Erroneous presentation of the fiscal impact of Obamacare

[JBird77777]

In approximate amounts, supporters of Obamacare assert that when the $900 billion cost and the $1 trillion revenue/savings from higher taxes and Medicare cuts are added together, the combined bill reduces federal debt by $100 billion, so it's a net fiscal benefit and should be enacted.

By that logic, any federal spending bill, when paired with a higher amount in tax hikes, could be asserted to be a good thing fiscally.

For example, suppose a bill were enacted that combines $100 billion to dig and refill holes in the ground with $1 trillion in tax hikes. Combined, this bill would reduce the debt by $900 billion, but clearly no such bill should be enacted. This is because, when the spending side is viewed alone, there would be no benefits and $100 billion in costs.

So it's important to compare the costs and benefits of the spending side of the bill, while initially disregarding the revenue/savings side, especially since these two sides are largely independent of each other.

This approach can be applied to the combined Obamacare bill as follows.

Suppose that Congress/Obama intended to enact the combined Obamacare bill but, due to a clerical word processing error, accidentally enacted only the higher taxes/Medicare cuts part of the proposed bill, thereby raising $1 trillion over ten years, but left out the health care spending part of the bill. Suppose no one noticed this error for the first three years, during which time $300 billion was raised/saved, but substantially none of the planned health care spending had occurred.

Then at that point the federal debt would have been reduced by $300 billion, and this (erroneously) enacted bill would be on a path to reduce the federal debt by an additional $700 billion over the next 7 years, for a total debt reduction of $1 trillion.

Upon discovering this clerical word processing error, then in simplified form, Congress/the President would need to choose one of the following options.

1. Pass a new, separate bill with the originally planned $900 billion dollars in federal health care spending. If this were done, then the effect of this action would be that, at the end of ten years, the cumulative federal debt would be $900 billion higher than if this new, separate bill were not passed,

OR

2. Set aside this particular health care bill and its associated spending, and either do nothing further or pass a much more limited bill at little or no cost to taxpayers, thereby allowing the $1 trillion to be used entirely to reduce the cumulative federal debt.

Viewed in this more accurate way, it seems unlikely that the American public, Congress, or indeed the President would choose to enact the health care expenditure part of Obamacare, because any healthcare benefits would not justify the $900 billion addition to the federal debt. President Obama has said repeatedly that he will not sign any bill that adds to the federal debt.

In other words, the notion that the combined Obamacare bill over 10 years will reduce the debt by $100 billion is misleading. More accurately, Obamacare adds $900 billion to the debt over 10 years and, separately and independently, the tax increases and Medicare cuts reduce the debt by $1 trillion over 10 years. Because of these massive additions to the federal debt, Obamacare cannot be justified and must be rejected.

[Mrs. B.S. Roberts]

“Obama has said repeatedly that he will not sign any bill that adds to the federal debt.”

He lies. He’s broken promises before. What makes this author think he’ll keep his word this time?

[FreedBird]

If someone lies time after time, over and over, that person will always be a liar. Most of these guys had to lie to even get elected. They probably cheated in school and throughout their entire life.

[combat_boots]

[JBird77777]

A stated primary goal of the bill is to reduce the federal cost of health care.
Accordingly, Obama promises that he will not sign any bill unless it does not add to the federal debt, as scored by the CBO.

One of Obama’s selling points with the American public and Congress is that both the Senate and the House bills pass this test. This occurs because, among other things, both bills have 10 years of tax hikes/Medicare cuts and fewer years of benefits and associated costs. If changes to the bill were to result in the bill no longer passing this standard set up by Obama, the bill would become virtually impossible to sell.

However, this standard of combining these largely unrelated aspects of this combined bill is conceptually erroneous, and should be rejected. Instead, the health care aspect of the bill should be evaluated separately from the largely independent tax hikes/Medicare cuts.

The CBO has scored the health care aspect of this bill as increasing the federal debt by $900 billion, and it is this aspect of the bill that should be the standard for determining fiscal impact. By this corrected standard, this bill fails the fiscal test.

The fact that this $900 billion debt increase is paired with $1 trillion of the largely independent tax hikes/Medicare cuts does not change this failure.

No case appears to have been set forth as to why the proposed $1 trillion of tax hikes/Medicare cuts should be used to “pay for” this $900 billion federal health care cost. There seems to be no valid basis for this pairing. If this $1 trillion aspect of the bill were to be enacted, it should instead be used to reduce the federal debt.

The focus should be on this $900 billion debt increase, that cannot be justified, not the combined $100 billion debt reduction that results from the incorrect combination of the two largely unrelated aspects of this bill.