Paying the Price for "Reform"
The first time the federal government spent $1.8 trillion in a year was 2001. This year, the federal deficit -- merely the gap between spending and revenue -- is $1.8 trillion. What is Congress doing about this unprecedented federal spending spree? They are considering passing health care legislation that would make the deficit even worse. Supporters of these "reform" proposals claim they will not add to the deficit, but it's hard to agree that these proposals as fiscally responsible if you look at the numbers.
As Senators and Representatives go back to their states during the August Congressional recess, they are being confronted with angry Americans who are opposed to the health care legislation being pushed through Congress. One of the main concerns people have about the proposals is whether or not they will add to the deficit. While Congressmen such as Sen. Arlen Specter or Rep. Zack Space say that the bills they are supporting would not add to the deficit, that's just not the case.
Take the legislation passed by the House Energy and Commerce Committee with Rep. Space's approval. The Congressional Budget Office (CBO) projected that this legislation would cost $1.3 trillion over the next ten years.
While many accept this $1.3 trillion number as the legislation's price tag, it's a misleading number for two reasons. One, given the history of government medical programs, this legislation's costs are almost certain to be higher than expected. Two, spending for this legislation is just ramping up at the end of CBO's ten-year estimate, meaning in 2020 and later we will be burdened with a much more expensive program.
It's a tricky proposition trying to project how much health care programs will cost, as the taxpayers of Massachusetts are finding out. The Massachusetts health care plan enacted in 2006 is already costing $1 billion, over a third more than projected. Closer to home, Ohio state policymakers often struggle to find money to pay Medicaid costs that exceed their budget allowance.
Federal medical programs, too, suffer from an inability to stay within expectations. When Medicare Part A was enacted in 1965, it was estimated that would cost $9 billion in 1990. When 1990 rolled around, Medicare Part A really cost $67 billion. Judging by history, it is extremely wishful thinking to believe the health care legislation being debated will cost anywhere near the estimated $1.3 trillion within ten years.
Even if it did stay within the cost estimates, spending on this program will rise dramatically after the ten-year budget window. In fact, only .6% of the spending in the legislation approved by the House Energy and Commerce Committee takes place in the first three years. Spending starts in the fourth year of the legislation and begins climbing dramatically after that.
Those who say this legislation will be "budget neutral" may be right over the next ten years if costs stay within estimates (highly unlikely), the bill's Medicare cuts are implemented (also unlikely, given Congress's past inability to restrain Medicare spending), and proposed taxes bring in the estimated amount of revenue (also a dubious proposition). After 2019, though, costs will continue to increase at an unsustainable pace. What about the deficit then?
The $1.8 trillion deficit we face this year requires less government spending and more fiscal discipline on the part of Congress and the President. When these policymakers should be focusing on trimming federal expenditures, they are looking to spend even more. That's not the right prescription to fix what ails America.
Marc Kilmer is a policy analyst with the Buckeye Institute for Public Policy Solutions, a research and educational institute located in Columbus, Ohio.
