Friday, January 7, 2011

Will Repeal of Obamacare Increase the Deficit?

This response to various news stories on the repeal of healthcare reform is one of several interesting responses.

Will Repeal of Obamacare Increase the Deficit?

One of the problems with any estimates from the CBO is that such estimates can only use numbers and assumptions provided by Congress. Usually, the assumptions of Congress are incorrect, assuming cuts that are never enacted and revenues that never materialize.

The CBO states in its analysis of H.R. 2, the heath care repeal act:
As with all of CBO’s cost estimates, these estimates—both for the first 10 years and beyond—reflect an assumption that the provisions of current law would otherwise remain unchanged throughout the projection period and that the legislation being considered would be enacted and implemented in its current form. CBO’s responsibility to the Congress is to estimate the effects of proposals as written and not to forecast future legislation. However, current law now includes a number of policies that might be difficult to sustain over a long period of time. If those policies or other key aspects of the original legislation would have subsequently been modified or implemented incompletely, then the budgetary effects of repealing PPACA and the relevant provisions of the Reconciliation Act could be quite different—but CBO cannot forecast future changes in law or assume such changes in its estimates.
Even the CBO doubts the Health Care Affordability Act (the real name of “ObamaCare”) will be implemented as it was passed. Health care reform budget estimates depend on cuts that will be nearly impossible to achieve.

All such discussions are academic, though. No one is really going to repeal the complete health care reform. What is more likely is that it will be modified numerous times over the next two years — and into the future. That is what happens to most legislation.

For a rather depressing bit of research, you can read all CBO cost estimates (and the waffling required with Congressional budgets):

The CBO’s process is notoriously flawed. The mathematical models used by the CBO would work perfectly with a 100% tax rate, for example, which we know would destroy any real economic activity. That is the problem with models — no one knows at what point things are “too expensive” for customers or taxpayers.

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