Friday, January 7, 2011

Wrong, and Wrong On ACA Repeal Costs

I watched a bit of the House debate on ACA repeal this morning, and since I've already written two posts on GOP distortions about costs, I think I'm obliged to note that the Democrats aren't exactly covering themselves in glory, either.  The Democrats seem to be struggling to come up with exactly the right way to describe what repeal would do, and sometimes they're really getting it wrong.  Meanwhile, the GOP goes from bad to worse.  (Sorry, but I'm not going to provide specific quotations here; it's just my notes from watching).

ACA repeal would, in fact, increase the deficit substantially, and more as time goes on.  That's according to neutral accounting, and it's a totally fair point for Dems to make.  However, it's more contentious to say that therefore repeal would be "expensive."  And it's just wrong to say that repeal would mean costs to "the taxpayers" equivalent to the increases in the projected deficit.  After all, repeal would in fact lower government costs, and eliminate some of the taxes included to pay for ACA.  The relationship between ACA repeal and taxpayer obligations is a complicated one...there are both tax hikes and tax cuts, and spending increases and cost savings, in the health care law passed by the historic 111th Congress.  And of course "taxpayers" are also citizens, who may save on insurance premiums if cost controls work or if they're eligible for subsidies, and save on heath care costs because their insurance works better.   At any rate, in my view Democrats were pretty sloppy with their language about these things.

At least they seem to be trying.  I saw two Republicans repeat the 10/6 myth, which was false in 2009 and absurdly false now.  Beyond that and similar phony stories, Republicans seem to have nothing beyond sneering and hand-waving to deal with the perfectly reasonable CBO estimates. 

It is worth noting, not that there's anything new here, that a party that really cares about deficits would take neutral projections that they're busting the budget seriously, and either have an extensive, fact-based refutation of CBO numbers  -- or else propose offsets, as they would have had to do under PAYGO rules.   Obviously, anyone who pays attention to their actions knows that Republicans are either indifferent to budget deficits or in favor of larger deficits, but it is worth pointing these things out, I guess.



  2. Saying deficit increases "cost" is not unique or new. The Republicans used this language about the stimulus which was >1/3 tax cuts.

    The fact that the Republicans don't care about the deficit should be repeated ad infinitum if only to kick their credibility. Dick Cheney said deficits don't matter. Bush doubled the debt. Reagan tripled it. Tax cuts feed the deficit. They're scam artists.

  3. Kristy,

    I said fact-based.

    The Budget Committee releases (including that one) are full of myths, rhetoric, and junk. Doc fix? C'mon.


    You are correct about Republicans and the stimulus. They were wrong then, and those Dems who used that rhetoric today are wrong now.

  4. There are two revenue raising components in the CBO score that are highly misleading, the CLASS Act and additional Social Security revenue. Neither of those are actually a net gain for the government's finances, they are exactly offset by future spending that is not included in the CBO score, and the two combined make up the entirety of the supposed deficit reduction in the bill.

    The "10 years of taxes, 6 years of spending" bit is indeed incorrect, but it is correct to say that the CBO score inappropriately counts revenue that cannot be claimed as a net gain to the budget. The fact that they use cash accounting makes it easy to give the appearance of deficit reduction by including things in the bill that have costs outside of 10 years.

    And to preempt the "but the CBO says it reduces the deficit even more in years 11-20", this is all highly speculative, which is partly why they don't officially score things beyond 10 years. Relying on those estimates/assumptions would be very unreliable because so much can change between now and then. But the costs from the CLASS Act and SS are not very subject to conditions changing. If we get the $70B in CLASS Act premiums we can fully expect to pay $70B in claims. And if we collect the $52B in SS taxes those people are now entitled to $52B in SS benefits. This is by design, not based on any assumption about the future economy or health care system.

  5. AB,

    Thanks for persevering on the comment. I hope you stick around.

