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  • Reality Check: Repeal of Obamacare Would Not Increase the Deficit

    As the new Congress settles in, the House of Representatives prepares to vote on January 12 on a measure to repeal Obamacare. Proponents of the health care law claim that repeal would increase the federal deficit and that a vote to kill Obamacare without offsetting the “cost” is hypocritical.

    This couldn’t be more wrong. For starters, Obamacare will not reduce the deficit. Though the Congressional Budget Office (CBO) projected that the health law would create $124 billion in savings, the CBO is required to make unlikely assumptions and disregard budget gimmicks included in the legislation. Taking this into account causes the cost of Obamacare to skyrocket.

    First, Obamacare does not include the “doc fix” to prevent an automatic cut to physicians’ reimbursement rates under Medicare. Earlier versions of reform included a fix, which made those proposals tip heavily into the red. Congress recently passed a one-year fix and will continue to prevent the cuts in the future, but it will still not solve the ongoing problem. Nevertheless, pretending it will not happen won’t reduce the deficit.

    Obamacare also includes billions in double-counted savings. Over the next decade, Obamacare includes $529 billion in cuts to Medicare and $70 billion in revenue from the new CLASS program. CBO’s score assumes that these savings and revenues will offset the cost of new programs in the legislation. But Medicare savings are also pledged to extend the program’s solvency. Revenue from CLASS, a new long-term care insurance program, is the result of premiums collected to pay out benefits in outlying years and will not pay for new programs, either. Claiming that these dollars will pay for Obamacare is akin to trying to make a mortgage payment and buy a Macbook with the same paycheck: In the real world, you can spend money only once.

    Obamacare also creates a new subsidy program for low- and middle-income Americans to purchase insurance. CBO predicts that 19 million Americans will benefit from this generous new entitlement program. But this doesn’t take into account Obamacare’s huge incentives for employers to drop their insurance programs and allow employees to instead purchase taxpayer-subsidized coverage. Former CBO director Doug Holtz-Eakin points out that businesses, especially those with mostly low-income employees, could drop their health plan, raise wages to make up for the lost benefit, pay the Obamacare employer penalty for not offering insurance, and still come out ahead. These incentives, combined with the various new insurance rules that will increase premiums on employer plans, will cause the cost of the subsidy program to greatly exceed initial projections.

    Finally, repealing Obamacare does not need to be offset under pay-as-you-go rules (PAYGO). To the contrary, repeal is in keeping with the spirit of PAYGO, which exists for the purpose of long-term deficit reduction. Moreover, PAYGO only requires deficit neutrality over a 10-year budget window, so a program could create savings in one decade but run trillions in deficits the next and still meet PAYGO requirements.

    This fact was not lost on the 111th Congress—the costliest provisions do not go into effect until 2014, so the CBO 10-year score includes only six years of spending. Experts agree that the CLASS program alone will be bankrupt by its second decade of existence, emphasizing the importance of considering a policy beyond one decade. Heritage budget expert Brian Riedl writes, “Nonsensically, repealing CLASS would violate the ‘pay as you go’ law against expanding budget deficits. This is because ‘pay-go’ focuses only on the 10-year $70 billion ‘cost’ of repeal and ignores the trillions of dollars that would be saved thereafter.” The same applies to Obamacare in its entirety.

    PAYGO merely “provides lawmakers with a convenient talking point and taxpayers with a false sense of security on budget reform,” as Riedl puts it. If Congress is really serious about reducing long-term deficits, the best path forward is to set aside PAYGO in favor of real budget process reform. In the meantime, repealing Obamacare is a good first step toward reducing the federal deficit.

    Posted in Obamacare [slideshow_deploy]

    26 Responses to Reality Check: Repeal of Obamacare Would Not Increase the Deficit

    1. George Colgrove, VA says:

      Many federal jobs have already been filled to support Obamacare. Services are already enacted. Repealing the law will also require the removal of these positions. If these positions stay in place, then yes, at $123,000 average salary and benefits a federal employee receives, will add to the deficit. Also, the revenue collected from an unwilling tax base to cover the package will also be repealed. Any funding elsewhere in the federal government that relied on that funding will need to be cut.

      It wont be as simple as repealing the law. There will need to be a forensic study on the effects of each end every point in the federal government (internal procedures and policies, Health Service Agents, IT staff, IRS Agents, Administrators, etc) that got a boost from the Obamacare omnibus bill that will need to be removed. We will need to get rid of the 10's of thousands (if not 100's of thousands as some alleged) of new federal positions that were created – and filled – to support it.

