The CBO and the Congressional Joint Committee on Taxation have just released its scoring of “budgetary effects of the reconciliation proposal, in combination with the effects of H.R. 3590, the Patient Protection and Affordable Care Act (PPACA), as passed by the Senate”. The link to the document is here. The CBO/JCT estimated reduction in the deficit over FY2010-2019 is $119 billion. A comparison of the impact on the budget balance against previous reconciliation measures is presented in Figure 1, below.
Figure 1: Impact on budget balance, in billions of FY2010$, for EGTRRA; for JGTRRA; and for Patient Protection and Affordable Care Act. Source: CBO, Budget and Economic Outlook: An Update (August. 2001), Table 1-4; CBO, Budget and Economic Outlook: An Update (August 2003), Table 1-8 (revenue implications only); and CBO, “H.R. 4872, Reconciliation Act of 2010: Estimate of direct spending and revenue effects for the amendment in the nature of a substitute released on March 18, 2010,” (March 18, 2010), Table 1.
Note that I used the CPI-all to convert to FY2010$. I used the CBO’s January 2010 forecasts for calendar year CPI year-on-year inflation rates for 2010 and 2011, and projections for 2012-2019, as reported in the CBO, Budget and Economic Outlook, Fiscal Years 2010-2020 (January 2010).
It is amazing how a massive tax increase will reduce the budget balance. Oh yes, and in a few years there will be this huge take over in health care but that si way in the future and will probably be changed many times before it has any effect so you can ignore that. So the bottomline is, enjoy your tax increase boys! That’s all you’re going to get for a while.
Oh yes, you will probably also get that double dip thing everyone is so anxious to see.
Take a look at last year’s W-2. Take your Social Security and Medicare “contributions” and add them together. Now add a box that says HR3590 and reduce your net imcome by that amount. Ain’t it grand!
RicardoZ: you forgot to put quotation marks around those passages you lifted from the CBO report. You and I both know the CBO are a bunch of amateur ideological bumpkins while you are an informed, trained professional economist dispassionately pursuing a simple answer to a complex problem, working hard to get it right because you know significant policy decisions are at stake.
An interesting comparison, one which I think you have done in previous posts, would be comparing this healthcare legislation to the Medicare Part D legislation. The difference in the long term impact is stunning when we actually decide to pay for a large new program.
“Oh yes, you will probably also get that double dip thing everyone is so anxious to see” says Ricardo.
Ricardo, are you attempting standard Keynesian analysis? A narrowing of the deficit by $119 bln over the next decade will cause a renewal of recession now? That $119 bln comes down to $11.9 bln per year, on average, over the period. US GDP is running at $14.5 trillion most recently. You think something less than 0.1% of GDP will tip us back into recession?
Or are you just having a propaganda-happy moment?
Haven’t we already covered this? The new taxes start right away, while the payouts don’t start for a few years. Thus, when scoring is limited to a 10 year horizon, there’s a reduction in the deficit, but it’s entirely transient. Look at the table in the CBO report. All of the on-budget deficit reductions are prior to 2016. Even the narrowing of the deficit increases in 2018 and 2019 are suspect; from what I’ve read, they depend on changes to Medicare benefits that will be politically hard to stick to when the time comes.
This is just politicians who know the rules the CBO uses to score legislation gaming the system to produce a score favorable to their preferred policy. The $119 billion figure shouldn’t be taken as evidence of anything.
Thank you for wonderfully illustrating how the current administration has made the gaming of the CBO scoring rules into an art form. It shows the value of having a former CBO director on staff, helping to shape policy.
To say the healthcare reform will pay for itself is an outrageous lie. Tax increases are needed to correct the huge imbalances that are built into current entitlements. Part of them are being stolen to pay for another increase in health care spending. Mankiw has the best analogy – a terribly obese person promises to reduce calorie intake in the future in order to ‘pay’ for an additional piece of pie he wants right now.
We have all become desensitized…numbed to the constant flow of the political machine. Think about what is happening – Our government is enacting legislation that a majority of Americans do not want. Instead of casting votes based on their constituency, congress resorts to an intense public relations campaign to convince the American voter that government knows best.
Democrats are quick to blame republicans for delaying passage of the health bill. However, democrats hold majorities in both houses of congress, and had a philibuster proof senate for a time.
If this is such a great bill for America then why must democrats resort to bribing their own party to move closer to passage? Democrats don’t need a single republican vote in the House to pass the bill. They didn’t need a single republican vote in the senate to get it passed. Democrats have to bribe and initimidate members of their own party to get the votes they need. That should tells us something.
rpl has it right, the $119B is meaningless. It’s just another widget of output from the misinformation machine.
I eagerly await Dr. Chinn’s updating of the above chart with the numbers provided in response to possible (though I would say probable) policy changes: http://www.cbo.gov/ftpdocs/113xx/doc11376/RyanLtrhr4872.pdf
The massive tax bill passed. This is a supply side disaster. Stock futures are down over 100 points premarket. Hold on to your seats. This is not going to be a fun ride.
Evidence suggests that not many people agree with you – the market closed up 0.5% over its previous close.
How about talking about total health care costs.
The HHS CMS actuary projects the Senate bill will increase total health care spending in 2019 from 20.8% to 20.9%.
I haven’t seen anyone make a convincing argument that the reason US health care costs are out of control is the out of control cost increases in primary care. Instead the claim is the cost drivers are the high tech critical care and advanced lifesaving procedures.
Yet, the first impact we are told we will see are long waits for primary care, which suggests one of two conditions:
1) people have a desperate desire to pay a copay, wait for an appointment, have a doctor stick a finger or stick inside them, and then tell them “lose weight and exercise more”.
2) people have real medical complaints but they can’t get a doctor appointment because they have no insurance and thus no doctor will add them to their patient list, they don’t want to wait at an ER and pay big bucks to see a doc, so they wait and see if the problem goes away, figuring that the bill for a really expensive ER visit will cost them the same as a “cheap” visit because they will get more charity/government assistance the more expensive it is.
If the ER visits that are only partially paid for and thus subsidized are replaced by twice as many regular visits that are paid for by subsidized insurance, will costs go up? Three times; four times? If primary docs are paid 10% more, and most people can pay because they have insurance, will more docs go into primary care to keep wait times the same? 20% more?
Are the models used by the actuary valid? Who knows for sure, but I assume they have the data for falling rates of insurance over the past several decades and the rising number getting Medicaid and Medicare to feed into the models so cost projections can be made for the two cases of doing nothing and five years of sharp increase in the number of insured.
If you argue that costs as a share of GDP will sharply increase contrary to the actuary forecast, then explain why. Will it be because people will be taking time out of life to have fingers stuck up their ass and being told they have been bad, as if the Monty Python “abuse” skit explains why people go to their doc? Or will it be because people who are dying today for lack of access to health care are going to live at a huge cost increase to society without making any contribution in return?