James Pethokoukis

Politics and policy from inside Washington

ObamaCare’s budget chicanery

Mar 9, 2010 15:43 UTC

David Brooks in the NYT outlines many of the way Democrats are trying to game the CBO budget analysis of ObamaCare:

1) There is the doc fix dodge. The legislation pretends that Congress is about to cut Medicare reimbursements by 21 percent. Everyone knows that will never happen, so over the next decade actual spending will be $300 billion higher than paper projections.

2) There is the long-term care dodge. The bill creates a $72 billion trust fund to pay for a new long-term care program. The sponsors count that money as cost-saving, even though it will eventually be paid back out when the program comes on line.

3) There is the subsidy dodge. Workers making $60,000 and in the health exchanges would receive $4,500 more in subsidies in 2016 than workers making $60,000 and not in the exchanges. There is no way future Congresses will allow that disparity to persist. Soon, everybody will get the subsidy.

4) There is the excise tax dodge. The primary cost-control mechanism and long-term revenue source for the program is the tax on high-cost plans. But Democrats aren’t willing to levy this tax for eight years. The fiscal sustainability of the whole bill rests on the naïve hope that a future Congress will have the guts to accept a trillion-dollar tax when the current Congress wouldn’t accept an increase of a few billion.

5) There is the 10-6 dodge. One of the reasons the bill appears deficit-neutral in the first decade is that it begins collecting revenue right away but doesn’t have to pay for most benefits until 2014. That’s 10 years of revenues to pay for 6 years of benefits, something unlikely to happen again unless the country agrees to go without health care for four years every decade.

6) There is the Social Security dodge. The bill uses $52 billion in higher Social Security taxes to pay for health care expansion. But if Social Security taxes pay for health care, what pays for Social Security?

Me: I have blogged about many of these dodges over the past months. They make WH claims about “bending the curve” a joke. This bill will surely cost far more than the CBO anticipates.


just like every other Washington program.

Senator Supply-Side?

Mar 9, 2010 14:59 UTC

Former Bear Stearns economist David Malpass is considering a run for US Senate in New York. If you believe in the wonder-working power of lower taxes, economic freedom and entrepreneurship, then you would probably find his candidacy an interesting one. The Washington Consensus, of course, is that spending cannot be cut so taxes must rise dramatically. Thus, Malpass would be a contrarian voice inside the Beltway.


Hopefully New York voters will embrace Malpass for his intelligence, as his style is pretty dry. Obama is the poster child for style over substance so maybe his political implosion will spark people to look a little deeper. It’s hard to have hope for New York voters who embraced Hillary Clinton, a carpet bagging phony.

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US debt approaches danger zone

Mar 9, 2010 14:18 UTC

The CBO analysis of the Obama budget finds that America’s debt-to-GDP ratio will hit 90 percent in 2020. Uh-oh. Research by Ken Rogoff and Carmen Reinhart finds that level to be problematic:

We study economic growth and inflation at different levels of government and external debt. … Our main findings are: First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies. Second, emerging markets face lower thresholds for external debt (public and private)—which is usually denominated in a foreign currency. When external debt reaches 60 percent of GDP, annual growth declines by about two percent; for higher levels, growth rates are roughly cut in half. Third, there is no apparent contemporaneous link between inflation and public debt levels for the advanced countries as a group (some countries, such as the United States, have experienced higher inflation when debt/GDP is high.)

Me: It is the apparent WH belief that debt is a long-term problem only. But the R&R research warns that the rush to implement liberal spending priorities today risks sacrificing growth and a rising standard of living tomorrow.


Remember Ross Perots,’that huge sucking sound”, well this time it’s Entitlements,that is sucking the Life out of America.

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