Repealing Obamacare would increase the deficit (and the number of uninsured Americans would skyrocket) | Arkansas Blog

Monday, June 22, 2015

Repealing Obamacare would increase the deficit (and the number of uninsured Americans would skyrocket)

Posted By on Mon, Jun 22, 2015 at 4:16 PM

Lots of Obamacare talk today — I thought I should highlight a report out last Friday  from the Congressional Budget Office. The CBO has once again found that repealing Obamacare would increase deficits. This despite the fact that the CBO is now being run by an economist hand-picked by Republicans, using the controversial "dynamic scoring" popular among right-wing believers in Voodoo Economics.

This marks the first time in almost three years that the CBO released a new budgetary estimate on repealing Obamacare. The story hasn't changed from previous estimates: repealing the health care law would increase deficits. Using "dynamic scoring," the CBO estimates that repealing the law would increase the ten-year deficit by $137 billion — with the impact growing over time. (A "static" projection, using the methods that CBO had employed for decades prior to the switch to "dynamic scoring," predicts an even larger increase in the ten-year deficit from repealing the law: $353 billion.)

The hit would be even worse over the following decade, the CBO reported, increasing annual deficits over the 2026 to 2035 period within a range around one percent of GDP, which amounts to $3 to 4 trillion during that decade. 

Republicans say over and over that Obamacare is a budget buster. Actually the law is decreasing deficits. They'll never admit it, but repealing the law would add to the debt that Republicans claim to be worried about. That's the projection that the non-partisan, widely trusted CBO keeps coming to, even when the game is rigged in favor of the GOP. 

And the budget-busting implications of repeal could be even worse, as Jonathan Cohn at the Huffington Post explains

The CBO's main estimate includes another important assumption that changes the outcome substantially. In calculating how Congress would rescind the law’s Medicare cuts, the CBO assumed Congress would use a formula less favorable to hospitals. If Congress used a formula more favorable to hospitals, the CBO said, repeal would increase the deficit by an additional $160 billion over 10 years — that is, on top of the higher deficits the CBO already expects.

That's the financial cost of the Republicans actually getting their way. As for the human cost, the CBO predicted that the number of uninsured Americans would grow by 19 million in the first year after repeal. 

Here's Paul Krugman's take

Despite including “dynamic scoring”, the report finds, unambiguously, that Obamacare reduces the deficit and repealing it would enlarge the deficit.

Is there anything in the report that provides fodder for the opponents? I see that the Times report says that there are “mixed effects”, because CBO says that GDP would be higher if the ACA were repealed. And maybe the usual suspects will try to spin it that way.

But the truth is that this report is much, much closer to what supporters of reform have said than it is to the scare stories of the critics — no death spirals, no job-killing, major gains in coverage at relatively low cost.

And there’s another important point: while the ACA may lead to somewhat lower GDP because it reduces labor supply, this does not imply a one-for-one loss in welfare. Suppose that a family’s second earner, now assured of being able to get health insurance, chooses as a result to work shorter hours and spend more time taking care of the children. GDP goes down — but there is a compensating non-monetary gain.

In fact, in a perfectly competitive economy the gain would fully offset the fall in GDP: if workers are paid their marginal product, the fall in GDP from the ACA is equal to the lost wages, but workers choosing to work less clearly prefer to have the extra time to the extra wages. Or to put it a bit differently, other things equal it’s agood thing if workers, freed from the fear that they won’t be able to get health insurance, respond by voluntarily working less.

OK, the story is made more complicated by taxes, which place a wedge between wages paid and income received; so there probably is a net cost to a fall in labor supply. But this effect is fully captured by the loss in revenue, which CBO doesn’t think would be large.

So overall this isn’t at all a “mixed” report — it’s a very big win for Obamacare supporters.



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