Lies, Damned Lies, and CBO Estimates
Posted by Daniel J. Mitchell
Washington is buzzing with news that the Congressional Budget Office has a new cost estimate for the President’s proposal to further expand the federal government’s control over the health care system. The White House is doubtlessly pleased because the takeaway message, as blindly regurgitated by the Associated Press, is that a giant new entitlement program is going to “drive down red ink:”
The Congressional Budget Office estimated the legislation would reduce the federal deficit by $138 billion over its first 10 years, and continue to drive down the red ink thereafter. Democratic leaders said the deficit would be cut $1.2 trillion in the second decade – and Obama called it the biggest reduction since the 1990s, when President Bill Clinton put the federal budget on a path to surplus.
Michael Cannon already has explained that the cost estimate is fraudulent because of what it leaves out, so let me explain why it is fraudulent because of what it includes. The CBO has a very dismal track record of getting the numbers wrong, in part because there is no attempt to measure how a bigger burden of government has negative macroeconomic effects, but also because the number crunchers do a poor job of measuring the degree to which people (recipients, health care providers, state and local politicians, etc.) will modify their behavior to become eligible for other people’s money. The problem is compounded by similar mistakes for revenue estimates from the Joint Committee on Taxation, which (like CBO) makes no attempt to capture macroeconomic effects and has a less-than-stellar history of predicting behavioral responses.
If the legislation passes, we will get more spending, more taxes, and more debt. Equally troubling, we will get more dependency. That’s good for Washington and bad for the country.
cato-at-liberty.org
Yet. Another. Fraudulent. Cost Estimate.
Posted by Michael F. Cannon
House Democrats claim that a not-yet-released Congressional Budget Office report puts the cost of their revised health care overhaul at $940 billion over the next 10 years.
Though I have yet to see the CBO score, I’ll bet anyone a fancy lunch that it does not claim the legislation would cost the federal government just $940 billion from 2010 through 2019.
As former Congressional Budget Office director Donald Marron has explained over and over, the figure that Democrats consistently cite for the cost of their bills is only the CBO’s estimate of the cost of federal spending related to the expansion of health insurance coverage. It is not the full cost to the federal government, because each bill also spends taxpayer dollars on other items.
Marron examined the CBO’s March 11 score of the bill that passed the Senate on Christmas Eve, and found an additional $96 billion of spending over 10 years. If the most recent iteration of ObamaCare is similar, then new federal spending in that bill would be approximately $1.036 trillion — pushing the total over the president’s spending target.
Anyone care to take me up on that fancy-lunch wager?
Moreover, the on-budget costs of the legislation probably account for only 40 percent of the total costs. The other 60 percent come from the private-sector mandates. But Democrats have systematically suppressed any estimates of those hidden taxes, probably because such an estimate would reveal the full cost of the legislation to be closer to $2.5 trillion over the next 10 years.
It has been 272 days since Democrats introduced the first complete version of the president’s health plan. We still haven’t seen an honest cost estimate.
cato-at-liberty.org |
