According to CBO, the health-care bill going through Congress right now was scored to cost at least $900 billion over ten years. It will also bring $18 billion in annual savings. That’s $180 billion over ten years. It’s hard to see how this is going to help shrink the deficit and get our fiscal outlook under control.
But what happens to our deficit if the $800 billion stimulus bill, which was rushed through back in February to implement temporary measures needed to counteract the recession, were to be extended?
Remember that the bill was made of $288 billion in tax relief (most of it is actually spending since it take the form of tax rebate and credits), $144 billion in transfers to states and $357 billion in federal spending.
But as we know, most bad things in Washington aren’t temporary. In fact, the president’s FY2010 budget already proposed to make permanent or extend some of the “temporary” stimulus spending measures such as the Making Work Pay Credit, the the Earned Income Tax Credit, the refundable portion of the child tax credit, and the American Opportunity Tax Credit and the Pell Grants for college education.
Yesterday in Forbes Magazine, American Enterprise Institute’s Alex Brill and Amy Roden put a number on that cost: It’s $94 billion a year. But they also predict that other provisions will be extended at a cost of $48 billion a year, to which one should add the administration’s plan for extending the $8,000 first-time home-buyer credit that is set to expire on Nov. 30, 2009. That would cost $6 billion annually. Overall, we are talking about an additional $140 billion a year.
To that number, I would add the $144 billion bailout to the states. Who truly believes that this is the last of state bailouts?
So how much are we really talking about? It’s $140 billion, $144 billion, plus $90 billion at least for health care, minus $18 billion in savings. That’s an extra $356 billion of additional spending per year. That’s an additional $3.5 trillion over ten years.
This does not include the new plans to bailout seniors, or the new the community-bank assistance effort that president Obama is expected to announce, which would be roughly $5 billion in rescue-fund money to help small banks extend more loans.
To help you visualize the additional spending we might be facing, I have made the following chart.
This is what we should keep in mind when we hear the administration or Nancy Pelosi talk about a new era of responsibility.