Hypothetical Mean

Commentary from an Actuarial and Economic Perspective

Fiscal Irresponsibility

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The CBO preliminarily estimates the cost impact of the House healthcare bill to be $1,042,000,000,000 over a 10 year period.

The Joint Committee on Taxation estimates that the proposed income tax surcharge and other revenue raising items will raise $583,000,000,000. Superficially, you would think that the House has “paid for” roughly 56% of the cost of the healthcare insurance provisions in this bill. That’s what House Democrats want you to think. But you would be very wrong.

The taxation would begin in 2011. The spending would begin a phase-in in 2013. By the time the spending is fully phased in, the annual tax revenues would pay for less than 45% of the spending provisions. By 2019, there’s a $115,000,000,000 per year hole blown into the federal budget, prior to the anticipated but still unscored Medicare spending reductions. The longer you extend the horizon, the less of this program they have actually paid for.

This is represented graphically below. The next time someone says that these bills will be “paid for”, remember that you can play funny games with the 10-year scoring window. Frontloading revenues and backloading spending is just one of those games. We didn’t hire these people to plays games with us, however. We hired them to govern us like adults. Time they started acting like them.

(note: it is possible that the Medicare cuts they come up with will exponentially grow in size; I am skeptical, however. Congress doesn’t have a good history with long-term and effective cuts in Medicare, nor are the truly serious delivery system reforms on the table any longer, as best as I can see. I also don’t believe that magic prevention improvements will ever end up giving us long-term cost savings, let alone exponentially increasing cost savings as required to pay for this sort of program.)


(BTW, this is a bipartisan maturity problem; the Republicans rammed through an entirely unfunded Medicare Part D program using similar budget gimmicks)


Written by Victor

July 16, 2009 at 3:46 am

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