The President’s $900 Billion Bill Will Cost How Much?

Two years ago I posted on the fiscal sleight-of-hand that was involved in passing the Patient Protection and Affordable health Care Act. I wrote this:

Whatever its merits as a reform of the healthcare system, in financial terms ObamaCare is an act of shameless fraud. The act is said to be $940 bill (meaning over ten years) and to lower deficits by $138 billion. Douglas Holtz-Eakin, former director of the Congressional Budget Office, lays out the largest and most obvious bits of deceit in those numbers in the New York Times.

The Democrats went to extraordinary lengths to produce a bill that would be scored by the CBO at under a trillion smackers over ten years. Here is what the President promised Congress and the American People in 2009:

Now, add it all up, and the plan I'm proposing will cost around $900 billion over 10 years -- less than we have spent on the Iraq and Afghanistan wars, and less than the tax cuts for the wealthiest few Americans that Congress passed at the beginning of the previous administration. (Applause.) Now, most of these costs will be paid for with money already being spent -- but spent badly -- in the existing health care system. The plan will not add to our deficit. The middle class will realize greater security, not higher taxes. And if we are able to slow the growth of health care costs by just one-tenth of 1 percent each year -- one-tenth of 1 percent -- it will actually reduce the deficit by $4 trillion over the long term.

I pointed out the magic involved in the President's math. I thought it obvious that the bill would cost much more than that.

Astoundingly enough, I was right. Philip Klein, at the Washington Examiner, reports on this year's CBO scoring.

President Obama's national health care law will cost $1.76 trillion over a decade, according to a new projection released today by the Congressional Budget Office, rather than the $940 billion forecast when it was signed into law.

If the CBO is right, the ten year cost of the PPACA will be almost twice the advertised price. Next year's estimate will very likely put the cost closer to two and a half trillion. The fiscal projections made at the time of its passage were, as I noted, acts of shameless fraud.

On the other hand, how much does this matter? The CBO just upped the deficit estimate for last fiscal year from $1.079 trillion to $1.171 trillion. How much the PPACA adds to the deficit remains to be determined. Let me suggest that it will exceed estimates. Meanwhile, it will be absorbing two trillion over ten years, wealth that cannot be used to fund anything else or reduce deficit spending. This is the fiscal record of our President.

Comments

[duggersd]

"Astoundingly enough, I was right." Astoundingly???? Really???? Just about anyone with a brain knew it. The CBO was using numbers given to it that had little to do with reality. I knew it. You knew it. Senator Johnson knew it. I bet even Cory and Bill knew it. So if one touted that fake number and knew there was no basis of reality for that number, what do we call that person? I know what I call a person who knowingly tells untruths.

[Bill Fleming]

Aw come on, KB. What's a couple of $ trillion among friends?
(We owe most of that money to ourselves, you realize.)

[Bill Fleming]

...p.s. one of these days, duggerSD is going to give himself apoplexy (if he's not done so already.)

[Jon S.]

Bill, We owe about 42% of that to foreign governments, you realize.

[Bill Fleming]

42% of what, Jon S.? What's your big number? (Besides, since when did 58% ≠ "most?)

[duggersd]

So, Bill, since we owe it to ourselves, why not just not pay it? If we owe it to ourselves and just don't pay it, then who is harmed?

[A.I.]

Speaking of shameless fraud, how about a budget projection that includes only one side of the ledger. Here is an excerpt from the CBO report cited:

Estimates Through Fiscal Year 2022

This report also presents estimates through fiscal year 2022, because the baseline projection period now extends through that additional year. The ACA’s provisions related to insurance coverage are now projected to have a net cost of $1,252 billion over the 2012-2022 period; that amount represents a gross cost to the federal government of $1,762 billion, offset in part by $510 billion in receipts and other budgetary effects (primarily revenues from penalties and other sources).

The addition of 2022 to the projection period has the effect of increasing the costs of the coverage provisions of the ACA relative to those projected in March 2011 for the 2012-2021 period because that change adds a year in which the expansion of eligibility for Medicaid and subsidies for health insurance purchased through the exchanges will be in effect. CBO and JCT have not estimated the budgetary effects in 2022 of the other provisions of the ACA; over the 2012-2021 period, those other provisions were previously estimated to reduce budget deficits.

Bottom line, projected costs are going up but so are offsets.

The full report is here: http://cbo.gov/publication/43080

[Bill Fleming]

False dichotomy duggerSD. We are paying it back, with interest. But if you had loaned yourself a million bucks at less than one per cent interest, how much would YOU worry about getting it paid off?

[Bill Fleming]

(...especially if you had a printing press in the basemant and a license to print money...)

[Jon S.]

Bill, I was wrong. In 2007 44.5% of our debt held by the public was foreign owned, with China being the #1 foreign holder of our debt. 55.5% may be a majority, but it also means that enough of our debt is owned by foreign powers that they gain leverage against us.

[duggersd]

OK, Bill, I get it. Our federal government can just spend whatever it wants and borrow all it wants. Hell, why even bother collecting taxes? We can just lend ourselves $4 trillion dollars a year at 1% and not pay it back. This should make everybody happy. The liberals can spend money and give it to everybody who does not work and the conservatives can have their taxes cut to $0.

[Bill Fleming]

No you don't get it DuggerSD. But that's okay. It's not my job to explain it to you.

[lynn]

Two simple words sum up what many of us knew and what many others are now beginning to realize about Obamacare: "They lied!"