      If we do not, there will be a tremendous number of idle federal employees being paid at a premium and processes that will make the deficit grow even faster – given that they will no longer have the revenue to cover these positions.

    2. Pingback: Tweets that mention Reality Check: Repeal of Obamacare Would Not Increase the Deficit | The Foundry: Conservative Policy News. -- Topsy.com

    3. R Holland, Chandler, says:

      Cut the federal budget by 5% in money and personnel each year for the next 5 years. Get the federal government out of the education business, return education responsibility to the states and local boards. Raise the retirement age to 67 for federal employees. Raise military retirement to 30 years service. Raise requirements for military medical retirement. Start transferring all government retirement, over the next 20-30 years, to a private 401K type system. Institute a flat rate income tax minus a standard deduction of $10K per person up to $30K per family.

      Three new constitutional amendments:

      1. Balanced budget.

      2. Line item veto.

      3. Term limits for congress.

    4. Jill, California says:

      Repealing the law can only help the economy.

      Ever since the law was passed, Blue Shield has been raising my premiums dramatically at every opportunity. So I'm struggling more financially than I was before … struggling as a result of everything this Obama administration has been doing for the past two years. (I'd almost be better off dropping my insurance and letting the government take care of me if I get hurt or sick.)

      And it all rolls downhill. I've had to cut my spending dramatically, which hurts the economy and jobs. One can't look at the financial impact in a vacuum. Just because there are financial impacts at the federal level if the law is repealed doesn't mean it won't be offset in other ways, such as letting taxpayers keep more of their money so they can spend it in ways that helps the economy.

      • mel says:

        Blue cross would have raised premiums anyway..they have been doing so way before Obamacare was a thought. Just because one event happens in the same period as another does not mean that they are related.

    5. Pingback: Tweets that mention Reality Check: Repeal of Obamacare Would Not Increase the Deficit | The Foundry: Conservative Policy News. -- Topsy.com

    6. TJS, FL says:

      Thanks, R Holland. We need specific handcuffs for Congress, they've proven decisively they cannot be trusted with any aspect of governing. We need constitutional amendments to strictly limit the damage they can do to our lives and the economy, except for times of declared war.

      Limit spending; taxing; borrowing; forbid guarantees of mortgages, insurance, loans, pensions, anything; limit terms including for judges and all federal employees except military; make all pensions defined contribution; limit damage done by federal regulations to 4% of GDP; forbid subsidies; means test social security; create a very simple tax code and regulations, and exclude all corporate taxes, which are simply passed through anyway. Switch social security to a 401K type system which pays only the impoverished, with the goal of making every workers a millionaire by retirement. Repeal the 17th amendment, so that senators are appointed by their state legislatures, as the Founders established. Require payoff of national debt at rate of $200 billion per year, which would still take 70 years to accomplish.

    7. Richardg, Ohio says:

      Repealing Obamacare Its not about the budget or deficit. Its about freedom, and an unconstitutional law.

      Oh, and my healthcare jumped $6000 this year.

    8. Bobbie says:

      Nor should government be spending for these federal positions regarding obamacare at this time. Jumping the gun puts us in financial peril and seems these overpaid wages are set in government stone.

      What the people have done for themselves, the government needs to stay out. Obama claimed he would regulate costs in the private sector which he only regulated them out of business.

      The government set up the free market insurance companies so they could tun around and point fingers, but what the government actually did was neglect their duty of oversight and admitted it by pointing their fingers…

      Obamacare effects every aspect of this government designed recession.

      THE RIGHT ACTION IS TO REPEAL!

    9. Bobbie says:

      Nor should government be spending for these federal positions regarding obamacare at this time. Jumping the gun puts us in financial peril and seems these overpaid wages are set in government stone.

      What the people have done for themselves, the government needs to stay out. Obama claimed he would regulate costs in the private sector which he only regulated them out of business.

      The government set up the free market insurance companies so they could turn around and point fingers, but what the government actually did was neglect their duty of oversight and admitted it by pointing their fingers…

      Obamacare effects every aspect of this government designed recession.

      THE RIGHT ACTION IS TO REPEAL!

    10. Kevin H, college par says:

      Here we go again – the Republicans are taking us quickly back to the 2001 Congress that killed our economy, cost us millions of jobs and added trillions in debt.

      You can't have it both ways. Republicans use CBO numbers when convenient (remember when Senator Grassley said 'CBO is God' just last year) and then they bash CBO when they don't the stats they provide. You can't have it both ways.

