Repealing Obamacare Would Lower Federal Deficits
June 23, 2015
The Congressional Budget Office (CBO) has just released a report on the budgetary and economic effects of repealing the Affordable Care Act (ACA). Press reports reflect what CBO has reported pursuant to its scoring instructions — specifically, that relative to its scorekeeping baseline, repeal of the ACA would worsen the federal deficit but bolster the economy. An analysis of the baseline and other reporting conditions tells a different story: that repeal would both bolster the economy while also reducing the deficit.
- CBO's new inclusion of economic feedback with the score — finding that the ACA's adverse economic effects make the deficit $216 billion worse over the next decade.
- Of note, this indicates the ACA's effects have significantly worsened since CBO scored a similar repeal bill in 2011. Back then CBO projected repeal would worsen federal deficits by $62 billion from 2016-2020, relative to the baseline.
- CBO's latest report says that repealing the ACA would add roughly $800 billion in Medicare costs over ten years relative to the scorekeeping baseline.
- But repealing the ACA would not actually increase Medicare expenditures by $800 billion. Medicare was already required to spend less than this additional $800 billion prior to the ACA's passage and would similarly be required to spend less than that if the ACA were repealed. CBO's latest estimate does not permit us to know exactly how much less.
Thus, although the scorekeeping conventions require CBO to find that repealing the ACA would increase Medicare spending by roughly $800 billion, the actual figure is almost certainly below $250 billion — or, at least $550 billion lower than the directed score. Given that this total score shows repeal adding either $353 billion or $137 billion to the deficit, depending on whether economic feedback effects are included, the actual change in law under repeal would clearly reduce the deficit.
Source: John Blahaus, "Repealing Obamacare Would Lower Federal Deficits," Economics 21, June 22, 2015.
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