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The Lie of Fiscal Responsibility

Health care bill worsens nation's financial future

Peter Suderman
March 22, 2010

As Democrats made cable-news victory laps in the wake of securing the necessary votes to pass a massive legislative overhaul of the American health care system, there was much talk of history—making it, watching it, being part of it, answering its call. But Washington's true attitude towards history is that of an abusive conqueror; it's not something to learn from, it's something to triumph over. And in that respect, Democratic health reformers deserve nothing but congratulations. Thanks to their dogged efforts, history—along with the popular will of the American public—has been thoroughly trounced. 

Since the New Deal, American entitlements have consistently grown faster than projected in size, scope, and cost. Like unwanted houseguests, 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. Indeed, the health care bill'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, or at least ought, to have been used to reform those programs, both of which are unsustainable. Yet the only way these changes were politically viable was if they were made in order to fund an all-new benefit. 

To hear the bill's supporters explain it, health reform constitutes a triumph of fiscal responsibility—lowering the deficit, extending the solvency of Medicare, and stifling the growth of health care costs. Rep. Bart Stupak (D-Mich.), a staunch pro-lifer whose last-minute decision to vote yes assured the bill's passage, was typical in his declaration 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 says the bill will actually reduce the deficit over time."

This case was crucial to the bill's last-minute success. In the preceding week, it became increasingly clear that a number of votes were contingent upon the bill receiving certain scores from the Congressional Budget Office (CBO). And when the scores—a $940 billion price tag for the first 10 years, $130 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. The truth is that the bill is the exact opposite of fiscally responsible.

A little more than 24 hours after releasing the reconciliation bill's preliminary score—the one that picked up the majority of the headlines and votes—the CBO released another report, this one produced at the request of Rep. Paul Ryan (R-Wis.). It said that if in addition to the health care bill, the Democrats also pass legislation known as the "doc fix"—which would cost an additional $208 billion—the total effect would be to add $59 billion to the deficit over the first 10 years. 

Defenders of the reform bill now argue that the doc fix is a separate issue. But Democrats didn't always think so: Last summer's first draft of the House health care bill included the doc fix. And Senate Majority Leader Harry Reid (D-Nev.) has reportedly used the provision to ensure support from the American Medical Association. Are we somehow 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. Hard to believe? The CBO's letter also says that, contrary to administration claims, the bill won't both reduce the deficit and extend the solvency of Medicare. One or the other, perhaps, but not both. 

Nor is that the only double count. 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 likely add to the deficit in the long term

Eventually, the deficit damage starts to add up. Toss out a few of the bill's more fanciful assumptions—the implementation of the tax on so-called "Cadillac" insurance plans (already successfully delayed by a full five years by benefits-rich unions), cuts to Medicare payments, and a planned slowing of the growth of insurance subsidies—and the CBO reports that, two decades out, the deficit would spike “in a broad range around one-quarter percent of GDP”—something like $600 billion. Fiscally responsible! 

Why does all this matter? It's not just the cherry-picking of figures and the rhetorical deception, it's the country's overall fiscal future. Thanks to a spiraling deficit, the economy is chugging merrily towards 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" path, and 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 magically 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 ought to have gone toward getting America's fiscal house in order. 

Democrats made history all right—but only by sacrificing the future.

Peter Suderman is an associate editor at Reason magazine. This column first appeared at Reason.com.


Peter Suderman is Associate Editor


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