James Pethokoukis

Politics and policy from inside Washington

Stealing from Social Security to pay for healthcare reform

October 20, 2009

Does BaucusCare raid Social Security to pay for healthcare reform? Sure seems like, according to Andrew Biggs of AEI:

Baucus’s plan purportedly would improve the budget balance by $81 billion from 2010 through 2019, and in 2019 itself would cut the deficit by $12 billion. … CBO breaks down the Baucus plan’s budgetary effects into those occurring “on budget” (where the substantive policy changes are) and those “off budget” (meaning through the Social Security program). The Baucus plan’s on-budget provisions would reduce the ten-year budget deficit by a tiny $1 billion and in 2019 would increase borrowing by $6 billion. …

Meanwhile, the Baucus plan’s fiscal skullduggery takes place off-budget. Social Security revenues would increase by $80 billion over ten years, with an $18 billon increase in 2019 alone. Around 3 million individuals would leave employer-sponsored health coverage — which is exempt from taxes — to purchase insurance through a subsidized “exchange.” Leaving employer-sponsored coverage would raise workers’ taxable wages and thereby boost Social Security revenues. Millions more would trade a portion of their insurance benefits for higher wages to avoid a new tax on high-cost policies. By skimming the new Social Security taxes, the Baucus plan appears to significantly cut the deficit when, in truth, it balances only by the skin of its teeth.

This is perhaps the clearest example of “raiding the trust fund” on record.  …  The plan does not simply rely on existing Social Security surpluses but creates new ones to offset higher spending on health coverage. Without new Social Security revenues the plan would not balance and, if the president is to be believed, would face a presidential veto. It’s that simple: no new Social Security taxes, no new spending.

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