      Republicans, in a matter of two days, have put up back on road to horrible deficits and debts, as they did in 2001 and 2003.

      After all their talk about the deficit, Republicans didn’t wait one day before pushing an extreme agenda that will cost American taxpayers more than $1.5 trillion and put Americas’ health coverage at risk. Today we learned that the Republicans’ plan increases the deficit by $230 billion over the next ten years, sixty percent more than previously estimated. And the Republicans’ plan to repeal health reform would continue to balloon the deficit by more than $1.3 trillion in the second ten years, also worse than previously expected, according to a projection released today by the non-partisan Congressional Budget Office.

      “In addition to its price tag, the plan means putting insurance companies back in charge of care, taking away tax cuts for small businesses, taking away free preventive screenings for diseases such as breast cancer, allowing insurance companies to once again deny coverage to children with a preexisting condition and re-opening the Medicare prescription drug doughnut hole. The costs of Republicans’ extreme agenda are simply too high for the middle class to bear.”

      According to the CBO, repeal would:

      - Increase the deficit by $230 billion over the next ten years.

      - Explode the deficit by more than $1.3 trillion in the decade after that.

      - Raise costs for Americans with employer-sponsored plans as well as people buying health care on the individual market. And those people buying insurance on their own would be paying more for insurance that provides them with less protection.

      - Take away 32 million Americans’ health insurance.

    11. Pingback: Repealing the health overhaul will lead to bigger deficits, CBO says | On Call with Stacey Singer

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    13. Sheri says:

      I'm a pharmacist and my husband and I have a disabled child who will be harmed if Obummercare goes into effect and decreases or removes her health insurance.

      The idea that repealing Obummercare will increase the deficit is ridiculous. We all know that the numbers the Demoncrats gave the CBO were false and were made up only to keep the supposed total 10 year price tag of Obummercare under the $1 trillion mark. The real cost if it isn't repealed will be trillions and trillions of dollars and poorer health care for the majority of ordinary people.

    14. Pingback: FRC Blog » The Social Conservative Review: January 6, 2011

    15. Mlenten says:

      Yes it will increase the deficit! Even your right wing cry baby's realize that! That is why they have exempt that from there cutgo program! Just like they did the tax cuts to the rich that created 25% of our current deficit. Honestly, reality is not with you…. And you people disagreeing with it and fox news inventing it does not mean it's true

    16. Bobbie says:

      Kevin, I'm serious, are you immigrant? Or just easily taken in by your love for corruption and non-productivity.

      If you're immigrant, I could understand your misunderstanding. If you're American, you're NOTHING BUT A PUPPET!

    17. Pingback: Repeal violates GOPs pledge to America - TDR Roundtable

    18. WardMD, Carson, CA says:

      So, all we have to do is REDUCE the RATE of taxation, and (like EVERY time that has been done), REVENUE to the Government will INCREASE, thereby offsetting the (alleged) "cost" of repeal!

    19. Bobbie says:

      Correction to previous comment, I meant: American born. I apologize.

    20. J. P. Gilligan says:

      The Dems or the CBO can spin the numbers any way they like. Can anyone seriously think that removing a vast government program will add to the deficit?! It's like Mark Twain said, "There are three kinds of lies: lies, damn lies and statistics".

    21. David Iden, Dayton, says:

      The double-counted $500 billion to be extracted from medicare is absolutely bogus. It is extremely unlikely that such medicare savings will be obtained without serious mandatory restrictions on service. Furthermore, Medicare is in such dire straits that every dollar saved by increased efficiencies or reduction of waste and abuse (the pledge of every government official for decades) should be retained by Medicare … not used to pay for Obamacare.

    22. Bobbie says:

      Clear your mind of your derangement. It is ignorant to believe repealing this "affordable health care act," that won't go into effect until 2014 would raise the deficit (unless it's by design.) REPEAL!

      THE President's "affordable health care act" is increasing costs presently even though it hasn't started yet, until 2014. It's already destroying the private industries, putting hardships on families while Obama's government accrues their money pile with other people's livelihoods.

    23. Publico, Washington says:

      "Congressional Budget Office (CBO) projected that the health law would create $124 billion in savings, the CBO is required to make unlikely assumptions and disregard budget gimmicks included in the legislation. Taking this into account causes the cost of Obamacare to skyrocket."

      Proof for that statement please, otherwise it is nonsense and your entire discussion becomes nonsense as a result.

    24. Pingback: Obama Care - Page 87 - The Warpath

    25. Pingback: 10 Top Reasons You Owe The Nation - US Message Board - Political Discussion Forum

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