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The Daily Signal
More Honest
Accounting Shows That Repealing Obamacare Is Good for the Economy
Paul Winfree
June 19, 2015
The fiscal year 2016 budget resolution passed by Congress in May
requires the Congressional Budget Office and the Joint Committee on
Taxation to include the macroeconomic feedback effects of changes in
policy on the budget when evaluating major legislation (CBO and JCT are
the official number crunchers of Congress).
Specifically, Section 3112 of the resolution requires CBO and JCT to
“incorporate the budgetary effects of changes in economic output,
employment, capital stock, and other macroeconomic variables resulting
from such major legislation.”
Put another way, when Congress considers a bill that cuts taxes or
removes work disincentives, CBO and JCT are now required to estimate
the budgetary effects of those policies resulting from changes in the
economy or employment.
This new requirement is a fundamental transformation from traditional
“static” scorekeeping which assumes that macroeconomic factors, such as
the level of employment or economic growth, are unchanged by policy.
The Daily Signal is the multimedia news organization of The Heritage
Foundation. We’ll respect your inbox and keep you informed.
These new “dynamic” estimates aren’t perfect by any means. However,
they will provide policymakers with a better assessment for how
legislation will actually affect the federal fisc.
The new dynamic scoring rule was recently tested in response to a
request from Senate Budget Committee Chairman Mike Enzi, R-Wyo., to
estimate how the repeal of the Affordable Care Act, or Obamacare, would
affect the deficit and the economy.
For the first time, the CBO and JCT found that repealing Obamacare
would increase the gross domestic product by 0.7 percent and that
effect alone would reduce projected deficits by $216 billion over the
2016 to 2025 period.
This may sound trivial, but a 0.7 percent increase in GDP is equivalent
to an additional $1,400 in the pocket of each household per year. CBO
also found that repealing Obamacare would increase capital stocks and
the number of people working over the next 10 years.
CBO and JCT also found that that repealing Obamacare would reduce the
deficit over the next five years but would then steadily increase the
unified budget deficits. However, that assumes Congress will allow both
the 40 percent excise tax on high cost health care plans and an
automatic reduction in Obamacare subsidies to kick in by 2018, both
which seem increasingly unlikely to actually happen.
It also assumes that $802 billion in Medicare cuts will also be
realized even though the program’s chief actuary has warned that should
these take place many seniors will lose access to providers or their
current coverage through the popular Medicare Advantage.
There are also several concerns with the presentation of the analysis
that are critical to understanding the effects of Obamacare repeal. For
instance, the estimated changes on direct spending and revenues
including the macroeconomic feedback do not include a breakout of
on-budget and off-budget effects. However, it’s important to have these
pieces so that budgeteers have a clear idea about how much money is
being borrowed from Social Security to fund the Obamacare coverage
expansion.
Those concerns aside, the provision of this dynamic analysis is a
significant step forward for those interested in a more honest
discussion of how legislation affects the federal budget.
Read this and other articles with links at The Daily Signal
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