Rove: Health care “only appears ... affordable” because of “10 years worth of revenue” vs “six years of spending”

From Rove's April 8 Wall Street Journal column:

The administration's difficulties in defending the stimulus may be why the president challenged Republicans who want to repeal, replace and reform ObamaCare to “go for it.” Mr. Obama seems to be wagering that Democrats will be better off in the midterm elections talking about health care than the economy. That, at least, has a chance of exciting the party's left-wing base. Focusing on the economy will likely depress turnout among independents and centrist Democrats.

But by big margins Obama-Care is unpopular and Americans distrust the administration's claims that its new entitlement program is affordable and “won't add a dime to the deficit,” as Mr. Obama relentlessly repeated during its passage through Congress.

It won't only add a single dime to the deficit; it will add zillions of them. ObamaCare only appears to be affordable on paper because it includes 10 years worth of revenue from huge tax increases and gigantic Medicare cuts to pay for six years of spending. What's more, 82% of the $434 billion expansion of Medicaid and 84% of the $466 billion in subsidies for insurance companies are spent between 2016 and 2019, after Mr. Obama would leave office (even if he serves a second term).

In fact, CBO projected deficit reductions would continue after 2019

CBO: Health care legislation yields “a net reduction in federal deficits of $143 billion” over 10 years. On March 20, CBO released an estimate of the effect of the combined effect of the Senate bill and reconciliation proposal on the federal budget. It found:

CBO and JCT estimate that enacting both pieces of legislation -- H.R. 3590 and the reconciliation proposal -- would produce a net reduction in federal deficits of $143 billion over the 2010-2019 period as result of changes in direct spending and revenues.

CBO: Over second 10 years, reconciliation bill would save “around one-half percent of GDP.” CBO also estimated savings for the decade following the 2010-2019 period:

Therefore, CBO has developed a rough outlook for the decade following the 2010-2019 period by grouping the elements of the legislation into broad categories and (together with JCT) assessing the rate at which the budgetary impact of each of those broad categories is likely to increase over time.

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Using this analytic approach, CBO estimated that enacting H.R. 3590, as passed by the Senate, would reduce federal budget deficits over the ensuing decade relative to those projected under current law -- with a total effect during that decade in a broad range between onequarter percent and one-half percent of gross domestic product (GDP).

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Reflecting the changes made by the reconciliation proposal, the combined effect of enacting H.R. 3590 and the reconciliation proposal would also be to reduce federal budget deficits over the ensuing decade relative to those projected under current law -- with a total effect during that decade in a broad range around one-half percent of GDP. The incremental effect of enacting the reconciliation bill (over and above the effect of enacting H.R. 3590 by itself) would thus be to further reduce federal budget deficits in that decade, with an effect in a broad range between zero and one-quarter percent of GDP.

Krugman: Claim that the bill “front-loads revenues and backloads spending” is a “lie” In a March 27 New York Times blog post, Paul Krugman responded to former CBO director Douglas Holtz-Eakin's claim that health care reform legislation is filled with “gimmicks” designed to make the legislation appear to reduce the deficit. Krugman wrote:

OK, I finally got around to reading Douglas Holtz-Eakin's op-ed on health care reform. It's much worse than I thought; time to scratch Holtz-Eakin off my shrinking list of reasonable, reasonably honest conservatives.

How bad is it? Holtz-Eakin declares that

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.

I think that's what is technically known as a “lie”. Holtz-Eakin, of all people, knows how to read a CBO report. So he's perfectly capable of looking at the actual report (pdf) and seeing that the revenues, like the costs, are minimal for the first four years. Here's the chart:

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His implication that there's funny business going on is totally false, and he knows it.

Wait, it gets worse: Holtz-Eakin implies that there are hidden, delayed costs:

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.

Claims that the plan is window-dressed to look good in its first decade only to go sour later might sound plausible -- except for the fact that the CBO projects bigger deficit-reduction in the second decade of the reform than in the first decade, something that wouldn't happen if lots of costs were being hidden by being pushed off into the future.

That said, we do learn something important from Holtz-Eakin's article. If this is the best critique a conservative budget wonk can come up with -- if deliberately misrepresenting how the legislation works is the only way to make it seem irresponsible -- then the bill must be pretty sound in fiscal terms.