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March 22, 2010

Smoke and Mirrors

Only in Obama's America could a bill that adds hundreds of billions of net spending to the deficit be called "deficit neutral":

ON Thursday, the Congressional Budget Office reported that, if enacted, the latest health care reform legislation would, over the next 10 years, cost about $950 billion, but because it would raise some revenues and lower some costs, it would also lower federal deficits by $138 billion. In other words, a bill that would set up two new entitlement spending programs — health insurance subsidies and long-term health care benefits — would actually improve the nation’s bottom line.

Could this really be true? How can the budget office give a green light to a bill that commits the federal government to spending nearly $1 trillion more over the next 10 years?

The answer, unfortunately, is that the budget office is required to take written legislation at face value and not second-guess the plausibility of what it is handed. So fantasy in, fantasy out.

In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges: The health care reform legislation would raise, not lower, federal deficits, by $562 billion.

Gimmick No. 1 is the way the bill front-loads revenues and backloads spending. That is, the taxes and fees it calls for are set to begin immediately, but its new subsidies would be deferred so that the first 10 years of revenue would be used to pay for only 6 years of spending.

Even worse, some costs are left out entirely. To operate the new programs over the first 10 years, future Congresses would need to vote for $114 billion in additional annual spending. But this so-called discretionary spending is excluded from the Congressional Budget Office’s tabulation.

Consider, too, the fate of the $70 billion in premiums expected to be raised in the first 10 years for the legislation’s new long-term health care insurance program. This money is counted as deficit reduction, but the benefits it is intended to finance are assumed not to materialize in the first 10 years, so they appear nowhere in the cost of the legislation.

Another vivid example of how the legislation manipulates revenues is the provision to have corporations deposit $8 billion in higher estimated tax payments in 2014, thereby meeting fiscal targets for the first five years. But since the corporations’ actual taxes would be unchanged, the money would need to be refunded the next year. The net effect is simply to shift dollars from 2015 to 2014.

Of course, such dizzying displays of prestidigitation should be left to the pros. Those of us less well versed in the ancient art of obfuscation should not try this sort of thing at home:

What troubles me is the substantive precedent of using future cuts in Medicare benefits as a funding source. This is really weird, if you think about it.

Imagine that your crazy uncle Fred had bought a dozen cars on credit. As a result, he faces car payments far in excess of what he can afford. He comes to you and says he has a plan that in a couple of years will reduce his car payments by a few thousand dollars. "Now I have the money for a down payment on a boat!" he exclaims, as he runs off to the boat dealer.

The equivalent is for Congress to treat future cuts in Medicare as if they were a newfound source of wealth to be tapped. Once they adopt this precedent, they can increase spending on whatever they want, in unlimited amounts, while claiming deficit neutrality. Future Medicare spending is so high that you can always come up with cuts, as long as they deferred.

Years ago, I thought a balanced budget amendment was misguided. Now, I'm convinced that our Congressional overlords are so deficient in integrity that we need to require them to disclose exactly how every bill they pass will be paid for out of current (not future) funding. We can only kick the can down the road so far.

Sooner or later, someone's going to have to figure out how to pay for it.

Posted by Cassandra at March 22, 2010 04:39 PM

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Comments

With Obamacare being forced down our throats, now is not the time to shrivel away. Now is the time to stand up and fight back harder then ever before. Will you join us on a campaign to DESTROY THE MOUTHPIECE OF OBAMA'S SOCIALIST AGENDA, THE MAINSTREAM MEDIA? WE ARE IN A FIGHT FOR THE FUTURE OF OUR COUNTRY, A FIGHT FOR OUR CHILDREN'S FUTURE. Join the fight here, http://sosssn.blogspot.com/

Posted by: sosssn at March 22, 2010 05:22 PM

One of the schemes BHO plans on using is to defund the military like the Europeans. Our "bushwhacking" allies whine about American exceptionalism and imperialism while depending on our good offices to protect them. The hypocrisy in this cheap shot villification of the U.S. is even more vile considering they divert their military budget to social programs. Their nightmare scenario is now a reality.

The worry is that between now and 2012 Israel is attacked and/or the U.S. We will be woefully unprepared to strike back in a meaningful way having run off the best and the brightest in or special forces who rightfully fear they will be prosecuted for doing their J.O.B. against a bad guy who has an ACLU card in his wallet with an 800 number on speed dial. The CIA is neutered by having to negotiate multiple levels of bureaucracy to call in a strike or make a captured terrorist in a burqa uncomfortable during questioning.

BHO's plans will fail under the weight of their own idiocy. Certainly it is our responsibility to facilitate the collapse at every opportunity. The bad guys see an opening and our planning their next move while BHO fiddles with his next glorification. His fecklessness will breed some strange bedfellows to be sure.

The clock is ticking...

Posted by: vet66 at March 22, 2010 06:38 PM

Sadly, they don't have to figure out a way to pay for it. Eventually, we'll have to pay for it in taxes, inflation, or both. Sadly, we'll have to pay their pensions, too.

Posted by: htom at March 22, 2010 11:11 PM

Ya'll should wait and give Obama a chance.

Ya'll ain't seen nothing yet.

Posted by: Ymarsakar at March 22, 2010 11:58 PM

Hopefully saner heads will prevail in the Senate.

Hopefully, I say...

Posted by: camojack at March 23, 2010 01:42 AM

Only in Obama's America could a bill that adds hundreds of billions of net spending to the deficit be called "deficit neutral"

Make that "Only in Obama's universe."

There are unicorns there, too.

Posted by: BillT at March 23, 2010 02:01 AM

Now, I'm convinced that our Congressional overlords are so deficient in integrity that we need to require them to disclose exactly how every bill they pass will be paid for out of current (not future) funding.

What, in *public*?

Most of this crew don't even have the integrity to fill out an honest tax return, and that's just between them and the IRS.

Posted by: BillT at March 23, 2010 02:09 AM

Sadly, we'll have to pay their pensions, too.

Not if they're convicted of malfeasance in office.

Posted by: BillT at March 23, 2010 05:04 AM

"There are unicorns there, too."

What about Planet Wrecking capitalists? The ones that go around like a Von Neumann machine and eats up entire solar systems to exploit their mineral wealth.

Posted by: Ymarsakar at March 25, 2010 01:16 PM

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