‘Obama talks about $600 billion. The Congressional Budget Office talks about $1.1 trillion,” a gray-haired man in a striped shirt bluntly told Democratic senator Arlen Specter at a town hall meeting in Lebanon, Pa., last Tuesday. “I have spent 40 years in government,” this vocal American continued. “I’ve never seen a program come in at the right price and stay at that price,” he concluded, as a packed room erupted into cheers and applause.
This citizen identified a key reason Obamacare should be defeated. At a roughly $1 trillion ten-year cost, this proposal’s advertised price tag almost certainly will go up, up, and away, if Congress enacts this measure. The federal government’s new commitments routinely look like wishful thinking once programs commence. Exacerbating this phenomenon, tax revenues are plunging these days like bowling balls tossed from the top of the Washington Monument.
According to a July 31 report from the Congressional Joint Economic Committee’s GOP staff, “major health care reform proposals have generally always cost more — sometimes significantly more — than the highest cost estimates published while the legislation was pending.”
As Congress debated the launch of Medicare in 1965, the House Ways and Means Committee calculated that Part A, the hospital entitlement, would cost taxpayers $9 billion in 1990. In fact, that year’s outlay was $67 billion, or 744 percent of what Ways and Means forecast.
In 1967, Ways and Means predicted that the entire Medicare program would cost the Treasury $12 billion in 1990. Actual expenditure: $110 billion. That is 917 percent of what the committee projected.
Congressional number crunchers reported in 1987 that Medicaid’s Disproportionate Share Hospital payments (cash for medical centers that primarily serve the poor and uninsured) would be about $1 billion, just five years later. In 1992, thanks to loopholes that states exploited to milk Uncle Sam, this narrow program exploded to $17 billion, 1,700 percent of what taxpayers were told to expect.
States witness this pattern, too. Massachusetts Commonwealth Care — an Obama-like program launched in 2006 by then-GOP governor Willard Mitt Romney — was supposed to cost $472 million in fiscal year 2008. That year’s real tally was $628 million, 33 percent above what Bay State residents were prepared to pay. Democratic state senator Jamie Eldridge complained in the Columbia Journalism Review, “health care reform has cost the Commonwealth much more than expected.”
What triggers these cost overruns? The Joint Economic Committee’s report explains that “initial public estimates appear simply to have underestimated the level of demand for the proposed new benefits, perhaps due to insufficient data or a lack of experience administering benefits of that sort.”
Also, government lacks the profit motive, which generally forces private-sector managers to control costs, lest they get fired. Private supervisors also have incentives to boost profits: bonuses, corner offices, stock options, and promotions. In government, carefully stewarding taxpayer dollars might advance one’s career. But because bureaucrats rarely earn bonuses, and there are no stocks to option in public agencies, government workers lack the accountability that pay-for-performance brings. And they rarely get sacked. When federal expenses zoom into the heavens, Congress orders a fresh round of greenbacks to be spent, which the Treasury obligingly prints. Federal bond sales borrow the deficit between taxes and outlays. The result is the next generation’s indebtedness and the Republic’s long-term impoverishment.
One newsworthy non-medical program reflects these tendencies. Cash for Clunkers badly underestimated popular demand for the $3,500 to $4,500 vouchers that Americans could secure by trading in older gas guzzlers for newer, more fuel-efficient vehicles. Its $1 billion budget was supposed to last from late July into November. Instead, the gas tank ran dry in a week. Congress dropped everything to pump another $2 billion into this jalopy. So, within days of hitting the road, Cash for Clunkers stood at 300 percent of its initial sticker price.
Meanwhile, the deficit is climbing like a North Korean rocket, as appropriations soar and tax collections tumble back to Earth. According to the IRS, this fiscal year’s individual income-tax revenues are down 20.5 percent. Corporate tax revenues are off a stunning 58 percent. Through last month, FY 2009 tax receipts fell $354.2 billion versus 2008’s comparable period. In the August 17 Fortune magazine’s cover story, Allan Sloan reports that the $87 billion in Social Security taxes that last year were predicted to reach Washington in 2009 now equal just $19 billion. Amid their ceaseless spending orgy, our federal masters somewhere must amass these missing $68 billion.
Obamacare is imploding on the merits, as should most initiatives that expand government and shrink individual freedom and personal choice. But even if Obamacare were Washington’s most noble effort since the Emancipation Proclamation, the inescapable truth is that we just cannot afford it.
– Deroy Murdock is a columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University.