Too Good To Be True?

Late last week the Democrats rejoiced when the CBO priced out their healthcare scheme at $940 billion and project that it would reduce the deficit by $138 billion in the first 10 years.

There is an old saying, "If it sounds to good to be true, it probably is." But wait, you say, isn't the CBO an nonpartisan watchdog that will give us the actual figures. The problem is the CBO is required by law to take the written legislation at face value and not second guess the assumptions. Fantasy in and fantasy out is the rule of thumb on this legislation.

The first problem with this bill is you have in the 10 year CBO estimate 10 years of taxes, but only 6 years of spending. It is the equivalent of saving for 4 years so you can make the payments on that new house. The problem is the 4 years of savings will run out after 6 years of payments and then what?

Now lets take a quick look at the other accounting tricks used to come up with this CBO number.
1. The cost of administration of all the new functions in this legislation is completely left out of the CBO numbers. It will cost $114 billion to do this over 10 years.

2. The government projects they will collect $70 billion in premiums for the new long term care insurance in the bill. This is counted as deficit reduction even though the government is adding future obligations. This type of accounting is illegal in the private sector, but is standard for the government and is why Social Security is in such bad shape. Remember the lock box?

3. There is a cut of $463 billion in Medicare that is included to help finance this bill. However, this includes a 20% decrease in reimbursement to doctors which everyone knows won't stand. Therefore $247 billion of this decrease will be lost when the congress "fixes" this. Everyone knows this will happen, but CBO cannot put this in their figures.

4. There are a number of smaller accounting gimmicks that account for another $80 billion for increased Social Security taxes, a one time early payment of taxes, and having all student loans made by the federal government.

So if you add these up you come up with $411 billion in additional spending and that $138 billion surplus becomes a $273 billion deficit. And all of this happens without "fixing" Medicare or looking ahead to the next 10 years when you have all the spending going on and you don't have a 4 year period to build up reserves.

We need to repeal this bill and actually come up with a cheaper reform.