Scoring the Baucus Bill

From Meagan McArdle at Atlantic:

The CBO projects $180 billion in "gross cost" of the coverage expansion--i.e., what the government will spend on Medicaid and SCHIP expansions, operating the exchanges, and subsidizing the purchase of standardized policies therein.  It turns out that about $58 billion, or just about one third of that cost, is being paid for by expecting employers to substantially lower their costs and pass through all the savings to their employees, who then pay taxes on them.

As revenue-raising mechanisms go, this is pretty indirect.  And with so many links in the chain, you can see lots of places where this could go wrong.  What if employers just cut their costs and don't raise their employees wages, because they're in a dying unionized industry?  What if they shift workers to other forms of tax-deferred compensation, like 401(k) matching or HSAs?  What if smart lawyers figure out a way to structure health plans to avoid the tax?  What if all the people who leave employer insurance for the exchange, or have their benefits cut, are low wage workers with low marginal tax rates?

Conservatives complained for a long time that, in calculating the cost of tax cuts, the CBO didn't take into account any of the dynamic effects.  If you cut taxes, people have more to spend, and spending generates economic growth and hence more taxes. 

Maybe conservatives shouldn't complain now that the CBO is suddenly in love with dynamic effects.  But why the change of heart?  The dollars going out under the Baucus bill are real dollars.  The dollars being relied upon to pay for large parts of the costs are based on rather complicated speculation.  What if, as Ms. McArdle asks, the speculations are wrong? 

Comments

[duggersd]

How about they do an honest scoring of the bill? This bill has a tax increase that starts right away and "benefits" that do not start until 2013. I would be interested in knowing what the scoring is for the years 2013 to 2023. I would be willing to bet this is no longer a deficit cutting procedure.
Also, part of the way of cost savings, the bill cuts something like $500 billion from Medicare. How is that justified? Those patients will not just go away.
I am also curious as to how they figure the costs to employers will be less. Anything I have read has indicated a higher cost for most people. If employers just keep their benefits the same, I fail to see a savings. If nothing, there will be more spent or employers will just pay the fine and let their employees be on their own.

[KB]

duggersd: The front-loading of the revenues was, as you indicate, an accounting trick. It gained Baucus a good CBO scoring. That will come back to haunt them later. As for the cuts that are a big part of the book balancing, I agree that they are sheer fantasies. But this whole thing looks like a fantasy to me. Thanks for the comment.