Live Free… or Get Out of the Way

This is from a friend of mine who’s a senior staffer in the House. It’s his report on what’s behind the facade reported by the liberal mass media.

Begin Quote:

I wrote up three reasons why the health care bill doesn’t really reduce the deficit. And I managed to complete the entire analysis without calling Obama a Nazi.

First, there are the much-discussed cuts to Medicare providers, amounting to hundreds of billions of dollars over 10 years. It’s very telling that Democratic congressional leaders, supported by the White House, have simultaneously pushed through these health care bills while also advancing legislation to reverse permanently very similar Medicare cuts to doctors that were enacted back in 1997 – paid for by additional borrowing. How Democrats can, with a straight face, claim these new provider cuts will survive while at the very same time they are trying to reverse previously-enacted cuts is beyond my sense of shame.

Second, more than half of the 10-year deficit reduction in both bills ($72 billion of the net $105 billion in the House bill and $130 billion in the Senate bill) comes from inclusion of a new long-term care (read: nursing home) entitlement program called the CLASS Act. Even Senator Kent Conrad (D-ND) has described CLASS as “a Ponzi scheme”. To understand the budget gimmick, consider that the government uses the cash method of accounting, not the accrual method. Because in the first 10 years, the program will pay out very little in benefits, Democrats get to count the premiums being paid into the program as “deficit reduction”. But both CBO and the CMS Chief Actuary have found that the CLASS Act is not actuarially sound – in the long term when it starts paying out large benefits, premiums will be insufficient and it will require massive borrowing to meet its obligations. The cost, however, falls outside the budget window and therefore effectively gets ignored, while the initial premiums get counted. It is a fiscal catastrophe, and the mother of all budget gimmicks.

Third, although CBO estimates that the two bills probably will not increase the deficit beyond the 10-year window, this is only because both bills include large tax increases on high-income individuals, with income thresholds that are not indexed for inflation. The only reason these revenues will grow at a rate as fast as the subsidies is good old-fashioned bracket creep. But as the annual exercise in “patching” the Alternative Minimum Tax has proven, Congress will not allow these tax increases to creep down into the middle class, which in turn means the revenues will not grow at nearly as fast a rate as CBO projects — or as fast as the spending in the bill. Democrats made a conscious decision to disallow inflation indexing of these tax brackets, so that they could claim the bill is something other than what it is.

End Quote.