The Lie of Fiscal Responsibility

Democrats used deceptive accounting to pass their health care bill.


After Democrats secured the votes necessary to overhaul the American health care system, there was much talk of history—making it, watching it, being a part of it, answering its call. But Washington's true attitude toward history is that of a conqueror: It's not something to learn from; it's something to triumph over. In that respect, the health reformers deserve congratulations. Thanks to their dogged efforts, history has been thoroughly trounced.

Since the New Deal, American entitlements have consistently grown faster than projected in size, scope, and cost. Like unwanted house guests, they cost money you don't have, and they can't be kicked out. Reform and repeal efforts are about as successful as kindergarten experiments with do-it-yourself haircuts. The health care law's very structure is a testament to this fact. Much of it is funded with changes designed to eliminate waste in Medicare and Medicaid —changes that could have been used to reform those programs, both of which are unsustainable. The only way these changes were politically viable, though, was if they were used to fund a new benefit.

Yet to hear the bill's supporters explain it, ObamaCare constitutes a triumph of fiscal responsibility, lowering the deficit, extending the solvency of Medicare, and reining in the growth of health care costs. Rep. Bart Stupak (D-Mich.), a staunch pro-lifer who assured the bill's passage by deciding to vote yes at the last minute despite misgivings about abortion funding, declared that the legislation would provide "health security and financial security" to Americans. "This is a good bill for the American people," he told MSNBC. "We're not adding to the deficit. Indeed, the CBO [Congressional Budget Office] says the bill will actually reduce the deficit over time."

This argument was crucial to the bill's success. In the preceding week, it became increasingly clear that several votes were contingent on the bill's receiving certain scores from the CBO. And when the scores—a $940 billion price tag for the first 10 years, $138 billion worth of deficit reduction in the first decade, and $1.2 trillion worth of reduction in the following 10 years—came through, many wavering Democrats hopped on board.

But health care votes bought with promises of fiscal responsibility might as well have been bought with suitcases full of Monopoly money. A little more than 24 hours after releasing the bill's preliminary score—the one that made headlines and attracted crucial votes—the CBO released another report, this one produced at the request of Rep. Paul Ryan (R-Wis.). Ryan asked about the "doc fix," which would prevent doctors' Medicare payments from being cut. The doc fix is now expected to be enacted separately, at a cost of more than $200 billion over 10 years. But if enacted along with the health care bill, the CBO estimated, the net effect would have been to enlarge the deficit by $59 billion during the first decade.

Defenders of the health care bill now argue that the doc fix is an unrelated issue. But Democrats didn't always think so: An early draft of the House health care bill, which was deemed too expensive, included the doc fix. And Senate Majority Leader Harry Reid (D-Nev.) reportedly used the provision to ensure support from the American Medical Association. Are we supposed to believe that it's good enough to bargain with but not good enough to figure into the budget?

Maybe the problem is something more elementary: Democrats just don't know how to count. Talking points released by House Majority Leader Steny Hoyer (D-Md.) in March claimed the bill both "IS FULLY PAID FOR" and "EXTENDS THE SOLVENCY OF MEDICARE." Contrary to such claims, the CBO's letter to Ryan said Medicare cuts cannot be used both to pay for insurance subsidies and to improve the program's fiscal outlook. One or the other, perhaps, but not both.

Nor is that the only double count. The CBO 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 premium revenue that will eventually be needed to pay benefits. The score counts the revenue anyway, despite the fact that, according to the CBO, the government's disability insurance obligations will probably add to the deficit in the long term.

Eventually, the deficit damage starts to add up. According to the CBO, if you scrap a few of the bill's more fanciful assumptions—cuts to Medicare payments, a slowing of the growth of insurance subsidies, implementation of the tax on "Cadillac" insurance plans (which union lobbyists already have managed to delay by five years)—the deficit will grow "in a broad range around one-quarter percent of GDP," or about $600 billion, in the second decade. Fiscally responsible!

Why does all this matter? It's not just the cherry-picked numbers and the rhetorical deception; it's the country's fiscal future. Thanks to a spiraling deficit, the economy is chugging merrily toward a broken bridge over a rocky canyon—a fact that almost no one from either party is willing to do anything about. America, according to the CBO, is on an "unsustainable" fiscal path, and Moody's recently warned that the nation's solid-gold credit rating may be at risk. So it doesn't matter how many times blinkered legislators repeat to themselves, "I think I can, I think I can." Nothing short of significant cutbacks to entitlement spending is going to transform the U.S. budget into the little engine that could. Instead, politicians are paying for new entitlements by shifting money from unsustainable programs—money that should have been used to help get America's fiscal house in order. 

Democrats made history all right. But only by sacrificing the future. 

Peter Suderman (peter.suderman@reason.com) is an associate editor at reason.