialize in the first 10 years... (iv) corporations deposit $8 billion in higher estimated tax payments in 2014... shift[ing] dollars from 2015 to 2014... (v) $53 billion in anticipated higher Social Security taxes... offset health care spending... workers have higher wages... qualify for increased Social Security benefits... the extra money raised from payroll taxes is already spoken for.... (vi) A government takeover of all federally financed student loans — which obviously has nothing to do with health care — is rolled into the bill because it is expected to generate $19 billion in deficit reduction...
As I see it, Eakin's (vi) is wrong--the student loan provision is a real deficit-reducer, and is not a gimmick. Eakin's (v) is wrong too--some but not all of the increased Social Security taxes are associated with higher Social Security benefits in out-years. Eakin's (iii) is wrong as well--the $70 billion is real, and the extra costs of long-term care after year 10 are more than paid for by reductions in Medicare spending growth. (i), (ii), and (iv) are properly classified as gimmicks--but they are small change in the context of the overall federal budget, and attention should not be focused on.
What does deserve attention is:
[T]the legislation proposes to trim $463 billion from Medicare spending and use it to finance insurance subsidies. But Medicare is already bleeding red ink, and the health care bill has no reforms that would enable the program to operate more cheaply in the future. Instead, Congress is likely to continue to regularly override scheduled cuts in payments to Medicare doctors and other providers...
As somebody-or-other said, this is budget nihilism: if we assume that congress will reverse all actions it takes to reduce the deficit and yet require that congress only pass bills that reduce the deficit nevertheless, we are asking that congress pass nothing at all. Perhaps that's what Douglas Holtz-Eakin thinks: that because we live in the Sewer of Romulus the best congress is the one that passes nothing at all. But if that is his argument, he should make it--and back it up. If that isn't his argument, he should explain why he believes that "congress is likely to continue to regularly override" the reductions in Medicare spending growth in the bill.
But he doesn't explain why he believes that "congress is likely to continue to regularly override" the reductions in Medicare spending growth in the bill. Instead, his op-ed is overwhelmingly a regurgitation of Republican talking points written by people a lot less smart, a lot less honest, and a lot less concerned with the public welfare than Douglas Holtz-Eakin is.
Ah, the perils of staying on-message to please your political masters...