[Bill Fleming]

Okay, since John S is obviously more interested im misleading us than he is adding clarity to the conversation, let's lay it out here to show how he and his GOP brethern like to fudge the numbers in an effort to scare everybody into an unreasonable panic (as if there weren't enough real things to be nervous about.

Rather than write a big speech, I'll just lay out these excerpts from Wikipedia and let you readers sort it out. Then maybe Jon will come back in and explain himself after he wipes the egg off his face ;^)

"The total or gross national debt is the sum of the "debt held by the public" and "intragovernmental" debt. As of February 2012, the "debt held by the public" was $10.7 trillion and the "intragovernmental debt" was $4.8 trillion, for a total of $15.8 trillion.[17]"

"As of January 2011, foreigners owned $4.45 trillion of U.S. debt, or approximately 47% of the debt held by the public of $9.49 trillion and 32% of the total debt of $14.1 trillion.[50] The largest holders were the central banks of China, Japan, the United Kingdom and Brazil.[52] The share held by foreign governments has grown over time, rising from 13% of the public debt in 1988[53] to 25% in 2007.[54]"

"As of May 2011 the largest single holder of US government debt was China, with 26 percent of all foreign-held US Treasury securities (8% of total US public debt).[55] China's holdings of government debt, as a percentage of all foreign-held government debt, have decreased a bit between 2010 and 2011, but are up significantly since 2000 (when China held just 6 percent of all foreign-held U.S. Treasury securities).[56]"

In other words, foreign debt is 32% of total debt, and our debt to China is 26% of that 36%. But to hear these GOP fear mongers tell it, China practically owns your kids and grandkids. Well, that's just pure bullsh*t, but it's astonishing how many supposedly smart people (like DuggerSD) fall for it.

[Bill Fleming]

Sorry, forgot the link:
http://en.wikipedia.org/wiki/United_States_public_debt#Foreign_ownership

[Bill Fleming]

Sorry, forgot the link:
http://en.wikipedia.org/wiki/United_States_public_debt#Foreign_ownership

[duggersd]

Bill, after reading your post about just owing the money to ourselves, I went to the Honda shop to buy my wife a new motorcycle. After choosing all of the neat accessories, the bill came to a little over $8000. I took out the Bank of DuggerSD checkbook and started to write it. They asked if I had the money, and I just told them I would owe it to myself. I was going to charge myself 1% interest. Those guys would not take my check! Must be Republicans!

[Bill Fleming]

You forgot to print yourself the money first, duggerSD. Plus you probably didn't have any assets to leverage. You can't believe what people will do for you when you have a good looking balance sheet. Hell, they might have just given you the car. Obviously you have no idea how to cut deals, brother.

[A.I.]

Dugger, Bill, Jon and Lynn, check the link in my post above. As I read it, the CBO report does not indicate any "net" change in the ACA's impact on the budget. So why all the sturm und drang over deficits?

[Bill Fleming]

A.I. Good question. My efforts here are to illustrate (as Ron Paul did) that a significant portion of the handwring is just pure government accounting foolishness. I certainly don't agree with RP on everything, but he really nailed it here:
http://www.tnr.com/article/politics/91224/ron-paul-debt-ceiling-federal-reserve

[Ken Blanchard]

A.I.: What does the program cost? You agree that it is $1.76 trillion over ten years. However we end up paying for it, that's still almost twice as much as $900 billion over ten years. The offsets you mention new revenues including taxes and penalties. For example, there is $54 billion in there from penalties on those who fail to buy insurance. Much as that may warm your heart, it represents wealth that is committed to this program and that can't be taxed or spent on anything else.

The CBO estimates that it will lower the deficit slightly. Good. Except that, again, the gross cost of the program represents wealth that cannot be used to lower the deficit or relieve the budgetary pressure on the rest of government expenditures.

Even if pretend that the offsets are money from outer space, that still leaves a cost of $1.252 trillion, which looks to me like more than $900 billion. The program costs a lot more than advertised.

[A.I.]

You might note KB that 2012 through 2022 is not a decade, it is 11 years. The 940 billion mentioned by Obama back in 2010 was for the decade ending in 2019, a ten-year period. And as we apparently both read it, it would be the line item that now is projected to be $1.252 trillion over 11 years.

Divide $1.252 trillion by 11 and you get an average cost per year of about $114 billion. I don't know why anyone would be so naive as to think the overall size of the program would not increase each year due to such factors as the advent of exchanges, population growth and medical advances. So, the program cost in that 11th year might well be over $200 million leaving a cost of about $1 trillion in the 2012-21 decade. That is not so far off from the original CBO estimate cited by Obama which again should take into account the factors mentioned above.

You might also note that the money involved will not go into some sort of black hole. It will be spent mostly on health care and private insurance creating private sector profits that will be taxed--unless Tea Party Republicans manage to eliminate all taxes.

So, there is no "shameless act of fraud" on the part of the president--only an unfounded accusation on your part.

[Ken Blanchard]

A.I.: if I sell you a car and tell you that it costs $9000 and then you find $17500 on your bill, I suspect you will think you have been cheated. If I tell you, that's okay, I repossessed your other car and that takes $5000 off the bill, I don't think you will be much happier. What it cost is what it cost.

[A.I.]

Bad analogy KB. Here's a better one: If you "leased" me a car in perpetuity and told me it would cost $9,000 over the first ten years and it ended up costing me 12,000 (not $17,500) over an 11 year period starting in the third year of the lease, I would not feel cheated. That would be especially true if after the first four years you were furnishing gas (subsidies to help insure more people) for the car--something you hadn't done for the first 4.