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CBO’s Preliminary Estimate For HC Draft

The (ahem) ‘cover letter’ to the Congressional Budget Report (a pdf file):

The House Budget Committee’s ranking Republican Rep. Paul Ryan, R-Wis., listens to comments on Capitol Hill in Washington, March 15, 2010, during the committee’s markup on the Reconciliation Act of 2010.

H.R. 4872, Reconciliation Act of 2010

March 18, 2010

Honorable Nancy Pelosi

Speaker

U.S. House of Representatives

Washington, DC 20515

Dear Madam Speaker:

The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have completed a preliminary estimate of the direct spending and revenue effects of an amendment in the nature of a substitute to H.R. 4872, the Reconciliation Act of 2010; that amendment (hereafter called “the reconciliation proposal”) was made public on March 18, 2010. The estimate is presented in three ways:

  • An estimate of the budgetary effects of the reconciliation proposal, in combination with the effects of H.R. 3590, the Patient Protection and Affordable Care Act (PPACA), as passed by the Senate;
  • An estimate of the incremental effects of the reconciliation proposal, over and above the effects of enacting H.R. 3590 by itself;
  • An estimate of the budgetary impact of the reconciliation proposal under the assumption that H.R. 3590 is not enacted (that is, an estimate of the bill’s impact relative to current law as of today).

Although CBO completed a preliminary review of legislative language prior to its release, the agency has not thoroughly examined the reconciliation proposal to verify its consistency with the previous draft. This estimate is therefore preliminary, pending a review of the language of the reconciliation proposal, as well as further review and refinement of the budgetary projections.

The reconciliation proposal includes provisions related to health care and revenues, many of which would amend H.R. 3590. It also includes amendments to the Higher Education Act of 1965, which authorizes most federal programs involving postsecondary education.

CBO and JCT estimate that enacting both pieces of legislation—H.R. 3590 and the reconciliation proposal— would produce a net reduction in federal deficits of $138 billion over the 2010–2019 period as result of changes in direct spending and revenue (see the top panel of Table 1 and subtitle A of title II on Table 5).

Approximately $85 billion of that reduction would be on-budget; other effects related to Social Security revenues and spending as well as spending by the U.S. Postal Service are classified as off-budget. CBO has not completed an estimate of the potential impact of the legislation on discretionary spending, which would be subject to future appropriation action.

CBO and JCT previously estimated that enacting H.R. 3590 by itself would yield a net reduction in federal deficits of $118 billion over the 2010-2019 period, of which about $65 billion would be on-budget. The incremental effect of enacting the reconciliation proposal—assuming that H.R. 3590 had already been enacted would be the difference between the estimate of the combined effect and the previous estimate for the Senate passed bill, H.R. 3590.

That incremental effect is an estimated net reduction in federal deficits of $20 billion over the 2010-2019 period over and above the savings from enacting H.R. 3590 by itself; almost all of that reduction would be on-budget (see the bottom panel of Table 1 and subtitle A of title II on Table 5).

The budgetary impact of the reconciliation proposal if H.R. 3590 is not also enacted would be different. Although estimates on that basis have been completed for most of the provisions of the reconciliation proposal, CBO does not yet have such an estimate for all of its provisions. By CBO’s estimate, the provisions that have been analyzed so far would reduce deficits by $82 billion over the 2010-2019 period (see Table 6).

Details on the budgetary effects of the health and revenue provisions of the reconciliation proposal, along with its effects combined with H.R. 3590, are provided in Tables 1, 2, and 3:

  • Table 1 summarizes the effect on the deficit of the health and revenue provisions of the reconciliation proposal combined with H.R. 3590; it also shows the net incremental effect of those provisions of the reconciliation proposal over and above the impact of enacting H.R. 3590 by itself.
  • For the two pieces of legislation combined, Table 2 provides estimates of the changes in the number of nonelderly people in the United States who would have health insurance and presents the primary budgetary effects of the provisions related to health insurance coverage.
  • For the two pieces of legislation combined, Table 3 displays detailed estimates of the costs or savings from the health provisions that are not related to health insurance coverage (primarily involving the Medicare program) and from certain of the revenue provisions that are not related to insurance coverage. The table does not include the effect on revenues of title IX, a set of tax provisions whose impact is reported separately by JCT.