    My understanding is that you're basically correct on CLASS Act, but it's a fairly minor component. What I don't know is whether the claims about its long-run sustainability are correct or not. If it's a long-run balanced program, then you're right that CBO scores it as a plus during the run-up years, but then it would pay for itself indefinitely, and so while it might be said to disguise some costs of ACA in the short-run, it's not a long-run issue. If it's not long-run balanced, then I agree that it would increase the long-run deficit. I don't know enough to know who to believe on it.

    On the SS revenues, I believe that you are not correct. My understanding -- and this mainly based on Ezra Klein's reporting -- is that you are wrong that "if we collect the $52B in SS taxes those people are now entitled to $52B in SS benefits." No new SS obligations come out of ACA, or at least no new ones not accounted for by CBO. What is not kosher is to *both* say that those SS revenues help the budget situation for ACA, *and* extend the actuarial life of either SS or Medicare. But putting aside that rhetoric, as far as I know you're wrong about new obligations not counted in the CBO score.

  6. Thanks, the interweb likes to swallow comments sometimes, luckily I was able to get it all in again because I rant about this stuff so much that it's all fresh in my head. :)

    Re: the CLASS Act, it's not really an issue of who to believe on the sustainability. It's fair to just assume it is sustainable, but this still means that the $70B surplus is not "real". The program on it's own is completely break-even, they're taking advantage of the timing of the inflows and outflows and the CBO's use of cash accounting. While it's true that it is a minor component, combined with the SS revenues it makes up basically all of the deficit reduction, which discredits the claims that repeal increases the deficit.

    Re: the SS taxes, the $52B is a net number, it is just the surplus of new SS revenue over benefits paid. They account for any new obligations, but only within the 10 year window. But all of that new money will eventually have to be paid out in benefits. And besides the issue of that money having to be paid to beneficiaries eventually, because SS is obligated to keep any excess in the trust fund, at some point that $52B has to be paid back to the trust fund. That's not to say that this doubles the obligation, just that any way you look at it the government will eventually have to come up with $52B to reimburse the SS trust fund. The CBO score does not account for the fact that this money has to be paid back.

    This is different from the Medicare trust fund issues because bringing in more Medicare taxes does not create a new liability, it just provides more funding. It's fine to say that new Medicare revenue helps the budget (but not both, like the double-counting you alluded to), but the same cannot be said of SS because getting more money creates new liabilities.

    I'm fine with people making the claim that PPACA is deficit-neutral. I disagree with some of the assumptions that get there, but reasonable people can disagree on those. But the things used to claim deficit reduction are undeniably gimmicks.

  7. AB:

    How does Social Security intake eventually have to become benefits? As I understand it (and I'm far from an expert on SS), SS benefits are "inflation" adjusted (and reasonable people can think that the way they calculate that inflation is silly or whatever). I don't think SS is required to spend the money that it takes in within a given time period. Rather, it gets invested in those special T-bills that the SocSec Trust Fund holds.

    Now, I think it's probably more accurate to call this "building up the SS trust fund" than "deficit reduction," because those T-bills, if not bought by SS could simply become regular T-bills, which the market seems perfectly willing to absorb. Plus, simply having a "guaranteed buyer" of debt is different from not having debt.

    Am I missing something?

  8. AB:

    Thanks, the interweb likes to swallow comments sometimes, luckily I was able to get it all in again because I rant about this stuff so much that it's all fresh in my head. :)

    I make a habit of saving comments, especially long ones.

  9. However, it's more contentious to say that therefore repeal would be "expensive."

    Why is that contentious? It depends on context.

    Digby has noticed the right's new meme which they are applying to everything: "job-killing". Everything is a "job-killer" now, it's the new pejorative which they are robotically repeating. Like how they used to say "tax and spend" ad nauseum.

    Unfortunately, it's not true but it doesn't have to be true. It just has to feel true.

  10. @Matt Jarvis: "How does Social Security intake eventually have to become benefits?"

    The more money you make and more SS taxes you pay, the greater your eventual SS benefits. SS is pay-as-you-go, but when it comes time to calculate your benefits it is based on the money you've made and SS taxes paid. You could improve the budget by raising SS tax rates, but paying more because you made more money does not improve the deficit, you've created a new liability.


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