Democrats' Health Budgeting: Garbage in, Garbage Out
The Congressional Budget Office is ever-present in the healthcare debate, especially in the aftermath of the President’s pledges to keep a reform bill under a price tag of $900 billion (over the next ten years) and to not “add a dime” to the deficit now or in the future.
The CBO seemingly blessed a Baucus bill that was kept under the $900 billion line only by the most transparent and dishonest budget trickery. House Democrats seemingly daily announce that their bill is now under the magic line, even though CBO Director Doug Elmendorf had apparently driven a stake in its heart earlier this year by pointing out that it: (a) cost too much, (b) ran near-term deficits, and (c) failed to “bend the cost curve” and thus added to the country’s entitlement burdens.
What is up with the CBO? One day they are damning flawed legislation; the next they are embracing its twin. Is the CBO scoring process simply arbitrary and without foundation? Perhaps so, but let’s first dive a little deeper and give it a fair hearing.
First, it is not the “CBO” scoring process. The process was originally established (along with the Budget Committees in the House and Senate, and the CBO itself) in the Budget Act of 1974. It has been tweaked since numerous times, and CBO has had input all along. But it is far from the case that CBO runs the show.
Instead, the CBO operates wearing a very particular set of handcuffs. To begin, the law says that the CBO cannot offer policy advice. It is literally the case that CBO (in general) and Doug Elmendorf (in particular) cannot simply announce “Gee, that _______ bill is a really irresponsible, wrongheaded, bad idea.” (Fill in ________ with the majority of bills that CBO is asked to analyze.) In the context of the healthcare reform debate, one pivotal moment came when the CBO Director opined to great fanfare that neither the House tri-committee bill nor the Senate committee bill would bend the cost curve. What was lost in the uproar was that he did not send out a press release, blog, or book himself on the Sunday shows. Instead, he was asked point blank by Senate Budget Chairman Kent Conrad.
CBO was used by Senator Conrad to make a point. Let me come back to that.
More recently, the CBO put out its “score” of the Baucus bill indicating that it cost under $900 billion, reduced the deficit over the next ten years, and did not create a new long-run fiscal imbalance. This seemed a bit odd (a euphemism for “completely batshit”) since the bill assumed that doctors would be subjected in two years to a cut in their Medicare reimbursements of over 20 percent. (As we have since seen, dropping this fiction would cost $250 billion, putting the real price tag over $1 trillion.)
It also assumed that future Congresses would steadily reduce Medicare spending to the tune of one-half trillion dollars, something that has never (did I mention never) happened. Instead, previous attempts of this sort (the 1997 Balanced Budget Act) were quickly reversed. And you would think that CBO might have mentioned the schizophrenic sleaziness of creating a new, large health entitlement spending program by promising to cut the previous large health entitlement spending program that had never been reined in. Nope.
You might have looked through the CBO score and noticed that the new entitlement program is projected to grow at 8 percent annually over the long term – exactly the same rate as in the CBO score of the properly-denigrated House bill. But CBO did not mention that the Baucus bill did not bend the cost curve. What’s up with that?
Finally, you may have been amused that the core of the funding mechanism was set of fees on the medical industry and taxes on “Cadillac” insurance plans that would ultimately impose $400 billion in new costs, roughly 90 percent of which would be borne by those making under $200,000. These new revenues were projected to grow at over 10 percent annually over the long term. But CBO said nothing about the base hypocrisy of campaigning for control of the nation’s finances by promising to exempt those making under $250,000 from the cost of their fantasies and then whacking the same people right on the schnozzola. Not to mention committing to continue to do so at a rate exceeding the wildest projections of their possible wage growth. CBO did not even footnote the joke.
You may see a pattern developing. The Senate Finance Committee undertakes political economy malpractice, but the CBO does not mention it. There is a good reason: It can’t. The statutes governing the budget process require that CBO compute the budgetary consequences of the written proposal. It cannot judge the intent of the current Congress, the likely actions of a future Congress, or the virtues of the proposals. Its job is to elucidate the budgetary consequences of the proposal, bill or law as written.
Put simply, if the Senate Finance Committee drafts a budgetary fantasy, CBO will have to score it. If I had a CBO, I could send it my plan for next year: make $5 million a month and buy a 50-room mansion with a national debt clock on every wall. I’m sure they would be able to say, “yep, this balances”. But that doesn’t mean it will happen. The same is true of the current healthcare reform fantasies.
As a footnote, this explains why CBO takes pains to stress that estimates are “preliminary” until final legislative language is available. This is not evidence of wimpiness or hedging. It is evidence of the wisdom garnered over years of living through the mismatch between Congressional intent and the ability of lawmakers to draft statutes that achieve their budgetary dreams.
So the bottom line is this: policy is made by the Congress, not CBO. If the Baucus score looks at odds with reality, that’s because CBO was used to deliver the score that it did. Those, particularly responsible Democrats in the Senate, who want a realistic assessment should do what Senator Conrad did. Ask.
What would the Baucus bill cost if the Medicare “doc fix” is included? Would it still balance? What happens if campaign promises must actually mean something and the fees and excise tax go away? Does it still balance? Does it bend the cost curve?
There are voices that will argue that the problem is CBO. They will point to the fact that budget projections don’t always turn out to be right. They will argue that even if the scores are numerically right, they are economically or politically misleading. As a former Director, I may be drinking the Kool-Aid, but I think these miss the point. The CBO is one of many instruments of policy-making in a political environment. It is the obligation of the elected curators of that process to use CBO to paint a complete picture of the consequences of policies.
It is not, and should not be, in the power of CBO to do so.