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  • Take CBO Report With a Grain of Salt: Obamacare Repeal Would Not Increase Deficits

    Next week, the House of Representatives will vote on H.R. 2, a measure to repeal Obamacare in its entirety. The Congressional Budget Office (CBO) today released a report stating that repealing the health care law would increase the deficit by $145 billion between 2012 and 2019.

    This report is based on the findings of the CBO’s March 2010 report that predicted that Obamacare would reduce the deficit. CBO does respectable work, but their analysts have their hands tied by assumptions they are required to make. The reality is that, in spite of the March report, Obamacare will not reduce the deficit, so repealing it would not add to the deficit, in spite of today’s report.

    The CBO report should be taken with a grain of salt for a few reasons. First, CBO is required to assume that current law will be enacted as written, even in cases where reality couldn’t be further from what is on the books. CBO Director Doug Elmendorf himself makes this clear in the report:

    Current law now includes a number of policies that might be difficult to sustain over a long period of time. … If those provisions would have subsequently been modified or implemented incompletely, then the budgetary effects of repealing [the law] and the relevant provisions of the Reconciliation Act could be quite different—but CBO cannot forecast future changes in law or assume such changes in its estimates.

    Second, CBO must ignore the many budget gimmicks written into legislation. The health law does not include the “doc fix” to prevent an automatic cut to physicians’ reimbursement rates under Medicare. Congress recently passed a one-year fix and will continue to prevent the cuts in the future, but this 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 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.

    Then, Obamacare creates a new subsidy program for the middle class 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 both businesses and their employees stand to seriously benefit by dropping employer coverage and instead relying on taxpayer-subsidized health care. 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 expectations.

    Since, in reality, Obamacare will not reduce the deficit, repealing the law does not need to be offset under pay-as-you-go (PAYGO) rules. Repeal is in fact 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. The loopholes of 10-year scoring were not lost on the 111th Congress—the costliest provisions of Obamacare do not go into effect until 2014, so the CBO score actually includes only six years of spending.

    If Congress is really serious about reducing long-term deficits, the best path forward is to accept the CBO report for what it is and also set aside PAYGO in favor of real budget process reform. In the meantime, repealing Obamacare is the right step toward reducing the federal deficit and getting health care reform right.

    Posted in Obamacare [slideshow_deploy]

    14 Responses to Take CBO Report With a Grain of Salt: Obamacare Repeal Would Not Increase Deficits

    1. Kevin H, college par says:

      'CBO is God' – said Republican Senator Grassley last year. CBO was cited repeatedly by Republicans and Heritage itself. However, when CBO shows the facts to be against what the Republicans want, they come out and bash it.

      You can try and manipulate the numbers all you want, but the CBO is considered by all as the non-partisan score keeper of Congress. They are the most non-biased number crunchers and you expect people to believe what you say over the CBO – that's humourous.

      You already have Republicans in violation of the Constitution by voting without being sworn in – perhaps Republicans should read the Constitution more often – then once every 2 years. Now you have Repubs trying to grow deficit and debts the way they did in 2001.

      Oh brother, here we go again!

      • Guest says:

        Kevin,
        Have you noticed that the deficit spending has quadrupled under president Marxist? There goes your argument that Republicans are growing the deficit. left wing radicals have been in power the past three years and the national debt grew by 4 trillion dollars. Gee? imagine that? don't let facts ruin your argument. Go read the porkulus bill and explain exactly what 1 trillion dollars of spending contained within went to remedy problems supposedly caused by GW Bush and company? The porkulus was nothing more than a liberal wish list spending spree that they have been dying to implement for the past 20 years.

    2. Lloyd Scallan (New O says:

      Unlike so many liberal, left-wing judges and politicians, the CBO does not and can not "interpret" the numbers they are given. The CBO can only score a bill

      by the informaiton at hand. In this case by a Dem controled Congress, that

      has consistantly lied and distorted facts. It's beyond understanding how anyone could quote results of any study or score knowing full well the info provided is

      at best "faulty", and in fact is a distorted.

