NCPA - National Center for Policy Analysis

Health Reform Will Spend More, Tax More and Reduce the Deficit Less than Previously Thought

August 2, 2012

On separate occasions, the Congressional Budget Office (CBO) has given different estimates as to how much President Obama's health care policy will end up spending, taxing and saving taxpayer dollars. To get an accurate picture of how three reports differ, estimates for their years of overlap (2013-2019) were compared, along with their 10 year projections, says Avik Roy, a senior fellow at the Manhattan Institute.

Regarding spending, projections for the health care law have increased in each report.

  • In the 2010 report, the cost of spending on new programs was estimated at $929 billion with a 10 year cost of $944 billion.
  • However, in the 2011 report, the cost rose to $956 billion with a 10 year cost of $1,442 billion.
  • This increasing trend continued in the 2012 report: the initial cost of new programs came out to $1,053 billion with a 10 year cost of $1,856 billion.

Similarly, the taxes to fund Obama's health care plan have steadily risen as well throughout the three CBO reports.

  • In 2010, the 10 year tax increases came out to around $631 billion.
  • This figure increased substantially in the 2011 report, climbing to a 10 year tax increase of approximately $968 billion.
  • Finally, in the 2012 report, these tax estimates increased further to $1,221 billion.

Crucially, much of the added costs (and necessitated supplementary tax dollars) are due to the failure of the Obama administration to follow through on its originally proposed cuts to Medicare. While these cuts were meant to generate substantial savings to fund the rest of the health care reform law, the federal government has failed to follow through, resulting in a greater tax burden and larger deficits.

The argument that the new health care law will reduce the deficit has also been undermined by the CBO's newest projections.

  • Between 2013 and 2019, the first CBO report showed a $140 billion deficit reduction.
  • The latest report has changed the deficit reduction to only $4 billion for those same years.
  • While the 10 year total deficit reduction increased from $143 billion in the 2010 report to $210 billion in the 2011 report, it subsequently dropped to $109 billion in the 2012 report.

Source: Avik Roy, "CBO: Obamacare Will Spend More, Tax More and Reduce the Deficit Less than We Previously Thought," Forbes, July 27, 2012.

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