For months, Democrats have been arguing that their health care bill would be deficit neutral, but the American people haven’t been buying it. A Quinnipiac poll released earlier today found that by a 73 percent to 18 percent margin, Americans don’t believe President Obama will be keep his promise that the health care bill would reduce the deficit — and just 32 percent of Democrats believe him. Evidently, Democrats have decided that the best way to confront this perception is to make even bolder claims. While initially the idea was that it wouldn’t add to the deficit, on Saturday Obama declared that the Senate bill was “the largest deficit reduction plan in over a decade.” Not to be outdone, Sen. Dick Durbin later boasted on the Senate floor that it was “the greatest deficit reduction bill in the history of the United States.”
The claim is based on a report by the Congressional Budget Office estimating that the Senate bill would reduce the deficits by $132 billion from 2010 to 2019. The CBO’s finding, however, was the result of a number of assumptions and accounting gimmicks that disguise the true cost of the legislation. More than half of that deficit reduction comes from the revenues generated by the Class Act — a new government-run long-term care insurance program that begins collecting premiums before it starts paying out benefits. That means that in the first decade, it reduces the deficit by $72 billion, but the CBO also tells us that it begins operating at a loss after 2029. The CBO also assumed that Democrats would allow a substantial cut in doctors payments under Medicare to actually happen, even though they already used the defense spending bill to delay the cuts until late February, at which time they are expected to reintroduce $250 billion legislation to avert those cuts over the next decade. This item alone would wipe out all of the projected deficit reduction, and then some. The Senate bill also delays 98 percent of the spending until after 2014 so that the bill will appear cheaper over the CBO’s 10-year budget window. And the CBO assumed that future lawmakers would actually enact the proposed Medicare cuts, which it noted “is often not the case for major legislation.”
But putting all of that aside, let’s just say for the sake of argument that the $132 billion deficit reduction figure is valid. It’s still worth putting in the proper context. According to the White House Office of Management and Budget, cumulative deficits will be $9.1 trillion from 2010-19, while the CBO, using different assumptions, projected the deficits at $7.1 trillion. As the chart below demonstrates, the projected deficit reduction from the health care bill in its first 10 years pales in comparison to overall deficits accumulated during the same period.
Thus, by making wild statements about this being the largest deficit reduction package in history, Democrats are going to pay a political price down the road. Even if the health care legislation reduces the deficit (which I don’t think will happen), Americans won’t isolate the effect of that one bill. All they’ll care about is that a massive health care bill passed that Democrats claimed would reduce deficits, and yet there are still massive deficits.