December 28, 2009

“I Will Not Sign a Healthcare Bill That Raises The Deficit by One Dime…Not One Dime!”

by Hal Gershowitz

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President Barack Obama, September 9th, 2009

Really? It would appear, then, the historic moment that the left wing of the Democratic Party is awaiting with such anticipation may be remembered as the moment the President of the United States vetoed the healthcare bill when it finally arrived at his desk citing the statement quoted above. Of course, we jest. We know perfectly well that politics always trumps principle in Washington, but then again, this is the season of sugarplums dancing in our heads.

We also know the talking-points emails are ready to flow to all of the healthcare-reform groupies pronouncing that the Congressional Budget Office (CBO) has scored the Senate bill and has found that the deficit will actually be reduced by around $142 billion during the first ten years and even more, much more, during the second ten years.

Sorry, but that’s not really what the CBO has found. What they have found is that IF the assumptions Senate Majority-Leader Reid required the green eyeshade people over at the CBO to use in calculating costs of the government healthcare program actually hold up, then there will be no increase in the deficit. Now, that’s a big IF and everyone in the House and Senate and the Administration knows it. In fact, it is such a big IF that federal officials would have prosecuted executives in the private sector for putting such misleading input into financial projections (remember Enron and WorldCom?)

The CBO scoring charade is akin to asking the CBO to estimate the cost of snow removal in Chicago during the winter of 2009-2010 assuming only two snow days of only two inches each with a strong warming trend immediately following each dusting. If, however, Chicago experienced a repeat of the winter of 1979 with its continuous snow and infamous blizzard, the folks at the CBO would be laughed out of town. An absurd analogy? Not at all. In fact, there would have been some reasonable statistical chance that the two-snow assumptions on which we posited our hypothetical CBO forecast of snow removal in Chicago could be realized. There is absolutely no chance the assumptions Reid gave to the CBO, and on which the rosy outlook for healthcare is predicated, will come to pass. NONE. What is worse is that they know it.

Let’s just look at one, and perhaps, the biggest farce in the Reid instructions to the CBO. Assume no Doc-fix going forward. The Doc-fix is Congresses annual cancelation of the automatic reduction in fees doctors are to be paid for caring for Medicare patients. The so-called deficit reducing Senate healthcare bill required the CBO to assume that henceforth there would be no more waivers of the reductions in fees to doctors and hospitals. Such an assumption is pure legislative chicanery. In fact, a law designed to “control” Medicare costs was enacted during the Clinton Administration in 1997 that required Medicare to slash payments to doctors each year by whatever percentage the increase in medical costs out paces a pre-determined level established by formula. Every year the doctors protest, as they should, and every year, with the single exception of 2002, Congress has waived the reduction in payments. In fact, as we’ve reported previously, Congress cancelled the reductions scheduled to go into effect next week at the very time they were writing legislation, the financing of which, was predicated on enforcing those very same reductions. This was deceit of historical proportions. It would also be insane public policy.

Furthermore, during the next ten years, when an estimated seventy million baby boomers will enter the ranks of the Medicare eligible, the CBO was also required to assume that there would be a half-trillion-dollar reduction in Medicare costs. How is this cost savings going to be realized in the face of such increased demand for medical service? Increased efficiency and reductions in waste and fraud, we are told. If that is so why haven’t we eliminated such vast waste and fraud already? Then there’s the matter of the increased cost of providing care (think additional doctors, clinics, tests, etc.) for the estimated 30 million additional people who will be covered under the new healthcare plan.

So how could the President promise not to a sign a healthcare bill that increased the deficit “by even one dime?” What was he really saying? We don’t think he was saying to Congress, “You have to send me a bill that is so carefully written, with realistic assumptions based on sound data inputted by independent economists and so carefully thought through, and analyzed that it won’t increase the deficit by one dime.” Clearly, this unwieldy, cobbled together, 2000-page monstrosity (closer to 3,000 if we count last hour amendments) meets none of the criteria of being well thought out, carefully drafted or thoroughly analyzed. It seems more the product of a Boris Karloff lab.ORA.tory (as the old horror films depicted them) than the work of the world’s greatest deliberative body. More likely, the President was signaling to Majority-Leader Reid and Speaker Pelosi, “You have to write assumptions for the Congressional Budget Office study that appear actually to result in a deficit reduction. And, like the Chicago winter of 1979, whatever will happen…will happen. Of course that particular winter cost the city’s Chief- Executive Officer, Mayor Michael Bilandic his job.

