Last Friday, I posted this chart about the health-care bill’s impact on the deficit. It was immediately used by some well-meaning liberal bloggers to show that I was actually making the case for, rather than against, the promises that the administration made about the potential accomplishments of the health-care bill (mainly that it would reduce the deficit by reducing health-care cost and spending).

I am not sure how anyone could look at this chart and the text that goes with it and conclude the following:

One of the most serious problems this country faces is that one of its two major political parties is run by people who attained their positions on the basis of ideological fidelity and lack very, very basic analytic skills.

But since the ones who do think Republicans are ideological idiots while Democrats are irreproachable and non-ideological can’t seem to get my affiliation right, I will assume that they might have a very hard time with data, too. So let me explain this chart and its implications again. I promise to go slowly this time.

My main points, based on CBO data and Dr. Douglas Elmendorf’s explanations of the impact of the bill, were the following:

First, if the health-care bill is applied as intended, the deficit would be reduced by $140 billion over ten years. As the chart demonstrates, a large share of the deficit reduction is the product of serious tax increases (blue bars on the chart). The bill raises taxes by $420 billion, which is hard to consider a saving for taxpayers.

Second, this chart also shows that if the spending cuts (green bars) are not enacted, then the deficit increases rather than shrinks. That’s because the increase in spending through the insurance-coverage provisions (red bars) is bigger than the increase in tax revenue (blue bars).

Third, in the best-case scenario, the health-care bill will add $400 billion to the deficit over ten years starting in 2019. In other words, we get $140 billion deficit reduction in the first ten years but add almost three times that amount in the following ten years.

Fourth, even given the best case scenario, the health-care bill will do nothing to reduce the substantial pressure of growing health-care costs on the federal budget. Here is the CBO director on this exact topic (and the slides underlying his blog post). Again, Emeldorf invalidates the claims of the president and his allies about the effects of the new laws on federal health spending and the budget.

In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure [of health-care spending on the federal budget]. In fact, CBO estimated that the health legislation will increase the federal budgetary commitment to health care (which CBO defines as the sum of net federal outlays for health programs and tax preferences for health care) by nearly $400 billion during the 2010-2019 period.

And:

Because federal health care programs make up a large share of the federal budget, putting that budget on a sustainable path would almost certainly require a significant reduction in the growth of federal spending on health care relative to the amounts projected under current law (including this year’s health legislation).
Now, there is much more to say on this topic.

Here is another CBO chart (via Keith Hennessey) that shows the effects of the two new health-care laws on Medicare spending. It also shows the effect if Congress permanently extends a Medicare “doctors’ fix” like the “temporary” one being considered in May in the House.

The light-blue line represents Medicare spending before the new laws, the dark-blue line after the new laws, and the dotted line is the new laws plus a permanent doc fix. As we can see, in spite of the savings (real or imaginary), the unsustainable spending growth doesn’t go away. In other words, the growth of spending is cut but not the spending itself.

More importantly, this is a best case scenario. In fact, CBO admits that its data is entirely predicated on the cuts happening:

Those longer-term calculations reflect an assumption that the provisions of the reconciliation proposal and H.R. 3590 are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments, and legislation to do so again is currently under consideration by the Congress. The reconciliation proposal and H.R. 3590 would maintain and put into effect a number of policies that might be difficult to sustain over a long period of time. Under current law, payment rates for physicians’ services in Medicare would be reduced by about 21 percent in 2010 and then decline further in subsequent years; the proposal makes no changes to those provisions. At the same time, the legislation includes a number of provisions that would constrain payment rates for other providers of Medicare services. In particular, increases in payment rates for many providers would be held below the rate of inflation (in expectation of ongoing productivity improvements in the delivery of health care).

So, what is the likelihood of the spending cuts actually being implemented? Weak. As we know, Congress has already delayed once the reimbursement cut scheduled to go into effect in March. What’s more, if history is our guide, we know that government programs almost systematically cost more than they are scheduled to. Take Medicare, for instance. In 1967, long-run forecasts estimated that Medicare would cost about $12 billion by 1990. In reality, it cost $110 billion that year. Today, it costs $500 billion and it is about to see its spending explode. More on this, here.