    3. Tim Az says:

      The bottom line is there has yet to be a person born that can honestly argue that downsizing govt. would result in increased debt upon the citizenry and retain the least amount of credibility among the most mathematically challenged of individuals. As for the CBO they can only perform the calculations with figures that congress presents them. So it is safe to say the most unpopular congress in the history of the United States is surely capable of withholding the necessary figures to lead the CBO to mathematically show that you actually can make ice cream out of horse crap. The troubles for you Kevin is that no one will buy their ice cream.

      Have we had enough yet?

    4. Jill, California says:

      There's an awful lot that the CBO doesn't take into consideration when determining the financial impact of various programs.

      For example, every time Blue Shield increases my premiums to pay for Obamacare …. which it has been doing every three months since the law passed … I have less money to pay for essentials or to spend on discretionary items. The trickle down effect is that I will owe less in income tax … good for me, bad for reducing the deficit. Likewise, the less money I spend in the stores, the less sales tax our government collects, which is also bad for reducing the deficit and hurts the retailers who would otherwise profit from my purchases.

      Obamacare is bad for our economy no matter how you calculate it.

    5. George, Lancaster, N says:

      Would you guys please get this info the those liberal nuckleheads. Start with Chucky Schulmer

    6. Martin Jones Grand J says:

      Remember… the hardest part of being a statistician (number cruncher) is to know what the individual(s) want to hear. Result: skewed accordingly

    7. John, Schererville, says:

      I have been reading some liberal blogs to see what they are bloviating about. It seems that the latest argument used to dismiss the move to repeal Obamacare as a political stunt is that mandating everyone to buy health insurance was supported by Republicans in the 90's and that the Heritage Foundation suggested this in response to Hillarycare. This kind of accusation by the left is usually an extreme distortion of fact and I was wondering what facts could be presented to refute this.

    8. Octavio, Texas says:

      Kevin H,

      I really hope you are being sarcastic. The CBO does not have any alternatives. The math simply does not add up. If one reads the reconciliation act and the original bill it is impossible to believe the less than trillion dollar costs of Obamacare. The estimates say that after full implementation the running cost of Obamacare is between 210 and 240 billion dollars a year. Tax collections in the US are, according to the Treasury department and the CBO, about 18% of GDP. The GDP is about 14 trillion dollars. So the total tax collections in the US are about 2.52 trillion dollars. So the healthcare law actually is about an increase of all taxes in the US of 210/2520 = 8.4% . And that is ALL taxes. I do not see how it is possible to say repealing this is bad for the economy.

    9. Bobbie says:

      When Obama assured the country that "America WANTS health care reform' my first reaction was "it's about time someone stepped in to deplete the corruption in every entity of government run health care." That is exactly what I understood being said, regarding "health care reform."

      Ridding the corruption in the government sector is all that needs to be done.

      This government health care reform is just another way to corrupt the people

      Government has to correct their own fraud and allow us the freedom we had, to buy our own insurance, visit with our own doctors to take care of our own body's.

      For years the government has been promising lesser costs to insurance premiums, prescriptions and co-pays in the private sector. Nothing has been done and all of a sudden, everyone has to sacrifice but the government and those they favor. Repeal the deal. It's unfair to put this weight on America!

    10. Bobbie says:

      forget unfair. IT'S CRIMINAL!!!!!!

    11. Mike, Wichita Falls says:

      When will the GOP ask the CBO to score this bill based on reality? As much as I support repeal as soon as possible, an updated score would have been nice to see first just to prove what we already know in our gut…it is unsustainable and robs another program that was unsustainable.

      If this bill is the best thing since sliced bread, why do benefits not fully kick-in until 2014? Aren't people suffering now, Democrats? Where's your compassion for those without insurance, 26 year-olds still living at home and those with pre-existing conditions?

    12. Kathryn Nix Kathryn Nix says:

      John,

      Here's an article by our health policy expert Robert Moffit on the validity of claims that certain provisions in the health care law came from the Heritage Foundation: http://www.heritage.org/Research/Commentary/2010/…. I think you will enjoy this piece.

      Best,

      Kathryn

    13. Pingback: What Do You Call $2.5 Trillion in Spending Cuts? A Good Start | Step Down Obama

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