NCPA - National Center for Policy Analysis


August 6, 2009

As ObamaCare sinks in the polls, Democrats are complaining that the critics are distorting their proposals.  But the truth is that the closer one inspects the actual details, the worse it all looks.  Today's example is the vast debt canyon that would open just beyond the 10-year window under which the bill is officially "scored" for cost purposes, says the Wall Street Journal.

The press corps has noticed the Congressional Budget Office's (CBO) estimate that the House health bill increases the deficit by $239 billion over the next decade.  But government-run health care won't turn into a pumpkin after a decade.  The underreported news is the new spending that will continue to increase well beyond the 10-year period that CBO examines, and that this blowout will overwhelm even the House Democrats' huge tax increases, Medicare spending cuts and other "pay fors," says the Journal:

  • In a July 16 letter, CBO director Douglas Elmendorf notes that the net costs of new spending will increase at more than 8 percent per year between 2019 and 2029, while new revenue would only grow at about 5 percent.
  • "In sum," he writes, "relative to current law, the proposal would probably generate substantial increases in federal budget deficits during the decade beyond the current 10-year budget window."

The House bill has changed somewhat in the meantime, but not enough to alter these numbers much, says the Journal.

While these are obviously very coarse estimates, there's also a projection of a $65 billion deficit in the 10th year -- and "deficit neutrality in the 10th year is . . . the best proxy for what will happen in the second decade."

And the CBO score almost surely understates this deficit chasm because CBO uses static revenue analysis—assuming that higher taxes won't change behavior. But long experience shows that higher rates rarely yield the revenues that they project, says the Journal.

ObamaCare's deficit hole will eventually have to be filled one way or another -- along with Medicare's unfunded liability of some $37 trillion.  That means either reaching ever-deeper into middle-class pockets with taxes, probably with a European-style value-added tax that will depress economic growth.  Or with the very restrictions on care and reimbursement that have been imposed on Medicare itself as costs exploded, says the Journal.

Source: Editorial, "ObamaCare's Real Price Tag; The funding gap is a canyon by year 10," Wall Street Journal, August 6, 2009.

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