Well, it was an historic victory. Kudos to Obama and his legislative chieftains – they prevailed over a united opposition, waverers in their own party, and the solid majority of public opinion to pass legislation that will take us across the road toward European-style social democracy. Now, for their sakes, it had better work. For unlike every other piece of major social legislation in this country’s history, this one is wholly owned by the Democratic Party. Its failure will be their failure.
And it can’t help but fail, at least from the standpoint of its stated requirement to be deficit-neutral. Just look at the financial flamboyance that was integral to getting it passed. The CBO scored it as actually contributing to $138 billion in deficit reduction over ten years, but their problem is that by law they have to take the preposterous assumptions they have been presented as a given, and judge the consequences with no editorial comment as to plausibility. Garbage in, garbage out, as they say. If not for the CBO judgment, this would have withered on the vine.
So let’s look at the toxic waste the CBO swallowed whole without complaint. First of all, the bedrock fraud of this whole bill – the actual costs to the government, the subsidies for the 32 million currently uninsured and the rest, will not start flowing for the first four years. But the deficit reduction measures – the taxes, the fees on surgical instruments, the cuts to Medicare Advantage, all the rest – well, they start right away. Ten years of income, six years of expenses, and voila – they match up, no increase to the deficit. It continues to astonish me that the Democratic leadership gives voice to this hypocrisy without the slightest twinge of embarrassment. What about the next ten years? Obama has claimed – again, with a straight face, that it saves over $1 trillion in the second decade, but there is no independent support for that at all; any sentient being can look at the run rate of the first ten years and figure it’s going to be underfunded by 40% in the second ten years as well, and that’s being optimistic.
But there’s so much more. Douglas Holtz-Eakin, who as previous head of CBO knows whereof he speaks, had a great analysis in today’s NY Times. This legislation plays games that would put any CEO in jail. There is a new long-term care program in it, expected to generate $70 billion in premiums over this first ten years. But the benefits won’t be paid out until sometime beyond that horizon, so it’s not counted at all in the costs of this bill. That’s $70 billion in free money. Never mind that at the end of that time there will be liabilities in this program far greater than $70 billion and not a dime to pay for them.
Congress also generates free money by passing this law that will cost $115 billion over the next ten years, but without including those administrative costs in the bill itself. They are counting on a future Congress to figure out where that money comes from, but as for this bill – well, deficit-neutral.
Similarly, there is more free money to be found in the included but totally non-related provision to scrap the independent student-loan business and make it another government program. The Feds have been providing subsidies for student loans provided by private financial institutions so that students can get below-market rates. Horrified that these private companies actually made money on this business, the wise men of Washington have decided to take away that undeserved lucre and provide the loans directly to the students. Of course, the below market rates still require the subsidies, but because the government is not paying them to an outside company, they count the “savings” of $19 billion toward the cost of Obamacare.
This is of a piece with the one item of Medicare expense they can be counted on to cut: $120 billion or so in subsidies to insurance companies for Medicare Advantage, which enables seniors to buy at advantageous cost supplemental insurance to cover things that Medicare does not. Obama claims (to no critical reaction) that this money “pads the profits of insurance companies and doesn’t make anybody healthier.” It is, by the way, one of the most popular of government programs, and I would suggest that the seniors who take advantage of it would argue to the contrary. Never mind, this program will be gutted and the government will gain another big chunk of the money it needs to pay for Obamacare. As to the seniors who have been its beneficiaries, well, they either will go onto a government program or do without. Although I seem to recall a significant political figure promising – more than once, I believe – that “if you like your health care, you can keep it.” Maybe my memory is just faulty.
Here’s another case of free money, or more accurately, counting as revenue money that is needed to pay for other liabilities: One of the assumptions of Obamacare is that companies will save enough money on their health care that they can pay their employees higher wages. Frankly, I think that is highly dubious – more likely companies will save that money by terminating their health care plans and dumping their employees on the government (“if you like your health care…” that refrain is sounding rather tinny). At any rate, those higher wages are expected to be great enough to generate $53 billion in Social Security taxes. But instead of figuring that money will pay for the associated Social Security expenses down the road, Obamacare claims it for its own. Another big chunk of the expense taken care of! Cha-ching! Al Gore, where is your lockbox?
This is all fun-house mirrors and fraud. There is scarcely an honest assumption in the whole misbegotten thing.
I haven’t even mentioned the 800-pound gorilla: this is an entitlement. There is one thing that reliably happens with entitlements – they grow much faster than official estimates. It happened with Social Security, Medicare, Medicaid, everything except Medicare Advantage, where the involvement of private companies and competition kept costs below expectations (can’t have that, now, can we?). So these costs will balloon far beyond any official worst-case guess. And what do we see in this bill? Hundreds of billions of cuts in Medicare costs – you know, the ones that were too easy to bother with all these years while we were fretting about Medicare’s solvency. As with the other acts of cowardice in this bill, those hard choices are left to a future Congress, but assumed to take place for the sake of the numbers.