Charles Krauthammer’s latest is a watershed moment in our fiscal discourse: it’s not the first column on health care reform (not by a long shot), and not the first column on the VAT (ditto), but it’s the first column to segue between the two as if they are inevitably and causally linked. Krauthammer’s message is that health care reform lies about its costs, so Obama’s plan must be to use the VAT to pay for the bill, bringing us to "European levels of taxation."
I’d like to talk about the VAT in a separate post. In the meantime, I wanted to quickly disabuse my two readers of Krauthammer’s accusations that the CBO–as I’ve come to learn since moving here, one of the most professional agencies in the federal government–engaged in willful misrepresentation of the health care bill’s costs. Krauthammer’s accusations are not original to him, but boil down to four arguments: 1) the use of non-health care provisions in the bill to offset health care costs, 2) the so-called “docfix”, 3) the double-counting of Medicare cuts, and 4) counting 10 years of revenues but only 6 years of outlays. Number 1 is pretty straight-forward to refute. Here is a chart of the 10 year budgetary impacts of each provision of the bill. I count four such provisions not related to health care: three involve changing the student loan system and have a combined net deficit reduction of $19 billion over 10 years. The fourth is the CLASS Act, a voluntary community assistance benefit that actually comes the closest to being a bonafide budget gimmick: it begins paying out benefits only after participants have paid in for five years. Thus, its $70 billion net deficit reduction over 10 years comes about in part because the program will be in revenue mode longer than it will be in pay-out mode between now and 2019. Still, even if you view these provisions cynically, they represent $89 billion in savings over 10 years. That leaves $54 billion in net savings due to the remainder of the health care bill. Now, I do retain sympathy for people who argue that to say “health care reform” saves $143 billion over 10 years is false, because they have a point: it’s the bill–health care reform plus student loan reform plus the CLASS Act–that saves this money. But to take another step and argue that the CBO numbers show HCR to be, by itself, a driver of the deficit is also false.
As for the rest of Krauthammer’s accusations: Jonathan Chait explained the “doc fix” best (bottom line: it was going to happen with or without HCR). Stan Collender explains the “double-counting” debate best (bottom line: it is not double-counting in any meaningful sense). And as for the “delay-in-pay” argument, well, the CBO itself disproved that one by estimating the net cost of the bill in its second decade–when there’s a full 10 years of both revenues and pay-outs–and found that net deficit reduction of the Senate bill with reconciliation fixes would be between .5% and .75% of the decade’s GDP, or between $1.4 and $2.0 trillion. I wouldn’t bet the farm on these numbers, but they pretty decisively show that the CBO’s model was not “gamed” to get HCR paid for in its first decade.