CBO: Previous director had it all wrong

Barack Obama hopes to push a massively expensive health-care reform proposal through Congress by claiming that the fiscal problems of federal entitlements spring from huge increases in health-care spending.  In that effort, his budget director Peter Orszag has supported him, especially with identical claims from his tenure at the Congressional Budget Office.  Now, however, the CBO has reversed itself and says that the problem isn’t health-care cost increases, but instead the aging and non-renewing population:

Today, CBO released its Long-Term Budget Outlook, projecting deficits will hit 7.5% of GDP by 2020, almost 15% by 2035, and well over 40% by the end of the 75-year budget window if we continue current policies. Driving these deficits is the rapid growth of Medicare, Medicaid, and to a lesser extent Social Security, along with the subsequent interest payments that result from high levels of debt sustained through continued borrowing.

A debate exists among experts, though, over the source of growth over these programs. OMB Director (and former CBO Director) Peter Orszag has been among those arguing that health care cost growth is the primary driver of projected entitlement costs, and that experts there has been an overemphasis on population aging. …

In its newest release, CBO allocates the interaction effect between the two effects, and finds that population aging contributes to closer to 30% of the growth in Medicare and Medicaid. When they look at a less distant year, 2035, they find population aging accounts for about 44% of the growth. … And all of this excludes the role of Social Security. Adding this program to the mix, population aging is responsible for around 44% of entitlement growth in 2080, and 64% in 2035.

What exactly does this mean?  The problem for the pending entitlement disaster is not excessive growth in health-care costs but instead the result of adding more and more people into the entitlements with fewer and fewer workers supporting the system.  That should be a patently obvious conclusion as Americans age more as a population, but Obama and Orszag kept pretending that the demographics had little to do with it.

Now, if the CBO is right, the solution proposed by Obama will make the problem exponentially worse.  As the CBO notes, the proper response to runaway entitlement growth under this scenario would be to reduce eligibility, either by outright denial, means testing, or tightening of requisites such as moving retirement to a later age.  Creating a massive new entitlement program in ObamaCare would be akin to pouring gasoline on a fire, even if one accepts the premise that government can control costs better than the private market without rationing care, where Medicare and the VA have already proven to be failures.

It seems apparent that Orszag has been tweaking the numbers and analysis for his own political biases, and Obama was happy to select him for that purpose.  Now that he’s left the CBO, though, the manipulation is much more readily apparent.

Update: Read Bruce Kesler’s post on other aspects of ObamaCare arguments collapsing.

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