Gimme Gimmicks: Getting Giddy Over the CBO's Latest Health Care Score

The latest—though likely not the last—Congressional Budget Office score for the Democrats health care overhaul is in, and after a harried week, it's making Rep. James Clyburn, the House Democrats' whip, "giddy."  What's worth squealing about? The score, which estimates the budgetary effects of the Senate health care bill in the context of the reconciliation changes proposed by House Democrats, officially projects that the bill will cost $940 billion and reduce the deficit by $130 billion over ten years. In the following decade, the CBO's crystal ball says the package conjures up $1.2 trillion in deficit reduction (maybe), a number which it also warns should be viewed as about as accurate as the predictions from most crystal balls.

Fans of budgeting gimmicks are in for a treat, as the document reads like a sort Greatest Hits of Budgeting BS. Jacob Sullum has already noted some of its many balance-sheet deceptions, including double counting Medicare savings and the inclusion of $19.4 billion in scored deficit reduction from a totally unrelated student-loan program, but here's a few more:

The score for the Senate bill includes $72 billion in revenues generated by the CLASS act, a federally-backed disability insurance program. But that $72 billion is just premium revenue that will eventually have to be used to pay out benefits. The score counts that revenue anyway, despite the fact that, according to the CBO, it would probably add to the deficit in the long term.

Even if you buy the projected deficit reductions—I'm skeptical—the bill achieves them at the cost of raising the national debt. At Fortune, Shawn Tully explains:

That forecast, however, doesn't mean that what the CBO counts as lower deficits will lead to less debt, as taxpayers might expect. In fact, it appears that it would require the Treasury to borrow almost 40 cents of every dollar in new spending the bill requires.

It's not an easy trick to reduce deficits and yet borrow more money. CBO does it because it has to. By law, the CBO is required to use "cash" or "unified budget" accounting. Under that system, the CBO projects all the new revenues and new expenses from the legislation it's requested to "score." If the extra revenues exceed the additional outlays, the bill is deemed to reduce deficits. That's the case with the health-care bill. The rub is that the measure gets a large portion of its revenues from new Social Security and Medicare taxes—plus levies it collects upfront to pay for a long-term care entitlement program.

Counting those taxes as deficit reducers presents two problems. First, the extra revenues are mainly needed to pay for higher benefits in the future. Second, they cannot be used to fund the lavish subsidies, tax credits for small employers, and other spending the bill mandates. "The law is clear," says Donald Moran, a former Reagan Administration budget official who runs a Washington, DC-based health-care consulting and research firm. "Revenues from those entitlement taxes must go into their trust funds. That money is not available to pay for the spending commitments of the health-care bill."

Indeed, as anyone who bothers to read the first paragraph of the CBO's letter will see, the entire report is arguably something of a cheat. See, House Speaker Nancy Pelosi promised that the CBO score for the reconciliation bill would be available 72 hours before taking a vote. She's also been pushing hard to schedule a vote by this weekend. And, sure enough, just in time, here's the score—in preliminary, subject-to-change, implicitly rushed-to-early-release form. Or, as the CBO says in its careful bureaucratese:

Although CBO completed a preliminary review of legislative language prior to its release, the agency has not thoroughly examined the reconciliation proposal to verify its consistency with the previous draft. This estimate is therefore preliminary, pending a review of the language of the reconciliation proposal, as well as further review and refinement of the budgetary projections.

Translation: We weren't really done yet, but House leadership wanted to vote this weekend, so we rushed this sucker out early. Granted, at this point the Democrats have so thoroughly gamed mastered the scoring process that the end result would likely be similar no matter when it came out. This is why leadership has been so confident that it could pick up the votes needed for passage: Many of those wavering votes, it now seems, were probably dependent on the deficit reduction figures in the CBO score—a score that leadership achieved by spending all week tweaking and resubmitting the legislative language in order to produce the desired result. Not surprisingly, the vote count now seems to be moving in their direction. If I were the Democrats' official vote-getter today, I suppose I'd be giddy too.