CBO on the Health Care Bill: More Spending, More Tax Revenue


Last week, the Congressional Budget Office released its summer update, a report that includes some information pertinent to the new health care law—including one data point that we didn't have before. In the past, when the CBO scored the health care bill, it had always mixed the new revenue and new spending calculations into a single element: the total effect on the deficit. But as Keith Hennessey points out, the new report breaks out the tax and revenue effects for the first time. The result—a lot more entitlement spending, and a big hike in tax revenues—is not exactly surprising. But it is clarifying:

Taking into account all of the provisions related to healt

h care and revenues, the two pieces of legislation were estimated to increase mandatory outlays by $401 billion and raise revenues by $525 billion.

As Hennessey says, it would have been nice to have had this information months ago:

Imagine two scenarios of a lawmaker who was on the fence last March. He or she is a Blue Dog Democrat, or a Democrat from a fiscally conservative red district, and is deeply concerned that the legislation may be fiscally responsible.  He is presented with two different statements from CBO:

1. "CBO says these bills will reduce the budget deficit by $124 billion over the next decade."

2."CBO says these bills will increase federal entitlement spending by $401 billion over the next decade, and will increase taxes by $525 billion over that same time period, for a net deficit reduction of $124 billion."

These are very different statements. Both are true. CBO said only the first when Members were looking to understand the fiscal impacts of this legislation.

Throughout the debate, Democratic legislators and other supporters of the bill told the public that the health care bill would save money. But in the sense that saving money meant spending less, that was never true. The bill increases entitlement spending by quite a bit—$401 billion, we now know. The way it supposedly cuts the deficit is by raising even more new tax revenue than it spends.

Update: It turns out that that the summer report was not the first time we saw these figures; CBO broke out this information three days prior to the passage of the bill. The revenue and outlay figures still stand, as does the broader point about the way the bill was discussed in terms of deficit effects rather than revenues and outlays. But like Hennessey, I overlooked the table in the original report.