Fiscal Responsibility and Repealing PPACA

Cross-posted from The Agenda on National Review Online.

Jonathan Cohn and Ezra Klein make a valid and important point about the new House majority’s push to repeal Obamacare. Here’s Cohn:

The media is playing [the repeal resolution] as a pointless stunt, because the Senate would never pass it and President Obama would never sign it. This seems unfair to me. Repeal of health care is among the very top priorities for these Republicans. Passing such a bill has important symbolic value.

But precisely because I do take this seriously, I'm curious: Will the Republicans ask the Congressional Budget Office to score the bill? Say what you will about the process that produced the Affordable Care Act, but it was not rushed and it did not try to game the budget accounting process. On the contrary, Democrats went to great pains--and, arguably, suffered tremendous political damage--because they were determined to produce a bill that the CBO would pronounce as deficit-reducing.

They succeeded, too. CBO projections suggest that the Affordable Care Act will reduce the deficit by more than $100 billion over ten years, which is not bad--indeed, not bad at all--for an initiative that will allow 30 million more people to get insurance and push the entire health care system in the direction of more efficiency. It stands to reason that if the Republicans repeal the bill, they will be increasing the deficit by an equivalent amount.

Ezra, in a detailed post, points out some of the apparent inconsistency in GOP’s position:

House Republicans are in a pickle: One of their new rules says that new legislation must be paid for. But the health-care bill reduces the federal deficit by more than $100 billion over the next 10 years. Luckily, they've figured out an answer to their problem: They've decided to simply exempt the repeal bill from the rules. That means they're beginning the 112th Congress by lifting their own rules in order to take a vote that will increase the deficit. Change we can believe in, and all that.

Republicans are aware that this looks, well, horrible. So they're trying to explain why their decision to lift the rule requiring fiscal responsibility is actually fiscally responsible. Majority Leader Eric Cantor got asked about this, and he returned the reporter's serve with a volley of nonsense. "About the budget implications, I think most people understand that the CBO did the job it was asked to do by the then-Democrat majority, and it was really comparing apples to oranges,” Cantor said. “It talked about 10 years' worth of tax hikes and six years' worth of benefits. Everyone knows beyond the 10-year window, this bill has the potential to bankrupt this federal government as well as the states."

That's all well and good -- but it's not true. Take Cantor's core point: The health-care reform bill includes "10 years' worth of tax hikes and six years' worth of benefits." There's nothing philosophical about this statement. It can be checked with a simple look at the spending tables the Congressional Budget Office published in their analysis of the bill. And when you look at those tables, Cantor's statement falls apart.

I have a piece out today, on National Review’s main page, that discusses this problem in depth. The basic point is that, while conservatives are rightly cynical of CBO projections about Obamacare’s deficit-reducing features, as a matter of parliamentary procedure, the CBO’s opinion is extremely important.

If Republicans manage to take back the White House and gain majority control of the Senate in 2012, they are almost certainly going to have to use the reconciliation process to repeal Obamacare. I note in the article:

As we learned last year, the reconciliation process is different from the normal legislative process. The Senate parliamentarian, using Congressional Budget Office estimates, certifies measures that, either by raising taxes or by cutting spending, will reduce the budget deficit. Only deficit-reducing measures can be passed using reconciliation.

The problem for Republicans is that the CBO estimated that the PPACA would reduce the deficit by $132 billion over the 2010–2019 period. Because of amendments passed in late 2010, it’s likely that the CBO’s estimate of the cost of repeal will be even higher in 2013. Hence, a simple, two-paragraph repeal measure won’t get through reconciliation.

This is where the agenda of the next Congress comes in. In place of comprehensive health-care reform, House Republicans are promising to reverse some of Obamacare’s most unpopular elements: for example, the new 1099 provision, which requires that all businesses issue an IRS form 1099 for any payments to vendors of more than $600 per year. The CBO scores this measure as raising $18 billion for the government over ten years: indeed, that’s why it was included in the PPACA in the first place. If Congress reduces Obamacare spending elsewhere to “pay for” this tax cut, ultimate repeal could become more difficult.

The individual mandate is a more worrisome example. Last June, the CBO projected that repealing the individual mandate would reduce the deficit by $252 billion in the 2011–2020 timeframe. Under current law, the CBO is counting on some people under PPACA paying the fine for not purchasing health insurance, thus increasing revenues to the government; however, repeal of the mandate would generate savings by reducing the number of people who rely on Medicaid and exchange subsidies. If the mandate is eliminated, repealing the rest of Obamacare will become $252 billion harder.

Hence, if Republicans in the 112th Congress succeed in eliminating some of these provisions, they may increase the fiscal cost, as scored by the CBO, of repealing the rest of Obamacare in the next Congress. In addition, every unpopular tax increase that is eliminated now will need to be offset by additional tax increases or spending cuts, which complicates things when the real repeal effort starts in 2013. Republicans, therefore, may be setting a trap for themselves.

It’s a long article, but it explores a lot of the implications of this problem. Let me know what you think.