So now we have a Bill with taxes and fees that kick in shortly after enactment, but with benefits deferred until 2014 and with CBO scoring limited to 10 years. Even the CBO analysis based on these faulty assumptions concludes that in 2019 alone taxes will be $100 billion higher and spending will be increased by $200 billion. By then, of course, President Obama will be safely ensconced in his Presidential Library teaching a new generation of community organizers how to make even greater advances into the world of European statism.

Now, the President does have a couple of aces up his sleeve. He can always finance the staggering additional cost of healthcare and prevent it from increasing the deficit by raising taxes (big time) or pay for it by printing whatever money is needed to pay the costs. 
But then, clearly, the bill that just passed the Senate will have, by definition, failed to have “not raised the deficit by one dime.”

So how did Senator Reid get his 60 votes for this legislative behemoth despite such little enthusiasm for it, even from his side of the aisle, and with polls stating that over 60 percent of Americans are against it? So much political capital has been spent by the President and the majority in Congress on passing a health care bill, any bill, that the process became a proverbial sitting duck for what can only be called legislative bribery. Every Senator’s vote was up for sale to get a special deal for his or her state at the expense of any semblance of a truly national interest. Columnist George Will described it “as an almost gorgeous absence of scruples or principles” Not that the Senators cared; they must have rationalized that they were rising above principles. Dana Milbank, writing in the Washington Post called it “Cash for Cloture”.

Take a few well-known examples mentioned by Milbank: Senators Ben Nelson and Mary Landrieu secured extra Medicaid money for Nebraska and Louisiana, respectively. Senator Chris Dodd got $100 million for a Medical Center in Connecticut. Other Senators also got goodies for their own states’ parochial interests. So now we seem to have a Senate with one Senator Bayh but many Senators bought.

And why was the bill rushed through the Senate before Christmas? The simple answer is that Senator Reid knows that it will take only a short time for the public to understand the real cost of the this so-called reform legislation and how little the vast majority of people will get for the added cost.

What we have seen at work in the Senate is what we call the Reid Ruse. The Senate Majority-Leader claims the bill would only cost $871 billion during the first ten years, and he may be right because, as we stated above, the bill defers most of the benefits (read costs) until 2014 and so, voila, no deficit. But as the CBO points out, when you look at ten years of actual cost the bill hits the public for a whopping $1.8 trillion for insurance coverage expansions alone, and approximately $700 billion more for various other parts of the bill, bringing the real cost to approximately $2.5 trillion.

As the Weekly Standard points out in its analysis of the bill, “In those real first ten comparative years (2014 to 2023), Americans would have to pay over $1 trillion in additional taxes, over $1 trillion would be siphoned out of Medicare (over $200 billion out of Medicare Advantage alone) and spent on Obamacare, and deficits would rise by over $200 billion. They would rise, that is, unless Congress follows through on the bill’s pledge to cut doctors’ payments under Medicare by 21 percent next year and never raise them back up.” But then, again, as we pointed out above, the reduction in doctor’s fees has already been canceled. And that’s the Reid Ruse, likely soon to bring us the only real medicine this new law will actually deliver… unfortunately, in the form of a large bitter pill to swallow and one that we are likely to choke on for the foreseeable future.

And now, as we go to press, comes word from the CBO that the assumptions they were given by the Majority Leader for analyzing the Reid bill are flawed and involve “double counting,” a phrase rarely used by the non-partisan and non-combative legislative scoring arm of Congress. To be specific, Reid and his colleagues identified an anticipated projected savings they could carve out of Medicare and then used the phantom savings to continue to finance Medicare through 2017 and also used the same savings to fund expanded healthcare coverage. The money just can’t be set aside to pay for future Medicare spending and at the same time be used to pay for current spending. If this sounds confusing, here is a simpler way to think of the impact of the CBO throwing a penalty flag over this particular legislative shell game provision; it converts a projected $132 billion surplus, into a $170 billion deficit.

So, on one hand, we have our September 9th Presidential pledge not to sign a bill “that adds one dime to the deficit…not one dime,” and, on the other hand we find ourselves with a budget-busting, deficit-driving healthcare bill relentlessly working its way to the Oval Office. The difference between what our President says and what our President does when confronted with such a clear dichotomy of rhetoric and reality will be instructive to the entire nation. The odds favoring rhetoric over reality are so high that Vegas oddsmakers would say they are off the charts.

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