Budget

The White House Kindly Requests You Do Not Refer to Its Health Care Budget Gimmicks as "Gimmicks"

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They're called "numbers." And the great thing is, we can do anything we want with them.

Peter Orszag, the cutest, coolest, cowboy-boot wearin'est budgeting badass ever to wrangle spreadsheets for a U.S. administration, is standing up to those not-so-cool critics who continue to insist that the health reform package President Obama and Congressional Democrats have put together is not, in fact, deficit neutral. At the Office of Management and Budget's blog, which I'm sure you all read religiously, he writes:

Recently, a lot of attention has been paid to a claim that this deficit reduction is achieved only through a business-as-usual Washington budget gimmick: paying for just a few years of costs with many more years of savings.

This charge, he says, is "false," and he wants everyone suckered by it to "get their facts straight." He then proceeds to explain that, although most of the spending in the first ten years does indeed occur in the last six years, according to the Congressional Budget Office, the bill would actually produce even greater deficit reduction in the second decade—about $1 trillion.

Perhaps I should've added "trickiest" to the list of adjectives describing Orszag, because as far as the CBO figures go, everything in his post is basically right; the problem is that he's conflating two different criticisms, and ignoring the ones that matter.

The issue with backloading spending isn't that it hides deficit spending; it's that it hides the full cost of the bill, thus making it politically viable. When early drafts of health care reform rang up at around $1.6 trillion, Washington underwent a massive freakout; it became clear that passing a bill that kind of price tag was almost certainly impossible. So Obama gave Congress a target of "around $900 billion" for the bill, and one of the ways the lower figure was achieved was by starting the taxes revenue mechanisms immediately but holding off on implementing the benefits. That allowed for the Senate bill's politically convenient $850 billion score while disguising the fact that true cost of a full ten years of the bill's programs is actually more like $1.8 trillion (and that's not counting the trillion-plus in additional costs imposed by an individual mandate).

And I said, "Look, there's no. Effing. Way. You can actually solve this damn Chinese finger puzzle."

Meanwhile, Orszag fails to address the relevant criticisms made by deficit neutrality skeptics. First is that the bill's supporters double count the Medicare savings. According to a December report by Orszag's trusted arbiter, the CBO, the bill will either reduce the deficit or extend the solvency of Medicare, not both. (And for what it's worth, Medicare's chief actuary agrees.) Yet as recently as March 10—yesterday—Obama was claiming that his health care plan would "help ensure Medicare's solvency for an additional decade." Great! But according to the CBO, that means the bill won't actually cut the deficit.

The other problem is that, in an effort to elicit a better score for the bill, the "doc fix"—an expensive, unfunded change in the way doctor's Medicare payments are made—was excluded from the bill. So, as scored, the bill assumes that there will be a massive cut in Medicare payments to doctors that almost certainly will not occur.

The liberal argument for this is that the doc fix would have to be passed no matter what, so it shouldn't count towards the health care bill's score. Maybe so, but that's not what House Democrats thought when they drew up their initial draft of the legislation. And Senate Majority Leader Harry Reid was more than willing to hold the fix over doctors' heads in order to ensure that they would support the Democrats' reform legislation.

And what does our good friend the CBO say? Well, if you enact the doc fix in conjunction with Obama's health care overhaul, it adds $89 billion to the deficit over the first ten years.

On the other hand, I do agree with Orszag on one point he makes: When it comes to health care reform, there's a lot of misinformation and misdirection. So before passing judgment on the current bill, we really ought to make sure to get our facts straight.