Surprise! Gaming CBO rules masks how healthcare reform may actually make deficit worse

December 23, 2009

[See update at bottom] A group of Republican senators, led by Jeff Sessions and Judd Gregg, are accusing the Democrats of double-counting Medicare tax hikes and spending cuts as both extending the solvency of the program and paying for expanded healthcare coverage. So they asked the CBO for its opinion. Here is the CBO’s response:

The key point is that the savings to the HI trust fund under the PPACA would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs. Trust fund accounting shows the magnitude of the savings within the trust fund, and those savings indeed improve the solvency of that fund; however, that accounting ignores the burden that would be faced by the rest of the government later in redeeming the bonds held by the trust fund. Unified budget accounting shows that the majority of the HI trust fund savings would be used to pay for other spending under the PPACA and would not enhance the ability of the government to redeem the bonds credited to the trust fund to pay for future Medicare benefits. To describe the full amount of HI trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government’s fiscal position. [Bold is mine-JP]

Me: Basically, the government is taking money out of Medicare’s Hospital Insurance trust fund, replacing it with IOUs and then spending it. But the CBO doesn’t score such intra-governmental transfers as the same sort of debt as when a Treasury bond is issued. But it is an obligation just the same. If not for this accounting quirk, the Senate health bill seemingly would be scored as increasing the budget deficit by $170 billion or so over the next decade (itself a funny number since taxes come first, then benefits) instead of cutting the deficit by $130 billion.  This is a similar shell game played by the government when it uses Social Security surpluses to mask the true depth of the budget deficit. I don’t see how supposed Dem budget hawks like Mark Warner and Kent Conrad and Evan Bayh can go along with this. This is just as bad as the shunting $250 billion in doctor payments into a different bill to hold down the official cost of ObamaCare.

The Centers Medicaid & Medicaid Services made a similar statement a couple of weeks back on Medicare funding:

The combination of lower Part A costs and higher tax revenues results in a lower Federal deficit based on budget accounting rules. However, trust fund accounting considers the same lower expenditures and additional revenues as extending the exhaustion date of the Part A trust fund. In practice, the improved Part A financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions under the PPACA) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.

UPDATE: Douglas Holtz-Eakin, a former CBO director, adds his two cents:

I read the CBO and they made the point exactly right: money can only be spent once.  The D’s are (again) trying to use dollars twice.  The first time (Bennet) amendment said they would not reduce Medicare benefits, but used medicare savings to fund subsidies.  Now they are saying they will put the money in the trust fund (and spend it on medicare) but use it to fund subsidies.  It is fundamentally dishonest.


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Fundamentally dishonest? If fundamentally means on every level, morally and ethically, as well as fiscally, then yes, it is fundamentally dishonest.

But then, what do we expect from the most honest, transparent, and ethical administration EVAH???

Don’t mark me as angry, or upset about this trampling of the Constitution by a bunch of out of control liberals. I am outraged.

Posted by Kbob in Katy, TX | Report as abusive

The only good thing I can say about this is that the Democrats own this monstrosity. When the fit hits the shan it will be they who bear the brunt of the anger of the people. I don’t think they care, but they may if they are kept out of power for a generation while more sensible and mature people try to straighten out the mess they are creating.

Posted by Jimbo | Report as abusive

Is it just as bad as not even including the trillions spent invading a country in the budget year after year? Where were all the deficit “hawks” when Bush and neo-cons genned up fake intel to spend trillion on Iraq?

Funny thing. The rightwing seem to have no qualms paying for wars and subsidizing the military-industrial complex but fight desperately against Americans getting health care.

Posted by SaltyDawg | Report as abusive

SaltyDawg, are you suggesting that Bush did it too?

Man, what a brilliant concept.

Why hasn’t anybody else thought of that?

Have you evern considered a career in politics.

With a mind like yours, the sky’s the limit.

Posted by proreason | Report as abusive

SaltyDawg, we didn’t need to hold Bush accountable. The media did that for us, because that is the job of the media. That is why freedom of the press is in the Constitution. Even the right hammered Bush about the deficit. Watch Beck, Hannity and O’Rielly from two-three years ago. They were going crazy about Bush’s spending. Now on the other Hand beside FOXNews and Talk radio, Obama gets a free pass. Do you know how many people from the AP fact checked Obamas Books….ZERO. Do you know how many fact checked Palin’s book…..Eleven. Also Bush’s biggest deficit year was 493 Billion. Obamas 1st year is 1.4 trillion. Almost a trillion over Bush’s worst year.

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