The health care reform law "reduces the deficit by nearly $1.2 trillion over the next two decades."
Bobby Scott on Tuesday, November 16th, 2010 in in a news release.
Bobby Scott says health care reform may cut deficit by $1.2 trillion over 20 years
In his quest to see all Bush-era tax cuts expire, Rep. Robert C. "Bobby" Scott criticizes Republicans for avoiding "tough" budgetary choices.
In a recent press release in support of allowing the tax cuts to expire, Scott, D-3rd, lambastes Republican legislators and President George W. Bush for enacting them without offering ways to cover the costs.
"Democrats can and have made these tough choices – most recently with the enactment of Health Care Reform, which provides the largest benefit to the middle class since the enactment of Social Security and at the same time reduces the deficit by nearly $1.2 trillion over the next two decades," Scott says.
Amid all the debate over health care reform, we wondered whether the new law really would slice the deficit by $1.2 trillion.
Scott, like President Obama in a similar claim check by PolitFact National, uses numbers from the Congressional Budget Office.
According to the CBO, the health care act is indeed expected to trim the deficit because tax increases and cost savings in the reforms are expected to outweigh the costs of its new programs and tax credits.
The projection for the first 10 years is solid. The CBO analysis says the health care act "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."
But the projection for the next decade is far more speculative.
The CBO typically only calculates the impact of legislation's cost over 10 years. But it will create calculations for a longer period if Congress requests it, which many members did for health care reform.
Here's what the CBO said about computing health reform's effect on the deficit between 2020 and 2030:
"A detailed year-by-year projection for years beyond 2019, like those that CBO prepares for the 10-year budget window, would not be meaningful because the uncertainties involved are simply too great. Among other factors, a wide range of changes could occur — in people’s health, in the sources and extent of their insurance coverage, and in the delivery of medical care (such as advances in medical research, technological developments, and changes in physicians’ practice patterns) — that are likely to be significant but are very difficult to predict, both under current law and under any proposal."
But the CBO was willing to estimate that in the second 10 years, the health care legislation would reduce deficits "in a broad range around one-half percent of GDP."
The GDP, or Gross Domestic Product, is the amount of goods and services produced within the borders of a nation during a year.
The CBO estimates the United States’ GDP will slightly exceed $22.5 trillion by 2020, up 4 percent from the year before.
To arrive at the $1.2 trillion figure, Scott is assuming that the GDP will continue to rise at that rate. And if it does, he’ll be right, if not conservative, in his claim.
Based on a 4 percent GDP increase each year with the deficit being reduced by half a percent, the deficit would actually be reduced to $1.4 trillion by 2030.e to the $1.2 trillion.
The GDP has risen by more than 4 percent all but five times over the last 50 years. Four of those occurrences have been in the last decade, including 2008 and 2009. Last year was the only time the GDP shrank in during the last five decades, falling 7.9 percent from 2008.
But looking at 20-year projections and using numbers that even the CBO says are dicey seems like shaky ground. Is Scott making a safe extrapolation or a leap of faith?
"I don't think $1.2 trillion is an overstatement," said Jim Horney, director of federal fiscal policy at the left-leaning Center on Budget and Policy Priorities.
He said translating percentages of GDP into dollars is the only way to convey it to the public.
"It's perfectly reasonable to put that into terms people can understand," Horney said.
Even so, CBO director Douglas W. Elmendorf noted that the projection is based on "assuming that all of its provisions would continue to be fully implemented."
That's a big assumption.
For example, on Dec. 10, 2009, the chief actuary for the Centers for Medicare and Medicaid Servicesissued a reportconcluding that the plan to reduce payment updates to health care providers through Medicare "are unlikely to be sustainable on an annual basis" and that further reductions in Medicare growth rates through the Independent Medicare Advisory Board "may be difficult to achieve in practice."
Robert Book, a health economist at the conservative Heritage Foundation, said a deficit reduction number extrapolated from a forecast of the GDP is dubious.
"GDP estimates are extremely uncertain," Book said. "Ten years ago, who would have predicted we'd have a recession last year? Nobody could possibly have known that."
And besides, he said, if the plan reduces deficits "it just means it raises taxes a lot."
"So the number is probably not right, and even if it were, it's meaningless," Book said.
So, let’s review:
Scott says health care reform would reduce the deficit by nearly $1.2 trillion over the next two decades.
While it’s true that the CBO report he relies on says the health care bill -- with the proposed reconciliation -- would continue to improve the deficit situation in the second 10 years, it does not arrive at a $1.2 trillion figure.
To do that, Scott relies on speculative GDP projections to predict a number that that CBO itself says would "not be meaningful because the uncertainties involved are simply too great."
So we rate the claim Half True.
Published: Tuesday, November 23rd, 2010 at 4:03 p.m.
Bobby Scott, Ending All Bush-era Tax Cuts Will Bring Budget Near Balance in Four Years, Nov. 16, 2010.
Congressional Budget Office, Cost estimate of H.R. 4872, Reconciliation Act of 2010, March 20, 2010.
Congressional Budget Office,Correction Regarding the Longer-Term Effects of the Manager's Amendment to the Patient Protection and Affordable Care Act, Dec. 20, 2009
Congressional Budget Office,Patient Protection and Affordable Care Act, Incorporating the Manager's Amendment, Dec. 19, 2009
Congressional Budget Office,The Budget and Economic Outlook: Fiscal Years 2010 to 2020, Jan. 28, 2010
Congressional Budget Office,Preliminary estimate of the spending and revenue effects of health reform legislation, March 18, 2010
Centers for Medicare and Medicaid Services,Estimated Financial Effects of the "Patient Protction and Affordable Care Act of 2009,"Dec. 10, 2009
PolitiFact.com,"Health care reform estimates for deficit reduction are not that exact,"by Angie Drobnic Holan, Feb. 1, 2010
Interview with Jim Horney, director of federal fiscal policy at the Center on Budget and Policy Priorities, March 18, 2010
Interview with Robert Book, a health economist at the Heritage Foundation, March 18, 2010
Google Public Data, Gross Domestic Product 1960-2009
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