Tables 4 and 5 show the incremental budgetary effects of the reconciliation proposal (except for title IX), over and above the effects of enacting H.R. 3590 by itself:

  • Table 4 presents the incremental effects of the health and revenue provisions of the reconciliation proposal—that is, the difference between the effects of the two pieces of legislation combined and the effects of H.R. 3590 by itself (as shown in CBO’s March 11 letter to Senator Reid).
  • Table 5 summarizes the incremental effects of the health, revenue, and education provisions of the reconciliation proposal, also assuming that H.R. 3590 has been enacted. (The impact of the health and revenue provisions is shown in more detail in Table 4.)

Table 6 shows the estimated effect of enacting the reconciliation proposal relative to current law—that is, assuming that H.R. 3590 is not enacted. That table does not include some effects that have not yet been estimated.

Effects of the Legislation Beyond the First 10 Years

Although CBO does not generally provide cost estimates beyond the 10-year budget projection period, certain Congressional rules require some information about the budgetary impact of legislation in subsequent decades, and many Members have requested CBO’s analyses of the long-term budgetary impact of broad changes in the nation’s health care and health insurance systems.

Therefore, CBO has developed a rough outlook for the decade following the 2010-2019 period by grouping the elements of the legislation into broad categories and (together with the staff of the Joint Committee on Taxation) assessing the rate at which the budgetary impact of each of those broad categories is likely to increase over time.

Our analysis indicates that H.R. 3590, as passed by the Senate, would reduce federal budget deficits over the ensuing decade relative to those projected under current law—with a total effect during that decade that is in a broad range between one-quarter percent and one-half percent of gross domestic product (GDP). The imprecision of that calculation reflects the even greater degree of uncertainty that attends to it, compared with CBO’s 10-year budget estimates.

Using that same analytic approach, the combined effect of enacting H.R. 3590 and the reconciliation bill would also be to reduce federal budget deficits over the ensuing decade relative to those projected under current law—with a total effect during that decade that is in a broad range around one-half percent of GDP. The incremental effect of enacting the reconciliation bill (over and above the effect of enacting H.R. 3590 by itself) would thus be to further reduce federal budget deficits in that decade, with a total effect that is in a broad range between zero and one-quarter percent of GDP.

Relative to H.R. 3590, the reconciliation proposal would make a number of changes that would affect its longer-term impact on the budget. In particular, it would increase the subsidies offered in the new insurance exchanges and would reduce the impact of an excise tax on health insurance plans with premiums above certain thresholds.

An important component of the longer-term analysis is that, beginning in 2019, the reconciliation proposal would change the annual indexing provisions so that the premium subsidies offered through the exchanges would grow more slowly; over time, the spending on exchange subsidies would therefore fall back toward the level under H.R. 3590 by itself.

Another key component of the longer-term analysis is that, beginning in 2020, the reconciliation proposal would index the thresholds for the high-premium excise tax to the rate of general inflation rather than to inflation plus one percentage point.

CBO has not extrapolated estimates further into the future because the uncertainties surrounding them are magnified even more. However, in view of the projected net savings during the decade following the 10-year budget window, CBO anticipates that the reconciliation proposal would probably continue to reduce budget deficits relative to those under current law in subsequent decades, assuming that all of its provisions would continue to be fully implemented.

Congressional rules governing the consideration of reconciliation bills also require an assessment of their budgetary impact separately by title. The effects of the reconciliation proposal over the 2010–2019 period are shown in Table 5, assuming that H.R.3590 is also enacted). CBO’s analysis of the longer-term effects, by title, is as follows:

  • Most of the changes to H.R. 3590 that have significant budgetary effects would be made by title I of the reconciliation proposal, so the conclusions about the longer term impact for the proposal as a whole—that it would reduce deficits, relative to H.R. 3590—also apply to that title.
  • The changes regarding health care contained in title II have a smaller budgetary impact than those in title I, and would by themselves increase budget deficits somewhat. That title also contains the proposal’s education provisions, which CBO estimates would reduce future deficits. In CBO’s estimation, the savings generated by the education provisions would continue to outweigh the costs related to health care stemming from title II, so that the title as a whole would continue to reduce the budget deficit in future years.

CBO has not yet completed an assessment of the impact for the longer term of enacting the reconciliation proposal by itself.

I hope this analysis is helpful for the Congress’s deliberations. If you have any questions, please contact me or CBO staff. The primary staff contacts for this analysis are Philip Ellis and Holly Harvey.

Sincerely,

Douglas W. Elmendorf

Director

That is to say, this is not a real estimate, since they don’t have the actual reconciliation bill.

