Over the past two years, Obamacare’s champions have often claimed that the new law would actually save the government money and reduce the deficit. Early on, they argued that it would do this in part by reducing health-care costs, but no one really makes that case anymore. Rather, they argue that Obamacare offers a version of today’s preferred liberal approach to deficit reduction: it increases taxes by even more than the immense amount by which it increases spending. That’s not exactly a recipe for fiscal responsibility or a means of addressing the underlying problem of costs, but on the face of it perhaps it should allow them to claim that Obamacare reduces the deficit.
Working out exactly what the effect of avoiding this double counting would be, and more broadly what the actual effect of Obamacare on the deficit is likely to be, is no easy feat. It basically requires re-scoring the law using the data available to CBO, but avoiding the misleading conventions forced upon the agency. In an important new paper out today from the Mercatus Center, Charles Blahous has done just that.
Blahous was an economic advisor in the Bush White House and is now a trustee of both the Social Security and Medicare programs. His paper deserves to redefine the fiscal debate about Obamacare. Blahous doesn’t only address the double-counting problem but goes through the law’s various sections and scores their likely effects—in each case offering an optimistic scenario, a pessimistic scenario (though by no means a worst-case, and some of these are still a bit optimistic), and a middle scenario. Regarding the overall effect of the law on the deficit, his conclusion is clear:
Taken as a whole, the enactment of the ACA has substantially worsened a dire federal fiscal outlook. The ACA both increases a federal commitment to health care spending that was already unsustainable under prior law and would exacerbate projected federal deficits relative to prior law. This is an unambiguous conclusion, as it would result regardless of the degree of future success attained in upholding various cost-saving provisions now embedded in the law.