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In an interview with President Barack Obama on Oct. 27, 2010, Daily Show host Jon Stewart summed up the president's first two years in office, saying that despite a campaign that promised audacious change, "legislatively, it has felt timid at times." Stewart cited the Democratic health care law as an example.
Obama scoffed at "this notion that health care was timid."
"You've got 30 million people who are going to get health insurance as a consequence of this," Obama said. "You've got a patient's bill of rights that makes sure insurance companies can't drop you when you get sick if you've been paying premiums, that makes sure there aren't lifetime limits, that makes sure kids who don't have health insurance can stay on their parents insurance until they are 26. And cuts the deficit by over a trillion dollars. This is, what I think most people would say, is as significant a piece of legislation as we have seen in this country's history."
On the campaign trail, many Republican candidates have lumped the health care bill in with the economic stimulus as examples of Obama administration initiatives driving the country deeper into debt. So Obama's claim that the health care bill would actually cut the deficit by over $1 trillion dollars is significant.
It's a claim Obama has made many times, and we first weighed in on it when Obama said in his State of the Union speech on Jan. 27, 2010, that health care reform "would bring down the deficit by as much as $1 trillion over the next two decades." So then it was "as much as" $1 trillion and this time it was "over $1 trillion dollars."
But the substance is the same: Obama is in pretty speculative territory here.
Obama is correct that the Congressional Budget Office, with its teams of economists and legislative analysts, has found that the health care bill passed in March not only pays for itself but brings down the deficit. That's because the plan includes new tax provisions and cost-savings measures to pay for its spending.
The CBO found the health care reform bill would reduce the deficit by $143 billion over 10 years.
So how does Obama get to over $1 trillion? He's looking way down the road, at a 20-year estimate, which gets highly speculative.
The CBO usually only calculates the impact of legislation's cost over 10 years. But the agency will create calculations for a longer period if Congress requests it.
The CBO doesn't like to calculate longer than 10 years because many variables are difficult to predict. Here's what the CBO had to say about calculating 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."
In fact, the CBO wouldn't even present its findings as a straightforward dollar number, but instead as a percentage of the gross domestic product, or GDP, which is a number that measures a nation's economic output. The CBO said that over the second 10 years, the Senate proposal should reduce the deficit "in a broad range around one half percent of GDP."
Obama's $1 trillion figure is an extrapolation of what one-half of 1 percent of GDP might be. According to the CBO's latest numbers, GDP will be $22.5 trillion in 2020. You can do a rough estimate and find that you could get to roughly $1 trillion over 20 years.
Back in January, we ran all this by Brian Riedl, lead budget analyst at the conservative Heritage Institution. He said that the numbers aren't phony, but that Obama tries to put a hard number on something that is inherently unpredictable.
"You really can't model GDP 15 years from now," he said. Riedl also said he thought Congress would not be able to stick to some of the spending reductions contained in the Democratic proposals, especially in regards to Medicare.
We also spoke to Jim Horney, director of federal fiscal policy at the left-leaning Center on Budget and Policy Priorities, who called Obama's $1 trillion figure " a little speculative."
"But if you say in your speech it will reduce the deficit one-quarter to one-half percent of GDP, no one listening to the State of the Union would have a clue as to what you meant, and it would make it sound like a tiny amount when it's not," Horney said.
Bottom line, Obama is presenting a highly speculative number as a hard fact. The CBO believes the health care bill will continue to improve the deficit in second 10 years. In an Oct. 22, 2010 presentation on the economic effects of the health care bill, CBO director Douglas W. Elmendorf said the legislation sets up a number of experiments in delivery and payment systems, but "it is unclear how successful the experiments will be." For that reason, and others, the CBO noted that the uncertainties involved are too great to create detailed projections. And so now, as then, we rate Obama's statement Half True.
The Daily Show website, Interview with President Barack Obama, Oct. 27, 2010
PolitiFact, "Health care reform 'would bring down the deficit by as much as $1 trillion over the next two decades,'" by Angie Drobnic Holan, Feb. 1, 2010
Congressional Budget Office, Presentation at the University of Southern California: "Economic Effects of the March Health Legislation," by CBO director Douglas W. Elmendorf, Oct. 22, 2010
Congressional Budget Office, Preliminary estimate of effects on direct spending and revenues of the final health care bill, March 20, 2010
The White House, State of the Union address, Jan. 27, 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
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