Gregg: CBO cost estimate of Pelosi Plan $3 trillion; Update: Heritage says $2.4T
posted at 11:30 am on November 7, 2009 by Ed Morrissey
Senator Gregg: Updated CBO Estimate of House Bill Pulls Back the Curtain on Majority’s Intent to Grow Government by $3 Trillion
Senator Judd Gregg (R-NH), ranking member of the Senate Budget Committee today commented on the Congressional Budget Office’s (CBO) more detailed cost estimate of the manager’s amendment to the House health reform bill.
Senator Gregg stated, “The CBO estimate released last night finally sheds light on the smoke and mirrors game the majority has been playing with the cost of their health care reform proposal. Over the first 10 years, this legislation builds in gross new spending of $1.7 trillion – and most of the new spending doesn’t even start until 2014. Once that spending is fully phased in, the House Democratic bill rings up at more than $3 trillion over ten years.
“Additionally, this bill cuts critical Medicare and Medicaid funding by $628 billion, accounts for nearly $1.2 trillion in tax and fee increases and will explode the scope of government by putting the nation’s health care system in the hands of Washington bureaucrats. The $3 trillion price tag defies common sense – we simply cannot add all this new spending to the government rolls and claim to control the deficit.
“If we continue to pile more and more debt on the next generation, they will never be able to get out from under it. The health care system needs reform, but this massive expansion of government, financed by our children and grandchildren, is the wrong way to proceed.”
I’m not sure where Gregg gets the $3 trillion number. From the CBO analysis released last night in a letter to John Dingell, it’s clear that the earlier report of the plan costing $1.8 trillion in its first actual ten years — that is, the first ten years of outlays — is well founded. It seems as though Gregg is combining outlays and tax revenues ($1.2 trillion) to get to $3 trillion, while the CBO deducts revenue from the outlays.
Is that legitimate? The CBO analysis concerns itself with deficit projections, so its methodology is proper for that purpose. Gregg seems to be saying that both outlays and taxes combine into an all-cost juggernaut for the American taxpayer (note his use of “grow government” rather than use costs). That may be legitimate, but the problem is that the outlays come mainly out of the new revenues, at least in theory.
I’d like to see more explanation of the $3 trillion number. Of course, I’d like to see a lot more explanation of the Pelosi Plan, including the constitutionality of the mandates, the impact of taxes and fees on innovation in the medical-device and pharmaceutical industries, and the impact on provider availability thanks to expanded government mandates and price controls. This bill is bad enough even without the $3 trillion price tag. Gregg had me at $1.7 trillion.
Update: The Heritage Foundation blog The Foundry splits the difference:
As Heritage analysts noted earlier in the week, the Congressional Budget Office released its preliminary score of the bill (H.R. 3962) but too many in the media have not been reporting its true cost. The true cost is not the net spending on only the coverage related provisions ($897 billion) but rather the total gross spending for the coverage provisions ($1.05 trillion) as well as any additional spending in the bill (approximately $217 billion). That would raise the plan’s price tag to about $1.5 trillion when including the roughly $210 billion cost of the “doc fix” is included. The “doc fix” refers to the undoing of the flawed Medicare payment update formula, which Congress created but has routinely stopped from being enforced. Under current law, that formula would result in a 20 percent reduction in doctors’ pay under the Medicare program.
The real story about the true cost is even more dramatic. The bill is front loaded with taxes, and back-loaded with spending in the first ten years. Since most of the spending in the House bill does not fully go into effect until 2014, the 10-year cost estimates based on the preliminary CBO score (for years 2010 through 2019) only account for six years of new spending under the plan. Once it is implemented (over a full 10-year window from years 2014 to 2023), the giant House health bill carries a price tag of $2.4 trillion, or as much as $2.6 trillion with the “doc fix.”
It’s just one of the shell games employed by Pelosi & Co.