But of course all of this is nonsense.

Just like every other CBO estimate about new entitlements throughout its history.

[Note – this posting of the CBO’s cover letter has replaced the earlier post of excerpted articles from the Politico and The Hill.]

This article was posted by Steve on Thursday, March 18th, 2010. Comments are currently closed.

12 Responses to “CBO’s Preliminary Estimate For HC Draft”

  1. Mithrandir says:

    I guess the CBO will just ‘deem’ health care to be cost-effective. Probably just liked the Nobel committee ‘deemed’ Obama to be a successful president after only 2 weeks in office.

  2. Petronius says:

    Garbage in, garbage out.

  3. JohnMG says:

    So. The vote will come on Sunday. Probably somewhere between nine PM and midnight. We’ll wake up on Monday with a brand new health care bill going to the Moron’s desk for a signature.

    Why didn’t we do this last June and save all this theatre. Everyone here knew this would happen. Nothing short of an earth quake, a tornado, a typhoon, or some other act of God that wipes out the entire executive and legislative branches of government will prevent this from passing.

    Welcome to Amerika-stan!!

  4. Rusty Shackleford says:

    There was an old expression, “You save thousands if you buy a million or more”, said the salesman. It completely escaped him that I only needed about 20 of them. But he kept lauding the “massive cost savings”.

    So, we spend a trillion dollars but “save” 130 billon. We could save 940 billion if we don’t spend it in the first place. Shoot, it’s only money…and look at what you’re getting.

    What could possibly go wrong?

  5. David says:

    Sure, pass it. Along with a small amendment agreeing to permanently dissolve the Democratic party if it actually increases the deficit. We lose the battle but win the war.

  6. tranquil.night says:

    This is bigger than just a scam and more than just irresponsible.

    1. Nobody’s still seen this new bill yet.
    2. It can’t seriously address what they say it does because they’d be reversing gimmicks that were all part of making the bill look less expensive in the first place.
    3. We know they’re earmarking for votes again.
    4. They’re ‘reconciling’ whatever manipulated savings they anticipate from the student loan takeover.

    There’s no consistency from the leadership, no one has any idea what went on in the backroom to even produce it. Total sham.

    • proreason says:

      Supposedly, the CBO has “high integrity”.

      But I’ve been reading recently that everybody that has a government job with any policy implicatiions whatsoever (jobs like MailMen would be excluded) essentially gets sucked into the maelstrom of government malfeasance and simply can’t get out. If they don’t go along with the socialist flow, they get fired. The pressure may be subtle, but it’s there.

      So I don’t think a geniunely honest person could work for the CBO. If you had any integrity at all, you would have to quit.

  7. proreason says:

    Before I realized how pointless it was, I used to argue with Mrs. proreason about money.

    Once she made up a budget to demonstrate her frugality. For example, it had a couple hundred a month for clothes, a couple hundred a month for auto expenses, you get the picture. It was all quite reasonable. Then I looked at the last line and there was a couple thousand a month for “credit cards”. So I pointed out that the problem might lie in that area, and she would have a more complete picture if she actually moved the credit card spending into the other categories so we could actually see how she spent the bulk of the money. She said she couldn’t do that. The money was already spent.

    After an hour of trying to explain it, I gave up. Credit card “stuff” never reached the budget and she still spends like a drunken sailor.

    But she did get a good job with the CBO.

  8. Right of the People says:

    I was wondering where Bernie Madoff’s accountants and lawyers went to after he went to the big house. They all got jobs at the CBO.

  9. Liberals Demise says:

    The ‘Great Karnac’ (Johnny Carson) knows what’s in the Bill because it has been sealed in an envelope, put into a mayonnaise jar and buried under Ed McManns front porch just waiting for the right moment to spring it on the CBO.

    Of course, dingleBarry has been left out of the loop.

  10. MinnesotaRush says:

    Lying, bribing, cheating, coercion, threats, devious and unlawful maneurvering, etc .. all to bring about a (nonexistent) piece of legislation that the majority of American citizens don’t want! Breathtaking!

    From our magnificent Declaration of Independence ..
    “That whenever any Form of Government becomes
    destructive of these ends, it is the Right of the People to alter or to
    abolish it, and to institute new Government, laying its foundation on
    such principles and organizing its powers in such form, as to them
    shall seem most likely to effect their Safety and Happiness.”

    God Bless us .. God Bless America!!!


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