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Will Obamacare cut our federal deficit?

By E. D. Kain

What the Affordable Care Act does is reduce some spending, while creating a whole bunch of new, untried subsidies for the middle class. But interestingly enough, the mainstream press has simply taken for granted the ‘fact’ that the ACA reduces deficits. At least that’s what NPR told me this morning on the way to work. Every discussion I’ve read or heard so far about the incoming Republican House mentions that their intentions to repeal Obamacare are actually fiscally irresponsible since it reduces the deficit. Full stop. Here’s Washington Post resident wonk, Ezra Klein, making just that case. I’m not sure why Democrats are so insistent here. The ACA is first and foremost a coverage bill. Cost-containment can come later.

Kevin D. Williamson, of National Review, disagrees with Klein, noting that much of the supposed cost-savings in the law are little more than elaborate gambles. Will Medicare spending really go down under the new bill? Will we actually raise the revenue we hope to raise? Will the subsidies stay at the amounts they are written at now, or will they increase under voter pressure? What about the notorious doc fix? What about the unchanged structural problems facing our healthcare system? Lipstick on a pig and all that jazz.  He notes this passage from CBO chief, Doug Elmendorf:

CBO’s cost estimate noted that the legislation maintains and puts into effect a number of policies that might be difficult to sustain over a long period of time. For example, the legislation reduces the growth rate of Medicare spending (per beneficiary, adjusting for overall inflation) from about 4 percent per year for the past two decades to about 2 percent per year for the next two decades. It is unclear whether such a reduction can be achieved, and, if so, whether it would be through greater efficiencies in the delivery of health care or through reductions in access to care or the quality of care. The legislation also indexes exchange subsidies at a lower rate after 2018, and it establishes a tax on insurance plans with relatively high premiums in 2018 and (beginning in 2020) indexes the tax thresholds to general inflation.

Writes Williamson:

More broadly speaking, what the Obamacare-reduces-the-deficit argument neglects is this: Repeal is not the end of the story. Repeal need not be followed by . . . the void. If we want to reduce the federal deficit by $100 billion over ten years, there are lots of ways to cut $10 billion a year from spending. The federal government in 2004 estimated that it spent $10 billion a year on services for illegal aliens. Cut it. Done. Color me skeptical that we have to spend nearly $1 trillion over a decade to get $10 billion a year in spending cuts. If I’m reading the budget right, HUD spent $45 billion in 2007. And Republicans have some very good ideas for health-care reform that also will reduce federal outlays, thereby reducing the deficit. It is not as though the choice is Obamacare or nothing.

Of course, the question of fiscal responsibility will haunt Republicans with or without the repeal of Obamacare. Here’s Mark Thompson on the fiscal hypocrisy of the incoming GOP House:

That the Republicans chose a paltry $100 billion in cuts as their target number in the campaign was pretty pathetic to begin with, given the size of the deficit.  But no, I was told, this figure was just going to be a starting point, and that they had no incentive to mention bigger cuts or specific cuts on the campaign trail for fear of alienating voters and jeopardizing their election.  No really, I was told, they’ll be able to make major cuts without touching defense, Medicare, or Social Security.

Thompson notes that even this $100 billion number may be too high.

Allahpundit writes:

But wait, you say! Shouldn’t it be fairly easy to find $100 billion to cut in an annual budget that exceeds $3.5 trillion? Well, yes — except that the GOP’s limiting itself to cutting discretionary spending (Social Security and Medicare are, as ever, completely off-limits) and even within discretionary spending they refuse to touch “security” budgets, i.e. Defense and Homeland Security. That leaves just $500 billion or so for this year to play with, and since, as Rich Lowry noted earlier at the Corner, a good chunk of that will already have been spent by the time the continuing resolution expires in the spring, they’d have to make huge cuts to what’s left in order to get to $100 billion in savings overall.

It’s much, much harder to cut spending in a meaningful way than it is to just keep borrowing money to pay for a bunch of things we can’t honestly afford. And if the GOP seems unwilling to touch defense, Medicare, or Social Security, then they’re simply unserious about the deficit. I know there are members of the Republican party who do want to tackle these sacred cows, but they are still in the minority, but it’s a slim minority.

I’ve said it before and I’ll say it again: spending cuts and tax increases are necessary but maybe the tail end (?) of a recession is not the best time for either. I liked the lame-duck tax compromise precisely because it might work to stimulate the economy. At some point, though, we’re going to have to stop thinking in terms of stimulus and start thinking in terms of long-term structural reform.

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