Another Cost of Obamacare

by Michael G. Franc

Fresh from his stint as the top White House budget official, Peter Orszag debuted yesterday on the New York Times editorial page.  In “One Nation, Two Deficits” he urges solving our intractable budget mess by putting everything on the table. Naturally, he recommends a massive and permanent increase in our tax burden as the main entree. But the way he arrives at that recommendation is a tad surprising.

Most of the chatter about this piece deals with the trial balloon he floats: a “compromise” that would extend the [Bush-era] tax cuts for two years and then end them altogether. Ideally only the middle-class tax cuts would be continued for now. Getting a deal in Congress, though, may require keeping the high-income tax cuts, too. And that would still be worth it. 

In offering this bone to the “high-income” types, Orszag is clearly channeling the unease growing among certain Democrats, especially those with tens of thousands of “wealthy” constituents in their congressional districts.

But the real surprise is Orszag’s rationale for why the tax relief must eventually give way (for everyone!) in 2013:

Although hardly anyone wants to admit it, we’re not going to solve our budget problem over the next decade unless revenue is part of the equation.

…Let’s look at the facts. The projected deficit for 2015 is 4 percent to 5 percent of G.D.P., depending on whose assumptions you use. A sustainable level is more like 3 percent or lower. So we need deficit reduction of 1 percent to 2 percent of G.D.P., or about $200 billion to $400 billion a year by 2015. These figures are uncertain, but they’re the best we have (and they may well turn out to be too optimistic).

How much savings is plausible on the spending side? Medicare, Medicaid and Social Security will account for almost half of spending by 2015. Even if we reform Social Security, which we should, any plausible plan would phase in benefit changes to avoid harming current beneficiaries — and so would generate little savings over the next five years. The health reform act included substantial savings in Medicare and Medicaid, so there aren’t further big reductions available there in our time frame. (Emphasis added.)

Hey, let’s replay that last sentence again:

The health reform act included substantial savings in Medicare and Medicaid, so there aren’t further big reductions available there in our time frame. (Emphasis added again.)

So, a permanent, multi-hundred billion dollar tax increase hangs over every American taxpayer like the sword of Damocles precisely because President Obama and his allies in Congress used up all the potential savings from two of the big three entitlement programs — Medicare and Medicaid — to pay for Obamacare?  The mere existence of Obamacare, we are now told, means all of us — included those with far less than $250,000 a year in income — will be saddled with higher taxes forevermore. And there is no other way to solve this fiscal mess? How convenient! Why didn’t Orszag and other administration officials in the know shout this rather salient fact from the rooftops prior to the final vote on Obamacare? Think it might have affected the outcome?

Guess we just have to score any future tax increase as yet another cost of Obamacare. Or, better yet, repeal the darn thing.

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