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NRO’s eye on debt and deficits . . . by Kevin D. Williamson.

No, Ezra Klein, Obamacare Will Not Reduce the Deficit



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Ezra Klein, he of recent “the Constitution’s old, and stuff” fame, is one of the great and most persuasive cheerleaders for the belief that Republicans cannot repeal Obamacare and remain fiscally responsible since — as everybody knows! — Obamacare reduces the national debt by $100 billion over the next ten years. He makes his case here. Taking a slightly different but in many ways similar view in National Review Online, Avik Roy concedes that, purely as a matter of parliamentary process, Obamacare’s deficit-reduction features have to be taken into account. (Roy is no doubt correct in his analysis of the process questions.)

Klein makes a persuasive case, in the same way that a lawyer who knows his client is guilty makes a persuasive case. Yes, if we confine ourselves to a very narrow range of debate and a very narrow selection of possible outcomes, then Obamacare does reduce the deficit over the next ten years, and its repeal would add to it over that time.

But there is a bit more to the story than that.

First, it is worth asking how complete and how accurate the CBO’s estimates are. You know who has some useful insights into that question? The CBO. For instance, CBO director Douglas Elmendorf readily concedes that “estimates of the effects of comprehensive reforms are clearly very uncertain, and the actual outcomes will surely differ from our estimates in one direction or another.” One direction or another. (Guess!) It will not come as a shock to observers of federal activities ranging from the ethanol program to the Iraq war that — unthinkable as it may seem — a government program may under some circumstances exceed its budget. If Obamacare spends not a nickel more than the CBO estimates, and if Obamacare produces every dime of the revenue promised, then it will prove a deficit-reduction tool over the next decade, by definition: That’s $411 billion in spending and $525 billion in revenue. I wonder if Ezra Klein would like to place a very large bet with his own money on the possibility of that happening. I would. In fact, I am willing to bet not only that there will be significant variation, I am willing to bet on the direction of that variation, at least insofar as the spending goes. (I would not be surprised if revenue projections fell short, too: Those tax increases are going to be even less popular when people start paying them.)

You know who seems sympathetic to my position? Douglas Elmendorf of the CBO, who writes: “CBO’s cost estimate noted that the legislation maintains and puts into effect a number of policies that might be difficult to sustain over a long period of time. For example, the legislation reduces the growth rate of Medicare spending (per beneficiary, adjusting for overall inflation) from about 4 percent per year for the past two decades to about 2 percent per year for the next two decades. It is unclear whether such a reduction can be achieved, and, if so, whether it would be through greater efficiencies in the delivery of health care or through reductions in access to care or the quality of care. The legislation also indexes exchange subsidies at a lower rate after 2018, and it establishes a tax on insurance plans with relatively high premiums in 2018 and (beginning in 2020) indexes the tax thresholds to general inflation.”

Take a look at the 1965 cost and revenue projections for Medicare and compare them to the reality of Medicare today. In 1965, Medicare was going to be totally solvent on a 1 percent payroll tax. How’d that work out?

And it is worth noting that Obamacare does not vanish into the legislative ether after this ten-year window we’re talking about. What happens in 75 year? In 100 years? There are very reasonable estimates that Obamacare will add many billions of dollars to the national debt over a longer timeline, even assuming that the bill is not monkeyed with piecemeal to reduce the taxes and increase the benefits — which is to say, assuming Washington suddenly is populated by saints and stoics.

This discussion, as framed by Klein, also rewards the Democrats for engaging in dishonest parliamentary shenanigans. As Klein well knows and the CBO reminds us, the Medicare “doc fix” was spun off into a separate bill specifically in order to keep some costs from being counted on Obamacare’s tab. As Cato’s Michael Tanner notes, “In a letter to Congressman Paul Ryan (RWI), the Congressional Budget Office confirms that if the costs of repealing the payment reductions, known as the “doc-fix,” as reflected in HR 3961, were to be included in the cost of health care reform, the legislation would actually increase budget deficits by $59 billion over 10 years.” This is a cheap accounting gimmick, conveniently excluded from the discussion. But it certainly is convenient to be able to account for the costs of Obamacare without having to account for the cost of bribing the doctors, and the congressmen who are most sensitive to them, to accept it. That is, of course, far from the only cost-shifting mechanism at work.

More broadly speaking, what the Obamacare-reduces-the-deficit argument neglects is this: Repeal is not the end of the story. Repeal need not be followed by . . . the void. If we want to reduce the federal deficit by $100 billion over ten years, there are lots of ways to cut $10 billion a year from spending. The federal government in 2004 estimated that it spent $10 billion a year on services for illegal aliens. Cut it. Done. Color me skeptical that we have to spend nearly $1 trillion over a decade to get $10 billion a year in spending cuts. If I’m reading the budget right, HUD spent $45 billion in 2007. And Republicans have some very good ideas for health-care reform that also will reduce federal outlays, thereby reducing the deficit. It is not as though the choice is Obamacare or nothing.

Treating the CBO ten-year estimate as though it is the alpha and the omega of the Obamacare-deficit discussion is a debater’s trick, one that we should not fall for. We have a good deal of history and experience on our side, and good reason for skepticism — if only we had a word for a political philosophy grounded in history, experience, and skepticism, in standing athwart history . . .

– Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, wherein you can learn more about the socialistic intrusions of Obamacare, and which now available at Amazon.com. You can buy an autographed copy through National Review Online here.


Tags: Debt , Deficit , Despair , Fiscal Armageddon , Obamacare


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