Fromer CBO Head Tells The True Story of ObamaCare

It will be as big a financial disaster as Medicare and Social Security!

The Baucus Bill Is a Tax Bill
Middle-class families would get hit with a double-digit increase in their marginal tax rate.
By DOUGLAS HOLTZ-EAKIN
Wall Street JournalOCTOBER 13, 2009

Remember when health-care reform was supposed to make life better for the middle class? That dream began to unravel this past summer when Congress proposed a bill that failed to include any competition-based reforms that would actually bend the curve of health-care costs. It fell apart completely when Democrats began papering over the gaping holes their plan would rip in the federal budget.

As it now stands, the plan proposed by Democrats and the Obama administration would not only fail to reduce the cost burden on middle-class families, it would make that burden significantly worse.

Consider the bill put forward by the Senate Finance Committee. From a budgetary perspective, it is straightforward. The bill creates a new health entitlement program that the Congressional Budget Office (CBO) estimates will grow over the longer term at a rate of 8% annually, which is much faster than the growth rate of the economy or tax revenues. This is the same growth rate as the House bill that Sen. Kent Conrad (D., N.D.) deep-sixed by asking the CBO to tell the truth about its impact on health-care costs.

To avoid the fate of the House bill and achieve a veneer of fiscal sensibility, the Senate did three things: It omitted inconvenient truths, it promised that future Congresses will make tough choices to slow entitlement spending, and it dropped the hammer on the middle class.

One inconvenient truth is the fact that Congress will not allow doctors to suffer a 24% cut in their Medicare reimbursements. Senate Democrats chose to ignore this reality and rely on the promise of a cut to make their bill add up. Taking note of this fact pushes the total cost of the bill well over $1 trillion and destroys any pretense of budget balance.

It is beyond fantastic to promise that future Congresses, for 10 straight years, will allow planned cuts in reimbursements to hospitals, other providers, and Medicare Advantage (thereby reducing the benefits of 25% of seniors in Medicare). The 1997 Balanced Budget Act pursued this strategy and successive Congresses steadily unwound its provisions. The very fact that this Congress is pursuing an expensive new entitlement belies the notion that members would be willing to cut existing ones.

Most astounding of all is what this Congress is willing to do to struggling middle-class families. The bill would impose nearly $400 billion in new taxes and fees. Nearly 90% of that burden will be shouldered by those making $200,000 or less.
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Why does it make sense to double down on the kinds of entitlements already in crisis, instead of passing medical malpractice reform and allowing greater competition among insurers? Why should middle-class families pay more than $2,000 on average, by my estimate, in taxes in the process?

Middle-class families have it tough enough. There is little reason to believe that the pain of the current recession, housing downturn, and financial crisis will quickly fade away—especially with the administration planning to triple the national debt over the next decade.

The promise of real reform remains. But the reality of the Democrats' current effort is starkly less benign. It will create a dangerous new entitlement that will be paid for by the middle class and their children.

Mr. Holtz-Eakin is a former director of the Congressional Budget Office and a fellow at the Manhattan Institute.