19 Mar 2010

That CBO Estimate

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Megan McArdle critiques the Congressional Budget Office’s estimate of the cost of Obamacare.

Thanks to reconciliation instructions, they needed to improve the budget impact by at least $1 billion in the sidecar. They improved it by exactly $1 billion. Which goes back to what I’ve now said several times: the CBO process has now been so thoroughly gamed that it’s useless. …

The proposed changes increase spending dramatically, most heavily concentrated in the out-years. The gross cost of the bill has risen from $875 billion to $940 billion over ten years–but almost $40 billion of that comes in 2019. The net cost has increased even more dramatically, from $624 billion to $794 billion. That’s because the excise tax has been so badly weakened. This is of dual concern: it’s a financing risk, but it also means that the one provision which had a genuine shot at “bending the cost curve” in the broader health care market has at this point, basically been gutted. Moreover, it’s hard not to believe that the reason it has been moved to 2018 is that no one really thinks it’s ever going to take effect. It’s one thing to have a period of adjustment. But a tax that takes effect in eight years is a tax so unpopular that it has little realistic chance of being allowed to stand. …

As I expected, the size of the magic asterisk–the modern equivalent of David Stockman’s infamous “savings to be named later” in the Reagan budgets–has had to be beefed up to offset the new spending. …

[A]re we really going to cut Medicare? If we’re not, this gargantuan new entitlement is going to end up costing us about $200 billion a year next decade, which even in government terms is an awful lot of money. There are offsetting taxes, but they’re either trivial or likely to be unpopular–look forward to a 4% rent increase when your landlord has to stump over the same amount for the new tax on rents. Then look forward to repeal of same.

I think this is a fiscal disaster waiting to happen. But no one on the other side cares, so I’m not sure how much point there is in saying that any more.

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One Feedback on "That CBO Estimate"

No Man

There are liars. Then, there are damned liars. And, there are accountants.

The savings will never materialize: too politically ‘expensive.’ The costs will be about six-times what they say. That is historical experience (Medicaid/medicare) for these massive, fiscal crap sandwiches.

“The health care bill will bankrupt America.” said the Massachussetts Treasurer. He knows.

This is like MAI appraisals to support overlending on real estate. MAI = “made as instructed.”

The answer was provided by our masters. The CBO’s job was to come up with 600 pages of numerical lies to cover it.



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